The URL can be used to link to this page

Home My WebLink AboutHuntington Center Associates LLC (Ezralow Co) - 2000-06-19I G rP\j �. OWNER PARTICIPATION AGREEMENT By and Between REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, Agency, and IIUNTINGTON CENTER ASSOCIATES, LLC, Participant. kian3s No IONJINII14 30 A 113 60 :Z Nd Z 1 100 Soot (13A1303U TABLE OF COYTENTS Page ARTICLE 100. SUBJECT OF AGREEMENT § 101. Purpose Qf-Agme.ment ............................. .......... I § 102. ThcJlcdcY-cWp.mcnt Pla...................................... I § 103. The Pr.Qject-Area ..... . .................. . .... .... ... ..... I § 104. Deschptionof.thc-Site........................................ 1 § 105. Panics -to LbLAgreement...................................... 2 § 105.1. The Agency................................................2 § 105.2. The Participan!.............................................. 2 § 105.3. Change in Owoership. Management and ConttQLof-Eanicipant ........ 2 § 105.4. No Third Pany_Bencficiary .................................... 3 ARTICLE 200. METHOD OF FINANCING ..................... ............. 3 § 201. Fusibility Gap Payments ..................................... 3 § 202. Submission_of Evidence oFFinancing ............................ 4 ARTICLE 300. ADDITIONAL PARCELS .................................... 9 § 301. Acquisitian-of_AdditionaLParc-els_Within.Site ..................... 9 § 302. Terms for Agency Conveyance of Additional Prop-eriies ............. 9 § 302.1 Escmw....................................................9 § 302.2 C-wmeya=e_of Title aad-D-ehyery_of P-ossession .................. 12 § 302.3 Form of Deed..............................................13 § 302.4 Condition of LUC........................................... 13 § 302.5 Time and Place-f.dtf2eIiv-ery.of4ccd ........................... 13 § 302.6 Conditions-recedent_to. Close ofFErow ........................ 13 § 302.7 Title-Insurance.............................................15 § 302.8 Occupants of the Additional Properties .......................... 15 § 302.9 Condition the-AdditiQnal.PtQperties .......................... 15 § 302.10 Indemnity............................I....................15 § 303. Intentional y Omitted ........................................ 16 § 304. Participant to Advance Acquisition and RelautimCosts ........... 16 § 305. Letter of Credit to Agency .................................... 17 ARTICLE 400. REDEVELOPMENT OF THE SITE ............................ 18 § 401. ScQne of Redevelo ment..................................... 18 § 402. Specific Plans and CQnditional..l.lse_P.ermiU ...................... 18 § 403. Cost of Redevelopment ...................................... 19 § 404. Reciprocal Easement Agr=,n= ............................... 19 § 405. Schedule of Perfonamu..................................... 19 § 406. Indemnification and Insurance ................................. 19 § 406.1. Indemnification:. Bodily Ina and-Progeny-ammage_lnsurance ...... 19 § 406.2. Environmental Indemnity .................................... 22 § 407. Nondiscrimination duringC4nsltuetion ......................... 23 § 408. Loc"alc."md_EederaUaws................................ 23 § 409. City and -Other Govcrnmental.Agency-Permils .................... 23 § 410. Prolubilion Against Transfer .................................. 24 § 411. No. Encumbrances-cxcept Mortga Cony-ey_anc.es and -Leases -Back or Other Conveyance fQr Einancing_for Redeve.lopment................................. 27 § 412. Holder Not.Obligated to_Constmct_1mpmcments_ Rig t to Cure ..... 28 § 413. Release oLC_onstruction Covenants ............................. 28 ARTICLE 500. USE OF TI iE SITE ......................................... 29 § 501. Uses.....................................................29 502. Intentionally-Qm=-d........................................ 31 503. Maintenance aLthc Site ...................................... 31 § 504. Obligation to Refrain from Discrimination ....................... 32 § 505. Form of Nondiscrimination and Nonsegregation Clauses ............ 32 § 506. Agreement Containitlg`Covenants Affecting Real Property .......... 33 § 507. Effect and Duratlmon-o ovenanis ......................... . .... 33 ARTICLE 600. SPECIAL PROVISIONS. . .... m- ........ M .............. ... 33 § 601. Agency, Participation Payment ................................. 33 602. HuyoutProvisions..........................................34 ARTICLE 700. DEFAULTS, REMEDIES AND TER1MINATION ..................... 35 § 701. Defaults - General .......................................... 35 § 702. Remedies and Rights of Termination ........................... 36 § 702.1 Termination b�Agencv ........... I ................ I ......... 36 § 702.2 Termination by Participan ................................... 37 § 703. Effect of_ViQlation of theserms_and-Pmisions of this Agreement After Completion of Redevelopment ................................ 38 § 704. Institution of Legal Actions ................................... 38 § 705 Acceptance of Service of Process .............................. 38 ARTICLE 800. § 801. § 802. § 803. § 804. § 805. § 806. § 807. § 808. § 809. § 810. § 811. § 812. § 813. § 814. § 815. § 816. GENERAL PROVISIONS ................................... 39 Notices. Demands.and Communications Between the Parties ........ 39 Nonliability of Officials and Employees of AgenU ................ 39 Remedies-NoLExclusiy-e-and-Wai5r_ers ........................... 40 Timc,of_the Essence ......................................... 40 Litigation and_Complia=.................................... 40 Participant,F. arranties...................................... 40 Modification ofAgmement................................... 41 Enforud.Delay............................................41 Conflict of interests ......................................... 41 WarrantyAgainst Payment of Consideration for Agreement ......... 41 Inspection of Books and Records .............................. 41 Relationship of the Parties .................................... 42 Interpretation of Agreement ................................... 42 Further-Assurances.........................................43 Binding_Effect.............................................43 Applicable Law............................................43 ARTICLE 900. ENTIRE AGREEMENT, WAIVERS AND AMENDMENTS ... I ........ 43 m ARTICLE 1000_ TIME FOR ACCEPTANCE OF AGREEMENT BY AGENCY ..... _ ... _ 44 ARTICLE 1100. EFFECTIVE DATE OF THIS AGREEMENT ....................... 44 iii ATTACHMENTS Attachment No. 1 - Site Map Attachment No. z - Legal Description of the Site Attachment No. 3 - Schedule of Performance Attachment No. 4 - Scope of Development Attachment No. 5 - Form of Agreement Containing Covenants Affecting Real property Attachment No. 6 - Form of Release of Construction Covenants Attachment No. 7 - Schedule of Feasibility Gap Payments Attachment No. 8 - Form of Grant Deed Attachment No. 9 - Form of Guaranty Agreement Attachment No. 10 - Cooperation Agreement iv ATTACHMENT NO. 1 SITE MAP [behind this page] N111be leap SEE 51E'CIAL PAGE 14? - 079 FOVP FEE rl rt f ASSFnAffWr Arl.OW 9.)W4CLr sr/7, Sty..", r,ss. Pliw 4p 30 31 AM 6 reaw" M n as .c ' Kl/f..r r CEr IfM ylrJ c L ii / 00 Ic + - raj 'n Jr --wr -- — twr •Y 1 �0. N . Eon 32 A►AAICH 196t . . q 'Ili NOTE - ASSESSOR'S ROCK a PANEL AXAkW ,f SAOV" TM cigars btootgomaywaaraod 45SESSOR'S MAP S0004I Ali[ Sr.7 ( 7 CaArry OF ORAMBF ATTACHMENT NO. 2 LEGAL DESCRIPTION OF SITE [behind this page} ORDER NO- : 9910472-45 PARCEL A Parcels 2 through 9 inclusive of Parcel Map No. 86-200, in the City of Huntington Beach, County of Orange, State of California, as shown on a map recorded in Book 255, Pages 40 to 45 inclusive of Parcel Maps, in the office of the County Recorder of said County. Except those portions of Parcel A (being portions of said Parcel 4 and 9) conveyed to the City of Huntington Beach, a municipal corporation by deed recorded May 1, 1991 as Instrument No. 91-209426 of Official Records. Also except that portion of Parcel A lying below a depth of 500 feet, measured from the surface of said land. Also except from a portion of Parcel A (being Parcels 4, 5, 6, 7. 0 and a portion of Parcel 2) an undivided 55% interest in all the land lying more than 500 feet below the surface, but none of the land lying above a depth of 500 feet below the surface of the lands with no right of surface access or use of the lands lying more than 500 feet below the surface, hereinafter referred to as 'said land' for the purposes of exploring and prospecting for (by geological, geophysical and all other means whether now known or not), drilling for, producing, savings, taking and owning oil, gas, asphaltum and other minerals, whether similar or dissimilar to those herein specified and including fissionable materials collectively hereinafter referred to as •said substances' in, under or that may be produced from said land, together with all rights, privileges and easements useful or convenient for operations in said land, in adjacent or contiguous lands, and in other lands in the same vicinity, including, but not limited to: (1) Subsurface rights of way for drilling, repairing, redrilling, deepening, maintaining, operation, abandoning, reworking and removing wells to, in, into and through said land. (21 The right to conduct operations by methods now known or unknown which are reasonably designed to benefit or facilitate the drilling for, or production of said substances from said land. (3) The unrestricted and exclusive right, power and authority to produce said substances beneath or recoverable from said land, and to exercise all other rights and privileges herein net forth by means of any well or mines which are slant drilled from surface drill sites located on such other lands and the producing intervals of which are bottomed in said land; and ORDER NO.: 9910472-45 (Continued) (4) The right to drill a well or wells or use any existing wells, to, in, into or through said portion of said land, for the purpose of injecting into said portion of said land, or into other lands, oil, gas, air, water or other liquid or gaseous substances, including the right, from time to time to ignite or otherwise activate any or all of such substances so injected or any or all of said minerals and materials described herein within said portion of said land or other lands, reserved in deed recorded April 4, 1986 as Instrument No. 86-136183 of Official Records and re -recorded August 13. 1986 as Instrument No. 86-360236 of official Records. PARCEL B: Easements for ingress and egress. automobile parking, pedestrian uses, installation, operation and maintenance of separate and common utility lines, structure support, signs and other shopping center uses, all as more particularly defined and described in that certain Construction, Operation and Reciprocal Basement Agreement recorded August 4, 1965 in Book 7617, Page 539 together with amendments recorded in Book 11087, Page 1770; Book 11091, Page 983 and as Instrument No. 87-406989 all of Official Records. .s- site #21 Huali=11 Beach Mall 7777 9er Ave HunticWoa Beach. CA PM=L 1, IN TUC CITY OF WMiTZWQTW BE&=, COUWff OF ORAM, MTV OF CMAXPOUTA, Of aARCxL KAP lM. @4-100 AS PtR NAP R=114= IN BOOR its PAOEs a0 THRODU 45 INC=,SIVli OF PAACUP MAPS IN rAZ OFFICE OD T= CUZAF!>r XZCORM of SAID CC&=Y . SXC>:P "m TRmaz Rom TliM pVILDllios. 9'Z7tt cmu AND wiavLImn (I2iim=ixa sum-SVRFACC MUCiuM AND FOZ MULTICK9 BUT wr INCS. M00 STam sew= An ARUM DRAIN31 AS W -11 m IN A CO1t4SYA?l t PROM WONTGO OMY P D A><Y><LOj"CpT CORPORAT1094 A iDZLA39M CORPOAASZ09, DATBD VOVYli = 14, l971 R.RCOSD NW42 ImR 30, 1273 Ili BOOK 10448 TAU iss OF OFFICIAL WORDS. ALSO sxC9VT TRRT PORTIOS TVZmOF LYING aUIDN A DBPTR OF s00.00 MA MPJURED FROM TbM SU"=5 OF SAID LAND. " R222RNIM IN THN ON= PROM JJMIMOTWi CMU. A DAATIr> 3ZXP COMBO OF XU"T=Q 0w BRADS C"ANY. A CALIFOR u CflRPOUATION An CORAL. 1W►LTY CO".. A >silIVADA COMPATtOtt. QVALIFZSD TO DO BUSOUS = T» 0ahotx Or CA;.IFCILQIA, Rmcoam Afl00i'Z,' 14, 1145 IN W)OR 1617 PALM 324, OFFICIAL RZQORVV . PARC&L B i A= SVZLDIMM, STLSIi.`l M AMD DMVROVRMMMS UNC..LVDING 602-8ilrl = BTRUC WM AM lDWfDAmim ! XOT 11OT xwm=ZP0 9TOM MISS An AM DRAM) ;11zmfn Qi Tu FOLZ.ONZ#0: 1tSRM 1. xv ?w CXTV OF p1tw Malm umm. COMM or ORAM. STAn of CALI7OMA, OF PARCH. 1W NO. 85-200 AS 992 fW R WIWW of MM 755 VAOSS 40 'iEROUGE 45 ZMCLDBT" OF PA=L NUB IN TU CMCI 01 T$ COVA" 220MU OF U= c cwff. FARat C I zRSZl B FOR Il>==S. 9=09, AVFCN = FAAKW, P'JmiiTR M =U, IMSTAIAA=*K, QVXR IW Alm I Ia. II&ISC MC3 OF SMUTS AM 0D WX ZTCMM LDS. STROC =X SUPPORT, S14les Ah0 07=2k A=Vr M C!Stl T am I ALL " nm PARTIMMMY UNTD iD AM DM OM= ZV T>iAT CJQ=7 M CiRly't1AGnOr.. OWWATZOK Allen AMPROCRL ZPAMW AGRZX14W R:+CDRDSO AUMT 4, INS SK *= 7611, Vh= !19 T arri A 1f=SR AtOWNU lRS USCoIWBD = BOOK U487, PAOs 1770. Z11 DOOM 11091. PAW 913 AND AS INSTIMCi! VO. 57-409189 AZZa Of OFFICIAL PJMXW=. AFR R6030 0MM. MA L TO G W-I%O TiT'LE NURAN m 00. ATft LORMA KAW 1?I K CLARK sT • lNl.O: OW CHWAGO it ifs+ OsWer:-00038026 ABsorAption. 2000.216387 F&qe 24 of 24 Co t: ZO 'd 'ON xyj W 2:II 11W 00OZ-I0-AS ATTACHMENT NO. 3 SCHEDULE OF PERFORMANCE [behind this page] ATTACHMENT NO. 3 SCHEDULE OF PERFORMANCE Submission- Gua anty_Agreement. Participant shall submit Guaranty Agreement to Agency pursuant to Section 105 2 (b) of this Agreement. Prior to Agency's execution of this Agreement. 2 Submission - Ooginal—Lelter—of Credit. Not later than 30 days after the date of Participant shall submit Original Letter of Agency's determination to Acquire Credit to Agency pursuant to Section 305 of Additional Properties by authorizing this Agreement. Agency staff to initiate negotiations to acquire such properties, if any. 3 Submission - vidence of Financing. Not later than 180 days after the date of Participant shall submit to Agency for approval this Agreement. the evidence of financing referred to in Section 202 of this Agreement. 4 AnprovA - vide of Financing. Agency Within 30 days after receipt by Agency. shall approve or disapprove evidence of financing. 5 Sul?missiQlL=JLojecLB.udgel. Participant shall Concurrently with submission of Evidence submit to Agency for approval or disapproval a of Financing. proposed Project Budget pursuant to Section 202 of this Agreement. b Apt aL- ProjesdCost Rudgel. Agency shall Within 30 days after receipt of proposed approve or disapprove the proposed Project Project Budget. Budget. 7 Submission -Applications for DemolitiQn. Not later than 180 days after the date of Grading and Excavation Permits. Participant this Agreement. shall submit to City for approval applications for demolition, grading and excavation permits and related documents. 8 Entitlements and Approvals. Participant to Not later than 180 days after the date of obtain all entitlements and approvals necessary this Agreement. for the redevelopment of the Site. Schedule of Performance l r- 9 10 11 12 13 Commctuemcnt_oLS&n!,truUl on. Participant shall commence the work and improvements required for redevelopment of the Site. Compl6on KCDnstructwn. Participant shall complete construction of all improvements. Certificate .of Occupancy. Participant shall obtain a certificate of occupancy from City for the redeveloped Site. Release of Construction Covenants. Agency to execute Release of Construction Covenants approving completion of redevelopment pursuant to this Agreement and terminating Guaranty Agreement. Over_ a ►nt g Commencement Date. Participant's obligation to make Agency Participation Payments pursuant to Section 601 of this Agreement commences. Agency's obligation to make reimbursement payments to Participant pursuant to Attachment No. 7 commences. NOTES: Within 210 days after the date of this Agreement for grading. Within 270 days after the date of this Agreement for vertical improvements. Not later than 24 months after commencement of construction of vertical improvements. Not later than 27 months after commencement of construction. Upon Participant's completion of redevelopment of the Site pursuant to this Agreement and Participant's written request for a Release of Construction Covenants. The last to occur of either the date of issuance of a Certificate of Occupancy by the City for the redeveloped Site, or the opening for business to the general public of the first -quality shopping center required to be redeveloped by this Agreement. 1. Deadlines set forth in this Schedule of Performance are subject to the enforced delay provisions of Section 808 of the Agreement. 2. Extensions may be approved in writing by the Agency's Executive Director pursuant to the Agreement. 3. Descriptions of items of performance and deadlines in this Schedule of Performance are not intended to supercede more complete descriptions in the text of the Agreement; and in the event of any conflict between the text of the Agreement and this Schedule, the text of the Agreement shall govern. krc&b%centeftop L4 Schedule of Performance 2 ATTACHMENT NO. 4 SCOPE OF DEVELOPMENT [behind this page] SMPE_OF DErVELOPMENT The Site shall be developed into a first -quality regional shopping center pursuant to plans approved by the City and meeting the design and architectural standards of that certain Specific Plan initially adopted by Resolution No. 2000-68 on July 5, 2000. k_kglhbkrnterluope 1-3 ATTACHMENT NO. 5 FORM OF AGREEMENT CONTAINING COVENANTS AFFECTING REAL PROPERTY [behind this page] OFFICIAL BUSINESS Document entitled to free recording per Government Code Section 6103 Recording Requested By and When Recorded Mail to: Redevelopment Agency of the City of Huntington Beach City Hall 2000 Main Street Huntington Beach, California 92648 SPACE ABOVE THIS LINE FOR RECORDING USE This AGREEMENT CONTAINING COVENANTS AFFECTING REAL PROPERTY (this "Covenant Agreement") is made and entered into by and between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic (the "Agency") and HUNTINGTON CENTER ASSOCIATES, LLC, a Delaware limited liability company ( the "Owner") with reference to the following: A. Owner holds fee title to that certain real property shown on the Site Map attached hereto as Exhibit A and incorporated herein by this reference, and which is more particularly described in the legal description attached hereto as Exhibit B and incorporated herein by this reference (the "Property"). B. The Property is subject to the redevelopment plan for the Huntington Beach Redevelopment Project, which was approved and adopted by Ordinance No. 2743 of the City Council of the City of Huntington Beach on November 26, 1984, and merged with certain other redevelopment projects in the City by the adoption of Ordinance No. 3343 on December 16, 1996 to form the Huntington Beach Redevelopment Project (the "Merged Redevelopment Project"). The Redevelopment Plan for the Merged Redevelopment Project (the "Redevelopment Plan") is incorporated herein by reference and made a part hereof as though fully set forth herein. C. This Covenant Agreement is made pursuant to that certain Owner Participation Agreement by and between the Agency and Owner dated , 2000 (the "OPA"), which is a public record on file at the offices of the Agency and is incorporated herein by this reference. The Property is the real property referred to in the OPA as the "Site." D. All capitalized terms in this Covenant Agreement shall have the meanings ascribed to them in the OPA unless indicated to the contrary herein. Agreement Containing Covenants Affecting Real Property Agency and Owner agree as follows: § 100 Uses of Property Owner hereby covenants and agrees on behalf of itself and any successors and assigns in the Property or any portion thereof or any improvements thereon or any interest therein that Owner, such successors and assigns shall: Develop, construct, renovate and rehabilitate improvements on the Property solely in accordance with this Covenant Agreement, the OPA, the Redevelopment Plan, and plans approved by the City. b. Devote the Property, or cause the Property to be devoted, solely to use as a first - quality regional shopping center in accordance with this Covenant Agreement, the OPA, the Redevelopment Plan, and plans approved by the City, until November 26, 2034. Beginning no later than the Operating Commencement Date, cause to be Operated on the Property until November 26, 2034, a first -quality regional shopping center meeting the design and architectural standards of that certain Specific Plan initially adopted by Resolution No. 2000-68 on July 5, 2000. All Boor area shall be Operated by retail stores of a type customarily located at first -quality regional shopping centers in Southern California. If any tenant over fifty thousand square feet (50,000) of gross leaseable area ("Major") ceases to Operate within the effective period of the operating covenants, Owner shall request the written approval of the Agency for the replacement of the Major with one or more proposed new tenants of comparable first - quality and trade name at the earliest practicable date, but in no event more than ninety (90) days after the Major to be replaced provides written notice to Owner of its intent to cease to Operate on the Property. Within thirty (30) days after receipt of Owner's request for approval, Agency shall respond in writing by stating what further information, if any, Agency reasonably requires in order to determine whether or not to approve the replacement tenant. Owner shall promptly furnish to Agency such further information as may be reasonably requested. Owner's request for approval shall be deemed complete thirty (30) days after Agency's receipt thereof, if no timely response requesting further information is given to Owner, or, if such a timely response requesting further information is received by Owner, on the date that Owner delivers such additional information to Agency, provided that such additional information is responsive to Agency's request. Agency shall approve or disapprove the proposed replacement tenant in the Agency's reasonable discretion, and shall provide Owner with written notice of its decision within thirty (30) days after Owner's request for such approval is accepted as complete or deemed complete. In deciding whether to approve a proposed replacement tenant, the Agency may consider, among other factors, the level of quality and the sales generation ability of the proposed replacement tenant and trade name. If Agency shall disapprove a proposed replacement tenant, Agency shall do so by written notice to Owner stating the reasons for such approval. "Operate," as used in this Agreement, means open to Agreement Containing Covenants Affecting Real Property the general public for business during commercially reasonable business hours, except when temporarily not open for business by reason of such reasonable interruptions as may be customary and incidental to the conduct of business at first -quality regional shopping centers in Southern California. d. Maintain the Property, or cause the Property to be maintained, in accordance with Section 101 of this Covenant Agreement. Pay when due all real estate taxes and assessments assessed and levied on the Property and any improvements thereon and refrain from appealing, challenging or contesting in any manner the validity or amount of any tax assessment, encumbrance or lien on the Property; provided, however, that such prohibition shall not apply to an appeal, challenge or contesting of an erroneous initial assessment for property tax purposes of the Property in the fiscal year of the completion of the improvements to be constructed and/or renovated pursuant to this Agreement. Not discriminate upon the basis of race, color, creed, religion, sex, age, marital status, handicap, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, or any improvements erected or to be erected thereon, or any part thereof. g. Include in all leases and subleases appropriate provisions requiring all lessees and sublessees to comply with and be bound by the applicable provisions of this Covenant Agreement. Pay when due the Agency Participation Payment in accordance with Section 601 of the OPA. i. Continue to perform all ongoing obligations of Participant under the OPA, including but not limited to those under Sections 304, 305 and 406 of the OPA. § 101. Maintenance of the Propene a. Owner shall maintain, repair and operate the Property and all improvements constructed or to be constructed thereon (including landscaping, lighting and signage), or cause the Property and all such improvements to be maintained, in a first quality condition, free of debris, waste and graffiti, and in compliance with the terms of the Redevelopment Plan, the City of Huntington Beach Municipal Code, and the following: (1) All improvements on the Property shall be maintained in good condition in accordance with the custom and practice generally applicable to comparable first quality shopping centers in Orange County, and in conformance and compliance with all plans, drawings and related documents approved by the Agency pursuant to the OPA, all conditions of approval of land use entitlements adopted by the City or the Planning Commission, including Agreement Containing Covenants Affecting Real Property painting and cleaning of all exterior surfaces of all private improvements and public improvements to the curbline. (2) Landscape maintenance shall include, without limitation, watering/irrigation; fertilization; mowing; edging; trimming of grass; tree and shrub pruning, trimming and shaping of trees and shrubs to maintain a natural and healthy appearance, road visibility, and irrigation coverage; replacement, as needed, of all plant matenals; control of weeds in all planters, shrubs, lawns, ground covers, or other planted areas; and staking for support of trees. (3) Clean-up maintenance shall include, without limitation, maintenance of all sidewalks, paths and other paved areas in a clean and weed -free condition; maintenance of all such areas clear of dirt, mud, trash, debris or other matter which is unsafe or unsightly; removal of all trash, litter and other debris from improvements and landscaping; clearance and cleaning of all areas maintained prior to the end of each day on which maintenance operations are performed to ensure that all cuttings, weeds, leaves and other debris are properly disposed of by maintenance workers. b. If the Agency gives written notice to Owner that the maintenance or condition of the Property or any portion thereof or any improvements thereon does not comply with the OPA and this Covenant Agreement and such notice describes the deficiencies, Owner shall correct, remedy or cure the deficiency within thirty (30) days following the submission of such notice, unless the notice states that the deficiency is an urgent matter relating to public health and safety in which case Owner shall cure the deficiency with all due diligence and shall complete the cure at the earliest possible time but in no even more than forty-eight (48) hours following the submission of the notice. In the event Owner fails to maintain the Property or any portion thereof or any improvements thereon in accordance with the OPA and this Covenant Agreement and fails to cure any deficiencies within the applicable period described above, the Agency shall have, in addition to any other rights and remedies hereunder, the right to maintain the Property and the improvements thereon, or portion thereof, or to contract for the correction of any deficiencies, and Owner shall be responsible for payment of all such costs reasonably incurred by the Agency. C. The Owner shall not use or permit the use of the Property in violation of (i) the Specific Plan and applicable zoning laws as they now exist or as they may hereafter be amended from time to time; or (ii) the Redevelopment Plan for the Project, as it now exists or, subject to Section 102 of the OPA, as it may hereafter be amended from time to time. Agreement Containing Covenants Affecting Real Property 4 § 102. Obligationlo_Refmin_fmm Dischnu-natian Owner hereby covenants and agrees on behalf of itself and any successors and assigns in the Property or any portion thereof or any improvements thereon or any interest therein, that there shall be no discrimination against or segregation of any person, or group of persons, on account of sex, marital status, race, color, religion, creed, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, and the Owner (itself or any person claiming under or through it) shall not establish or permit any such practice or practices of discrimination, or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees of the Property, or any portion thereof. § 103. Form -of Nondiscrimination and Nonsegregation clauses The Owner shall refrain from restricting the rental, sale or lease of the Property, or any portion thereof, on the basis of sex, marital status, race, color, religion, creed, ancestry or national origin of any person. All such deeds, leases or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: a. In deeds: "The grantee herein covenants by and for himself, his heirs, executors, administrators and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of sex, marital status, race, color, religion, creed, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land herein conveyed, nor shall the grantee himself or any person claiming under or through him, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the land herein conveyed. The foregoing covenants shall run with the land." b. In leases: "The lessee herein covenants by and for himself, his heirs, executors, administrators and assigns, and all persons claiming under or through him, and this lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons on account of sex, marital status, race, color, religion, creed, national origin or ancestry, in the leasing, subleasing, transferring, use, or enjoyment of the land herein leased nor shall the lessee himself, or any person claiming under or through him establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy, of tenants, lessees, sublessees, subtenants or vendees in the land herein leased." C. In contracts: "There shall be no discrimination against or segregation of, any person, or group of persons on account of sex, marital status, race, color, religion, creed, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land, nor shall the transferee himself or any person claiming under or through him, establish or permit any such practice or practices of Agreement Containing Covenants Affecting Real Property 61 discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the land." § 104. No Transfers No sale, conveyance, assignment, leasing or other transfer of any kind of any interest in the Property or any portion thereof or any improvements thereon, or any change in the ownership of Owner or its successors or assigns shall be permitted prior to twenty (20) years after the Operating Commencement Date, except as authorized by the express terms of the OPA. § 105. Binding Effect All obligations of "Owner" under this Covenant Agreement (and all of the terms, covenants and conditions of this Covenant Agreement) shall be binding upon Owner, its successors and assigns and every successor in interest of the Property or any portion thereof or any interest therein, jointly and severally, for the benefit and in favor of the Agency, its successors and assigns, and the City of Huntington Beach. All rights of "Owner" under this Covenant Agreement shall inure to the benefit of Owner and its permitted successors and assigns. 1.EXIM .4• •0 • • �.i The covenants contained in Sections 100 and 101 of this Covenant Agreement shall remain in effect until November 26, 2034. The covenants against discrimination shall remain in perpetuity. All other covenants shall remain in effect unless and until they expire in accordance with the express terms thereof. § 107. No Merger This Covenant Agreement shall not merge into any other agreement between Agency and Owner. M • U•II•.• i• . • Breach of any of the covenants, conditions, restrictions, or reservations contained in this Covenant Agreement shall not defeat or render invalid the lien of any mortgage or deed of trust made in good faith and for value as to the Property, whether or not said mortgage or deed of trust is subordinated to this Covenant Agreement, but unless otherwise herein provided, the terms, conditions, covenants, restrictions and reservations of this Covenant Agreement shall be binding and effective against the holder of such mortgage or deed of trust and any owner of the Property, or any part thereof, whose title thereto is acquired by foreclosure, trustee's sale, or otherwise. § 109. Svveranc& If any provision of this Covenant Agreement is determined by a court of competent jurisdiction to be illegal, invalid or enforceable, such provision will be deemed to be severed and Agreement Containing Covenants Affecting Real Property deleted from the Covenant Agreement as a whole and neither such provision, nor its severance and deletion shall in any way affect the validity of the remaining provisions of this Covenant Agreement. IN WITNESS WHEREOF, the Agency and Owner have caused this instrument to be executed on their behalf by their respective officers thereunto duly authorized. Dated: 12000 ATTEST: Agency Clerk REVIEWED AND APPROVED: Ray Silver, Executive Director APPROVED AS TO FORM: Kane, Ballmer & Berkman Agency Special Counsel AAgency= REDEVELOPMENT AGENCY OF THE CITY OF HUN'TINGTON BEACH Chairman APPROVED AS TO FORMM: Agency General Counsel INITIATED AND APPROVED: Director of Economic Development Agreement Containing Covenants Affecting Real Property 7 "Owner" HUNTrNGTON CENTER ASSOCIATES, LLC, a Delaware limited liability company By: Huntington Management Ent., LLC, A Delaware limited liability company, Its Manager By: BMLF/Huntington, LLC, A Delaware limited liability company, Its Manager Dated: , 2000 By: 0c&\hbXcenterlc0vs 1-5 Bryan Ezralow, Trustee of the Bryan Ezralow 1994 Trust Its Manager Agreement Containing Covenants Affecting Real Property EXHIBIT A SITE MAP site rza.p SEF SPEC14L PAGE 47 - 079 F09 F£F r1 rC C A55fnNFW fi-C OW A11 ALA S!/?, Ste' H, r3S. Rt1w %142• Qf . 40 30 317-1 room" .rr Ji i � U ®34 r r K oft"o, ." I mum#me O �. ww M -0 I1 ' I .O K ± i Q f`. 9r .o .c Ott •M i Sri. •nc wr►R�Y Irf IO i sar.c N .-. � � -funk• — "----.—.__�.T. .f ..--- s.} � V `e ri 13 32 E� 51 More - ASSESSOR'S ox" a ASSESSOR'S MAP MARCH r9Q1 PAAM Atm4wxs WON'M2 AR@E sC'7 !' jQQ7) ANtXi yp P r H-!r SAV" IN CIR�C!£S COWITY OF ORAMB£ (� : EXHIBIT B LEGAL DESCRIPTION ORDER NO.- 9910472-45 PARCEL A Parcels 2 through 9 inclusive of Parcel Map No. 86-200, in the City of Huntington Beach, County of Orange, State of California, as shown on a map recorded in Book 255, Pages 40 to 45 inclusive of Parcel Maps, in the office of the County Recorder of said County. Except those portions of Parcel A (being portions of said Parcel 4 and 8) conveyed to the City of Huntington Beach, a municipal corporation by deed recorded May 1, 1991 as instrument No. 91-209426 of Official Records. Also except that portion of Parcel A lying below a depth of 500 feet, measured from the surface of said land. Also except from a portion of Parcel A (being Parcels 4, S, 6, 7, 8 and a portion of Parcel 2) an undivided 55% interest in all the land lying more than 500 feet below the surface, but none of the land lying above a depth of 500 feet below the surface of the lands with no right of surface access or use of the lands lying more than 500 feet below the surface, hereinafter referred to as "said land" for the purposes of exploring and prospecting for (by geological, geophysical and all other means whether now ksiown or not), drilling for, producing, savings, taking and owning oil, gas, asphaltum and other minerals, whether similar or dissimilar to those herein specified and including - fissionable materials collectively hereinafter referred to as "said substances" in, under-. or that may be produced from said land, together with all rights, privileges and easements useful or convenient for operations in said land, in adjacent or contiguous lands, and in other lands in the same vicinity, including, but not limited to: (1) Subsurface rights of way for drilling, repairing, redrilling, deepening, maintaining, operation, abandoning, reworking and removing wells to, in, into and through said land. (2) The right to conduct operations by methods now known or unknown which are reasonably designed to benefit or facilitate the drilling for, or production of said substances from said land. (3) The unrestricted and exclusive right, power and authority to produce said substances beneath or recoverable from said land, and to exercise all other rights and privileges herein set forth by means of any well or mines which are slant drilled from surface drill sites located on such other lands and the producing intervals of which are bottomed in said land; and ORDER NO.- 9910472-45 (Continued) (4) The right to drill a well or wells or use any existing wells, to, in, into or through said portion of said land, for the purpose of injecting into said portion of said land, or into other lands, oil, gas, air, water or other liquid or gaseous substances, including the right, from time to time to ignite or otherwise activate any or all of such substances so injected or any or all of said minerals and materials described herein within said portion of said land or other lands, reserved in deed recorded April 4, 1986 as Instrument No. 86-136103 of Official Records and re -recorded August 13, 1986 as Instrument No. 86-360236 of Official Records. PARCEL 8: Easements for ingress and egress, automobile parking, pedestrian uses, installation, operation and maintenance of separate and common utility lines, structure support, signs and other shopping center uses, all as more particularly defined and described in that certain Construction, Operation and Reciprocal Basement Agreement recorded August 4, 1965 in Book 7617, Page 539 together with amendments recorded in Book 11087, Page 1770; Book 11091, Page 983 and as Instrument No. 87-406969 all of Official Records. v 1\ 1 O f r Site tF21 'gton Beach Ms!!» t Ave Huatngwn Beach, CA TAX me 142-�M-v tAP=L 1. IN 791 CZTY OF ftMMI14TCI1 BXA=. an;WPY or ORAN=. STJITC OT C11LI1'O>< xA, Or VA=1p rwr No. 64-200 AS PER MAP "COMM IN 9001 163 PAQZ2 40 THROWX 45 IN=SIVI Or FAACXL. KUS IN rXX OFrICS Or TRZ QOUWrY JtXC3RDsil Or SAID COUNTY. EXCCSPTXM TARRZrR014 TK2 81TII0=08, MUCTt7i" AM a4PIl70ggm tII1LLuDINU Stm-suRTAQ 3T umISs An YoubMTIONS auT bvr tItCL[T nm STOVX 6twzu mm ARRA DRAMS) As 16:tst'4 IN A COWMYA?tCs PROM WCW7VaMOIY WARD DV4=M=& CO PORAUCK, A 13NI.AI111>!R C OPORATION, M90 WOVUH >Ol 14, 1972 RSC0'JU= WOVE ER 30, 1972 IN 300% 10441 PAOs 669 OF OFFICIAL AWOMS . ALSO EXC"? TRAT VCATIOIT nC[R 'Or LYING StLOW A MPTZ 01 $00.00 1�4 MASUXED FRW TU SUI<IrMX O1 $A= L%VM, AS Rn2R«D IN Tmt Dl= TROK KWrINGTW CpMM, A VAgTWXU IP MPOSM OF 1[=rXNL1M 11WWH COMRPANY, A CALITORM COAPOMTIol6 AM CORAL UALTY CO".. A NTVM A CORPORATION. QST IrZ= TO DO SUS13=3 Z WS MTA or QW1VC8M. RSCol = AMMST 14, 1565 IN BWX 7617 PAUX 334, DIZICIAL RALDROa. PARC>r,1. L t ALL Z9XLD]3M* M C'lt W WC XMPROV>DCWTS (ZVCt2 ZM 9U#-SURIm3 STRUCTU S Alm r041�t=I=sl IWT mr halo rmmc Rs1ISRs Am AM OpAxls) slYOATs>9 OK as IQ%.0 =o: P> am 1. IN T= CZTY or 1tflnzwr01t Nam, c0mg or Damn. $?An Of CALI70MM, Or PARA= NO U0. 49-19Q As Vn PIAa AX=WW nt loos; 251 VAa= 40 TEROM 46 W, :L I ><vs Or PA CAL HUB IN UM OTf=Cs O1► TO C UMN ssCDMM Or 811=D coarertt. iAstsL C t misn m'!s m nmms. mus. IImuma= mmm. psflmlA2m us. VASTAtdd1 ON, OVZXAIIM Asa valump011!m Or SWMAU AM CMM URI M LDffw9, sT:flm= suppmT, slow no Or= sIIOPPmm m"m ==, ALL " "m PAI "emA my comet Am DRSWo m IN =hT CS uXV C'AMSTROC4 (we OIt1 RTIM AM 1=1990= WUUW k= A=XW= RPWIlM At] NT 4, loss 2N 320-1 7617, F>AU 239 T00tTUR Ir=Z7t A 0=00rTs 2=303b IN BOOK 12017, VAO* 1770, IN W= 11091, PA= 963 AND As VMT9= Wr 90. 67-404989 ALG Of OFFICIAL R20MG. AFTER R10=0 . W& To: GHr-4Q0 Mg MUNW4CE oo. ArM LoFtMA KW I" N. CLARK V - K4Zr OW CHWAW 1t W%n4 Ards:-00038020 .Dsmaslptfon: 2000.216J87 FjqM 24 of 24 Commmt, -- -- ZO A 'ON xvj SOH 011 1 �u 002-10-d3S STATE OF CALIFORNIA COUNTY OF ss. ) On , 2000 before me, _ _.. , personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature STATE OF CALIFORNIA ) ss. COUNTY OF On ._-._._ , 2000 before me, , personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature ATTACHMENT NO. 6 FORM OF RELEASE OF CONSTRUCTION COVENANTS [behind this page] Recording Requested By and When Recorded Mail to: Huntington Center Associates, LLC C/o The Ezralow Company, LLC 23622 Calabasas Road, Suite 100 Calabasas, California 91302 Attention: Ms. Cristina Agra -Hughes SPACE ABOVE THIS LINE FOR RECORDING USE EFLEASE QF CONSTRUC LON OOVENANT� WHEREAS, HUNTINGTON CENTER, LLC, a Delaware limited liability company ("Participant") is the owner of certain real property situated in the City of Huntington Beach, California described in Exhibit A which is attached hereto and made a part hereof (the "Property"), and has agreed to rehabilitate, renovate and construct certain improvements thereon (the "Improvements"); and WHEREAS, pursuant to the Owner Participation Agreement ("OPA") dated , 2000 entered into by and between the Redevelopment Agency of the City of Huntington Beach (the "Agency") and Participant, the Agency has agreed to furnish Participant with a Release of Construction Covenants ("Release") upon the completion of the redevelopment of the Improvements pursuant to the OPA, and such Release is to be in such form as to permit it to be recorded in the Recorder's Office of Orange County; and WHEREAS, the OPA states that the Release shall be conclusive determination of satisfactory completion of the rehabilitation, renovation and construction of the Improvements as required by the Scope of Development (Attachment No. 4 of OPA) and Sections 401 and 501 (a) and (b) of the OPA; and WHEREAS, the Agency has determined that the rehabilitation, renovation and construction of the Improvements, as defined in the Scope of Development and Sections 401 and 501 (a) and (b) of the OPA, has been satisfactorily completed in accordance with the requirements of the Scope of Development and Sections 401 and 501 (a) and (b) of the OPA; and NOW THEREFORE, it is hereby acknowledged and agreed by the parties hereto that: 1. The Agency does hereby certify that the rehabilitation, renovation and construction of the Improvements on the Property has been fully and satisfactorily performed and completed as required by the Scope of Development and Sections 401 and 501 (a) and (b) of the OPA, and that Participant has fully complied with the terms of the Scope of Development and Sections 401 and 501 (a) and (b) of the OPA with respect to such redevelopment of the Property. Release of Construction Covenants 1 All covenants set forth in the OPA and the Agreement Containing Covenants (Attachment No. 5 of OPA) remain in effect in accordance with the terms thereof. IN WITNESS WHEREOF, the Agency has executed this Release this _ day of , 2000. Dated: ATTEST: Agency Clerk .2000 REVIEWED AND APPROVED. Ray Silver, Executive Director k `•cg`.hblecnterVelease 1.2 REDEVELOPMENT AGENCY OF THE CITY OF IIUNTINGTON BEACH Chairman APPROVED AS TO FORM: Agency General Counsel INITIATED AND APPROVED: Director of Economic Development Release of Construction Covenants i] EXHIBIT A STATE OF CALIFORNIA COUNTY OF On personally appeared ss. — 2000 before me, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature ATTACHMENT NO. 7 SC14EDULE OF FEASIBILITY GAP PAYMENTS [behind this page] SC HDULFOF EASIBIL TAP P_AYAMNIS PART 1 (APPLICABLE ONLY IF WARD PARCEL IS PART OF SITE) (a) Applicability_of.I'_aLt1. This Part 1 of this Attachment No. 7 shall apply only if the Ward Parcel is included in the legal description of the Site and is redeveloped pursuant to the Owner Participation Agreement by and between Agency and Participant dated as of 2000 ("OPA"). This Part I shall not apply in the event the OPA is terminated as to the Ward Parcel pursuant to Section 702.1 (b) or 702.2 (c) of the OPA. Regardless of whether or not the OPA is terminated as to the Ward Parcel pursuant to Section 702.1 (b) or 702.2 (c) of the OPA, Participant shall use its best efforts to cause the replacement of the exterior of the Ward Parcel building and renovation of the Ward Parcel parking lot in accordance with City approved plans, in order to ensure that such Ward Parcel building and parking lot conform with the redevelopment of the Site. Alternative provisions for feasibility gap payments, which exclude the Ward Parcel from the legal description of the Site, are set forth in Part 2 of this Attachment No. 7. Any amounts paid by Agency pursuant to Part 1 shall be credited on a dollar -far -dollar basis against Agency's obligations under Part 2. (b) Reimbursement. Subject to all of the terms and conditions of the OPA (including, without limitation, the provisions of paragraph (d) below limiting the Agency's payment obligation hereunder to particular sources of funds), the principal amount reimbursable by the Agency to Participant during the Reimbursement Term under this Part l shall be Sixteen Million Seven Hun&e�Land_Eif y T au=d_Dolliti($16 MO-00), to pay for the following: demolition, clearance, site preparation, public improvements, utilities and facilities, and acquisition of land and easements, and all other legally permissible items reimbursable to Participant. (c) Interest Rate. The principal amount of this Part 1 shall bear interest at the rate of eight percent (8%) per annum from the Operating Commencement Date (hereinafter defined) until paid, subject to the following: The eight percent (8%) interest rate shall be adjusted in the event the City issues Community Facilities District bonds pursuant to paragraph (f) below in the following manner: to the extent the proceeds of such bonds are equal to or greater than the amount owed by Agency under this Part 1, the interest rate shall be eight percent (8%) minus one-half of the difference, if any, between eight percent (8%) and the True Interest Cost of the Community Facilities District bonds ("Adjustment Formula"). For example, if the bonds are sold at six percent (6%) True interest Cost, then the interest rate to be paid by Agency under this Part 1 shall be seven percent (7%) (calculated as 8% minus one-half of 2%, i.e., the difference between 8% and 6%). To the extent the net proceeds of such bonds are less than the amount owed by Agency under this Part 1, the Adjustment Formula Attachment No. 7 Schedule of Feasibility Gap Payments shall be prorated according to the amount of such bond proceeds. For example, if a total of S 13,750,000 in bonds are sold at 6% True Interest Cost, then Agency shall be required to pay 7% interest on 513,750,000 of the amount owed, and 8% interest on the remaining 53,000,000 of the amount owed. "True Interest Cost" as used herein means the rate, compounded semi-annually, necessary to discount the amounts payable on the respective principal and interest payment dates to an amount equal to the par amount of the bonds, less underwriter's discount (including original issue discount) and transaction costs. In no event shall the principal amount of this Part 1 bear interest at a rate over eight percent (8%). (d) Qbligadon to Make Payments. The obligations of the Agency under this Part 1 shall be special and limited obligations payable to Participant solely from the sources of funds expressly identified in this Part 1. The Agency shall have no obligation to pay any amounts to Participant pursuant to this Part l except as follows: (1) UndiLom-Precedent. The following conditions precedent to each payment hereunder shall be satisfied: A. The Completion Date, as defined in paragraph (k) below, shall have occurred; B. The Operating Commencement Date, as defined in paragraph (k) below, shall have occurred; and C. Participant shall be not be in default of any of its material obligations under the OPA. (2) Available Sitt-_Gncrated. PropertyTax Increment. On or prior to September 30 of each year, beginning with the first September 30 which follows the satisfaction of all conditions precedent specified in paragraph (d)(l) above, and continuing until the principal amount specified in paragraph (b) above (and any accrued interest thereon) has been paid in full or until the twentieth (201h) anniversary of the Operating Commencement Date, whichever first occurs, the Agency shall calculate and pay to Participant an amount equal to the lesser of (i) seventy percent, (70%1 of Available Site -Generated Property Tax Increment received by the Agency during the pnor Fiscal Year (July 1-June 30), or (ii) such portion of such Available Site -Generated Property Tax Increment received by the Agency during the prior Fiscal Year that is sufficient, when added to the Available Site -Generated Sales Tax during the prior Fiscal Year, to repay all funds owed by Agency to Participant pursuant to this Attachment No. 7, plus 8% interest (adjusted pursuant to paragraph (c) above in the event the City issues Community Facilities District bonds), within a twenty (20) year amortization period. "Available Site -Generated Property Tax Increment" means the total ad valorem property tax Attachment No. 7 Schedule of Feasibility Gap Payments 2 increment revenue allocated to and received by Agency in any fiscal year pursuant to Section 33670(b) of the California Health and Safety Code, as said statute may be amended from time to time, by application of the one percent (1%) tax levied against real property as permitted by Article XIIIA of the California Constitution, in an amount equal to any increase in the assessed value of the Site over and above an assessed value of Fly Two Milliotione Hundred and Fifty -Three Thousand Dollars (552.153.OM, but specifically excluding therefrom all of the following: (A) a portion of such tax increment revenues equal to the twenty percent (20%) of tax increment revenue from the redevelopment project area as a whole that is set aside pursuant to Sections 33334.2 es seq. of the California Health and Safety Code or any successor law for low- and moderate -income housing purposes; and (B) a portion of such tax increment revenues equal to the percentage of tax increment revenues from the redevelopment project area as a whole that the Agency is required to pay to any and all governmental entities pursuant to any provision of law, as amended from time to time, or pursuant to tax sharing/pass-through agreements entered into prior to the OPA by the Agency and such governmental entities implementing the tax sharing/pass-through agreements; and (C) a portion of such tax increment revenues equal to the percentage of tax increment revenues in the redevelopment project area as a whole which the Agency may be required by the State of California to pay from time to time, including, for example, and without limiting the generality of the foregoing, any payments which the Agency may be required to pay to the Education Revenue Augmentation Fund pursuant to Section 33681 et seq. of the California Health and Safety Code; and (D) the amount of any revenues received by the Agency which are attributable to any special taxes or assessments or voter -approved indebtedness; and (E) charges for County administrative charges, fees or costs equal to the percentage of such charges in the Project Area as a whole. (3) Available Site -Generated Sales Tax. On or prior to September 30 of each year, beginning with the first September 30 which follows the satisfaction of all conditions precedent specified in paragraph (d)(1) above, and continuing until the principal amount specified in paragraph (b) above (and any accrued interest thereon) has been paid in full or until the twentieth (20'') anniversary of the Operating Commencement Date, whichever first occurs, the Agency shall calculate and pay to Participant an amount equal to the lesser of (i) seventy percent (70%) of the Available Site -Generated Sales Tax received by Agency during the prior Fiscal Year (July I -June 30), or (ii) such portion of such Available Site -Generated Sales Tax received by the Agency during the prior Fiscal Year that is sufficient, when added to the Available Site -Generated Property Tax Increment during the prior Fiscal Year, to repay all funds owed by Agency to Participant pursuant to this Attachment No. 7, plus 8% interest (adjusted pursuant to paragraph (c) above in the event the City issues Community Facilities District bonds), within a twenty (20) year amortization period. "Available Site -Generated Sales Tax" as used herein shall mean not more than seventy percent (70%) of the sales tax revenue actually received by the City in any fiscal year as the City's share of sales tax revenue generated by the Site on or after the Operating Commencement Date in an amount in excess of Eight Hundred and ollars ($890,040) in such fiscal year and paid to the Agency pursuant to the Cooperation Agreement by and between the City and Agency of even date herewith (Attachment No. 10 of OPA). Attachment No. 7 Schedule of Feasibility Gap Payments 3 (4) RecalculationAYailab.ic_Site-C.encrated Prone rty-Tax✓Increment_and Available_Site-Gencrated gale-, ax. The annual sum of Available Site -Generated Property Tax Increment and Available Site -Generated Sales Tax that is sufficient to repay all funds owed by Agency to Participant pursuant to this Attachment No. 7, plus interest, within a twenty (20) year amortization period, as provided for in paragraphs (d)(2) and (d)(3) above, shall be recalculated prior to each September 30 during the 20-year amortization period to account for all of the following: (A) prepayments of Agency's obligations pursuant to paragraph (e) of this Attachment No. 7; (B) any annual payment by Agency less than the amount sufficient to fully amortize the payments due to Participant over a 20-year amortization period based upon the amortization schedule then in effect; and (C) any adjustments in the Project Costs after the date that the amortization schedule then in effect was prepared. (e) Prepayment. Agency's obligations hereunder may be prepaid by Agency, in whole or in part, at any time and from time to time without penalty, from any funds lawfully available to Agency for such purposes, including, but not limited to, grants obtained for public improvements (such as, for example, a State of California grant for freeway off -ramp construction). In the event Agency is prohibited by the terms of any such grants and/or funds from transferring the grants and/or other funds directly to Developer as prepayment hereunder, Agency may use such grants and/or other funds directly to pay for all or a portion of the items listed in paragraph (b) above, and the amount expended by Agency by the use of such grants and/or other funds shall be counted toward the prepayment of Agency's obligations hereunder. (f) Issuance of Bonds. Agency and Participant shall use their reasonable best efforts to cause City to consider the issuance of Community Facilities District bonds or similar instruments secured by a special tax on Participant's title to the Site and the improvements to be constructed thereon pursuant to the Agreement to fund eligible public improvements, if the Agency determines that such an issuance is feasible and would not adversely affect the financial objectives of the Agency or the City. Participant shall, separate from any other advance or payment from Participant to Agency pursuant to the QPA and this Attachment No. 7, advance to Agency the amounts necessary for appraisals, consultants, bond counsel, and other costs of issuance related to any such Community Facilities District bonds or other similar instruments, with such costs being reimbursable to Participant from bond proceeds to the extent legally permissible. In the event of an issuance of Community Facilities District bonds or similar instruments, Participant shall pay all special taxes (and any related penalties, costs, fees or other charges) due in connection with such bonds or similar instruments and shall be in full compliance with all of its other obligations in connection with such bonds or other instruments. The Agency shall have no obligation to reimburse Participant for debt service, repayment of principal or interest, penalties or any other amounts due in connection with the bonds or similar instruments, including but not limited to any amounts which may become payable as a result of Participant's failure to pay special taxes and/or to timely perform Participant's other obligations thereunder. The Agency's payment obligations under this Attachment No. 7 shall not be pledged to payment of the bonds or similar instruments, and the Agency shall have no obligation to the bondholders or any third party in connection with such bonds or similar instruments. Attachment No. 7 Schedule of Feasibility Gap Payments 4 (g) Suboidina.tion. The Agency's obligation to pay Available Site -Generated Property Tax Increment in accordance with this Part I shall be subordinate to the Agency's existing bonded indebtedness and bond issuance(s) and the refunding or refinancing thereof and any future bonds the Agency may issue and the bonded indebtedness incurred in connection therewith, provided that at the time of issuance of any such future bonds, (i) Agency provides to Participant a fiscal report prepared by a qualified independent fiscal consultant demonstrating that the gross annual Available Site -Generated Property Tax Increment, less the amount of such Available Site -Generated Property Tax Increment paid to Participant, is equal to or greater than one hundred and ten percent (1 l0%) of the total bonded debt service for both the existing and proposed bonds, and (ii) the Agency reasonably determines that such issuance and indebtedness will not materially adversely affect the Agency's ability to perform its obligations under this Part 1. Bonded indebtedness includes any indebtedness incurred by the Agency for bonds, notes, interim certificates, debentures, certificates of participation or other obligations issued by the Agency. The Agency's obligation to pay a portion of Available Site -Generated Property Tax Increment to Participant under this Part 1 is not and shall not be construed as a "pledge" of property tax revenues for purposes of Section 33671.5 of the California Health and Safety Code. In the event Available Site -Generated Property Tax Increment is received by Agency and is not reimbursed to Participant during any Fiscal Year pursuant to this Attachment No. 7 by reason of the diversion of such Available Site -Generated Property Tax Increment to repay senior Agency bonded indebtedness to which such tax increments were pledged (the "Diverted Tax Increment"), then, in the following fiscal Year, in addition to paying to Participant seventy percent (70%) of Available Site -Generated Property Tax Increment owed to Participant for that Fiscal Year, Agency shall draw from the remaining thirty percent (30%) of Available Site -Generated Property Tax Increment such amount as necessary to compensate Participant for all Diverted Tax Increment. (h) OPA. This Part 1 of the Attachment No. 7 is part of the OPA and is subject to all of the terms and conditions thereof. (1) &L-M. The Agency shall have the right at its option and as a non-exclusive remedy to set off amounts owed by Participant to the Agency under the OPA against amounts payable by the Agency under this Part 1. 0) Pay=nt Obligations Forgiven. Except for any Diverted Tax Increment, any balance remaining in Agency's payment obligations under this Part I after the Reimbursement Term shall automatically be deemed forgiven. (k) Definitions. The following definitions shall apply to this Part 1: (1) "City" as used herein shall mean the City of Huntington Beach. (2) "Completion Date" as used herein shall mean the date on which the Release of Construction Covenants to be issued by Agency pursuant to the Agreement with respect to the Attachment No. 7 Schedule of Feasibility Gap Payments 5 redeveloped Site and improvements is recorded in the Official Records of Orange County. (3) "Fiscal Year," as used herein, means each twelve-month period beginning on July 1 and ending on June 30. (4) "Operating Commencement Date" as used herein means the last to occur of either the date of issuance by the City of the Certificate of Occupancy for the redevelopment of the Site, or the opening for business to the generai public of the first -quality shopping center required by the OPA to be redeveloped on the Site by Participant. (5) "Reimbursement Term" as used herein means the period beginning on the Operating Commencement Date and ending twenty (20) years after the Operating Commencement Date, during which Agency is obligated to make reimbursement payments to Participant pursuant to this Attachment No. 7. (6) "Site" as used herein means that certain real property (including the Ward Parcel) in the City of Huntington Beach, more particularly described in the legal description attached hereto as Exhibit A and incorporated herein by this reference, and any improvements constructed or to be constructed thereon in accordance with the OPA. (1) Article 7 of OPA. Nothing contained in this Attachment No. 7 shall alter or modify in any way any of the provisions of Article 7 of the OPA. END OF PART 1 Attachment No. 7 Schedule of Feasibility Gap Payments PART 2 (APPLICABLE ONLY IF WARD PARCEL NOT PART OF SITE) (a) Applicability_of_P_art-2. This Part 2 of this Attachment No. 7 shall apply only if the Owner Participation Agreement by and between Agency and Participant dated as of , 2000 ("OPA") is terminated as to the Ward Parcel pursuant to Section 702.1 (b) or 702.2 (c) of the OPA. Regardless of whether or not the OPA is terminated as to the Ward Parcel pursuant to Section 702.1 (b) or 702.2 (c) of the OPA, Participant shall use its best efforts to cause the replacement of the exterior of the Ward Parcel building and renovation of the Ward Parcel parking lot in accordance with City approved plans, in order to ensure that such Ward Parcel building and parking lot conform with the redevelopment of the Site. Alternative provisions for feasibility gap payments, which include the Ward Parcel from the legal description of the Site, arc set forth in Part 1 of this Attachment No. 7. Any amounts paid by Agency pursuant to Part 1 shall be credited on a dollar -for -dollar basis against Agency's obligations under this Part 2. (b) Reimhursement. Subject to all of the terns and conditions of the OPA (including, without limitation, the provisions of paragraph (d) below limiting the Agency's payment obligation hereunder to particular sources of funds), the principal amount reimbursable by the Agency to Participant during the Reimbursement Term under this Part 2 shall be Fifteen Million Dollars ($15.00-0.00Q), to pay for the following: demolition, clearance, site preparation, public improvements, utilities and facilities, and acquisition of land and easements, and all other legally permissible items reimbursable to Participant. (c) lateruLRate. The principal amount of this Part 2 shall bear interest at the rate of eight percent (8%) per annum from the Operating Commencement Date (hereinafter defined) until paid, subject to the following: The eight percent (8%) interest rate shall be adjusted in the event the City issues Community Facilities Distnct bonds pursuant to paragraph (f) below in the following manner: to the extent the proceeds of such bonds are equal to or greater than the amount owed by Agency under this Part 2, the interest rate shall be eight percent (8%) minus one-half of the difference, if any, between eight percent (8%) and the True Interest Cost of the Community Facilities District bonds ("Adjustment Formula"). For example, if the bonds are sold at six percent (6%) True Interest Cost, then the interest rate to be paid by Agency under this Part 1 shall be seven percent (7%) (calculated as 8% minus one-half of 2%, i.e., the difference between 8% and 6%). To the extent the net proceeds of such bonds are less than the amount owed by Agency under this Part 2, the Adjustment Formula shall be prorated according to the amount of such bond proceeds. For example, if a total of $13,750,000 in bonds are sold at 6% True Interest Cost, then Agency shall be required to pay 7% interest on $13,750,000 of the amount owed, and 8% interest on the remaining $3,000,000 of the amount owed. "True Interest Cost" as used herein means the rate, compounded semi-annually, Attachment No. 7 Schedule of Feasibility Gap Payments 7 necessary to discount the amounts payable on the respective principal and interest payment dates to an amount equal to the par amount of the bonds, less underwriter's discount (including original issue discount) and transaction costs. In no event shall the principal amount of this Part 2 bear interest at a rate over eight percent (8%)- (d) Obligation -to -Make Payments. The obligations of the Agency under this Part 2 shall be special and limited obligations payable to Participant solely from the sources of funds expressly identified in this Part 2. The Agency shall have no obligation to pay any amounts to Participant pursuant to this Part 2 except as follows: (1) GonditionOPrecedent. The following conditions precedent to each payment hereunder shall be satisfied: A. The Completion Date, as defined in paragraph (k) below, shall have occurred; B. The Operating Commencement Date, as defined in paragraph (k) below, shall have occurred; and C. Participant shall be not be in default of any of its material obligations under the OPA. (2) Available Site -Generated Proper Tax Incremcnt. On or prior to September 30 of each year, beginning with the first September 30 which follows the satisfaction of all conditions precedent specified in paragraph (d)(1) above, and continuing until the principal amount specified in paragraph (b) above (and any accrued interest thereon) has been paid in full or until the twentieth (20"`) anniversary of the Operating Commencement Date, whichever first occurs, the Agency shall calculate and pay to Participant an amount equal to the lesser of (i) sixiXpercent601) of Available Site -Generated Property Tax Increment received by the Agency during the prior Fiscal Year (July 1-June 30), or (ii) such portion of such Available Site -Generated Property Tax Increment received by the Agency during the prior Fiscal Year that is sufficient, when added to the Available Site -Generated Sales Tax during the prior Fiscal Year, to repay all funds owed by Agency to Participant pursuant to this Attachment No. 7, plus 8% interest (adjusted pursuant to paragraph (c) above in the event the City issues Community Facilities District bonds), within a twenty (20) year amortization period. "Available Site -Generated Property Tax Increment" means the total ad valorem property tax increment revenue allocated to and received by Agency in any fiscal year pursuant to Section 33670(b) of the California Health and Safety Code, as said statute may be amended from time to time, by application of the one percent (1 %) tax levied against real property as permitted by Article XIIIA of the California Constitution, in an amount equal to any increase in the assessed value of the Attachment No. 7 Schedule of Feasibility Gap Payments 8 Site over and above an assessed value of Forty Three Million Two Hundrsd-and_Twenty_Eight 1hous=d_DQ1lars_(543,228,000), but specifically excluding therefrom all of the following: (A) a portion of such tax increment revenues equal to the twenty percent (20%) of tax increment revenue from the redevelopment project area as a whole that is set aside pursuant to Sections 33334.2 es stq. of the California Health and Safety Code or any successor law for low- and moderate -income housing purposes, and (B) a portion of such tax increment revenues equal to the percentage of tax increment revenues from the redevelopment project area as a whole that the Agency is required to pay to any and all governmental entities pursuant to any provision of law, as amended from time to time, or pursuant to tax sharing/pass-through agreements entered into prior to the OPA by the Agency and such governmental entities implementing the tax shanng/pass-through agreements; and (C) a portion of such tax increment revenues equal to the percentage of tax increment revenues in the redevelopment project area as a whole which the Agency may be required by the State of California to pay from time to time, including, for example, and without limiting the generality of the foregoing, any payments which the Agency may be required to pay to the Education Revenue Augmentation Fund pursuant to Section 33681 a seq. of the California Health and Safety Code; and (D) the amount of any revenues received by the Agency which are attributable to any special taxes or assessments or voter -approved indebtedness; and (E) charges for County administrative charges, fees or costs equal to the percentage of such charges in the Project Area as a whole. (3) Available Six enerated�ales_Tax. On or prior to September 30 of each year, beginning with the first September 30 which follows the satisfaction of all conditions precedent specified in paragraph (d)(l) above, and continuing until the principal amount specified in paragraph (b) above (and any accrued interest thereon) has been paid in full or until the twentieth (20`h) anniversary of the Operating Commencement Date, whichever first occurs, the Agency shall calculate and pay to Participant an amount equal to the lesser of (i) sixty percent (6 % of the Available Site -Generated Sales Tax received by Agency during the prior Fiscal Year (July i-June 30), or (ii) such portion of such Available Site -Generated Sales Tax received by the Agency during the prior Fiscal Year that is sufficient, when added to the Available Site -Generated Property Tax Increment during the prior Fiscal Year, to repay all funds owed by Agency to Participant pursuant to this Attachment No. 7, plus 8% interest (adjusted pursuant to paragraph (c) above in the event the City issues Community Facilities District bonds), within a twenty (20) year amortization period. "Available Site -Generated Sales Tax" as used herein shall mean not more than sixty percent (60%) of the sales tax revenue actually received by the City in any fiscal year as the City's share of sales tax revenue generated by the Site on or after the Operating Commencement Date in an amount in excess of SeYenHundteAand Filly Thousand Dollars (5750.000) in such fiscal year and paid to the Agency pursuant to the Cooperation Agreement by and between the City and Agency of even date herewith (Attachment No. 10 of OPA). (4) Recalculation of Availabl"iieGenerated Proper Tax Inczement and Available Site -Generated Sales Tax. The annual sum of Available Site -Generated Property Tax Increment and Available Site -Generated Sales Tax that is sufficient to repay all funds owed by Agency to Participant pursuant to this Attachment No. 7, plus interest, within a twenty (20) year Attachment No. 7 Schedule of Feasibility Gap Payments 9 amortization period, as provided for in paragraphs (d)(2) and (d)(3) above, shall be recalculated prior to each September 30 during the 20-year amortization period to account for all of the following: (A) prepayments of Agency's obligations pursuant to paragraph (e) of this Attachment No. 7; (B) any annual payment by Agency less than the amount sufficient to fully amortize the payments due to Participant over a 20-year amortization period based upon the amortization schedule then in effect; and (C) any adjustments in the Project Costs after the date that the amortization schedule then in effect was prepared. (c) Pre aayment. Agency's obligations hereunder may be prepaid by Agency, in whole or in part, at any time and from time to time without penalty, from any funds lawfully available to Agency for such purposes, including, but not limited to, grants obtained for public improvements (such as, for example, a State of California grant for freeway off -ramp construction). In the event Agency is prohibited by the terms of any such grants and/or funds from transferring the grants and/or other funds directly to Developer as prepayment hereunder, Agency may use such grants and/or other funds directly to pay for all or a portion of the items listed in paragraph (b) above, and the amount expended by Agency by the use of such grants and/or other funds shall be counted toward the prepayment of Agency's obligations hereunder. (f) Issuance of Bonds. Agency and Participant shall use their reasonable best efforts to cause City to consider the issuance of Community Facilities District bonds or similar instruments secured by a special tax on Participant's title to the Site and the improvements to be constructed thereon pursuant to the Agreement to fund eligible public improvements, if the Agency determines that such an issuance is feasible and would not adversely affect the financial objectives of the Agency or the City. Participant shall, separate from any other advance or payment from Participant to Agency pursuant to the OPA and this Attachment No. 7, advance to Agency the amounts necessary for appraisals, consultants, bond counsel, and other costs of issuance related to any such Community Facilities District bonds or other similar instruments, with such costs being reimbursable to Participant from bond proceeds to the extent legally permissible. In the event of an issuance of Community Facilities District bonds or similar instruments, Participant shall pay all special taxes (and any related penalties, costs, fees or other charges) due in connection with such bonds or similar instruments and shall be in full compliance with all of its other obligations in connection with such bonds or other instruments. The Agency shall have no obligation to reimburse Participant for debt service, repayment of principal or interest, penalties or any other amounts due in connection with the bonds or similar instruments, including but not limited to any amounts which may become payable as a result of Participant's failure to pay special taxes and/or to timely perform Participant's other obligations thereunder. The Agency's payment obligations under this Attachment No. 7 shall not be pledged to payment of the bonds or similar instruments, and the Agency shall have no obligation to the bondholders or any third party in connection with such bonds or similar instruments. (g) Subordination. The Agency's obligation to pay Available Site -Generated Property Tax Increment in accordance with this Part 2 shall be subordinate to the Agency's existing bonded indebtedness and bond issuance(s) and the refunding or refinancing thereof and any future bonds Attachment No. 7 Schedule of Feasibility Gap Payments 10 the Agency may issue and the bonded indebtedness incurred in connection therewith, provided that at the time of issuance of any such future bonds, (1) Agency provides to Participant a fiscal report prepared by a qualified independent fiscal consultant demonstrating that the gross annual Available Site -Generated Property Tax Increment, less the amount of such Available Site -Generated Property Tax Increment paid to Participant, is equal to or greater than one hundred and ten percent (1 l0%) of the total bonded debt service for both the existing and proposed bonds, and (d) the Agency reasonably determines that such issuance and indebtedness will not materially adversely affect the Agency's ability to perform its obligations under this Part 2. Bonded indebtedness includes any indebtedness incurred by the Agency for bonds, notes, interim certificates, debentures, certificates of participation or other obligations issued by the Agency. The Agency's obligation to pay a portion of Available Site -Generated Property Tax Increment to Participant under this Part 2 is not and shall not be construed as a "pledge" of property tax revenues for purposes of Section 33671.5 of the California Health and Safety Code. In the event Available Site -Generated Property Tax Increment is received by Agency and is not reimbursed to Participant during any Fiscal Year pursuant to this Attachment No. 7 by reason of the diversion of such Available Site -Generated Property Tax Increment to repay senior Agency bonded indebtedness to which such tax increments were pledged (the "Diverted Tax Increment"), then, in the following Fiscal Year, in addition to paying to Participant sixty percent (60%) of Available Site -Generated Property Tax Increment owed to Participant for that Fiscal Year, Agency shall draw from the remaining forty percent (40%) of Available Site -Generated Property Tax Increment such amount as necessary to compensate Participant for all Diverted Tax Increment. (h) QPA. This Part 2 is part of the OPA and is subject to all of the terms and conditions thereof. (i) Se-t=011. The Agency shall have the right at its option and as a non-exclusive remedy to set off amounts owed by Participant to the Agency under this Agreement against amounts payable by the Agency under this Part 2. 0) Payment Obligations Forges. Except for any Diverted Tax Increment, any balance remaining in Agency's payment obligations under this Part 2 after the Reimbursement Term shall automatically be deemed forgiven. (k) Definitions. The following definitions shall apply to this Part 2: (1) "City" as used herein shall mean the City of Huntington Beach. (2) "Completion Date" as used herein shall mean the date on which the Release of Construction Covenants to be issued by Agency pursuant to the Agreement with respect to the redeveloped Site and improvements is recorded in the Official Records of Orange County. (3) "Fiscal Year," as used herein, means each twelve-month period beginning on Attachment No. 7 Schedule of Feasibility Gap Payments 11 July l and ending on June 30. (4) "Operating Commencement Date" as used herein means the last to occur of either the date of issuance by the City of the Certificate of Occupancy for the redevelopment of the Site, or the opening for business to the general public of the first. -quality shopping center required by the OPA to be redeveloped on the Site by Participant. (5) "Reimbursement Term" as used herein means the period beginning on the Operating Commencement Date and ending twenty (20) years after the Operating Commencement Date, during which Agency is obligated to make reimbursement payments to Participant pursuant to this Attachment No. 7. (6) "Site" as used herein means that certain real property (excluding the Ward Parcel) in the City of Huntington Beach, more particularly described in the legal description attached hereto as Exhibit A and incorporated herein by this reference, and any improvements constructed or to be constructed thereon in accordance with the OPA. (1) ArticleZof9PA. Nothing contained in this Attachment No. 7 shall alter or modify in any way any of the provisions of Article 7 of the OPA. k_`.c&bXccnter fcasgmp1-5 Attachment No. 7 Schedule of Feasibility Gap Payments 12 EXHIBIT A TO PART 1 LEGAL DESCRIPTION OF SITE fincludcs Ward Parcel) Attachment No. 7 Schedule of Feasibility Gap Payments ORDER NO.: 9910472-45 PARCEL A Parcels 2 through 9 inclusive of Parcel Map No. 86-200, in the City of Huntington Beach. County of Orange, State of California. as shown on a map recorded in Book 255, Pages 40 to 45 inclusive of Parcel Maps, in the office of the County Recorder of said County. Except those portions of Parcel A (being portions of said Parcel 4 and 8) conveyed to the City of Huntington Beach, a municipal corporation by deed recorded May 1. 1991 as Instrument No. 91-209426 of Official Records. Also except that portion of Parcel A lying below a depth of 500 feet, measured from the surface of said land. Also except from a portion of Parcel A (being Parcels 4, 5, 6, 7, 8 and a portion of Parcel 2) an undivided 55% interest in all the land lying more than 500 feet below the surface, but none of the land lying above a depth of 500 feet below the surface of the lands with no right of surface access or use of the lands lying more than 500 feet below the surface, hereinafter referred to as "said land• for the purposes of exploring and prospecting for (by geological, geophysical and all other means whether now known or not), drilling for, producing, savings, taking and owning oil, gas, asphaltum and other _ minerals, whether similar or dissimilar to those herein specified and including fissionable materials collectively hereinafter referred to as •said substances• in, under or that may be produced from said land, together with all rights, privileges and easements useful or convenient for operations in said land, in adjacent or contiguous lands, and in other lands in the same vicinity, including, but not limited to: (1) Subsurface rights of way for drilling, repairing, redrilling, deepening, maintaining, operation, abandoning, reworking and removing wells to, in, into and through said land. (2) The right to conduct operations by methods now known or unknown which are reasonably designed to benefit or facilitate the drilling for, or production of said substances from said land. (3) The unrestricted and exclusive right, power and authority to produce said substances beneath or recoverable from said land, and to exercise all other rights and privileges herein set forth by means of any well or mines which are slant drilled from surface drill sites located on such other lands and the producing intervals of which are bottomed in said land; and ORDER NO.: 9910472-45 (Continued) (4) The right to drill a well or wells or use any existing wells, to, in, into or through said portion of said land, for the purpose of injecting into said portion of said land, or into other lands, oil, gas, air, water or other liquid or gaseous substances, including the right, from time to time to ignite or otherwise activate any or all of such substances so injected or any or all of said minerals and materials described herein within said portion of said land or other lands, reserved in deed recorded April 4, 1986 as Instrument No. 86-136183 of Official Records and re -recorded August 13. 1986 as Instrument No. 86-360236 of Official Records. PARCEL 8: Easements for ingress and egress, automobile parking, pedestrian uses, installation, operation and maintenance of separate and common utility lines, structure support, signs and other shopping center uses, all as more particularly defined and described in that certain Construction, Operation and Reciprocal Easement Agreement recorded August 4, 1965 in Book 7617, Page 539 together with amendments recorded in Book 11081, Page 1770; Book 11091, Page 983 and as Instrument No. 87-406989 all of Official Records. Site #2S Eivatin�toa Beach Mall 77T7 der Ave Huati Wan Beach, CA PMczL 1. IN T8L CITY OF U MMMIMMY SX&M. CQLTYN Of ORAPIOS, STATr. OF CALLYOINLA, OF PARCStp PAP NO. 84-200 AB 961t KXP A1<L' M MID IN 2001 233 PAGMIR 40 Twto= 45 IMMCLUSIVI OF PAACXL MAPS IN rAl OFFICE Of TMLS COMITY JZCOMR U of SAID COMM. SXCZFTIMfQ TPRUIrmic" TVs BVIL0I1*81 MTTRUCTtJUS mm MlCvYPIpRrMI Iltgcumlxo SUM1-SUMCS STAOC l9AU Aar Y+ORAOLTIOUS HOT WM I1lCLtiU= STOM RiZWM An ARmA DRAM) AS iZC"AF' = rK A CWFZYANCt FROM NOarZOOt M WUD D y=pPI=& COSJIOSRATIOIR, A IDELAMUM CORLPOMRATION. Daw movzm= 14. 1072 MRSCORDW NOVEmm 30, 1072 IS BOOR 10444 PAO% 483 OF OFFICIAL RZCO=S . ALSO axC]CP'!' TMRAT PORTION TlLSMR90lr LYIM10 SSWK A DSPTS Or $00.00 FM PQAMURZD FROM TU St, RMZ OF SAtn L WO, A3 RSSrR%I a W THR 0950 TMROM MtWrl=T= C$MR><7R, A DA><Tmuzip C'OMRPOm OF uuxT lmTcw 88AL*i COKPANY, A CmiroRRm C"amp4SAnam AMm CORAL vjAuTY COMP.. A MSVADA CORPOMTIOM, OVALIFUD TO DO SUItOUS 1x TIM 80.7 Or CALIMMfiA. WORM hUMNT 14, ills IN BOOK 1617 PALM 534, OFFICIAL L{�oaRRDS. VARCLL s c AM SLJI7 PIMS, S'ISOCIVI S APO 9 (Tx=:P Zm SRm-SUR7AC3 An lOUIUMMM SO'l' ON IPCL4MZM STWX SMRWM ADD AAM=Mi t &=I SlTOA'!Sa our 132 FUQ.Ii WXW a PARCEL 1, LL THE CYTY OW MLMWtlWhVM Sss=i COMM W OSAM, ST=3 Ot CALIPOSPMLA, Of PARC'!M. Pa! 90. 44-200 AS DIM 1AV ISOOVAM Mu SOOT[ 255 Vh=1 40 TV== 46 tO4C'S.DMMTTX OF PAXACiL MAPS EN TXZ omcs ow "m c=m YACU M N OS SAW cot rr. FARM C s M umcz ITs POR DIM", anus, Mfg"== PAMZKma l PmsMPeum WMI S 28S'IALI&TION. O MTiATUM AM 1A1MZWOM OP SMZPARATS AM CW@= 17Z'iirM LIMttt, STMIDCYX SUPPOR'!, 814W AIRD Qr k SMeoPIPMM 'tl.Mr2 90= 0 ALL " m" PAarIC gXMT D1liIM= AMID VVICkI120 IN MCAT CSORtr = COm+f'LSAC'tICAM, cw=A?=Ot Am RWIPMROCAL SASSP=T AMSMUT S.EOR WOU AMUST 4. LOGS IN SOOR 7617, pips 139 WORMER WZ= AMOMINSUM sesMPiM W 8009 11047, PAM 1770. Mx M1 M 1149i, PAW !Sa AM AS XXSTSLMIOi7r! MLO. 47-4"919 ALL Of OFFICIAL mMWWO- REOMoWO. KVL 1*. A� O T � Co' 114 K CLARK at - mLC 00p CKCAQO R 4w4 Order:-00058029 DrrcrApt on: 2000.216367 VpVw 24 of 21 Cara•4at: - — ZO 'd 'OH Xd3 WV £Zs11 Ida OOOZ-10-d3S EXHIBIT A TO PART 2 LEGAL DESCRIPTION OF SITE [excludes Ward Parcel] Attachment No. 7 Schedule of Feasibility Gap Payments ORDER NO.. 9910472-45 PARCEL A: Parcels 2 through 9 inclusive of Parcel Map No. 86-20o, in the City of Huntington Beach. County of Orange, State of California, as shown on a map recorded in Book 255, Pages 40 to 45 inclusive of Parcel Maps, in the office of the County Recorder of said County. Except those portions of Parcel A (being portions of said Parcel 4 and B) conveyed to the City of Huntington Beach, a municipal corporation by deed recorded May 1. 1991 as Instrument No. 91-209426 of Official Records. Also except that portion of Parcel A lying below a depth of 500 feet, measured from the surface of said land. Also except from a portion of Parcel A (being Parcels 4, 5, 6, 7, 8 and a portion of Parcel 2) an undivided SS% interest in all the land lying more than 500 feet below the surface, but none of the land lying above a depth of 500 feet below the surface of the lands with no right of surface access or use of the lands lying more than 500 feet below the surface, hereinafter referred to as "said land" for the purposes of exploring and prospecting for (by geological, geophysical and all other means whether now known or not), drilling for, producing, savings, taking and owning oil, gas, asphaltum and other minerals, whether similar or dissimilar to those herein specified and including fissionable materials collectively hereinafter referred to as "said substances' in, under or that may be produced from said land, together with all rights, privileges and easements useful or convenient for operations in said land, in adjacent or contiguous lands, and in other lands in the same vicinity, including, but not limited to: (1) Subsurface rights of Tray for drilling, repairing, redrilling, deepening, maintaining, operation, abandoning, reworking and removing wells to, in, into and through said land. (2) The right to conduct operations by methods now known or unknown which are reasonably designed to benefit or facilitate the drilling for, or production of said substances from said land. (3) The unrestricted and exclusive right, power and authority to produce said substances beneath or recoverable from said land, and to exercise all other rights and privileges herein set forth by means of any well or mines which are slant drilled from surface drill sites located on such other lands and the producing intervals of which are bottomed in said land; and ORDER NO.- 9910472-45 (Continued) (4) The right to drill a well or wells or use any existing wells, to, in, into or through said portion of said land, for the purpose of injecting into said portion of said land, or into other lands, oil, gas, air, water or other liquid or gaseous substances, including the right, from time to time to ignite or otherwise activate any or all of such substances so injected or any or all of said minerals and materials described herein within said portion of said land or other lands, reserved in deed recorded April 4, 1986 as Instrument No. 86-136163 of Official Records and re -recorded August 13, 1986 as Instrument No. 86-360236 of Official Records. PARCEL B: Easements for ingress and egress, automobile parking, pedestrian uses, installation, operation and maintenance of separate and common utility lines, structure support, signs and other shopping center uses, all as more particularly defined and described in that certain Construction. Operation and Reciprocal Easement Agreement recorded August 4, 1965 in Book 7617, Page 539 together with amendments recorded in Book 11087, Page 1770; Book 11091, Page 983 and as Instrument No. 87-406999 all of Official Records. ATTACHMENT NO. 8 FORM OF GRANT DEED [behind this page] Recording Requested By and When Recorded Mali to: Huntington Center Associates, LLC C/o The Ezralow Company, LLC 23622 Calabasas Road, Suite 100 Calabasas, California 91302 Attention: SPACE ABOVE THIS LINE FOR RECORDING USE FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, herein called "Grantor," hereby grants to HUNTINGTON CENTER ASSOCIATES, LLC, herein called "Grantee," the real property shown on the Property Map attached hereto as Exhibit A and incorporated herein by this reference and described in the legal description attached hereto as Exhibit B and incorporated herein by this reference (the "Property"), in accordance with and subject to the covenants, conditions and restrictions set forth in this Grant Deed. The Property is subject to the redevelopment plan for the Huntington Beach Redevelopment Project, which was approved and adopted by Ordinance No. 2743 of the City Council of the City of Huntington Beach on November 26, 1984, and merged with certain other redevelopment projects in the City by the adoption of Ordinance No. 3343 on December 16, 1996 to form the Huntington Beach Redevelopment Project (the "Merged Redevelopment Project"). The Redevelopment Plan for the Merged Redevelopment Project (the "Redevelopment Plan") is incorporated herein by reference and made a part hereof as though fully set forth herein. This Grant Deed is made pursuant to that certain Owner Participation Agreement by and between the Grantor and Grantee dated , 2000 (the "OPA"), which is a public record on file at the offices of the Grantor and is incorporated herein by this reference. The Property is the real property referred to in the OPA as the "Additional Properties". All capitalized terms in this Grant Deed shall have the meanings ascribed to them in the OPA unless indicated to the contrary herein. Grantor and Grantee agree as follows: § 100 Use"f Property Grantee hereby covenants and agrees on behalf of itself and any successors and assigns in the Property or any portion thereof or any improvements thereon or any interest therein that Grantee, such successors and assigns shall: Grant Deed a. Develop, construct, renovate and rehabilitate improvements on the Property solely in accordance with this Grant Deed, the OPA, the Redevelopment Plan, and plans approved by the City. b. Devote the Property, or cause the Property to be devoted, solely to use as a first - quality regional shopping center in accordance with this Grant Deed, the OPA, the Redevelopment Plan, and plans approved by the City, until November 26, 2034. Beginning no later than the Operating Commencement Date, cause to be Operated on the Property until November 26, 2034, a first -quality regional shopping center meeting the design and architectural standards of that certain Specific Plan initially adopted by Resolution No. 2000-68 on July 5, 2000. All floor area shall be Operated by retail stores of a type customarily located at first -quality regional shopping centers in Southern California. If any tenant over fifty thousand square feet (50,000) of gross leaseable area ("Major") ceases to Operate within the effective period of the operating covenants, Grantee shall request the written approval of the Grantor for the replacement of the Major with one or more proposed new tenants of comparable first -quality and trade name at the earliest practicable date, but in no event more than ninety (90) days after the Major to be replaced provides written notice to Grantee of its intent to cease to Operate on the Property. Within thirty (30) days after receipt of Grantee's request for approval, Grantor shall respond in writing by stating what further information, if any, Grantor reasonably requires in order to determine whether or not to approve the replacement tenant. Grantee shall promptly furnish to Grantor such further information as may be reasonably requested. Grantee's request for approval shall be deemed complete thirty (30) days after Grantor's receipt thereof, if no timely response requesting further information is given to Grantee, or, if such a timely response requesting further information is received by Grantee, on the date that Grantee delivers such additional information to Grantor, provided that such additional information is responsive to Grantor's request. Grantor shall approve or disapprove the proposed replacement tenant in the Grantor's reasonable discretion, and shall provide Grantee with written notice of its decision within thirty (30) days after Grantee's request for such approval is accepted as complete or deemed complete. In deciding whether to approve a proposed replacement tenant, the Grantor may consider, among other factors, the level of quality and the sales generation ability of the proposed replacement tenant and trade name. If Grantor shall disapprove a proposed replacement tenant, Grantor shall do so by written notice to Grantee stating the reasons for such approval. "Operate," as used in this Agreement, means open to the general public for business during commercially reasonable business hours, except when temporarily not open for business by reason of such reasonable interruptions as may be customary and incidental to the conduct of business at first -quality regional shopping centers in Southern California. d. Maintain the Property, or cause the Property to be maintained, in accordance with Section 101 of this Grant Deed. Grant Deed Pay when due all real estate taxes and assessments assessed and levied on the Property and any improvements thereon and refrain from appealing, challenging or contesting in any manner the validity or amount of any tax assessment, encumbrance or lien on the Property; provided, however, that such prohibition shall not apply to an appeal, challenge or contesting of an erroneous initial assessment for property tax purposes of the Property in the fiscal year of the completion of the improvements to be constructed and/or renovated pursuant to this Agreement. f. Not discriminate upon the basis of race, color, creed, religion, sex, age, marital status, handicap, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, or any improvements erected or to be erected thereon, or any part thereof. g. Include in all leases and subleases appropriate provisions requiring all lessees and sublessees to comply with and be bound by the applicable provisions of this Agreement. h. Pay when due the Agency Participation Payment in accordance with Section 601 of the OPA. Continue to perform all ongoing obligations of Grantee under the OPA, including but not limited to those under Sections 304, 305 and 406 of the OPA. § 101. Maintenanc_t_of_the_J?mpcM Grantee shall maintain, repair and operate the Property and all improvements constructed or to be constructed thereon (including landscaping, lighting and signage), or cause the Property and all such improvements to be maintained, in a first quality condition, free of debris, waste and graffiti, and in compliance with the terms of the Redevelopment Plan, the City of Huntington Beach Municipal Code, and the following: (1) All improvements on the Property shall be maintained in good condition in accordance with the custom and practice generally applicable to comparable first quality shopping centers in Orange County, and in conformance and compliance with all plans, drawings and related documents approved by the Grantor pursuant to the OPA, all conditions of approval of land use entitlements adopted by the City or the Planning Commission, including painting and cleaning of all exterior surfaces of all private improvements and public improvements to the curbline. (2) Landscape maintenance shall include, without limitation, watering/irrigation; fertilization; mowing; edging; trimming of grass; tree and shrub pruning, trimming and shaping of trees and shrubs to maintain a natural and healthy appearance, road visibility, and irrigation coverage; replacement, as needed, Grant Deed of all plant materials; control of weeds in all planters, shrubs, lawns, ground covers, or other planted areas; and staking for support of trees. (3) Clean-up maintenance shall include, without limitation, maintenance of all sidewalks, paths and other paved areas in a clean and weed -free condition; maintenance of all such areas clear of dirt, mud, trash, debris or other matter which is unsafe or unsightly; removal of all trash, litter and other debris from improvements and landscaping; clearance and cleaning of all areas maintained prior to the end of each day on which maintenance operations are performed to ensure that all cuttings, weeds, leaves and other debris are properly disposed of by maintenance workers. b. If the Grantor gives written notice to Grantee that the maintenance or condition of the Property or any portion thereof or any improvements thereon does not comply with the OPA and this Grant Deed and such notice describes the deficiencies, Grantee shall correct, remedy or cure the deficiency within thirty (30) days following the submission of such notice, unless the notice states that the deficiency is an urgent matter relating to public health and safety in which case Grantee shall cure the deficiency with all due diligence and shall complete the cure at the earliest possible time but in no even more than forty-eight (48) hours following the submission of the notice. In the event Grantee fails to maintain the Property or any portion thereof or any improvements thereon in accordance with the OPA and this Grant Deed and fails to cure any deficiencies within the applicable period described above, the Grantor shall have, in addition to any other rights and remedies hereunder, the right to maintain the Property and the improvements thereon, or portion thereof, or to contract for the correction of any deficiencies, and Grantee shall be responsible for payment of all such costs reasonably incurred by the Grantor. C. The Grantee shall not use or permit the use of the Property in violation of (i) the Specific Plan and applicable zoning laws as they now exist or as they may hereafter be amended from time to time; or (ii) the Redevelopment Plan for the Project, as it now exists or, subject to Section 102 of the OPA, as it may hereafter be amended from time to time. [.�� 07 r C-i'F11Ma Grantee hereby covenants and agrees on behalf of itself and any successors and assigns in the Property or any portion thereof or any improvements thereon or any interest therein, that there shall be no discrimination against or segregation of any person, or group of persons, on account of sex, marital status, race, color, religion, creed, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, and the Grantee (itself or any person claiming under or through it) shall not establish or permit any such practice or practices of discrimination, or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees of the Property, or any portion thereof. Grant Deed 4 § 103. Form oLNQndi,seriminasiQn_and-N- nsegregation_Clauacs The Grantee shall refrain from restricting the rental, sale or lease of the Property, or any portion thereof, on the basis of sex, marital status, race, color, religion, creed, ancestry or national origin of any person. All such deeds, leases or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: In deeds: "The grantee herein covenants by and for himself, his heirs, executors, administrators and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of sex, marital status, race, color, religion, creed, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land herein conveyed, nor shall the grantee himself or any person claiming under or through him, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the land herein conveyed. The foregoing covenants shall run with the land." b. In leases: "The lessee herein covenants by and for himself, his heirs, executors, administrators and assigns, and all persons claiming under or through him, and this lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons on account of sex, marital status, race, color, religion, creed, national origin or ancestry, in the leasing, subleasing, transferring, use, or enjoyment of the land herein leased nor shall the lessee himself, or any person claiming under or through him establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy, of tenants, lessees, sublessees, subtenants or vendees in the land herein leased." C. In contracts: "There shall be no discrimination against or segregation of, any person, or group of persons on account of sex, marital status, race, color, religion, creed, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land, nor shall the transferee himself or any person claiming under or through him, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the land." § 104. No Transfers No sale, conveyance, assignment, leasing or other transfer of any kind of any interest in the Property or any portion thereof or any improvements thereon, or any change in the Granteeship of Grantee or its successors or assigns shall be permitted prior to twenty (20) years after the Operating Commencement Date, except as authorized by the express terms of the OPA. Grant Deed § 105. Right to Revest After conveyance of the Property to Grantee, Grantor shall have the right, at its option, to reenter and take possession of the Property (or portion thereof) conveyed by Grantor to Grantee with all improvements thereon, and revest in the Grantor the estate theretofore conveyed to Grantee, if after conveyance of title and prior recordation of the Release of Construction Covenants, Grantee or its successors or assigns, in violation of the OPA or this Grant Deed: (1) Subject to the provisions of Section 808 of the OPA, fails to proceed with the construction of the improvements on the Property as required by the OPA for a period of ninety (90) days after written notice thereof from Grantor; (2) Subject to the provisions of Section 808 of the OPA, abandons or substantially suspends construction of the improvements on the Property for a period of ninety (90) days after written notice thereof from Grantor; (3) Assigns or purport to assign the OPA (or any rights therein), or sells, transfers, conveys, assigns or leases the whole or any part of the Property, or any of the improvements to be constructed thereon, in violation of the OPA or this Grant Deed. b. Such right to reenter and repossess the Property (or portion thereof) conveyed by Grantor to Grantee shall be subject to and limited by and shall not defeat, render invalid or limit: (1) Any bona fide mortgage, deed of trust or other security instrument of sale and leaseback or other conveyance for financing, provided that such mortgage, deed of trust, security instrument, sale and leaseback or conveyance for financing is permitted by the OPA; (2) Any rights or interest provided in the OPA for the protection of the holder of such bona fide, permitted mortgages, deeds of trust or other security instruments, the lessor under such sale and leaseback, or the grantee under such other conveyance for financing; C. Upon the revesting in Grantor of title to the Property (or any portion thereof) as provided in this Section 105, Grantor shall, pursuant to its responsibilities under the California Community Redevelopment Law (Health and Safety Code Sections 33000 et seq.), use its reasonable best efforts to resell the Property (or any such portion thereof) as soon as possible and in such manner as Grantor shall find feasible and consistent with the objectives of the law and of the Redevelopment Plan, to a qualified and responsible party or Grant Deed parties (as determined by Grantor), who will assume the obligation of making or completing the improvements, or such other improvements in their stead, as shall be reasonably satisfactory to Grantor and in accordance with the uses specified for the Property (or such portion thereof) in the Redevelopment Plan. Upon such resale of the Property (or any portion thereof), the proceeds thereof shall be applied as follows: (1) First, to reimburse Grantor on its own behalf and/or on behalf of the City of Huntington Beach, for all costs and expenses of Grantor incident to such sale and/or conveyance, for all costs and expenses incurred by Grantor (including, but not limited to, salaries to personnel in connection with the recapture, management and resale of the Property, or any portion thereof, but less any income derived by Grantor therefrom in connection with such management); all taxes, assessments and water and sewer charges with respect thereto-, any payments made, or necessary to be made, to discharge or prevent from attaching or being made any subsequent encumbrances or liens due to obligations, defaults or acts of Grantee, its successors or transferees; any expenditures made or obligations incurred with respect to the making or completion of the improvements or any part thereof on the Property (or any such portion thereof), and any amounts otherwise owing to Grantor by Grantee or its successors or transferees, and (2) Second, to reimburse Grantee, its successors or transferees up to the amount equal to the sum of (A) the purchase price (or allocated portion thereof) paid to Grantor by Grantee for the Property or any such portion thereof; and (B) costs incurred for the development of the Property, or any such portion thereof, and for the improvements existing thereon and the time of reentry and repossession; less (C) gains or income withdrawn or made by Grantee, its successors or assigns therefrom or from the improvements thereon. (3) Any balance remaining after such reimbursements shall be retained by Grantor as its property. d. The rights established in this Section 105 are to be interpreted in light of the fact that the purpose of the OPA is the redevelopment of the Property and not land speculation. All obligations of "Grantee" under this Grant Deed (and all of the terms, covenants and conditions of this Grant Deed) shall be binding upon Grantee, its successors and assigns and every successor in interest of the Property or any portion thereof or any interest therein, jointly and severally, for the benefit and in favor of the Grantor, its successors and assigns, and the City of Grant Deed 7 Huntington Beach. All rights of "Grantee" under this Grant Deed shall inure to the benefit of Grantee and its permitted successors and assigns. § 102. Effect and Duration of-Co-yenants The covenants contained in Sections 100 and 101 of this Grant Deed shall remain in effect until November 26, 2034. The covenants against discrimination shall remain in perpetuity. All other covenants shall remain in effect unless and until they expire in accordance with the express terms thereof. 1: �� u This Grant Deed shall not merge into any other agreement between Grantor and Grantee. § 109. 1 iens_of Motigagea aad_D=ds_Qibust Breach of any of the covenants, conditions, restrictions, or reservations contained in this Grant Deed shall not defeat or render invalid the lien of any mortgage or deed of trust made in good faith and for value as to the Property, whether or not said mortgage or deed of trust is subordinated to this Grant Deed, but unless otherwise herein provided, the terms, conditions, covenants, restrictions and reservations of this Grant Deed shall be binding and effective against the holder of such mortgage or deed of trust and any Grantee of the Property, or any part thereof, whose title thereto is acquired by foreclosure, trustee's sale, or otherwise. § 110. S_=raace If any provision of this Grant Deed is determined by a court of competent jurisdiction to be illegal, invalid or enforceable, such provision will be deemed to be severed and deleted from the Grant Deed as a whole and neither such provision, nor its severance and deletion shall in any way affect the validity of the remaining provisions of this Grant Deed. IN WITNESS WHEREOF, the Grantor and Grantee have caused this instrument to be executed on their behalf by their respective officers thereunto duly authorized. "Grantor" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH Dated: , 2000 By: Chairman Grant Deed ATTEST: Agency Clerk REVIEWED AND APPROVED Ray Silver, Executive Director APPROVED AS TO FORM - Kane, Ballmer & Berkman Agency Special Counsel APPROVED AS TO FORM: Agency General Counsel INITIATED AND APPROVED: Director of Economic Development AGrantce- HUNTNGTON CENTER ASSOCIATES,LLC, a Delaware limited liability company By: Huntington Management Ent., LLC, A Delaware limited liability company, Its Manager By: BMLF/Huntington, LLC, A Delaware limited liability company, Its Manager Dated: 32000 By: k-kg\Wccnter%dced l -5 Grant Deed 9 Bryan E-r_ralow, "Trustee of the Bryan Ezralow 1994 Trust Its Manager EXHIBIT A SITE MAP EXHIBIT B LEGAL DESCRIPTION OF PROPERTY STATE OF CALIFORNIA COUNTY OF On _ ._ _ _ _ _ 2000 before me, personally appeared _ _ _ , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature _ STATE OF CALIFORNIA COUNTY OF } ss. On , 2000 before me, , personally appeared _ , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature ATTACHMENT NO. 9 FORM OF GUARANTY AGREEMENT [behind this page] �UARANTYAJGREEMENT THIS GUARANTY AGREEMENT (this "Guaranty") is made and entered into by HUNTINGTON MANAGEMENT, ENT., LLC, a Delaware limited liability company (the "Guarantor"), to and for the benefit of the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH ("Agency"), and its successors and assigns. RECITALS: A. HUNTINGTON CENTER ASSOCIATES, LLC, a Delaware limited liability company ("Participant"), and Agency have entered into that certain Owner Participation Agreement dated on or about the date hereof (the "OPA"). Guarantor is the managing member of Participant. The OPA and all of the terms and provisions therein are fully incorporated herein by this reference as though fully set forth herein. B. Guarantor acknowledges that this Guaranty is required by the Agency as a condition precedent and as an inducement to the Agency to enter into the OPA to provide certain financial assistance to the Participant and carry out various other obligations in accordance with the terms of the OPA. NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration given by Agency to Guarantor, the receipt and sufficiency of which is hereby acknowledged, and in further consideration of and to induce the Agency to execute the OPA and perform its obligations under the OPA, the Guarantor does hereby irrevocably warrant, guarantee and agree as follows: 1. Guarantor acknowledges receipt of a copy of the OPA and all of the instruments described therein and/or attached thereto. 2. Guarantor hereby guarantees to, as managing member of the Participant and pursuant to Participant's operating agreement, take all necessary action to make operating or capital calls of Participant's members in order to redevelop the Site in accordance with the OPA. 3. The execution by Agency of the OPA shall conclusively evidence the reliance by the Agency upon this Guaranty and the obligations and agreements of Guarantor as set forth herein. 4. The obligations of Guarantor shall not be discharged, impaired or otherwise affected by (i) any sale, transfer, assignment, pledge, surrender, indulgence, forbearance, alteration, substitution, exchange, change in, amendment, revision, modification or other disposition of the Guaranty Agreement OPA or the Site or any portion thereof or any improvements thereon or any interest therein or (ii) any failure, negligence or omission on the part of the Agency to enforce the terms of the OPA. 5. Guarantor hereby expressly waives (a) notice of acceptance of this Guaranty; (b) all notices to which Guarantor might otherwise be entitled, except as required herein; (c) any defense arising by reason of any disability of Guarantor; (d) diligence in enforcement of any and all formalities which might otherwise be legally required to charge the Guarantor with liability except as required herewith; and (e) all diligence in collection or protection and all presentment, demand, protest and notice of protest, notice of dishonor. Guarantor shall be provided with copies of Agency notices of default of Participant. 6. In the event that Guarantor should fail to fully perform promptly as herein provided, Agency shall have the following remedies: (a) at its option and without any obligation to do so, upon prior thirty (30) days written notice from Agency to Guarantor, proceed to perform on behalf of Guarantor any and all of the obligations guaranteed hereunder; and Guarantor shall, upon demand, pay to the Agency all such sums reasonably expended by Agency in such performance on behalf of Guarantor; and (b) from time to time and without requiring anything more than notice of default to Participant and opportunity to cure the obligations guaranteed hereunder by Guarantor, to enforce the provisions of this Guaranty by action at law or in equity or both, and further to collect in any such action compensation for all loss, cost, damage, injury and expense sustained or incurred by Agency as a consequence of Guarantor's failure to perform the obligations guaranteed hereunder when due hereunder. 7. This Guaranty is a guaranty of the performance of the obligations guaranteed hereunder, and Guarantor shall be strictly liable for any claims by Agency against Guarantor with respect thereto. 8. Guarantor shall pay to the Agency, upon demand, all fees and costs (including, without limitation, reasonable attorneys' fees and disbursements) incurred by the Agency in instituting and/or maintaining any action for damages or specific performance against Guarantor pursuant to the terms of this Guaranty. 9. As of the date of execution of this Guaranty, (i) Guarantor warrants that it has full authority to execute this Guaranty and comply with its terms, and (ii) Guarantor declares to and covenants with Agency and its successors and assigns, that, except for the lawsuits described in the Section 406.1 of the OPA, Guarantor knows of no defense whatsoever to any action, suit or proceeding, at law or otherwise, that may be instituted on this Guaranty. Guaranty Agreement 10. This Guaranty shall terminate upon the earlier of (i) Agency's determination, in its sole discretion, to terminate this Guaranty, (ii) Agency's approval of a release of Participant pursuant to Section 410 of the OPA, or (ill) twenty (20) years after the Operating Commencement Date_ 1 I. Each reference herein to "Agency" shall be deemed to include the Redevelopment Agency of the City of Huntington Beach in its capacity as Agency under the OPA, and each of its successors and assigns; and all of the provisions of this Guaranty shall run in favor of said named Agency, the City of Huntington Beach, and their respective successors and assigns. 12. This Guaranty shall be governed by and construed in accordance with the laws of the State of California, without giving effect to the conflict of laws principles of said state. 13. Any legal actions pursuant to this Guaranty must be instituted in the Superior Court of the County of Orange, State of California, in any other appropriate court of that county, or in the Federal District Court in the Central District of California. 14. In the event legal action is commenced by the Agency against the Guarantor, service of process on the Guarantor shall be made by personal service upon an officer of Guarantor and shall be valid whether made within or without the State of California, or in such manner as may be provided by law. 15. Time is of the essence hereof. 16. If any term, provision, covenant or condition hereof or any application thereof should be held by a court of competent jurisdiction to be invalid, void or unenforceable, all terms, provisions, covenants and conditions hereof, and all applications thereof not held invalid, void or unenforceable, shall continue in full force and effect and shall in no way be affected, impaired or invalidated thereby. [end - signature page follows] Guaranty Agreement IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date set forth below. Dated: 2 , 2000 k:`cglhb`,centchi;uaranty l -4 "GUARANTOR" Huntington Management Ent., LLC, A Delaware limited liability company By: BMLF/Huntington, LLC, A Delaware limited liability company, Its Manager Guaranty Agreement 4 Bryan Ezralow, Trustee of the Bryan Ezralow I994 Trust Its Manager ATTACHMENT NO. 10 COOPERATION AGREEMENT [behind this page] -CQQP_ERATIQAASREEMENT THIS COOPERATION AGREEMENT (this "Agreement") is entered into this 2ndday of October , 2000, by and between the CITY OF HUNTINGTON BEACII (the "City") and the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH (the "Agency"), with reference to the following facts: A. Concurrently with the approval and execution of this Agreement, the Agency is entering into that certain Owner Participation Agreement (the "OPA") with HUNTINGTON CENTER ASSOCIATES, LLC, a Delaware limited liability company ("Participant"). The OPA provides for the development and operation on the Site (as defined in the OPA) by Participant of improvements described in the Scope of Development appended to the OPA as Attachment No. 4, including, without limitation, improvements for commercial, retail, entertainment and other uses. Except as otherwise provided in this Agreement, all capitalized terms in this Agreement shall have the meanings ascribed to such terms in the OPA. B. The Schedule of Feasibility Gap Payments appended to the OPA as Attachment No. 7 conditionally obligates the Agency to apply certain funds to reimburse Participant for specified costs. Paragraph (d)(3) of the Schedule of Feasibility Gap Payments provides that under specified circumstances, the Agency may be obligated to pay to Participant Available Site -Generated Sales Tax (as defined in Paragraph (k)(3) of the Schedule of Feasibility Gap Payments) received by the City from the improvements developed on the Site by Participant. C. The City and the Agency intend by this Agreement for the City to advance funds to the Agency only if and to the extent necessary to enable the Agency to perform its obligations under Paragraph (d)(3) of the Schedule of Feasibility Gap Payments. The City's obligation to advance funds to the Agency in any given year is limited to the amount of Available Site -Generated Sales Tax actually received by the City in the year such obligation arises. This Agreement does not obligate the City to use any future Available Site -Generated Sales Tax for current advances to the Agency, nor does it obligate the City to set aside any Available Site -Generated Sales Tax for advances to the Agency in future years. NOW, THEREFORE, the City and the Agency do mutually agree as follows: I. [§ 100] ADVANCE OF FUNDS On or prior to each date the Agency is required to make a payment to Participant pursuant to Paragraph (d)(3) of the Schedule of Feasibility Gap Payments, City shall advance to Agency an amount equal to the amount required to be paid by the Agency to Participant pursuant to said Paragraph (d)(3), as reasonably determined by the Agency. The City's advance shall bear interest at a variable rate equal to the rate earned from time to time on the City's investments with the Local Agency Investment Fund administered by the State of California, from the date on which such funds are advanced until the date of repayment. The City's obligation to advance funds to the Agency in any given year is limited to the amount of Available Site -Generated Sales Tax (as defined in Paragraph (k)(3) of the Schedule of Feasibility Gap Payments) generated from the improvements developed on the Site and actually received by the City in the year such obligation arises. This Agreement does not obligate the City to use any future Available Site -Generated Sales Tax for current advances to the Agency, nor does it obligate the City to set aside any Available Site - Generated Sales Tax for advances to the Agency in future years. Il. [§ 200] REPAYMENT A. [§ 201] SQurc.e.oLFunds Consistent with and subject to the proper and orderly implementation of the Redevelopment Plan for the Huntington Beach Redevelopment Project, the Agency shall use lawfully available funds for the purpose of repaying to City the principal amount advanced by City pursuant to this Agreement and any accrued interest thereon. B. [§ 202] Subordination of,lndebtedricas The indebtedness of the Agency to the City created by this Agreement is subordinate to any pledge of tax increments to the bondholders of any tax allocation bonds which are or may be issued by the Agency and to any other indebtedness incurred by the Agency as reasonably necessary for the proper and orderly implementation of the Redevelopment Plan for the Huntington Beach Redevelopment Project. In addition, the indebtedness of the Agency to the City created by this Agreement is subordinate to Agency's obligations to make payments to Participant under the OPA, including but not limited to repayment of funds advanced by Participant pursuant to the OPA. Ill. [§300] LIABILITY AND INDEMNIFICATION In contemplation of the provisions of California Government Code Section 895.2 imposing certain tort liability jointly upon public entities solely by reason of such entities being parties to an agreement as defined by Government Code Section 895, the parties hereto, as between themselves, pursuant to the authorization contained in Government Code Sections 895.4 and 895.6, shall each assume the full liability imposed upon it, or any of its officers, agents or employees, by law for injury caused by negligent or wrongful acts or omissions occurring in the performance of this Agreement to the same extent that such liability would be imposed in the absence of Government Code Section 895.2. To achieve the above -stated purpose, each party indemnifies, defends and holds harmless the other party for any liability, losses, costs or expenses that may be incurred by such other party solely by reason of Government Code Section 895.2. IV. [§ 400] ENTIRE AGREEMENT; WAIVERS AND AMENDMENTS (a) This Agreement shall be executed in three (3) duplicate originals, each of which is deemed to be a original. This Agreement consists of three (3) pages and constitutes the entire understanding and agreement of the parties. (b) This Agreement integrates all of the terms and conditions mentioned herein or incidental hereto, and supersedes all negotiations or previous agreements between the parties with respect to the subject matter of this Agreement. 2 (c) All waivers of the provisions of this Agreement and all amendments to this Agreement must be in writing and signed by the authorized representatives of the parties. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above. Dated:(9 1:, 2000 ATTEST: City Clerk REVIEWED AND APPROVED _ 6 ,J141t Ray S' er, City Administrator Dated: ed Z , 2000 ATTEST: Agency Clerk CITY OF HUNTINGTON BEACH Mayor 72 �, APPROVED AS TO FORM: City Attorney INITIATED AND APPROVED: & e, W Director of Economic Development REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH Chairmari Pro Tem APPROVED AS TO FORM: Agency General Counsel /f_;'/z/419 3 REVIEWED AND APPROVED: &7",- c-9,41 Ray %Ker, Executive Director APPROVED AS TO FORM: lqt-�77 (D' /&, Kane, Ballmer & Berkman Agency Special Counsel Wcenter"Coop1 3 INITIATED AND APPROVED: 4&d �, /'hl Director of Econ is Development OWNER PARTICIPATION AGREEMENT THIS OWNER PARTICIPATION AGREEMENT (the "Agreement") is entered into this 2nd day of October , 2000 by and between the REDEVELOPMFNT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic (the "Agency") and HUNTINGTON CENTER ASSOCIATES, LLC, a Delaware limited liability company ("Participant"). The Agency and the Participant agree as follows: ARTICLE 100. SUBJECT OF AGREEMENT § 101. PurpQ5Q of Agreement The purpose of this Agreement is to implement the Redevelopment Plan for the Merged Redevelopment Project Areas (the "Project") in the City of Huntington Beach by providing for the rehabilitation and construction of improvements on certain real property in the Project Area (the "Site," as described in Section 104) by Participant pursuant to this Agreement. § 102. ThtRedevelopment Plan This Agreement is made in accordance with and subject to the redevelopment plan for the Huntington Beach Redevelopment Project, which was approved and adopted by Ordinance No. 2743 of the City Council of the City of Huntington Beach on November 26, 1984, and merged with certain other redevelopment projects in the City by the adoption of Ordinance No. 3343 on December 16, 1996 to form the Huntington Beach Redevelopment Project (the "Merged Redevelopment Project"). The Redevelopment Plan for the Merged Redevelopment Project (the "Redevelopment Plan") is incorporated herein by reference and made a part hereof as though fully set forth herein. This Agreement shall be subject to the Redevelopment Plan. Any amendment to the Redevelopment Plan which materially affects the redevelopment of the Site under the terms of this Agreement shall require the written consent of Participant. The "Project Area" is located in the City of Huntington Beach, California. The exact boundaries of the Project Area are specifically and legally described in the Redevelopment Plan and Ordinance No. 3343. The "Site" is that certain real property illustrated and designated as such on the "Map of the Site" (which is attached hereto and incorporated herein as Attachment No. 1) and having the legal description set forth in the "Legal Description of the Site" (which is attached hereto and incorporated herein as Attachment No. 2). The Site is generally comprised of a shopping center commonly known as the "Huntington Center" and includes the Montgomery Ward, LLC property which is designated as the "Ward Parcel" on the Map of the Site ("Ward Parcel"). In the event Agency or Participant terminates this Agreement as to the Ward Parcel pursuant to Section 702.1 (b) or 702.2 (c), respectively, then the Ward Parcel shall be removed from the legal description of the Site. § 105. Parties to_the.Ag=ent § 105.1. The Agm" The Agency is a public body, corporate and politic, exercising governmental functions and powers, and organized and existing under Chapter 2 of the Community Redevelopment Law of the State of California, Health and Safety Code Section 33000, et-seq. The principal office of the Agency is located at City Hall, 2000 Main Street, Huntington Beach, California 92648. "Agency" as used in this Agreement, includes any legally permissible assignee of or successor to the Agency or its rights, powers and responsibilities. a. Ldentity.. The Participant is HUNTINGTON CENTER ASSOCIATES, LLC, a Delaware limited liability company. The principal office of the Participant for purposes of this Agreement is 23622 Calabasas Road, Suite 100, Calabasas, California 91302. Participant represents and warrants that it is the sole owner of the Site, except for those portions identified on the Map of the Site (Attachment No. 1) as the Ward Parcel. Notwithstanding any other provisions hereof, all of the terms, covenants and conditions of this Agreement shall be binding on Participant and all of its successors and assigns, jointly and severally, and shall inure to the benefit of Participant and any of its permitted successors and assigns. b. Guarangt. As a condition precedent to Agency's execution of this Agreement, Participant shall provide Agency with a guaranty by Participant's manager, Huntington Management Ent., LLC, a Delaware limited liability company, guaranteeing Participant's performance of certain of its obligations hereunder as more fully described in a Guaranty Agreement (substantially in the form appended hereto as Attachment No. 9 and incorporated herein by this reference). 1 •.., Me iTsM U.i.''i Mil The Participant represents and agrees that Participant's undertakings pursuant to this Agreement are, and will be used for, the purpose of redevelopment of the Site and not for speculation in landholding. The Participant further recognizes that, in view of: (1) the importance of the redevelopment of the Site to the general welfare of the community; (2) the public aids set forth in this Agreement that have been made available by law and by the Agency and the City on the conditions stated herein, for the purpose of making such redevelopment possible; and 2 (3) the fact that a change in the identity, ownership and control of the Participant is, for practical purposes, a transfer or disposition of the Site or portion thereof then owned by the Participant; the qualifications and identity of the Participant are of particular concern to the community and the Agency. The Participant further recognizes that it is because of such qualifications and identity that the Agency is entering into this Agreement with the Participant. Accordingly, no voluntary or involuntary successor in interest of the Participant shall acquire any rights or powers under this Agreement except as expressly set forth herein. The Participant shall not, prior to twenty (20) years after the Operating Commencement Date (defined in Section 601), assign all or any part of this Agreement or any interest therein, or any portion of the Site without the prior written approval of the Agency, except to a Controlled Affiliate, and further provided that such transferee (including a Controlled Affiliate) shall assume all of the obligations of Participant with regard to the Site or the relevant portion thereof, and shall deliver written evidence of such assumption in a form reasonably satisfactory to the Agency. No such approval by the Agency of an assignment shall release Participant from any of its obligations hereunder. As used herein, "Controlled Affiliate" shall mean an entity which is controlling or is controlled by (by virtue of having the ability to direct, or by being a managing partner of such entity) by Participant and/or the Guarantors and/or any entity owned, managed and controlled by the Guarantors. 1 ►� mm-n-IMIM. VA No person or entity shall acquire any rights or benefits as a third party beneficiary under this Agreement. Without limiting the foregoing, and notwithstanding the provisions of Article 200 of this Agreement, the Mortgagee (hereinafter defined) is merely an incidental beneficiary and shall have no rights or benefits hereunder. ARTICLE 200. METHOD OF FINANCING § 201. Eeasibility Gap -Payments (a) Participant and the Agency acknowledge and agree that due to substantial project costs in the areas of demolition, clearance, site preparation, public improvements, utilities and facilities, and acquisition of land and easements, the redevelopment of the Site as contemplated under this Agreement would not be feasible in the absence of Participant's agreement to initially pay such costs and the Agency's agreement to reimburse a portion of such costs. (b) Therefore, subject to all of the terms and conditions of this Agreement, the Agency shall reimburse Participant, during the Reimbursement Term, for a portion of the costs of the demolition, clearance, site preparation, public improvements, utilities and facilities, and acquisition of land and easements required to redevelop the Site under this Agreement, in accordance with the Schedule of Feasibility Gap Payments appended to this Agreement as Attachment No. 7 and incorporated herein by this reference. Agency shall have no obligation to reimburse Participant for any costs paid by Participant pursuant to this Agreement except as specified in the Schedule of Feasibility Gap Payments. "Reimbursement Term" as used herein shall mean the period beginning on the Operating Commencement Date and ending twenty (20) years after the Operating Commencement Date, during which Agency is obligated to make reimbursement payments to Participant pursuant to the Schedule of Feasibility Gap Payments. § 202. SubnussiQnof Exidencc__o.f Einancinb Within the times established therefor in the Schedule of Performance (attached hereto as Attachment No. 3 and incorporated herein by this reference), the Participant shall submit to the Agency evidence reasonably satisfactory to the Agency that the Participant has obtained sufficient equity capital and commitments for the financing necessary for the rehabilitation and renovation of the improvements with respect to the redevelopment of the Site in accordance with this Agreement (the "Evidence of Financing"). The purpose of Agency review of the Evidence of Financing is to provide assurance that sufficient funds will be available to complete the redevelopment of the Site in accordance with this Agreement. Such Evidence of Financing shall include the following: 1. PrQjcet Budget. A current budget of all anticipated costs for the development and construction of the improvements in connection with the redevelopment of the Site as set forth in the Scope of Development and provided for in this Agreement, with a sources and uses statement (the "Project Budget"). The Project Budget shall have a reasonable relationship with the pro forma previously provided to Agency for the redevelopment of the Site, and shall state the estimated anticipated amount of Project Costs (hereinafter defined) and shall include a separate dollar amount for each category (1) through (17) in the definition of Project Costs in Section 202 (1) (a) below and a reasonable description or itemization of the costs in each such category. A cost or expense which is not included in the Project Budget approved by the Agency shall not be a Project Cost for purposes of this Agreement (including the Agency Participation Payments, defined in Section 601) unless Participant submits evidence satisfactory to the Agency, at the earliest possible date and, if feasible, before the cost is incurred, demonstrating that such cost or expense (i) will be actually incurred or paid for by or on behalf of Participant for or in connection with the development of the improvements on or with respect to the applicable Parcel in connection with the initial construction; and (ii) cannot reasonably be or have been avoided or reduced; and (iii) was not foreseeable on the date of this Agreement. a. "Project Costs" as used herein means the following actual costs and expenses of the development work to be performed by or on behalf of Participant for or in connection with the development of the improvements required or contemplated by this Agreement and plans approved therefor by the City on or with respect to the Site, to the extent that such costs and expenses are incurred and paid for by Participant to third parties (other than imputed interest amounts under item (6) below, the developer's fee under item (17) below, and any items approved under paragraph (b) below not paid to third parties) in connection with the initial construction and are either included in the Agency -approved Project Budget or approved in writing by the Agency pursuant to this Section 202 (1): (1) Land development work, including site preparation, demolition and excavation, grading, asbestos abatement, soils compaction and remediation, hazardous materials mitigation or removal, utility relocation and abandonment and off -site improvements. (2) Construction of the improvements and installation of the required infrastructure, fixtures, furniture, machinery and equipment, and 4 repair of any damage caused and arising during construction from a casualty not covered by insurance proceeds. (3) Building permits, public entity approvals and authorizations, and entitlement fees not paid for or reimbursed by Agency. (4) Premiums for casualty, public liability and property damage and other similar insurance during construction and on bonds securing work against liens for labor and materials. (5) Real estate taxes and assessments upon the Site or the improvements during the period of construction. (6) Actual interest on acquisition and construction loans and an imputed cost of equity funds at 10% per annum prior to the issuance by Agency of the Release of Construction Covenants (Attachment No. 6). (7) Fees for (i) architects, engineers, accountants and CEQA consultants; and (ii) real estate and financial advisors and attorneys previously identified to Agency or subsequently approved by Agency. Saybrook Capital, LLC, Holland and Knight, LLP, Mt. Holly Partners, and Sullivan, Workman and Dee have previously been so identified to Agency. (8) Purchasing fees paid to third parties not affiliated with Participant in connection with the purchase of furniture, fixtures and equipment. (9) Development fees paid to government agencies, including traffic mitigation costs and fees and other governmental exactions. (10) Charges and premiums for searching and insuring title, including related surveys and endorsements. (l 1) Out-of-pocket costs incurred by Participant in connection with construction financing, including, without limitation, commitment fees, mortgage broker fees, standby fees and fees of a like nature, printing and duplicating expenses, documentary transfer tax stamps, mortgage taxes, recording charges. (12) Customary and reasonable pre -opening expenses. (13) Costs of required studies, reports, inspections and surveys. (14) Costs for construction management and costs for Site security prior to and during the construction period. (15) Broker's commissions or finders fees for land assembly and leasing. (16) The initial acquisition costs for the Site and the Acquisition and Relocation Costs for the Additional Properties, if any (defined in Sections 301 and 304). (17) A developer's fee of three percent (3%) of Project Costs (excluding improvements installed or constructed by tenants and items (6), (l l ) and (16) of this Section 202 (1) (a)), but not in any event to exceed a developer's fee of Two Million Two Hundred Thousand Dollars ($ 2,200,000). In the event this Agreement is terminated as to the Ward Parcel pursuant to Section 702.1 (b) or 702.2 (c), then such developer's fee shall not exceed One Million Eight Hundred Fifty Thousand Dollars ($1,850,000). b. The parties acknowledge that additional significant capital expenditures involving items included as Project Costs under Section 202 (1) (a) I, 2, 3, 7, 9, and 13 above may be made by Participant after the recordation of the Release of Construction Covenants, which expenditures are not a normal re -tenanting expense, are not a maintenance or operational expenditure typical for the normal maintenance or operation of a development similar to the subject development, and are not made in connection with the initial tenanting of commercial space within the improvements developed on the Site, but are instead made in order to materially augment Gross Revenues (defined in Section 601). Such expenditures exceeding One Hundred Thousand Dollars ($100,000) meeting the description of the immediately preceding sentence (referred to in this Agreement as "Proposed Post -Construction Capital Expenditures"), however, shall not be included in Project Costs for any purpose under this Agreement, unless submitted to the Agency's Executive Director prior to such expenditure and approved as a Project Cost (referred to in this Agreement as "Approved Post -Construction Capital Expenditures"). Such submittal shall be made prior to the capital expenditure if feasible. The Agency's Executive Director shall reasonably consider each submitted Proposed Post -Construction Capital Expenditure for approval or disapproval, provided such expenditure is not a normal re -tenanting expense, is not made in connection with the initial tenanting of commercial space within the improvements developed on the Site, is not a maintenance or operational expenditure typical for the normal maintenance or operation of a development similar to the subject development, and provided such approval will in the aggregate not have a material adverse economic impact on the Agency's economic interests, including without limitation the Agency Participation Payments (defined in Section 601). C. Within one -hundred and twenty (120) days after the recording of the Release of Construction Covenants to be issued by the Agency pursuant to this Agreement, Participant shall submit to Agency, for the review and written approval or disapproval of the Agency's Executive Director, a statement (the "Certified Project Cost Statement") setting forth the total amount of Project Costs, a separate amount for each category ((1) through (17)) in the definition of Project Costs in Section 202 (1) (a) above, and a reasonable description or itemization of the costs incurred in each such category, together with a certificate of an independent certified public accountant reasonably acceptable to Agency (the "Accountant"). The Accountant's certificate shall be addressed to Agency, and shall state that the Accountant is familiar with the definition of Project Costs in this Agreement and attest to the accuracy of the Certified Project Cost Statement, subject to usual and customary qualifications. The Accountant shall be selected by Participant, but shall be one of the following: Z i) Arthur Andersen & Co., LLP; ii) Deloitte & Touche, LLP; iii) Ernst & Young, LLP; iv) Price Waterhouse Coopers, LLP; v) KMPG Peat Marwick, LLP; vi) Any national or other qualified accounting firm, first approved in writing by the Agency Executive Director, having at the time of delivery of the Certified Project Cost Statement reputation and stature in the accounting community comparable to the foregoing firms as of the date of this Agreement. 2. Gcneral Contrast. A copy of the contract between Participant and the general contractor for the construction of the improvements in connection with the redevelopment of the Site, consistent with the Project Budget and certified by Participant to be a true and correct copy thereof. 3. Construction Loan. If Participant intends to obtain some or all of the financing from a construction lender, a copy of all principle construction loan documents (e.g., notes, trust deeds, indentures, loan agreements, etc.) and permanent loan documents (ifa condition of the construction loan), necessary to complete funding for the development and construction of the improvements in connection with the redevelopment of the Site (as set forth in the Scope of Development and provided for in this Agreement). 4. Full Equity Financing. If Participant intends to finance the full cost of construction of the improvements itself without a construction loan, evidence satisfactory to Agency that Participant has, at the time such Evidence of Financing is required to be demonstrated, sufficient equity capital in sufficiently liquid form (and which is not otherwise encumbered by any pledge or grant of a security interest to a third party), to assure complete funding for the redevelopment and construction of the improvements (as set forth in the Scope of Development and provided for in this Agreement). Participant shall have the right to use any funds or assets available to Participant for actual payment of costs, notwithstanding that said funds or assets may be different from the sources of equity capital utilized to demonstrate the evidence of equity financing required by this Agreement. Participant's evidence of equity financing shall be satisfied by evidence of any combination of the following: a. Cash, on deposit in a construction account, checking account, money market account, escrow or other immediately available form of deposit, held in the name of Participant, over which Participant retains the right to direct investments; 7 b. An irrevocable direct pay letter of credit, in favor of Participant, drawn on a bank or other financial institution first approved in writing by Agency, with a term that is consistent with the anticipated need for funds during the construction period, the terms of which are consistent with this Agreement; C. An available line of credit with a bank or other financial institution first approved in writing by Agency's Executive Director or designee, the terms of which are consistent with this Agreement, provided that the collateral or assets pledged by Participant for such line of credit shall not otherwise be utilized to demonstrate the evidence of equity financing required by this Agreement, unless Participant has the right to substitute such collateral or assets with other collateral or assets which are not otherwise utilized to demonstrate the evidence of equity financing required by this Agreement and which may or may not be liquid; or d. Evidence of any other comparable form of assets that the Agency's Executive Director or designee reasonably determines is sufficiently liquid to assure that such assets will be available to Participant when needed to pay project expenses. 5. Partial. Equity Financing If construction financing, as described in Section 202 (3), is insufficient to pay all construction costs with respect to the redevelopment of the Site, evidence satisfactory to Agency of sources of capital sufficient to demonstrate that Participant has, at the time such Evidence of Financing is required to be demonstrated, sufficient equity capital in sufficiently liquid form which is not otherwise encumbered by any pledge or grant of a security interest to a third party (as described in Section 202 (4)), to cover the excess, if any, of the cost of construction over the financing authorized by mortgage loans (as described in Section 202 (3) or otherwise readily available to Participant). Agency's Executive Director or designee shall approve or disapprove the submission of Evidence of Financing for redevelopment of the Site within the time established therefor in the Schedule of Performance (Attachment No. 3). The sole criteria for approval or disapproval of the Evidence of Financing shall be whether such Evidence of Financing demonstrates that there are sufficient funds to complete the redevelopment of the Site pursuant to this Agreement. The Agency shall not unreasonably withhold its approval or disapproval of the Evidence of Financing. If Agency's Executive Director or designee shall disapprove any such Evidence of Financing, Agency's Executive Director or designee shall do so by written notice to Participant stating the reasons for such disapproval. The Participant shall promptly obtain and submit to the Agency new Evidence of Financing. The Agency shall approve or disapprove such new Evidence of Financing in the same manner and within the same times established in this Section 202 for the approval or disapproval of the Evidence of Financing as initially submitted to the Agency. At any time prior to the times provided in this Agreement for submission of Evidence of Financing, Participant may submit to Agency's Executive Director or designee for review, comment and, if deemed appropriate by Agency's Executive Director or designee, approval, any loan applications to be made by Participant or pro forma loan documentation provided by the proposed lender; provided that review, comments and approval, if any, by Agency's Executive Director or designee shall be for the sole purpose of determining and advising Participant whether such loan applications or pro forma loan 0 documents are consistent with the requirements of this Agreement. All comments and approvals, if any, shall be in writing. Any items so submitted and approved by Agency's Executive Director or designee shall not be subject to subsequent disapproval. Reimbursement of Agency Costs Agency shall provide appropriate assistance to Participant as reasonably necessary, up to the amount referred to below, to close Participant's construction and permanent loan(s), such as providing estoppel certificates, legal opinions, etc., provided however that all costs incurred by Agency to provide such assistance shall be paid by Participant. With respect to each loan closing, Participant shall deliver a retainer to Agency in the maximum sum of Ten Thousand Dollars (S 10,000), concurrently with the submission of Evidence of Financing, to be applied to the payment of Agency's costs. The administrative costs of Agency shall be charged at the actual and reasonable cost thereof not to exceed an hourly rate of Fifty Dollars (S50). The costs of Agency for consultants or legal services required for providing such assistance shall be the actual sums billed to Agency for such consulting or legal services. If such costs incurred by Agency for a loan closing equal less than Ten Thousand Dollars ($10,000), the balance shall be refunded promptly following the closing. Notwithstanding any other provision in this Agreement, Participant's obligation to pay such Agency costs shall survive the termination of this Agreement. ARTICLE 300. ADDITIONAL PARCELS a. In accordance with and conditioned on all the terms, covenants, and conditions of this Agreement and subject to specific Agency determinations and authorizations made on a case -by -case basis, and in consideration of the performance by each party of all of its obligations under this Agreement, the Agency hereby agrees to use good faith efforts in acquiring title to properties within or around the Site, or interest therein, in order to further the purposes of the Redevelopment Plan and this Agreement and to facilitate the redevelopment of the project approved by the Agency pursuant to the Redevelopment Plan and this Agreement, including without limitation the creation of unified ownership and control of the redeveloped Site in Participant (the "Additional Properties"), and to sell such Additional Properties, if any, to the Participant pursuant to the terms of this Agreement. Upon Agency's acquisition of title to such Additional Properties, if any, (and/or upon obtaining orders of prejudgment possession meeting the requirements for conveyance of such Additional Properties), the Participant agrees to purchase the Additional Properties from the Agency, for the consideration and subject to the terms, conditions and provisions set forth herein. The Agency may, in its sole discretion, decide either to limit its attempts to acquire any Additional Properties to voluntary negotiation with property owners or to consider exercising the power of eminent domain. The Agency expressly reserves the right to comply with all applicable laws in connection with any exercise or potential exercise of the power of eminent domain. § 302.1 EsCrow a. Agency agrees to open an escrow for conveyance of the Additional Properties with Commonwealth Land Title or any other escrow agent mutually acceptable to Agency and C Participant ("Escrow Agent") within thirty (30) days (or earlier, if feasible) after Agency acquisition of fee title to the Additional Properties. This Section 302 constitutes the joint escrow instructions of Agency and Participant, and a duplicate original of this Agreement shall be delivered to the Escrow Agent upon the opening of the escrow. Agency and Participant shall provide such additional escrow instructions consistent with this Agreement as shall be necessary. The Escrow Agent hereby is empowered to act under such instructions, and upon indicating its acceptance thereof in writing, delivered to Agency and to Participant within five (5) days after opening of the escrow, the Escrow Agent shall carry out its duties as Escrow Agent hereunder. b. Upon delivery to the Escrow Agent of the Grant Deed (hereinafter defined), duly executed by Agency and Participant, the Escrow Agent shall record the Grant Deed in accordance with these escrow instructions, provided that title to the Additional Properties can be vested in Participant in accordance with the terms and provisions of this Agreement. The Escrow Agent shall buy, affix, and cancel any transfer stamps required by law. Any insurance policies governing the Additional Properties are not to be transferred. "Grant Deed" shall mean the instrument by which Agency shall convey fee title to the Additional Properties to Participant, substantially in the form of the instrument appended hereto as Attachment No 8 and incorporated herein by this reference. C. Participant shall pay into escrow to the Escrow Agent the following fees, charges and costs promptly after the Escrow Agent has notified Participant of the amount of such fees, charges, and costs, but not earlier than ten (10) days prior to the scheduled date for the conveyance of the Additional Properties: (1) One half of the escrow fee; (2) The premium for the Owner's Title Policy (hereinafter defined); and (3) Recording fees. d. Agency shall pay into escrow to the Escrow Agent the following fees, charges and costs promptly after the Escrow Agent has notified Agency of the amount of such fees, charges, and costs, but not earlier than ten (10) days prior to the scheduled date for the conveyance of the Additional Properties: (1) One half of the escrow fee; (2) From funds derived from Participant pursuant to Section 304, costs necessary to place the title to the Additional Properties in the condition for conveyance required by the provisions of this Agreement; (3) Ad valorem taxes, if any, upon the Additional Properties or upon this Agreement or any rights hereunder, prior to the conveyance of title or possession; and (4) Any State, County, or City documentary stamps or transfer tax. e. Agency and Participant shall timely and properly execute, acknowledge and deliver the Grant Deed conveying to Participant title to the Additional Properties in accordance with the requirements of this Agreement. f. The Escrow Agent is authorized to: (1) Pay, and charge Agency and Participant, respectively, for any fees, charges and costs payable under this Section 302. Before such payments are made, the Escrow Agent shall notify Agency and Participant of the fees, charges and costs necessary to clear title and close the escrow. (2) Disburse funds and deliver the Grant Deed and other documents to the parties entitled thereto when the conditions of this escrow have been fulfilled by Agency and Participant. (3) Record any other instruments delivered through this escrow if necessary or proper to vest title in Participant in accordance with the terms and provisions of this Agreement or as directed by Agency. g. All funds received in this escrow shall be deposited by the Escrow Agent in a general escrow account with any state or national bank doing business in the State of California and reasonably approved by Participant and Agency, and may be combined in such with other escrow funds of the Escrow Agent. h. if this escrow is not in condition to close on or before one -hundred and twenty (120) days after escrow opens, either party who then shall have fully performed the acts to be performed before the conveyance of title may, in writing, demand the return of its money, papers, or documents from the Escrow Agent. No demand for return shall be recognized until ten (10) days after the Escrow Agent (or the party making such demand) shall have mailed copies of such demand to the other parry or parties at the address of its principal place of business. Objections, if any, shall be raised by written notice to the Escrow Agent and to the other party within the 10-day period, in which event the Escrow Agent is authorized to hold all money, papers, and documents with respect to the Additional Properties until instructed by a mutual agreement of the parties or, upon failure thereof, by a court of competent jurisdiction. If no such demands are made, the escrow shall be closed as soon as possible. i. If objections are raised as above provided for, the Escrow Agent shall not be obligated to return any such money, papers, or documents except upon the written instructions of both Agency and Participant, or until the party entitled thereto has been determined by a final decision of a court of competent jurisdiction. if no such objections are made within said 10-day period the Escrow Agent shall immediately return the demanded money, papers, or documents. J. The parties understand they may be required to execute additional standard form escrow instructions required by the Escrow Agent ("General Instructions"). In the event of a conflict between this Agreement and any such General Instructions, this Agreement shall control. The parties agree, however, that they will refuse to sign General Instructions which (1) purport to relieve the Escrow Agent of liability for negligence or intentional wrong -doing; (2) excuse the Escrow Agent from strict compliance with each and all of the provisions of this Agreement and the General Instructions; or (3) purport to authorize the Escrow Agent to follow the instructions or directive of any person not a direct signatory party to this Agreement. Any amendment to the escrow instructions shall be in writing and signed by both Agency and Participant. At the time of any amendment the Escrow Agent shall agree to carry out its duties as Escrow Agent under such amendment. k. All communications from the Escrow Agent to Agency or Participant shall be directed to the addresses set forth in Sections 105, and in the manner set forth in Section 801 for notices between the parties hereto. Prorations (1) G-enexal. Rentals, revenues, and other income, if any, from the Additional Properties, and operating expenses, if any, affecting the Additional Properties shall be prorated as of 11:59 P.M. on the day preceding the close of escrow. (2) Taxes -and Assessments. All non -delinquent real estate taxes on the Additional Properties shall be prorated as of the close of escrow. (3) Operating Espcnse . Any other expenses incurred in operating, securing and maintaining the Additional Properties, and any other costs incurred in the ordinary course of business or the maintenance of the Additional Properties shall be prorated on an accrual basis. Agency shall pay all such expenses that accrue prior to the close of escrow and Participant shall pay all such expenses accruing on the close of escrow and thereafter. (4) MethQd.Qf_ mmtiQn. All prorations shall be made in accordance with customary practice in Orange County, except as expressly provided herein. Such prorations, if and to the extent known and agreed upon as of the close of escrow, shall be paid into escrow by the respective parties. § 302.2 Conveyance of Title and Delivery of Possession a. Subject to any mutually agreed upon extension of time, Agency shall convey title to the Additional Properties to Participant on or before the close of escrow (so long as all conditions precedent have been satisfied), or such later date mutually agreed to in writing by Agency and Participant and communicated in writing to the Escrow Agent. b. Except as otherwise provided herein, the purchase price shall be delivered to Agency and possession of the Additional Properties shall be delivered to Participant at the close of escrow. Participant shall accept title and possession to the Additional Properties upon the close of escrow. 12 § 302.3 Form of Deed Agency shall convey to Participant title to the Additional Properties in the condition provided in Section 302.4 by Grant Deed in a form to be mutually agreed upon by Agency and Participant consistent with this Agreement and substantially in the form attached hereto and incorporated herein as Attachment No. 8. The Grant Deed shall contain covenants necessary or desirable to carry out this Agreement. § 302.4 Condition of Title Subject to the terms and conditions of this Agreement, Agency shall convey to Participant fee simple merchantable title to the Additional Properties free and clear of all liens, encumbrances, assessments, easements, leases and taxes; except those which are set forth in the Grant Deed, and those which are otherwise consistent with this Agreement and which are acceptable to Participant. § 302.5 Time and Plac-e. for Delivery of Deed Subject to any mutually agreed -upon extension of time, Agency and Participant shall deposit the Grant Deed with the Escrow Agent on or before the close of escrow. § 302.6 Conditions Precedent to Glose of Escrow The close of escrow and the obligations of Agency and Participant under this Section 302 are subject to the satisfaction prior to the close of escrow (unless otherwise provided), of the following conditions, and the obligations of the parties with respect to such conditions are as follows: $epl�sentations, Warranties -and-Covenants (1) Participant shall have duly performed each and every agreement to be performed by Participant hereunder and Participant's representations, warranties and covenants set forth in this Agreement shall be true and correct as of the date of the close of escrow. (2) Agency shall have duly performed each and every agreement to be performed by Agency hereunder and Agency's representations, warranties and covenants set forth in this Agreement shall be true and correct as of the date of the close of escrow. b. Deliveries (1) Participant shall have delivered the items to be delivered by Participant, when and as required in this Agreement. (2) Agency shall have delivered the items to be delivered by Agency, when and as required by this Agreement. 13 C. Conditions Precedent. As of the close of escrow, all of the conditions precedent to conveyance of title as set forth in this Agreement shall have been satisfied. d. Lticlnsivance. At or prior to the close of escrow, Commonwealth Land Title or any other title company mutually agreed upon by Agency and Participant (the "Title Company") shall be committed to issue the Owner's Title Policy. e. Eailure of Conditions _to Close of Escrow. In the event any of the conditions precedent to the close of escrow are not timely satisfied or waived, for a reason other than the default of Agency or Participant, the following shall apply: (1) With regard to conditions precedent to the close of escrow which are for the benefit of Agency, Agency shall have the right to terminate the escrow and the rights and obligations of Agency and Participant thereunder, except as otherwise provided herein; and (2) With regard to conditions precedent to the close of escrow which are for the benefit of Participant, Participant shall have the right to terminate the escrow and the rights and obligations of Agency and Participant thereunder, except as otherwise provided herein; and (3) With regard to conditions precedent to the close of escrow which are for the benefit of both Agency and Participant, either party shall have the right to terminate the escrow and the rights and obligations of Agency and Participant thereunder, except as otherwise provided herein; and (4) Escrow Agent is hereby instructed to promptly return to Participant and Agency all funds, if any, and documents deposited by them, respectively, into escrow which are held by Escrow Agent on the date of said termination (less, in the case of the party otherwise entitled to such funds, the amount of any cancellation charges required to be paid by such party under Section 302.6 (0); and (5) Neither party shall have any further rights or obligations hereunder except as otherwise provided herein. f. Cancellation-ftes and Expcnscc.s. In the event this escrow terminates because of the nonsatisfaction of any condition for a reason other than the default of Agency or Participant under this Agreement, the cancellation charges, if any, required to be paid by and to Escrow Agent and the Title Company shall be borne by Participant and all other charges shall be borne by the party incurring same. g. Disbursements and Other Actions t4-be-taken.by the Escrow Agent. At the close of escrow, Escrow Agent shall promptly undertake all of the following in the manner hereinbelow indicated: 14 (1) Cause the Grant Deed and any other documents which the parties hereto may mutually direct, to be recorded in the Official Records of the County Recorder of Orange County, and obtain conformed copies thereof for distribution to Agency and Participant. (2) Direct the Title Company to issue the Owner's Title Policy to Participant. (3) Prepare and distribute to Participant and Agency each, copies of both parties' escrow closing statements and a complete copy of all documents handled by escrow. Escrow Agent agrees that release of funds to Agency shall irrevocably commit Escrow Agent, on behalf of Title Company, to issue the Owner's Title Policy in accordance with this Agreement. § 302.7 Title -Insurance Concurrent with recordation of the Grant Deed, the Title Company shall provide and deliver an owner's title policy to the Participant ("Owner's Title Policy"). Participant shall be responsible for paying the premium for a title insurance policy in the amount of the purchase price, including any extended coverage or special endorsements which it requests. Agency shall have no responsibility for paying the cost of the premium for any title insurance policy. Agency agrees that title to the Additional Properties shall be conveyed free of any possession or right of possession except that of Participant, unless waived by Participant in writing. § 302.9 Condition of the Additional ProperUs The Additional Properties and all existing improvements thereon shall be conveyed in an "as is" condition, with no warranty, express or implied by Agency as to the existence or non-existence of Hazardous Substances (hereinafter defined), the condition of the soil (or water), its geology, or the presence of known or unknown faults or the condition of the existing improvements. It shall be the sole responsibility of Participant, at Participant's expense, to investigate and determine the condition of the Additional Properties and its suitability for the development and use required by this Agreement. If condition of the Additional Properties, or any part thereof, is not in all respects entirely suitable for the use or uses to which the Additional Properties will be put, then it is the sole responsibility and obligation of Participant to take such action as may be necessary to place the Additional Properties in a condition that is entirely suitable for the development and use provided in this Agreement. § 302.10 Indemnit�t Participant hereby agrees to indemnify, defend and hold harmless Agency and City and their respective members, officers, agents, employees, contractors and consultants from any claims, actions, suits, legal and administrative proceedings, liability, injury, deficiency, damages, fines, penalties, punitive damages, costs and expenses (including, without limitation, the cost of any cleanup, remediation, removal, mitigation, monitoring or testing of Hazardous Substances, and reasonable attorneys' fees) resulting from, arising out of, or based upon (i) the presence, release, use, &J generation, discharge, storage or disposal of any Hazardous Substances on, under, in or about, or the transportation of any Hazardous Substances to or from, the Additional Properties; or (ii) the violation, or alleged violation, of any statute, ordinance, order, rule, regulation, permit, judgment or license relating to the use, generation, release, discharge, storage, disposal or transportation of Hazardous Substances on, under, in or about, to or from, the Additional Properties. This indemnity shall include, without limitation, any damage, liability, fine or penalty arising from or out of any claim, action, suit or proceeding for personal injury (including sickness, disease or death), tangible or intangible property damage, compensation for lost wages, business income, profits or other economic loss, damage to the natural resource or the environment, nuisance, contamination, leak, spill, release or other adverse affect on the environment. Participant shall not be responsible for (and such indemnity shall not apply to) property damage or bodily injury to the extent caused by the intentional misconduct or gross negligence of the Agency or City or their designated employees or agents, or for any legal obligations of the Agency and City, if any, which are independent of this Agreement and existing as of the date of this Agreement. § 303. Intentionally Omitted § 304. Participant to Advance Acquisition and Relocation Costs a. In accordance with this Section 304 and within the times required by Section 305, Participant shall advance to Agency all actual Acquisition and Relocation Costs incurred or to be incurred by Agency in relation to the acquisition of Additional Properties, if any, that may be authorized for acquisition by the Agency. Acquisition and relocation obligations, if any, shall be administered and reviewed by the Agency (or its designated relocation consultant) in conformity with all Relocation Laws (hereinafter defined). As used in this Agreement, "Acquisition and Relocation Costs" shall mean all costs arising out of the acquisition of Additional Properties, including, but not limited to, purchase price payments to third party owners (including all interests of the owners, tenants, vendors, suppliers, and any and all other claimants as to the purchase price) and related closing costs (including brokers' fees); costs incurred by the Agency by negotiation or eminent domain including, but not limited to, the purchase price, just compensation for the taking or threatened taking of property interests in the Additional Properties (land, leasehold interest, building, fixtures, equipment, loss of goodwill and improvements, if any); costs for payment of goodwill as provided under California law in eminent domain actions; fees and actual expenses of acquisition agents; appraisal fees; costs of environmental studies performed on the Additional Properties (including, but not limited to, all investigations and reports done on Hazardous Materials); escrow fees; costs of drawing the deeds for each property acquired; recording fees; notary fees and premiums for title insurance policies; any state, county or city documentary stamps or transfer tax; court costs; witness fees; expert witness fees; prorated taxes; reasonable attorney fees; deposits to obtain an order of prejudgment possession, if incurred; amounts to satisfy judgments of condemnation; costs necessary to permit early acquisition of property interests where delays would create a hardship for the owner; abandonment costs and/or damages which the Agency may be ordered to pay in any eminent domain proceeding; and any additional costs incurred to settle or pay claims of inverse condemnation, or judgments in inverse condemnation; costs for relocation assistance and benefits pursuant to the Relocation Laws (i.e., all applicable state and local relocation laws, including without limitation, the California Relocation Assistance Law (Government Code § 7260 et seq.) and the implementing regulations thereto (California Code of Regulations, Title 24 § 6000 et seq.) and local implementing regulations thereto, and all applicable federal relocation Iaws, including, without limitation, the Uniform Relocation Assistance and Real Property Acquisition IV Policies Act of 1970 (42 U.S.C. § 42014655, and 49 C.F.R. part 24), acquisitions and eminent domain laws (Government Code § 7267 et seq. and Code of Civil Procedure § 1240.000 et seq.) and any other applicable federal, state or local enactment, regulation or practice providing for relocation assistance and benefits, acquisition and/or compensation for property interests (including without limitation goodwill and furnishings, fixtures and equipment, leasehold bonus value, and moving expenses)); and any and all related claims. b. All Acquisition and Relocation Costs shall be the sole financial responsibility of Participant. The Agency shall have no obligation to repay or reimburse Participant for any Acquisition and Relocation Costs. C. Participant hereby forever waives, disclaims and releases Agency and the City and their respective officers and employees from all claims for Acquisition and Relocation Costs, and covenants and agrees to and shall defend, release, indemnify and hold harmless the Agency and the City and their respective officers and employees (collectively, the "Indemnitees") from and against any and all claims, actions, liability, penalties, charges, loss, damage, costs, expenses whatsoever (including reasonable attorneys' fees and court costs) for Acquisition and Relocation Costs which may now or in the future be incurred or suffered by Indemnitees by reason of, or resulting from, in full or in part, or in any respect whatsoever from the acquisition of Additional Properties or redevelopment of the Site pursuant to this Agreement. § 305. Leber -of -Credit to Agency a. In the event Agency determines to acquire any Additional Properties (or portions thereof) by authorizing Agency staff to initiate negotiations to acquire such properties, then, within thirty (30) days after the date of Agency's determination, Participant shall deliver to the Agency an irrevocable letter of credit, cash deposit or other satisfactory security, first approved in writing by the Agency Executive Director and legal counsel as to form, content and issuer, in an amount determined pursuant to Section 305 (b) below, and otherwise complying with the requirements of this Agreement (the "Original Letter of Credit"). b. The amount of the Original Letter of Credit shall be established by the Agency's Executive Director based on Agency appraisals of the Additional Properties and Agency estimates of all other contemplated Acquisition and Relocation Costs. The Agency shall consult with the Participant in making such determination and shall provide written notice to Participant of the amount of the Original Letter of Credit no later than thirty (30) days prior to the date Participant is required to deliver the Original Letter of Credit to Agency. The term of the Original Letter of Credit shall be not less than one (1) year, and such term shall be subject to extension if Acquisition and Relocation Costs will or might be incurred following the scheduled expiration of the Letter of Credit; provided, however, in the event the Original Letter of Credit is not extended as required herein within thirty (30) days prior to its scheduled expiration, the Agency shall have the right to draw from the Original Letter of Credit an amount deemed sufficient by Agency to pay for any Acquisition and Relocation Costs which will or might be incurred following such scheduled expiration. C. Within thirty (30) days after the Agency provides written notice to Participant that Acquisition and Relocation Costs are likely to exceed the amount of the Original Letter of Credit, Participant shall deliver to the Agency additional letter(s) of credit and/or amendment(s) to 17 the Original Letter of Credit, first approved in writing by the Agency as to form, content and issuer (each referred to herein as an "Additional Letter of Credit"), in such amounts as are requested by the Agency to cover Acquisition and Relocation Costs not covered by the existing Original Letter of Credit. The Agency may provide such notice at any time and from time to time. The Original Letter of Credit, together with all Additional Letters of Credit, are referred to collectively herein as the "Letter of Credit." d. Participant shall be responsible to pay to the issuer of the Letter of Credit all interest, costs and fees incurred with respect to the issuance of the Letter of Credit and each draw on the Letter of Credit. C. The Agency shall have the right to draw on the Letter of Credit from time to time to pay any and all Acquisition and Relocation Costs as such costs become due. The only condition for any draw on the Letter of Credit shall be a certification by the Agency Executive Director or designee that the draw is permitted under the terms of this Agreement. A copy of such certification by the Agency Executive Director or designee, along with a breakdown of the draw amount, shall be provided to Participant. Participant and Agency shall consult so as to attempt to schedule relocating and business closures so as to lawfully minimize Acquisition and Relocation Costs without delaying completion of the Project. Within ten (10) days following each draw on the Letter of Credit, the Agency shall provide the Participant with a written report showing the specific nature and amount of each such draw. ARTICLE 400. REDEVELOPMENT OF THE SITE § 401. Sco"fRedey-elopment The improvements on the Site shall be rehabilitated and renovated or caused to be rehabilitated and renovated by Participant in accordance with and within the limitations established in the Scope of Development (Attachment No. 4), the Redevelopment Plan, and plans approved by the Agency pursuant to this Agreement. Participant shall use its best efforts to cause the replacement of the exterior of the Ward Parcel building and renovation of the Ward Parcel parking lot in accordance with City approved plans, in order to ensure that such Ward Parcel building and parking lot conform with the redevelopment of the Site, regardless of whether or not this Agreement is terminated as to the Ward Parcel pursuant to Section 702.1 (b) or 702.2 (c). Participant shall prepare and submit to the City applications for building, grading and excavation permits and any other permits which may be required for redevelopment of the Site. All such applications shall comply with City requirements for the applicable permit and shall be submitted for review and written approval or disapproval by the City within the times established therefor in the Schedule of Performance (Attachment No. 3). The Site shall be redeveloped as generally established in City -approved entitlements and permits, including Specific Plans and Conditional Use Permits, if applicable, except for such changes as may be mutually agreed upon between Participant and the City. 1F SE�2$-QQ IT:iT froo:HQLLAtIp + pIIgKT ttp 1213896245fl > nt by: Y-W, BALLuth f 403. T-727 P 11/19 Job-944 The Pardcipam gbal best an corn of cwstroctiag, rebabWtaticg mW movaiing the uaps+oovem=u on the Site and co structins end ir> Wling A public and private on- and of -site impmentima thcmn or therefor, except as set forth in the Schedule of Feasibility Gait Payments (Attacbment No. 7). The Schedule of Feasi4x 4 Gap PaytOntu consists of Part l! and Pan 2. with Part 2 only becoming applicable bi the event this Agreement is terminated as to Hte Ward Parcel pursuant to Section 702. t (b) or 7021(c). • 1 ; - -.7 . ..,,.... Participant: hereby warrants and represents titer Fa ticip=l is parry to a reciprocal easnnr agreement vci}th other proparry owners within the! Site. Participant Shall not amsttd the =Vrocsl arsese ag agtmetla without the prior wri tree appmvtil of ASMy as to both consistency with this Aimee wt and Participant's authority over the eat= Site to accomplish the redcwelopracru purposes contcnnph tod under this Agreement PardcWwt covcrtartts to at its best effom to obtain the counatof other property owtsen within the Site to v Aevelop the puidng lots and %lidding Wert= on the site pttrsumt to this A m*mwt The Participant sball obiaia, or cause to be obtaitted, all approvals required for the redevelopment of the Site, including those specified haaim within the tunes specified in the Schedute of Perfemu=a (Amwhmcat No. 3). The Participant shall begin sad eomple>m A cou#ucticm sad rehabilitation witisla the tunas speoified in the Schedule of PerfomAwe. The Sebedule of Palom=e is subject to revision from time to time as approved in uniting by the Agawy Executive Director or desiguft avA tha Participant. Ming periods of conitruccion and/or rmhabili"on, the Participant shall submit to the Agemy a wd= report of the progress o f the const cation w1ca and as reasonably requested by the Agency. The report shall be in such form and detail as may be reasonably acquired by the Agency and shell irelude a number of construction pbooagraphs (i(rcgw xW) to ken sine the best report by the Participant. f 406. Ad Insivaa� The Partioil=t agrees to and shall defend release, indemnity lad hdd hatnieas the Agency and the City and their respective officers and employees from art$ against any and all claims, actions, liability, pewlties, charges, loss. damage, costs, or expenses whatsoever (including reasomblc attorneys' fop and cyoun costs) arising &nm or as a result of the 6mth of any person or any accident. Wu-ry, loss, or damage whatsoever caused to any per3on or to the property of any perm whieb shall occur dircctiy or Wirectly as a rsasslt ofor in oomemion with the acts ofor on behalf of the Participant in Connection Kith the redcvelopment of the Site, this Agreement' or the implemattation duswf, whether such activirm or pertiornmee thccreof be by the Participant or by anyone directly or indirectly employed or contracted by Participant, or whether such damage shall occur or be discov*rcd before or after tamination of this Agsement. 'This indrt wdty and agreement 19 '1z �I SEP-2HO 17:12 Froa:HDLLIWD i KNIGHT LLP 12118962450 T-727 P IZ/19 Job-944 to daieod, release area bold harmlem the Agency end City dsali include but shall oat be limited to any sad all pezzding and ftwe e)ainm wdonk liability,Judgments, orders, penalties, charges, loss, doolk hats. ar eacptasCs whaevQ (ituludit� teasar>$blt: atw�y� fries and court cosh) ariairJg frarn or ss a result of a claim. administrative proceeding or judicial action filed by or against the Participant cr Agency or City or any of their respective officcn and eraployees rataung to ate subject ofd is Asremnmt or the decisions and.'or actions taken by the Agency or City relating to or in impla=tadon of this Apeemnt; including, but not limited w the following lawsuits currently tmft litigation: a. Burlington Goat Factory Warebouse of Huncingwn Hcach, Inc,, a California corporation v. City of iiuntiagtott Such Redevelopment Agency, a California munici* corporation, City of Huntington Beach, a California municipal `i corporation, Ray Silver, individuagy and in his capacity as an Administrator for the City of Hundagtar► Beach Ralevelopment Agency, Howard Ucfsky, individually nd in bit capaclty as the Director of Fleming of the City of Huntington Beach. United States District CQuN Ceaaal District of California, Case No. CVbO- 46683NM(AUx). b. In the Mahar of the Petition of the Redevelopment Agency of the City of Huntin wn Beach, Superior Court of California, County of Orange, Civil Case No. CC04:43. c. Burlinvon Cant Facmy Warehouse of Huntington Beach, Inc., a Califortzia corporation v. Huntington Caserta Associates, a Dclawuc limited liability oompaay, F.rralow Retail Pmpwtiea, s Delaware limited liability company, 'i ho Ezralow Company. a Dalawam limited liability company. Superior Court of California. County of Orange, Casa No. 00CC06309• d. Montgomery Ward, LLC, a Delaware hutted liability company v. City of Huatitsgtoa SMCb., a Cilif=ja municipal corporWon, as Respon&rd, and Hunting= CaWr Associslea, a Delaware limited liability company, and Redavt lagtnetrt Agattey of the City of HuatUn a $each, a PUhftc body, corporate and politic, u heal Parties in Interest, Superior Court of California, County of Orange, Cow No. OOM292. The Participant shalt riot be responsible for, and such indemnity t<hall not apply to the accent that rain hum nmults It m the gross negligeam or wzrntg&l utmrttYoatal acts or orniesimu of the Agency. City, or their respective officers, agents or employees; provided, however, drat Participant shall remain obligated to pay for claims, acdow, liability, juudgmeats, orders, penalties, charges, loss. daatnage,, eosin, or apcnm whassmver (including taascttiable attameW fees and aaurt cam) for all pzosat and }ht m litigation arising out of or r3elsted to the subject of this Agm went (including, but not limited to, those described in Section 406.1(a) through (d)) regardless of the outcome of any such litigation). Participant's obliWons set forth above regarding the payment of reasonable ttwn2eys' fat incuurrd by Agency abet I be subject to :he following: (1) Participant shall only be obligated to pay for those coats incurred alher the date of this Agreament; (2) payamu of anorneys' Pecs saki oosu under this agwruent to defend ftU be paid by Partic4nw to Away as incurred and when duo for paymers by Asarco; (3) Agwy shall have dw right to select Agony's legal counsel, but sh*U osiodically caasult with Participant includin3 without limitation, prior to hiring outside SEP-29-00 17:13 Froa:HOLLAND I KNICHT LLP i2i38962�5Q T-727 P.13/19 Job-944 legal ooaasek (4) Agency shall pmvlde Participant with monthly cost v"j and Agency agrees to nambasm auoh costs its a cost Offsetive maaanar. 1r Dwixg the period con, m&u ing with any lrelimbtary work by Participant on or with mgwd to the Site or any portion titeM4 until a:wa rtty (20) yran after The Ope aft CommauenU at Nre. the participant WWI take out, maintain, and furnish or cause to be furnished to the Agency, 6*hcate otig6als or appropriate eertificaus (countersigned by as authorized agent of the insure:) of infrlxattce as follows: A. Comprehensive geyntxal lability i5odilY ipJaY and property damage}, autonavbilc Liability (including owned, !tired, and non -owned vehicles), blanket contraenlal liability, and personal injury liability, all with limits not less that $3,W0,000 combined single liirit per occurrence. All such policies sball contain a waiver of subrogation for the benefit of the Agency and the City. B. All such insurance policies "I eoatain the following three endorsement provisions: "The City of Huntington Beacb and the Redmiopment Apney of the City of HuntEngton Beach (site "Agencn their elective and appointive bowls. chinas, and employees are added as ukWon>al iusureds with respect to tints subj= project and contract with the Agency." "Said policy shall not terminate, be canceled. not the coverage reduced until after thirty (30) days written notice is given to the Redevelopment Agency ofrhe City of iHuntutgton Beach_" "Said policy and coveraSe as is Afforded to the City of Huntingm Beach azd the Redevelopment Agency of d x City of HundiftSton Beach, their elective and appointed boaatrda, off=n and employees :}tall be primary its unince sad not co:ttr'bating with Any other insurance mmntabned by the Chy of Huntit = Reach or the Redevelopment Agency of the City of Huntington &etch.« C. All such insurannce policies sine!! be provided by insurers admitted and authorized to do business in the Statc of C abibraia with a m W== rating of A: VIII. Parsicipaw must deliver proof of the insurance required under this Section 406.1 to Agency prior to Agency execution of this ASmement. p, The insurance coverage and limits required herein sbxi{ not be construed As a limit of Participant's liability. participant agrees to et.spond for any loam with respect to this Agra:meuL sad impletuatation tl:zvd, itmtned by the Agency or City and 21 ri not covered by Participant's insurance, whether by reason of coverage being inapplicable or by Participant's failure to obtain coverage. Participant agrees to provide immediate notice to Agency and City of any claim or loss against Participant that includes Agency or City as a defendant. Agency and City assume no obligation by the receipt of such notice, but have the right (but not the duty) to monitor the handling of any such claim or claims if they are likely to involve the Agency or City. § 406.2. Environmental Indemnity (a) "Hazardous Substance," as used in this Agreement means any substance, material or waste which is or becomes regulated by the United States government, the State of California, or any local or other governmental authority, including, without limitation, any material, substance or waste which is (1) defined as a "hazardous waste," "acutely hazardous waste," "restricted hazardous waste," or "extremely hazardous waste" under Sections 25115, 25117 or 25122.7, or listed pursuant to Section 25140, of the California Health and Safety Code; (ii) defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code; (iii) defined as a "hazardous material," "hazardous substance," or "hazardous waste" under Section 25501 of the California Health and Safety Code; (iv) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code; (v) petroleum; (vi) asbestos; (vii) a polychlorinated biphenyl; (viii) listed under Article 9 or defined as "hazardous" or "extremely hazardous" pursuant to Article 11 of Title 22 of the California Code of Regulations, Chapter 20; (ix) designated as a "hazardous substance" pursuant to Section 311 of the Clean Water Act (33 U.S.C. Section 1317); (x) defined as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act (42 U.S.C. Section 6903); (xi) defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601); or (xii) any other substance, whether in the form of a solid, liquid, gas or any other form whatsoever, which by any governmental requirements either requires special handling in its use, transportation, generation, collection, storage, treatment or disposal, or is defined as "hazardous" or is harmful to the environment or capable of posing a risk of injury to public health and safety. (b) Participant hereby represents and warrants that the development, construction and uses of the Site permitted under this Agreement (i) will comply with all applicable environmental laws; and (ii) do not require the presence of any Hazardous Substance on the Site, except for those customarily used in the ordinary course of business for such development, construction and use. (c) By this Agreement, Participant provides to the Agency, effective immediately, an indemnification of the Agency and City and their respective members, officers, employees, agents, contractors and consultants relating to the environmental condition of the Site and the presence of Hazardous Substances thereon. Therefore, Participant hereby agrees to indemnify, defend and hold harmless Agency and City and their respective members, officers, agents, employees, contractors and consultants from any claims, actions, suits, legal and administrative proceedings, liability, injury, deficiency, damages, fines, penalties, punitive damages, costs and expenses (including, without limitation, the cost of any cleanup, remediation, removal, mitigation, monitoring or testing of Hazardous Substances, and reasonable attorneys' fees) resulting from, arising out of, or based upon (i) the presence, release, use, generation, discharge, storage or disposal of any Hazardous Substances on, under, in or about, or the transportation of any Hazardous Substances to or from, the Site; or (ii) the violation, or alleged violation, of any statute, ordinance, order, rule, regulation, permit, judgment or license relating to the use, generation, release, discharge, storage, disposal or 22 transportation of Hazardous Substances on, under, in or about, to or from, the Site. This indemnity shall include, without limitation, any damage, liability, fine or penalty arising from or out of any claim, action, suit or proceeding for personal injury (including sickness, disease or death), tangible or intangible property damage, compensation for lost wages, business income, profits or other economic loss, damage to the natural resource or the environment, nuisance, contamination, leak, spill, release or other adverse affect on the environment. Participant shall not be responsible for (and such indemnity shall not apply to) property damage or bodily injury to the extent caused by the intentional misconduct or gross negligence of the Agency or City or their designated employees or agents, or for any legal obligations of the Agency and City, if any, which are independent of this Agreement and existing as of the date of this Agreement. (d) From the date of this Agreement, Participant hereby waives, releases and discharges the Agency, the City and their respective members, officers, employees, agents, contractors and consultants, from any and all present and future claims, demands, suits, legal and administrative proceedings, and from all liability for damages, losses, costs, liabilities, fees and expenses (including, without limitation, attorneys' fees) arising out of or in any way connected with the Agency's or Participant's use, maintenance, ownership or operation of the Site, any Hazardous Substances on the Site, or the existence of Hazardous Substances contamination in any state on the Site, however the Hazardous Substances came to be placed there, except to the extent arising out of the gross negligence or intentional misconduct of the Agency or City or their employees, officers or agents. Participant acknowledges that it is aware of and familiar with the provisions of Section 1542 of the California Civil Code which provides as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." To the extent of the release set forth in this Section 406.2, Participant hereby waives and relinquishes all rights and benefits which it may have under Section 1542 of the California Civil Code. UVAIM M9u M N M MAW Mo IR •s The Participant agrees for itself and its successors and assigns that in the rehabilitation and construction of the improvements pursuant to this Agreement, Participant will not discriminate against any employee or applicant for employment because of sex, marital status, race, color, religion, creed, ancestry, or national origin, and that the Participant will comply with all applicable local, state and federal fair employment laws and regulations. § 408. Local_ State_ and Federal Laws The construction of all improvements on the Site shall be in conformity with all applicable laws, including all applicable Federal and State labor standards. § 409. pity and Other Governmental Agency Permits Before commencement of construction or development of any buildings, structures or other works of improvement upon the Site or any portion thereof, and within the times prescribed therefor 23 in the Schedule of Performance (Attachment No. 3), the Participant shall, at its own expense, secure or cause to be secured any and all land use and other entitlements, approvals and permits which may be required by the City or any other governmental agency affected by such construction, development or work, including but not limited to conditional use permit(s), grading, building and sign permits. It is understood that the Participant's obligation is to pay all necessary fees and to timely submit to the City final drawings with final corrections to obtain a building permit. The Agency shall provide all proper assistance to the Participant in securing these permits. The Participant shall be responsible for paying all environmental mitigation fees and permits, and all fees and charges of any kind charged by City pursuant to law. § 410. Prohibition Against Transfer (a) No voluntary or involuntary successor in interest of the Participant shall acquire any rights or powers under this Agreement except as expressly set forth herein. (b) Prior to twenty (20) years after the Operating Commencement Date, the Participant shall not make any total or partial sale, transfer, conveyance or assignment of the whole or any part of the Site or any improvements thereon or any interest therein ("Transfer") without the prior written approval of the Agency, except to a Controlled Affiliate. This prohibition shall not be deemed to prevent the granting of casements, leasehold interests, licences, concessions, subleases or permits necessary for the redevelopment of the Site pursuant to the Scope of Development (Attachment No. 4), nor shall it prohibit the granting of any security interests permitted under this Agreement for financing the redevelopment of the Site consistent this Agreement. (c) Subject to Section 410 (d) below, Participant may make a Transfer with the prior written approval of the Agency subject to the rights of any permitted Mortgagee, which approval shall not be unreasonably withheld in the event that all conditions of this Section are met. Such approval shall be given by Agency if: (1) At the time of such Transfer, this Agreement shall be in full force and effect and either no default then exists or no default will exist upon consummation of the Transfer; (2) Agency determines in its sole discretion that the following Transfer requirements are met: (i) the Transfer is made to a responsible third party who will undertake Participant's responsibilities under this Agreement to develop, use and maintain the Site in accordance with this Agreement; (ii) if the Transfer occurs prior to the issuance of a Release of Construction Covenants, that such third parry shall demonstrate qualifications and experience with respect to the type of development proposed herein and in the Agreement to assure the development and operation of the Site are equal to or greater than the qualifications and experience of Participant; and (iii) such third parry shall demonstrate sufficient financial resources or commitments to assure operation (and, if the Transfer occurs prior to the recordation of a Release of Construction Covenants, development) of the Site in accordance with this Agreement; (3) The transferee shall have executed an express assumption, in form and substance first approved in writing by Agency, of the obligations and liabilities of Participant under this Agreement arising on and after the effective date of the Transfer; 24 (4) The Transferee shall have a net worth equal to or greater than that of Participant, subject to increase on the fifth (5th) anniversary of the effective date of this Agreement and every five (5) years thereafter in accordance with the escalation of the Consumer Price Index during each such five (5) year period, or, for any Transfer proposed after the recordation of the Release of Construction Covenants, such other evidence as may be reasonably satisfactory to Agency documenting the financial wherewithal of the transferee to successfully operate the improvements and the Site; and (5) The transferee shall have experience in the operation and management of a retail shopping center of the type and character located on the Site, or shall agree and covenant as an additional obligation under this Agreement to at all times cause the Site to be operated and managed by a person, first approved in writing by Agency's Executive Director, who has substantial experience in managing and operating a retail shopping center of similar type and character. The Agency shall not unreasonably withhold approval of the release of Participant upon the approved Transfer, based upon the evidence provided above. If Agency approves any Transfer pursuant to this Section, such approval shall not be effective unless and until Participant gives Agency notice of the Transfer and a copy of any documents effecting and/or evidencing such Transfer, and unless and until any such transferee assumes all of the obligations and liabilities of Participant under this Agreement. (d) Notwithstanding any other provision of this Agreement to the contrary, Agency approval of a Transfer shall not be required in connection with any of the following: (1) Any Transfer to a Controlled Affiliate. (2) Transfers resulting from the death or mental or physical incapacity of an individual. (3) Transfers or assignments in trust for the benefits of spouse, children, grandchildren, or other family members. (4) The conveyance or dedication of any portion of Participant's interest in the Site to the City or other appropriate governmental agency, or the granting of easements or permits in accordance with the Agreement where required to facilitate the development or operation of the Site or the development or operation of any of the other portions of the Site. (5) The leasing or sub -leasing of a building pad or of any part or parts of a building or structure for occupancy, or entering into of any concession agreements, licenses, or other contracts in the normal course of owning and operating the improvements on the Site, provided that all applicable requirements of this Agreement have been met. (6) The sale of portions of the Site as pads for individual users not exceeding a building area of ten thousand (I0,000) gross square feet. (e) In the event that Participant requests Agency's written approval of a proposed Transfer pursuant to this Section, Participant agrees to provide Agency with such information, including financial statements as Agency may reasonably require in order to evaluate the solvency, 25 financial responsibility and relevant business acumen and experience of any proposed transferee. Such information shall include, without limitation, a balance sheet of the proposed transferee as of a date within ninety (90) days of the request for Agency's approval and statements of income or profit and loss for the two-year period preceding the request for Agency's approval, if the same be available (or such other similar information as shall be available at the time the request for approval of the Transfer is made), and a written statement in reasonable detail as to the business and experience of the proposed transferee during the five (5) years preceding the request for Agency's approval. Within thirty (30) days after the receipt of Participant's written notice requesting Agency approval of an Transfer, Agency shall respond in writing by stating what further information, if any, Agency reasonably requires in order to determine whether or not to approve the requested Transfer. Upon receipt of such a timely response, Participant shall promptly furnish to Agency such further information as may be reasonably requested. Participant's request for approval of a Transfer and delivery of necessary information for financing purposes shall be deemed complete twenty (20) days after Agency's receipt thereof and Participant's request for approval of a Transfer and delivery of necessary information for all other types of Transfer shall be deemed complete thirty (30) days after Agency's receipt thereof if Agency does not deny approval or if no timely response requesting further information regarding the proposed Transferee is delivered to Participant, or, if such a timely response requesting further information is received, on the date which is fifteen (15) days after the date that Participant delivers such additional information to Agency. None of the foregoing shall restrict Agency's rights to deny approval of any Transfer not found acceptable by Agency pursuant to this Agreement. Any Transfer requiring Agency's approval shall only be effective upon Agency's written approval of such Transfer. Agency shall approve or disapprove any requested Transfer for financing purposes requiring Agency approval within thirty (30) days after Participant's request therefor is accepted as complete or is deemed complete, and Agency shall approve or disapprove any other type of requested Transfer requiring Agency approval within forty-five (45) days after Participant's request therefor is accepted as complete or is deemed complete. Any disapproval shall be in writing an shall specify the reasons for the disapproval and, if applicable, the conditions required to be satisfied by Participant in order to obtain approval. Participant agrees to reimburse Agency for Agency's reasonable costs and attorneys' fees incurred in connection with the processing and documentation of any requested Transfer which requires Agency's approval hereunder. (I) During the existence of this Agreement, Participant shall promptly notify Agency of any and all changes whatsoever in the identity of the parties in control of Participant (including transfers to a Controlled Affiliate), of which it or any of its officers have been notified or otherwise have knowledge or information. (g) In the event that the Participant does make a Transfer in violation of this Agreement prior to twenty (20) years after the Operating Commencement Date, or purports to do so, the Agency shall be entitled to any right or remedy authorized herein or in law or equity. 26 (h) In the absence of specific written agreement by the Agency as provided in this Agreement, no Transfer or approval by the Agency of any Transfer, shall be deemed to relieve the Participant or any other party from any obligations under this Agreement. Approval by Agency of one or more Transfers shall not operate as a waiver or estoppel to the future enforcement by Agency of its rights pursuant to this Agreement. § 411. No_Encimibrances except Mortgages. Deeds of Tru.si _Cm eyancU and Leases=Back _or. OtherSAnYeyance for -Financing. -far Redevelopment Notwithstanding Section 410, mortgages, deeds of trust, conveyances and leases -back, or any other form of conveyance required for any reasonable method of financing are permitted prior to twenty (20) years after the Operating Commencement Date, but prior to the recordation of the Release of Construction Covenants such financing shall only be for the purpose of securing loans of funds to be used only for financing, re -financing, or obtaining permanent financing for the acquisition of the Site or any portion thereof and the rehabilitation, renovation and construction of improvements on the Site or any portion thereof, and any other expenditures necessary and appropriate to redevelop the Site in accordance with this Agreement . Prior to the recordation of the Release of Construction Covenants, the Participant shall not enter into any such mortgage or deed of trust without the prior written approval of the Agency, which the Agency shall not unreasonably withhold or delay if the Participant submits evidence satisfactory to the Agency demonstrating that (a) the mortgage, deed of trust or other security instrument is consistent with the provisions of this Agreement; (b) the mortgage, deed of trust or other security instrument expressly acknowledges that the rights of any holder or person acquiring title through or following foreclosure are subordinate and subject to the provisions of the Agreement Containing Covenants Affecting Real Property (the "Covenant Agreement"), which is to be executed and recorded pursuant to Section 506 of this Agreement; (c) the proceeds thereof are to be used only for redevelopment of the Site in accordance with this Agreement; and (d) a minimum equity of Twenty -Two Million Dollars ($22,000,000) shall be retained. The Agency shall not withhold its approval of any mortgage or deed of trust used to secure a loan satisfying the criteria set forth in the immediately preceding sentence by the following third party institutional lenders or financial institutions: City National Bank, Far East National Bank, Wells Fargo National Bank, and Bank of America (collectively, "Approved Lenders"). After the recordation of the Release of Construction Covenants, the Participant shall provide notice and a copy of any such mortgage or deed of trust demonstrating that (a) the mortgage, deed of trust or other security instrument is consistent with the provisions of this Agreement; and (b) the mortgage, deed of trust or other security instrument expressly acknowledges that the rights of any holder or person acquiring title through or following foreclosure are subordinate and subject to the provisions of the Covenant Agreement. The words "mortgage" and "deed of trust" as used herein includes all other modes of financing real estate acquisition, construction, and land development. Prior to twenty (20) years after the Operating Commencement Date, the Participant shall not place or allow to be placed on the Site or any part thereof or the improvements thereon, any mortgage, deed of trust, encumbrance or lien other than as provided in this Section 411. The Participant shall remove or cause to be removed any levy or attachment made on the Site or any part thereof, or assure the satisfaction thereof within a reasonable time but in any event prior to a sale thereunder. 27 Prior to the recordation of the Release of Construction Covenants, the Participant shall notify the Agency in advance of any mortgage, deed of trust or sale and lease -back financing which Participant proposes to enter into. § 412. HQIdP_LNot Obligated_Lo_Construct Impvements; Right_So-CAae The holder of any mortgage, deed of trust or other security interest authorized by this Agreement (the -Mortgagee") shall in no way be obligated by the provisions of this Agreement to construct or complete the construction of improvements, or to guarantee such construction or completion. Upon the written request of a Mortgagee, Agency shall copy to such Mortgagee any notices of default which are sent to Participant by Agency. Each such holder shall (insofar as the rights of the Agency are concerned) have the right at its option to cure or remedy or commence to cure or remedy any Participant default consistent with the terms and conditions of this Agreement. Nothing contained in this Agreement shall be deemed to oblige, permit or authorize such holder to undertake or continue the construction or completion of the improvements without first having expressly assumed the Participant's obligations to the Agency by written agreement satisfactory to the Agency. The holder in that event must agree to complete, in the manner provided in this Agreement, the improvements to which the lien or title of such holder relates, and submit evidence satisfactory to the Agency that it has the qualifications and financial responsibility necessary to perform such obligations. Any such holder properly completing such improvements shall be entitled, upon request made to the Agency, to a Release of Construction Covenants from the Agency with respect to such improvements. Agency agrees to cooperate with Mortgagees or potential Mortgagees to reasonably consider requested revisions or additions to this Agreement which would not materially impair Agency's rights hereunder or which would not materially increase Agency's obligations hereunder. § 413. Releast_oLCQnstru tion-Co.venants Promptly after completion of all construction and rehabilitation to be completed pursuant to the Scope of Development and Sections 401 and 501 (a) and (b) of this Agreement in connection with the redevelopment of the Site, as reasonably determined by the Agency, the Agency shall furnish the Participant with a Release of Construction Covenants upon wntten request therefor by the Participant. Such Release of Construction Covenants shall be substantially in the form appended hereto as Attachment No. 6 and incorporated herein by this reference. The Agency shall not unreasonably withhold or delay the Release of Construction Covenants. Such Release of Construction Covenants shall be, and shall state that it is, a conclusive determination of satisfactory completion of the construction, rehabilitation and renovation required by the Scope of Development and Sections 401 and 501 (a) and (b) of this Agreement with respect to the redevelopment of the Site. The Release of Construction Covenants shall not constitute a determination of satisfactory compliance with any other provision of this Agreement. A Release of Construction Covenants shall be in such form as to permit it to be recorded in the Office of the Recorder of Orange County. If the Agency refuses or fails to furnish a Release of Construction Covenants after written request from the Participant, the Agency shall, within thirty (30) days of the written request, provide the Participant with a written statement which explains in reasonable detail the reason(s) the Agency refused or failed to furnish a Release of Construction Covenants. The statement shall also contain 28 the Agency's specific recommendation of the action the Participant must take to obtain a Release of Construction Covenants; provided, however, that the statement need not include technical information or instructions. If the reason for such refusal is confined to the immediate availability of specific items of materials for landscaping, the Agency will issue its Release of Construction Covenants upon the posting of a bond, first approved by the Agency as to form and substance, by the Participant with the Agency in an amount representing a fair value of the work not yet completed. The Release of Construction Covenants shall not constitute evidence of compliance with, or satisfaction of, any obligation of the Participant toward any holder of a mortgage, or any insurer of a mortgage securing money loaned to finance the improvements, nor any part thereof. No such Release of Construction Covenants is a notice of completion as referred to in Section 3093 of the California Civil Code. ARTICLE 500. USE OF THE SITE § 501. Uses (a) Participant hereby covenants and agrees on behalf of itself and any successors and assigns in the Site or any portion thereof or any improvements thereon or any interest therein that Participant, such successors and assigns shall: a. Develop, construct, renovate and rehabilitate improvements on the Site solely in accordance with the Redevelopment Plan, this Agreement (including but not limited to the Scope of Development, Attachment No. 4), the Covenant Agreement and plans approved by the City. b. Devote the Site, or cause the Site to be devoted, solely to use as a first - quality regional shopping center in accordance with the Redevelopment Plan, this Agreement, the Covenant Agreement, and plans approved by the City, until November 26, 2034. C. Beginning no later than the Operating Commencement Date, cause to be Operated (hereinafter defined) on the Site until November 26, 2034, a first - quality regional shopping center meeting the design and architectural standards of that certain Specific Plan initially adopted by Resolution No. 2000-68 on July 5, 2000. All floor area shall be Operated by retail stores of a type customarily located at first -quality regional shopping centers in Southern California. If any tenant over fifty thousand square feet (50,000) of gross leaseable area ("Major") ceases to Operate within the effective period of the operating covenants, Participant shall request the written approval of the Agency for the replacement of the Major with one or more proposed new tenants of comparable first -quality and trade name at the earliest practicable date, but in no event more than ninety (90) days after the Major to be replaced provides written notice to Participant of its intent to cease to Operate on the Site. Within thirty (30) days after receipt of Participant's request for approval, Agency shall respond in writing by stating 29 what further information, if any, Agency reasonably requires in order to determine whether or not to approve the replacement tenant. Participant shall promptly furnish to Agency such further information as may be reasonably requested. Participant's request for approval shall be deemed complete thirty (30) days after Agency's receipt thereof, if no timely response requesting further information is given to Participant, or, if such a timely response requesting further information is received by Participant, on the date that Participant delivers such additional information to Agency, provided that such additional information is responsive to Agency's request. Agency shall approve or disapprove the proposed replacement tenant in the Agency's reasonable discretion, and shall provide Participant with written notice of its decision within thirty (30) days after Participant's request for such approval is accepted as complete or deemed complete. In deciding whether to approve a proposed replacement tenant, the Agency may consider, among other factors, the level of quality and the sales generation ability of the proposed replacement tenant and trade name. If Agency shall disapprove a proposed replacement tenant, Agency shall do so by written notice to Participant stating the reasons for such approval. "Operate," as used in this Agreement, means open to the general public for business during commercially reasonable business hours, except when temporarily not open for business by reason of such reasonable interruptions as may be customary and incidental to the conduct of business at first -quality regional shopping centers in Southern California. d. Maintain the Site, or cause the Site to be maintained, in accordance with Section 503 of this Agreement. e. Pay when due all real estate taxes and assessments assessed and levied on the Site and any improvements thereon and refrain from appealing, challenging or contesting in any manner the validity or amount of any tax assessment, encumbrance or lien on the Site; provided, however, that such prohibition shall not apply to an appeal, challenge or contesting of an erroneous initial assessment for property tax purposes of the Site in the fiscal year of the completion of the improvements to be constructed and/or renovated pursuant to this Agreement. f. Not discriminate upon the basis of race, color, creed, religion, sex, age, marital status, handicap, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Site, or any improvements erected or to be erected thereon, or any part thereof g. include in all leases and subleases appropriate provisions requiring all lessees and sublessees to comply with and be bound by the Sections 501-505 of this Agreement and the Covenant Agreement. h. Pay when due the Agency Participation Payment in accordance with Section 601 of this Agreement. 30 Continue to perform all ongoing obligations of Participant under this Agreement, including but not limited to those under Sections 304, 305 and 406 herein. § 502. Intentionally_Qmiiced § 503. Maintcnance of the Sitc a. Participant shall maintain, repair and operate the Site and all improvements constructed or to be constructed thereon (including landscaping, lighting and signage), or cause the Site and all such improvements to be maintained, in a first quality condition, free of debris, waste and graffiti, and in compliance with the terms of the Redevelopment Plan, the City of Huntington Beach Municipal Code, and the following: (1) All improvements on the Site shall be maintained in good condition in accordance with the custom and practice generally applicable to comparable first quality shopping centers in Orange County, and in conformance and compliance with all plans, drawings and related documents approved by the Agency pursuant to this Agreement, all conditions of approval of land use entitlements adopted by the City or the Planning Commission, including painting and cleaning of all exterior surfaces of all private improvements and public improvements to the curbline. (2) Landscape maintenance shall include, without limitation, watering/irrigation; fertilization; mowing; edging; trimming of grass; tree and shrub pruning, trimming and shaping of trees and shrubs to maintain a natural and healthy appearance, road visibility, and irrigation coverage; replacement, as needed, of all plant materials; control of weeds in all planters, shrubs, lawns, ground covers, or other planted areas; and staking for support of trees. (3) Clean-up maintenance shall include, without limitation, maintenance of all sidewalks, paths and other paved areas in a clean and weed -free condition; maintenance of all such areas clear of dirt, mud, trash, debris or other matter which is unsafe or unsightly; removal of all trash, litter and other debris from improvements and landscaping; clearance and cleaning of all areas maintained prior to the end of each day on which maintenance operations are performed to ensure that all cuttings, weeds, leaves and other debris are properly disposed of by maintenance workers. b. If the Agency gives written notice to Participant that the maintenance or condition of the Site or any portion thereof or any improvements thereon does not comply with this Agreement and such notice describes the deficiencies, Participant shall correct, remedy or cure the deficiency within thirty (30) days following the submission of such notice, unless the notice states that the deficiency is an urgent matter relating to public health and safety in which case Participant shall cure the deficiency with all due diligence and shall complete the cure at the earliest possible time but in no even more than forty-eight (48) hours following the submission of the notice. In the event Participant fails to maintain the Site or any portion thereof or any improvements thereon in accordance with this Agreement and fails to cure any deficiencies within the applicable period described above, the Agency shall have, in addition to any other rights and remedies hereunder, the right to maintain the Site and the improvements thereon, or portion thereof, or to contract for the correction of any deficiencies, and Participant shall be responsible for payment of all such costs reasonably incurred by the Agency. kil C. The Participant shall not use or permit the use of the Site in violation of (a) the Specific Plan and applicable zoning laws as they now exist or as they may hereafter be amended from time to time, or (b) the Redevelopment Plan for the Project, as it now exists or, subject to Section 102 of this Agreement, as it may hereafter be amended from time to time. § 504. QbligatimllloRefrain from Discrimination Participant hereby covenants and agrees on behalf of itself and any successors and assigns in the Site or any portion thereof or any improvements thereon or any interest therein, that there shall be no discrimination against or segregation of any person, or group of persons, on account of sex, marital status, race, color, religion, creed, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Site, and the Participant (itself or any person claiming under or through it) shall not establish or permit any such practice or practices of discrimination, or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees of the Site, or any portion thereof. § 505. Form of Nondis- inatioti_aad Nonsegregation_Claus-es The Participant shall refrain from restricting the rental, sale or lease of the Site, or any portion thereof, on the basis of sex, marital status, race, color, religion, creed, ancestry or national origin of any person. All such deeds, leases or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: 1. In deeds: "The grantee herein covenants by and for himself, his heirs, executors, administrators and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of sex, marital status, race, color, religion, creed, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land herein conveyed, nor shall the grantee himself or any person claiming under or through him, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the land herein conveyed. The foregoing covenants shall run with the land." 2. In leases: "The lessee herein covenants by and for himself, his heirs, executors, administrators and assigns, and all persons claiming under or through him, and this lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons on account of sex, marital status, race, color, religion, creed, national origin or ancestry, in the leasing, subleasing, transferring, use, or enjoyment of the land herein leased nor shall the lessee himself, or any person claiming under or through him establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy, of tenants, lessees, sublessees, subtenants or vendees in the land herein leased." In contracts: "There shall be no discrimination against or segregation of, any person, or group of persons on account of sex, marital status, race, color, religion, creed, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, 32 tenure or enjoyment of the land. nor shall the transferee himself or any person claiming under or through him, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the land." 506. Agreement Containing Covenants -Affecting -Real P=er y Concurrently with the execution of this Agreement, the Agency and Participant shall execute and cause to be recorded the Agreement Containing Covenants Affecting Real Property in substantially the form appended to this Agreement as Attachment No. 5 and incorporated herein by this reference (sometimes referred to as the "Covenant Agreement"). The covenants established in this Agreement, shall, without regard to technical classification and designation, be binding on the Participant and any successor in interest to the Site, or any portion thereof, or any interest therein, or any improvements thereon, for the benefit and in favor of the Agency, City and their successors and assigns. The covenants contained in Sections 501 and 503 of this Agreement shall remain in effect until November 26, 2034. The covenants against discrimination shall remain in perpetuity. All other covenants shall cease and terminate on the dates specified in the Covenant Agreement. ARTICLE 600. SPECIAL PROVISIONS As additional consideration for the performance by Agency of its obligations under this Agreement, Participant shall pay to Agency an Agency Participation Payment (hereinafter defined) each Operating Year (hereinafter defined) commencing with the Operating Commencement Date (hereinafter defined). Subject to the Buyout Provisions (hereinafter defined) of Section 602 below, the obligation of the Participant to make the Agency Participation Payments shall continue for a period of twenty (20) Operating Years after the Operating Commencement Date, and shall, during such 20 year term, survive the sale, transfer or refinance of the Site and the improvements or any portion thereof, and not be affected or reduced in any way by reason of any such sale, transfer or refinance. The Agency Participation Payment shall be paid to Agency by Participant for each Operating Year within ninety (90) days of the end of such Operating Year, together with a certified statement submitted for Agency's approval or disapproval documenting in detail the basis for the calculation of the Agency Participation Payment due Agency. Each Agency Participation Payment shall be made in an amount consistent with the Agency approved certified statement for the subject Operating Year. For purposes of calculation and payment of the Agency Participation Payment, the following terms shall have the following respective meanings: "Agency Participation Payment" means an amount equal to twenty percent (20%) of the Adjusted Gross Revenues for each Operating Year. 33 "Gross Revenues" means all revenue of any kind or nature paid to Participant or Participant's agents each Operating Year from the rental, lease, licensing, operation, use or ownership of retail, restaurant, entertainment and other commercial spaces on the Site, and includes Agency reimbursement payments to Participant pursuant to the Schedule of Feasibility Gap Payments (Attachment No. 7); provided, however, that Gross Revenues shall not include insurance, pass - through taxes or assessments, common area maintenance charges, or any proceeds from the sale or refinancing of the Site or its improvements. "Adjusted Gross Revenues" means the excess of eighty-five percent (85%) of the Gross Revenues for each Operating Year after Participant's Annual Return. "Adjusted Project Costs" means Project Costs as approved by the Agency pursuant to Section 202, plus the total of all Annual Return Shortfalls, if any. "Annual Return Shortfall" means the amount in any Operating Year by which Participant's Annual Return exceeds eighty-five percent (85%) of Gross Revenues for that Operating Year. "Operating Commencement Date" means the last to occur of either the date of issuance by the City of the Certificate of Occupancy for the redevelopment of the Site, or the opening for business to the general public of the first -quality shopping center required by this Agreement to be redeveloped on the Site by Participant. "Operating Year" means each twelve month period that commences on the Operating Commencement Date and each anniversary of the Operating Commencement Date, provided that Participant may convert Operating Years to calendar years, provided appropriate and equitable adjustments are made for any partial year to the reasonable satisfaction of the Agency's Executive Director, and provided that there is no reduction in the required 20 year term of the Agency Participation Payments. "Participant's Annual Return" means an amount equal to twelve percent (12%) of Adjusted Project Costs (including, without limitation, Annual Return Shortfalls, if any). For the first five (5) years after the Operating Commencement Date, there shall be no Buyout of the Agency Participation Payments. Commencing with the sixth (6th) anniversary of the Operating Commencement Date, until twenty (20) years after the Operating Commencement Date, Participant may at any time Buyout the Agency Participation Payments and terminate any obligation to continue paying any further Agency Participation Payments by paying the Buyout Amount to the Agency within sixty (60) days of the Effective Date, provided Participant shall have given Agency written notice of its intent to effect such Buyout, and shall have identified in such written notice the Effective Date of such Buyout, and further provided such identified Effective Date shall be a date which is on or after the date the Agency receives such written notice. For purposes of this Agreement, the following terms shall have the following respective meanings: 34 "Buyout Amount" means the following: (a) for a Buyout with an Effective Date commencing on the sixth (6th) anniversary of the Operating Commencement Date and ending on the tenth (10th) anniversary of the Operating Commencement Date, the Buyout Amount shall be the greater of (i) the sum of Three Million Dollars ($3,000,000), or (ii) the sum obtained by multiplying the amount of actual Agency Participation Payments payable for the twelve month time period prior to the Effective Date by ten (10); or (b) for a Buyout with an Effective Date commencing on the first day following the tenth (10th) anniversary of the Operating Commencement Date and ending on the twentieth (20th) anniversary of the Operating Commencement Date, the Buyout Amount shall be the greater of (1) the sum of Three Million Dollars (S3,000,000), or (ii) the net present value of the remaining Agency Participation Payments until the twentieth anniversary of the Operating Commencement Date (the "End Date"), assuming Gross Revenues will be equal to Gross Revenues for the twelve month period preceding the Effective Date, and increasing such projected Gross Revenues by 9% on each fourth anniversary of the Effective Date. The discount rate used to calculate the net present value shall be equal to the annual rate equal to the sum of (i) the interest rate on ten-year U.S. Treasury bills or notes having a maturity date closest to and no later than the End Date as reported in the Wall Street Journal on the Effective Date (or if the Wall Street Journal is not published on the calculation date, the first publication date thereafter) and (ii) three hundred (300) basis points. If the Wall Street Journal is no longer published at least weekly, the calculation shall be made using a financial reporting service proposed by Participant and reasonably acceptable to Agency. In the event the Buyout Amount calculated pursuant to this Section 602 (b)(ii) equals or is greater than the sum of Three Million Dollars ($3,000,000), then, at such time and at all times thereafter until the End Date, the Buyout Amount payable to Agency shall be the sum calculated pursuant to Section 602 (b)(ii), and Section 602 (b)(i) shall not longer apply. "Buyout" means the termination of the Participant's obligation to continue paying any further Agency Participation Payments beyond the Effective Date by paying the Buyout Amount to the Agency. "Effective Date" means the date on which the Buyout, if any, shall occur. ARTICLE 700. DEFAULTS, REMEDIES AND TERMrNATION § 701. Defaults -General a. Subject to the extensions of time set forth in Section 808, failure or delay by either party to perform any term or provision of this Agreement, after written notice and opportunity to cure as provided in this Section or other relevant section of this Agreement, constitutes a default under this Agreement. The party who fails or delays must immediately commence to cure, correct or remedy such failure or delay and shall complete such cure, correction or remedy with reasonable diligence. 35 b. The injured party shall give written notice of default to the party in default, specifying the default complained of by the injured party. Failure or delay in giving such notice shall not constitute a waiver of any default, nor shall it change the time of default. Except as otherwise expressly provided in this Agreement, any failures or delays by either party in asserting any of its rights and remedies as to any default shall not operate as a waiver of any default or of any such rights or remedies_ Delays by either party in asserting any of its rights and remedies shall not deprive either party of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert or enforce any such rights or remedies. C. If a monetary event of default occurs, prior to exercising any remedies hereunder, the injured party shall give the party in default written notice of such default. The parry in default shall have a period of ten (10) calendar days after such notice is received or deemed received within which to cure the default prior to exercise of remedies by the injured party. d. If a non -monetary event of default occurs, prior to exercising any remedies hereunder, the injured party shall give the party in default notice of such default. If the default is reasonably capable of being cured within thirty (30) calendar days after such notice is received or deemed received, the party in default shall have such period to effect a cure prior to exercise of remedies by the injured party. If the default is such that it is not reasonably capable of being cured within thirty (30) days, and the parry in default (1) initiates corrective action within said period, and (ii) diligently, continually, and in good faith works to effect a cure as soon as possible, then the party in default shall have such additional time as is reasonably necessary to cure the default prior to exercise of any remedies by the injured party. In no event shall the injured party be precluded from exercising remedies if the non -monetary event of default is not cured within one hundred and twenty (120) days, or the injured party's rights under this Agreement becomes or is about to become materially jeopardized by any failure to cure a default. C. Any notice of default that is transmitted by electronic facsimile transmission followed by delivery of a "hard" copy, shall be deemed delivered upon its transmission; any notice of default that is personally delivered (including by means of professional messenger service, courier service such as United Parcel Service or Federal Express, or by U.S. Postal Service), shall be deemed received on the documented date of receipt; and any notice of default that is sent by registered or certified mail, postage prepaid, return receipt required shall be deemed received on the date of receipt thereof. § 702. Remedies and -Rights of Termination a. Prior to the Agency's issuance of the Release of Construction Covenants, the Agency may, at its option, terminate this Agreement in the event that Participant violates this Agreement by doing any of the following: (1) The Participant (or any successor in interest) assigns or purports to assign this Agreement or any right therein, or in the Site, or any portion thereof, or the underlying real estate of the Site, or any of the improvements thereon in violation of this Agreement; or 36 (2) The Participant fails to submit the certificates of insurance, Evidence of Financing, Guaranty Agreement, plans, drawings, and related documents and any other documents required by this Agreement for any portion of the Site by the dates provided in this Agreement and the Schedule of Performance (Attachment No. 3) therefor; or (3) The Participant fails to advance funds to Agency for Acquisition and Relocation Costs pursuant to Section 304 within the times established in this Agreement and the Schedule of Performance (Attachment No. 3); or (4) The Participant breaches this Agreement in any material respect. If any default or failure referred to in this Section 702.1 (a) is not cured by Participant within the cure period specified in Section 701, then this Agreement and any rights of the Participant, or any assignee or transferee, in this Agreement, or arising therefrom, shall at the option of the Agency, be terminated by the Agency by five (5) days' prior written notice to the Participant, provided such default or failure is not cured prior to the effective date of such termination. In the event of such termination, neither the Agency nor the Participant shall have any further rights against or liability to the other under this Agreement with respect to the Site, except that Participant shall continue to be responsible for and shall indemnify Agency against the items set forth in Section 304 and 406, including all Acquisition and Relocation Costs incurred by Agency if any. In the event the Agency does not terminate this Agreement pursuant to this Section 702.1, the Agency may pursue any legal and/or equitable rights and/or remedies it may have against Participant, including, but not limited to, damages, specific performance, declaratory relief, and any other legal and equitable remedies. b. Agency or Participant shall have the option to terminate this Agreement as to the Ward Parcel at any time within one (1) year after the effective date of this Agreement. In the event Agency terminates this Agreement as to the Ward Parcel, then the Ward Parcel shall be removed from the legal description of the Site and the Scope of Development, and Participant shall continue to be responsible for and shall indemnify Agency against the items set forth in Section 304 and 406, including all Acquisition and Relocation Costs incurred by Agency if any. Regardless of whether or not this Agreement is terminated as to the Ward Parcel, Participant shall use its best efforts to cause the replacement of the exterior of the Ward Parcel building and renovation of the Ward Parcel parking lot in accordance with City approved plans, in order to ensure that such Ward Parcel building and parking lot conform with the redevelopment of the Site. § 702.2 Termination by..Pailicipant a. In the event (i) the Agency breaches this Agreement in any material respect, and such breach is not cured by Agency within the cure period specified in Section 701, or (ii) Participant submits evidence satisfactory to Agency that after and despite diligent efforts, Participant is unable to obtain sufficient financing to redevelop the Site as required by this Agreement, then this Agreement and any rights of the Agency in this Agreement, or arising therefrom, shall at the option of the Participant, be terminated by written notice thereof to the Agency; provided, however, that Participant's right to terminate due to its inability to obtain sufficient financing shall expire within one (1) year after the effective date of this Agreement. 37 b. In the event Participant terminates this Agreement pursuant to this Section 702.2 (a) (i), Participant may pursue any legal and/or equitable rights and/or remedies it may have against Agency, including, but not limited to, damages, specific performance, declaratory relief, and any other legal and equitable remedies. In the event of a termination pursuant to this Section 702.2 (a) (ii), neither the Agency nor the Participant shall have any further rights against or liability to the other under this Agreement or with respect to the Site, except that Participant shall continue to be responsible for and shall indemnify Agency against the items set forth in Section 304 and 406, including all Acquisition and Relocation Costs incurred by Agency if any. C. Agency or Participant shall have the option to terminate this Agreement as to the Ward Parcel at any time within one (1) year after the effective date of this Agreement. In the event Participant terminates this Agreement as to the Ward Parcel, then the Ward Parcel shall be removed from the legal description of the Site, and Participant shall continue to be responsible for and shall indemnify Agency against the items set forth in Section 304 and 406, including all Acquisition and Relocation Costs incurred by Agency if any. Regardless of whether or not this Agreement is terminated as to the Ward Parcel, Participant shall use its best efforts to cause the replacement of the exterior of the Ward Parcel building and renovation of the Ward Parcel parking lot in accordance with City approved plans, in order to ensure that such Ward Parcel building and parking lot conform with the redevelopment of the Site. QfRedevelonimcrit The Agency is deemed the beneficiary of the terms and provisions of this Agreement and the covenants running with the land, both for and in its own tight and for the purpose of protecting the interests of the community. The Agreement and the covenants shall run in favor of the Agency without regard to whether the Agency has been, remains or is an owner of any interest in the Site or any portion thereof or other land in the Project Area. The Agency shall have the right if any covenants or other provisions of this Agreement are breached to exercise all rights and remedies, and to maintain any actions or suits at law or in equity or other proper proceedings to enforce the curing of such breaches to which it is entitled. In addition to any other rights or remedies, either party may institute legal action to cure, correct or remedy any default, to recover damages for any default, or to obtain any other remedy consistent with the purpose of this Agreement. Such legal actions must be instituted in the Superior Court of the County of Orange, State of California, in any other appropriate court of that county, or in the United States District Court for the Central District of California. a. In the event that any legal action is commenced by Participant against Agency, service of process on Agency shall be made by personal service upon the Executive Director, or in such other manner as may be provided by law. b. In the event that any legal action is commenced by Agency against Participant, service of process on Participant shall be made by personal service upon Participant (or 38 upon a member of Participant) and shall be valid whether made within or without the State of California, or in such manner as may be provided by law. ARTICLE 800. GENERAL PROVISIONS § 801. Notic_ca-Dmands_and-C-ommunkations Between the Parties Formal notices, demands and communications between Agency and Participant shall be deemed sufficiently given if dispatched by first class mail, registered or certified mail, postage prepaid, return receipt requested, or by electronic facsimile transmission followed by delivery of a "hard" copy, or by personal delivery (including by means of professional messenger service, courier service such as United Parcel Service or Federal Express, or by U.S. Postal Service), to the addresses of Agency and Participant as set forth below. Such written notices, demands and communications may be sent in the same manner to such other addresses as either party may from time to time designate by mail. Any notice that is transmitted by electronic facsimile transmission followed by delivery of a "hard" copy, shall be deemed delivered upon its receipt within regular business hours of regular business days; any notice that is personally delivered (including by means of professional messenger service, courier service such as United Parcel Service or Federal Express, or by U.S. Postal Service), shall be deemed received on the documented date of receipt; and any notice that is sent by registered or certified mail, postage prepaid, return receipt required shall be deemed received on the date of receipt thereof: Copies of all notices, demands and communications shall be sent as follows: Participant: Huntington Center Associates, LLC C/o The Ezralow Company, LLC 23622 Calabasas Road, Suite 100 Calabasas, California 91302 Attention: Mr. Bryan Ezralow, President Agency: Redevelopment Agency of the City of Huntington Beach City Hall 2000 Main Street Huntington Beach, California 92648 Attention: David Biggs, Economic Development Director .:1 •1 .. • •i .II ��. • • No member, official or employee of the Agency shall be personally liable to the Participant, or any successor in interest, in the event of any default or breach by the Agency, or for any amount which may become due to the Participant or any of its successors, or on any obligation under the terms of this Agreement. Except as set forth in the Guaranty Agreement and for derivative liability, no member, officer, manager, director, shareholder, or employee of Participant shall be personally liable to the Agency in the event of any default or breach by Participant, or for any amount which may become due to the Agency, or on any obligation under the terms of this Agreement. 39 § 803. Remedies Not Exclusive and Wai-yas No remedy conferred by any of the specific provisions of this Agreement is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in or by statute or otherwise, and the election of any one or more remedies shall not constitute a waiver of the right to pursue other available remedies. § 804. Jimc of the-Esse= Time is of the essence in this Agreement. § 805. Litigation and Compliance The Participant warrants, to the best of its actual knowledge, that except for the lawsuits described in Section 406.1, there are no suits, other proceedings or investigations pending or, to the best of the Participant's knowledge, threatened against the Participant, that would, if concluded adversely to the Participant, have a matenal adverse effect on the financial condition of the Participant and Participant's ability to fully perform its obligations under this Agreement. "Actual knowledge" as used herein means what is actually known by Bryan Ezralow or Douglas Gray as of the date of this Agreement. § 806. Participant's .W_auaadu The Participant hereby represents the following to Agency for the purpose of inducing Agency to enter into this Agreement and to consummate the transactions contemplated hereby, all of which shall be true as of the date hereof: (a) The Participant has the legal power, night and authority to enter into this Agreement and the instruments and documents referenced herein to which the Participant is a party, to consummate the transactions contemplated hereby, to take any steps or actions contemplated hereby, and to perform its obligations hereunder. (b) All requisite action has been taken by the Participant and all requisite consents have been obtained in connection with the entering into this Agreement and the instruments and documents referenced herein to which the Participant is a parry, and the same are authorized by the Redevelopment Plan and comply with all applicable laws, statutes, ordinances, rules and governmental regulations. (c) This Agreement is duly executed by the Participant, and all agreements, instruments and documents to be executed by the Participant pursuant to this Agreement shall, at such time as they are required to be executed hereunder, be duly executed by the Participant, and each such agreement is, or shall be at such time as it is required to be executed hereunder, valid and legally binding upon the Participant and enforceable in accordance with its terms and the execution and delivery thereof shall not, with due notice or the passage of time, constitute a default under or violate the terms of any indenture, agreement or other instrument to which the Participant is a party. 40 (d) Except for litigation described in Section 406.1, there is no pending or threatened litigation which, in the reasonable opinion of the Participant, would, if decided adversely to the Participant, prevent the Participant from performing its duties and obligations hereunder. § 807. Modification of Agreement No modification, waiver, amendment, discharge, or change of this Agreement shall be valid unless the same is in writing and signed by both the Agency and Participant. § 808. Enforced Delay In addition to specific provisions of this Agreement, performance by either party hereunder (including, without limitation, all Attachments and exhibits hereto) shall not be deemed to be in default where delays or defaults are due to war, insurrection, strikes, lock -outs, riots, floods, earthquakes, fires, casualties, acts of God, acts of the public enemy, epidemics, quarantine restrictions, freight embargoes, lack of transportation, governmental restrictions or priority, litigation, unusually severe weather, inability to secure necessary labor, materials or tools, delays of any contractor, subcontractor or suppliers, acts of the other party or any third party not under the control of the acting party, acts or failure to act of the City or any other public or governmental agency or entity (except that an act or failure to act of the Agency shall not excuse performance by the Agency). Financial and economic problems/factors shall not constitute enforced delays under this Section 808 and shall not excuse performance by the Participant. An extension of time for any such cause shall be for the period of the enforced delay and shall commence to run from the time of the commencement of the cause, If notice by the party claiming such extension is sent to the other party within thirty (30) days of knowledge of the commencement of the cause. Times of performance under this Agreement may also be extended in writing by the mutual agreement of Agency and the Participant. § 809. Conflict of interests To the extent prohibited by law, no member, official or employee of the Agency shall have any personal interest, direct or indirect, in this Agreement nor shall any such member, official or employee participate in any decision relating to this Agreement which affects his or her personal interests or the interests of any corporation, partnership or association in which he or she is directly or indirectly interested. § 810. Warranty Against Payment of Consideration for Agreement Except as provided in this Agreement, the Participant warrants that it has not paid or given, and will not pay or give, any person any money or other consideration for obtaining this Agreement. § 811. Inspection of Books and Records Solely as pertinent to the purposes of this Agreement, the Agency or its accountant, auditor, or experienced, reputable consultant shall have the right at al reasonable times to inspect the books, records, and/or other documents of the Participant pertaining to the Site and/or the project which is 41 the subject of this Agreement. Agency shall keep the information obtained through such inspections confidential to the extent permissible by law. § 812. Relatimship of -the Panics Nothing contained in this Agreement shall be deemed or construed as creating a partnership, joint venture, or any other relationship between the parties hereto other than as specified in the provisions contained herein, or cause the Agency to be responsible in any way for the debts or obligations of Participant or any other party. The Participant agrees to indemnify, hold harmless and defend the Agency from any claim made against the Agency arising from a claimed relationship of partnership or joint venture between Agency and Participant with respect to the redevelopment, operation, maintenance or management of the Site or improvements thereon. § 813. Int=Letation of Agree (a) The language in all parts of this Agreement shall in all cases be construed simply, as a whole and in accordance with its fair meaning and not strictly for or against any party. The parties hereto acknowledge and agree that this Agreement has been prepared jointly by the parties and has been the subject of arm's length and careful negotiation over a considerable period of time, that each party has been given the opportunity to independently review this Agreement with legal counsel, and that each party has the requisite experience and sophistication to understand, interpret, and agree to the particular language of the provisions hereof. Accordingly, in the event of an ambiguity in or dispute regarding the interpretation of this Agreement, this Agreement shall not be interpreted or construed against the party preparing it, and instead other rules of interpretation and construction shall be utilized. (b) If any term or provision of this Agreement, the deletion of which would not adversely affect the receipt of any material benefit by any party hereunder, shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall not be affected thereby and each other term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. It is the intention of the parties hereto that in lieu of each such clause or provision of this Agreement that is illegal, invalid, or unenforceable, there be added as a part of this Agreement an enforceable clause or provision as similar in terms to such illegal, invalid, or unenforceable clause or provision as may be possible. (c) The captions of the articles, sections, and subsections herein are inserted solely for convenience and under no circumstances are they or any of them to be treated or construed as part of this instrument. (d) References in this instrument to this "Agreement" mean, refer to and include this instrument as well as any riders, exhibits, addenda and attachments hereto (which are hereby incorporated herein by this reference) or other documents expressly incorporated by reference in this instrument. Any references to any covenant, condition, obligation, and/or undertaking "herein," "hereunder," or "pursuant hereto" (or language of like import) shall mean, refer to, and include the covenants, obligations, and undertakings existing pursuant to this instrument and any riders, exhibits, addenda, and attachments or other documents affixed to or expressly incorporated by reference in this instrument. 42 (e) As used in this Agreement, and as the context may require, the singular includes the plural and vice versa, and the masculine gender includes the feminine and vice versa. (f) Except as otherwise expressly provided in this Agreement, approvals or consents required of Agency or Participant in this Agreement shall not be unreasonably withheld or delayed. All approvals or consents shall be in writing. Failure by either party to approve a matter within the time provided for approval of the matter shall not be deemed a disapproval, and failure by either party to disapprove a matter within the time provided for approval of the matter shall be deemed an approval. § 814. Further Assurances Agency and Participant agree to reasonably cooperate with each other to accomplish the purposes of this Agreement, and hereby agree to execute such other documents and to take such other actions as may be reasonably necessary to further the purposes of this Agreement. § 815. Binding Effect This Agreement, and the terms, provisions, promises, covenants and conditions hereof, shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted heirs, legal representatives, successors and assigns. The laws of the State of California shall govern the interpretation and enforcement of this Agreement. ARTICLE 900. ENTIRE AGREEMENT, WAIVERS AND AMENDMENTS This Agreement is executed in six (6) duplicate originals each of which is deemed to be an original. This Agreement includes forty-five (45) pages and the ten (10) attachments which constitute the entire understanding and agreement of the parties. This Agreement integrates all of the terms and conditions mentioned herein or incidental hereto, and supersedes all negotiations or previous agreements between the parties with respect to all or any part of the subject matter hereof. All waivers of the provisions of this Agreement must be in writing and signed by the appropriate authorities of the Agency or the Participant, and all amendments hereto must be in writing and signed by the appropriate authorities of the Agency and the Participant. This Agreement is entered into by all parties with the recognition and anticipation that subsequent agreements implementing and carrying out the provisions of this Agreement may be necessary. 43 ARTICLE 1000. TIME FOR ACCEPTANCE OF AGREEMENT BY AGENCY This Agreement, when executed by the Participant and delivered to the Agency, must be authorized, executed and delivered by the Agency within forty-five (45) calendar days after execution and delivery to the Agency by the Participant, or this Agreement may be withdrawn by the Participant on written notice to the Agency. ARTICLE 1100. EFFECTIVE DATE OF THIS AGREEMENT The date of this Agreement shall be the date when this Agreement shall have been signed by the Agency. OdaDated: , 2000 Ai --EST: Agency Clerk REVIEWED AND APPROVED Ray SO er, Executive Director APPROVED AS TO FORM: Kane, Ballm & Berkman Agency Special Counsel REDEVELOPMENT AGENCY OF THE CCIY OF HUNTINGTON BEACI I By: Chairman ro Tem APPROVED AS TO FORM: Agency General Counsel yip/ZA* INITIATED AND APPROVED: Director of Economi evelopment 44 Dated: 7 lz , 2000 k-`•cgkJWcemer",opa l _ 7 HUNTINGTON CENTER ASSOCIATES, LLC, a Delaware limited liability company By: 45 Huntington Management Ent., LLC, A Delaware limited liability company, Its Manager By: BMLF/Huntington, LLC, A Delaware limited liability company, Its Manager By: ryan Ezralow, Trustee of the Bryan Ezralow 1994 Trust Its Manager 2 z D t<0'A 4*v- Council/Agency Meeting Held- 60 Deferred/Continued to: 1 A proved ZI Condi tonally Approved ❑ Denied d Drf Cit C k's l nature Council Meeting Date- 12/18/00 Department ID Number: ED-00-50 CITY OF HUNTINGTON BEACH REQUEST FOR REDEVELOPMENT AGENCY ACTION SUBMITTED TO: HONORABLE CHAIRMAN AND REDEVELOPMENT AGENCY MEMBERS SUBMITTED BY: RAY SILVER, Executive Directore-90 - PREPARED BY: DAVID C BIGGS, Director of Economic Development SUBJECT: AUTHORIZE REDUCTIONIRETURN OF LETTERS OF CREDIT - HUNTINGTON CENTER ASSOCIATES, LLC Statement of Issue, Funding Source, Recommended Action, Alternative Action(s), Analysis, Environmental Status, Attachment(s) Statement of Issue: Huntington Center Associates, LLC, provided the Redevelopment Agency with Letters of Credit totaling $10 million in anticipation of the Agency acquiring certain properties in the Huntington Center site. The Redevelopment Agency has elected to not acquire these properties and authorization is sought to reduce and/or return the Letters of Credit. Funding Source: Non -applicable Recommended Action: Authorize the Agency Executive Director, upon payment of any amounts currently owed to the Agency, to reduce the amount of the remaining Letter of Credit to $100,000 and return the balance of the $10 million in Letters of Credit to Huntington Center Associates, LLC, or to accept a $100,000 cash deposit in lieu of the reduced Letter of C red it_ Alternative Actions): 1) Authorize the Agency Executive Director to Return the $10 Million Letters of Credit and bill Huntington Center Associates for any expenses incurred for direct payment, or 2) Require a higher level of Letter of Credit remain in place or the amount of the cash deposit to be higher than $100,000. REQUEST FOR REDEVELOPMENT AGENCY ACTION MEETING DATE: 12/18/00 DEPARTMENT ID NUMBER: ED-00-50 Analysis: Huntington Center Associates, LLC (HCA), is the developer which has proposed the comprehensive redevelopment of Huntington Center. On October 2, 2000, the Redevelopment Agency approved an Owner Participation Agreement (OPA) with FICA for the redevelopment of Huntington Center. This OPA anticipated the Redevelopment Agency making offers to purchase certain ownership interests in order to effectuate this redevelopment Pursuant to Section 305 of the OPA, HCA provided $10 million in Letters of Credit upon which the Redevelopment Agency could draw to meet its acquisition expenses. On October 3, 2000, the Redevelopment Agency made offers to purchase the necessary interests_ On November 20, 2000, the Redevelopment Agency conducted an eminent domain hearing regarding the acquisition of these parcels and determined not to proceed with the condemnation action. Based upon this action, on December 1, 2000, the Redevelopment Agency sent Revocation of Offer letters to the affected parties_ As such, HCA has requested the return of the Letters of Credit since the Agency will not be proceeding with any acquisitions. Under the terms of the OPA, HCA is still obligated to repay the Redevelopment Agency for certain costs associated with the Agency's implementation activities under the OPA. Costs incurred to date and expected costs are not anticipated to exceed $200,000 to $250,000. Therefore it would be appropriate upon payment of any current amounts owed to reduce the remaining Letter of Credit required to $100,000 and return the balance of the $10 million in Letters of Credit to Huntington Center Associates, LLC, or to accept a $100,000 cash deposit in lieu of the reduced Letter of Credit Environmental Status: NIA Attachment(s): RCA Author_ D. Biggs, ext 5909 LOCretum -2- 12/13100 10:41 AM Letter of December 12, 2000 from HCA ATTACHMENT #1 :sec .i 2 010 3 I� 32'80 P. 2 HUNTINGTON CENTER ASSOCIATES, LLC 23622 Calabasas Road Suite 100 Calabasas, California 91302 (818) 223-3500 (818) 223-3501 (facsimile) December 12, 2000 Via Facsimile Mr. David Biggs Director of Economic Development City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Re: HUNTINGTON' CENTER Letters of Credit Dear David: Pursuant to our discussion of earlier today, we have posted with the Agency three letters of credit in the aggrega-e arro= of $10,000,000 (the "Acquisition Letters of Credit"). These were posted by Huntington Center Associates ("HCA") in advance under the Owner Participation Agreement ("OPA") to secure payment by HCA of the Agency's acquisition costs for Ward's and Burlington's interests in the Huntington Center. As you know, the Council determined not to authorize the resolution of necessity necessary to permit the Agency's acquisition of such interests, and, thereafter, I requested the Agency's release of the Acquisition Letters of Credit. We have cooperated fully with the City and Agency in this redevelopment and it is our intention to continue to do so. We have appreciated your reciprocation of our efforts, and we look forward to the redevelopment of the Center. We have a substantial investment in the asset, and we will be investing considerable additional sums into its revitalization. In short, we believe we have stepped -up to all of our obligations vis-a-vis the redevelopment of the Center over the last year, and we will continue to do so. We propose that in consideration of the Agency's release of the Acquisition Letters of Credit which is necessary to meet our commitments to our investors, that we will post a separate letter of credit (tine "Costs Letter of Credit") in the initial amount of S 100,000 which will be available to the Agency -`or pa)�:tent of HCA's obligations for acquisition costs incurred by the City and Agency and other pa)7nent or reimbursement obligations of HCA under the OPA. If any such payment or reimbursement is not paid by HCA within thirty (30) days after 121200 c.%wo-k\1ettersu1.db.D 12 DEC-12-2000 15.-55 E19 223 3536 96% P.02 Letter to A+tr. David Biggs December 12, 2000 written demand and any back -tip documentation required under the OPA, the Agency would be entitled, from time to time, to draw upon the Costs Letter of Credit for the amount or amounts dje. HCA will agree to replenish the Costs Letter of Credit promptly after any Agency draw so that in all everts the arrourt of the Costs Letter of Credit would be S 100,000. We believe the foregoing proposal represents a mutually bene5cial compromise addressing our respective needs. Please advise me if this is acceptable to the Agency. "shank you for your continued courtesy and cooperation. V truly yours H yen R. Ezralow for HUNTLNGTO>ti CENTER ASSOCIATES, LLC 121200 cAworlcUe .crsll-.db.D? 2 N DEC-12-2oee 15;56 818 223 3536 96i P.03 RCA ROUTING SHEET INITIATING DEPARTMENT: Economic Development SUBJECT: HUNTINGTON CENTER ASSOCIATES, LLC — REDUCTIONIRETURN OF LETTERS OF CREDIT COUNCIL MEETING DATE: December 18, 2000 RCA ATTACHMENTS STATUS Ordinance (w/exhibits & legislative draft if applicable) Not Applicable Resolution (w/exhibits & legislative draft if applicable) Not Applicable Tract Map, Location Map and/or other Exhibits Not Applicable Contract/Agreement (w/exhibits if applicable) (Signed in full by the City AHome) Not Applicable Subleases, Third Party Agreements, etc. (Approved as to fonn by City Attome) Not Applicable Certificates of Insurance (Approved by the City Attome) Not Applicable Financial Impact Statement (Unbud et, over $5,000) Not Applicable Bonds (If applicable) Not Applicable Staff Report If applicable) Not Applicable Commission, Board or Committee Report (If applicable) Not Applicable Findings/Conditions for Approval and/or Denial Not Applicable EXPLANATION FOR MISSING ATTACHMENTS REVIEWED RETURNED FORWARDED Administrative Staff Assistant Ci Administrator Initial City Administrator (Initial) City Clerk { ) EXPLANATION FOR RETURN OF ITEM: 71 �- PAAlvN, %E�9,- I)Rv- Council/Agency Meeting Held: Deferred/Continued to: '4 proved ❑ Conditionally Approved ❑ Denied Q- ty rws Signature Council Meeting Date: June 19, 2000 Department ID Number: ED 00-26 CITY OF HUNTINGTON BEACH C REQUEST FOR REDEVELOPMENT AGENCY ACTION SUBMITTED TO: HONORABLE CHAIRMAN AND REDEVELOPMENT AGENCY, MEMBERS `o_C_' SUBMITTED BY: RAY SILVER, Executive Director v PREPARED BY: DAVID C. BIGGS, Director of Economic Development SUBJECT: Approve Developer Selection from Huntington Center Owner Participation Proposals Statement of Issue, Funding Source, Recommended Action, Alternative Action(s), Analysis, Environmental Status, Attachment(s) Statement of Issue: On March 3, 2000, the Redevelopment Agency issued a Statement of Interest and Request For Proposal (RFP) letter to all the major property owners and long- term tenants in the Huntington Center redevelopment site. The letters requested proposals for the redevelopment of the entire Huntington Center. Three proposals were submitted (Burlington Coat Factory, The Ezralow Company and Montgomery Wards). The Agency Board needs to select a respondent to undertake the comprehensive redevelopment of the site_ Funding Source: Not applicable at this time Recommended Action; Direct staff to negotiate an Owner Participation Agreement with Huntington Center Associates, LLC, an Ezralow Company subsidiary, for the comprehensive redevelopment of Huntington Center. Alternative Action(s): Do not select an overall developer for the entire Huntington Center. Analysis: On November 26, 1984, the Redevelopment Agency Board adopted the Huntington Center Commercial District Redevelopment Plan. One of the principal reasons for the adoption of the plan was the obsolescence of the Huntington Center and the need to redevelop it. As time has progressed, the center has lost two of its anchor stores and has become severely deteriorated. JC Penney left the Center in August of 1994; Broadway closed its store in August of 1996. The replacement store for JC Penney only occupies two of three floors in the building. F 4 REQUEST FOR REDEVELOPMENT AGENCY ACTION MEETING DATE: June 19, 2000 DEPARTMENT ID NUMBER: ED 00-26 The City has seen its sales tax revenue from the site decline from over $1.5 million in 1990 to less that $850,000 in 1998. One of the existing anchors has seen its sales volume decline by 30% between 1994195 and 1998199. The gross assessed value of the site, which has dramatically driven down the Redevelopment Agency revenues, has declined from $94 million in 1993/94 to $45 million in 1999/00. In addition, there are property owner initiated assessed valuation appeals now pending. The community has long clamored its redevelopment, as the center has become an eyesore. The Agency attempted to work with the various owners of the center over the past 10 years to no avail. Recently a new owner has come into the picture and has demonstrated the interest to pursue the Center's redevelopment. The Agency intends for the Huntington Center to be rehabilitated and repositioned into a high -quality, well -integrated retail and entertainment center under unified ownership. To that end, the Agency has determined that, in order to revitalize the economy of the center and to best achieve the redevelopment goals of the Agency and Redevelopment Plan, the Agency may need to encourage comprehensive changes to both the structural and tenant composition of the Huntington Center. The Agency believes that unified development of the Huntington Center will allow for the oversight and site control necessary to effectively redevelop and maintain the center as a superior quality development, and will advance the Redevelopment Plan's stated goal of implementing design and use standards to assure high aesthetic and environmental quality, and providing unity and integrity to developments within the Project Area (Redevelopment Plan, Section 500). 1n addition, Agency expert consultants confirm that unified development and maintenance of the Huntington Center in the highest standards will enable the center to attract the combination and caliber of tenants as well as financing necessary to reposition it into a first-rate retail and entertainment center. Because of the Huntington Center's location as a major gateway to the City, it is vital to the interests of the City that the Huntington Center be redeveloped in a manner that will significantly enhance the image of the community and set the standard desired for future high -quality development in the City. The Agency believes that the unified, comprehensive development and maintenance of the center as envisioned by the Agency will accomplish these purposes as well as those set forth in the Redevelopment Plan. In order to effectuate the Redevelopment Plan and accomplish the objectives described above, the Agency issued a Request for Proposal and Statement of Interest (RFP) (Attachment 1) to qualifying owners and long-term tenants within the Huntington Center. The RFP described the objectives of the Agency and Redevelopment Plan, and sought proposals for the redevelopment of the entire Huntington Center in accordance with such objectives. Three proposals were submitted - Burlington Coat Factory (Attachment 2), The Ezralow Company (Attachment 3) and Montgomery Wards (Attachment 4). Agency staff has carefully reviewed and analyzed the three proposals in light of both the goals and objectives described above and the specific requirements set forth in the RFP (see Attachment 5 for summary matrix), and has come to the conclusion that only the proposal from The Ezralow Company meets these goals, objectives and requirements. RCAHBMaII -2- 616100 10:02 AM REQUEST FOR REDEVELOPMENT AGENCY ACTION MEETING DATE: June 19, 2000 DEPARTMENT ID NUMBER: ED 00-26 The Economic Development Department is recommending The Ezralow Company's proposal for several reasons. First, it was the only submission which addressed and proposes to fulfill the Agency's stated goal of comprehensive development - the proposal offered detailed plans prepared by experts for the extensive redevelopment of the Huntington Center in its entirety. The submissions by Montgomery Ward and Burlington Coat Factory, however, did not address the Agency's stated goal of comprehensive development. Rather, Montgomery Ward only addressed the renovation of its two individual buildings, and Burlington Coat Factory only addressed its desire to continue leasing property within the Huntington Center. Based on their proposals, it does not seem that either Montgomery Ward or Burlington Coat Factory desire or are willing to engage in a comprehensive redevelopment of the Huntington Center as envisioned by the Agency, instead, they want only to maintain their individual stores. However, fragmented development proposals will not accomplish the goals and objectives established by the Agency and Redevelopment Plan. Second, The Ezralow Company was the only party which submitted essentially all of the documents which were required by the RFP and necessary for the Agency to adequately evaluate the potential participant's redevelopment plans for the Huntington Center as well as the potential participant's development experience and financial capability (please see Attachment 5). Montgomery Ward and Burlington Coat Factory did not submit these essential documents. For these reasons, the Economic Development Department recommends that Agency staff enter into negotiations with The Ezralow Company (or any one or its affiliates or subsidiaries) for an Owner Participation Agreement for the redevelopment of the Huntington Center. If this recommendation is approved, staff will negotiate for a 60-day period, during which the selected participant shall be required to provide adequate assurances to Agency that the participant has definitive plans for and is capable of attracting the combination and caliber of tenants as well as financing necessary to rehabilitate and reposition the entire Huntington Center into a first-rate, unified development. Environmental Status: None for this action. Attachment(s): RFP Letter. 2 1 Burlington Proposal. 3 Ezralow Proposal. 4 1 Montgomery Wards Proposal. 5 1 Huntington Center Proposal Analysis Matrix. RCAHBMall -3- 616100 10:02 AM REQUEST FOR REDEVELOPMENT AGENCY ACTION MEETING DATE: June 19, 2000 DEPARTMENT ID NUMBER: ED 00-26 RCA Author: D. Biggs X5909 & Gus Duran X1529 RCAHBMall -4- 616100 10:02 AM RFP Letter ATTACHMENT #1 J• & City of Huntington Beach 2000 MAIN STREET CALIFORNIA 92648 L DEPARTMENT OF ECONOMIC DEVELOPMENT Director 7141536-5582 Redevelopment 7141536-5582 FAX 714/375-5087 }lousing 714/536-5542 March 3, 2000 Burlington Coat Factory Warehouse of HB, Inc. Attn: Legal Department 1830 Route 130 North Burlington, NJ 08016 Re: Statement oi' Interest and Request For Proposal for Redevelopment of Huntington Center Within the Huntington Beach Redevelopment Project Area (Burlington Coat Factory, 7777 Edinger Ave., Huntington Beach, CA 92647) Dear Business Owner: A. Introduction The Redevelopment Agency of the City of Huntington Beach (the "Agency") is seeking the interest of property owners (defined below) in the redevelopment of the Huntington Center (the "Site"). The Site is part of the Huntington Beach Redevelopment Project, which Redevelopment Plan was approved and adopted by the City Council of the City of Huntington Beach on December 16, 1996 by Resolution No. 3343. The Agency intends for the Site to be. rehabilitated and repositioned into a high -quality, well -integrated retail and entertainment center under unified ownership. The Agency believes unified ownership of the Site will allow for the oversight and control necessary to effectively redevelop and maintain the Site, without the problems often associated with fragmented ownership. The revitalized Site is intended to serve the region and to provide new jobs and economic opportunities to residents of the region. In addition, the location of the Site as a major gateway to the City of Huntington Beach, as well as the excellent visibility and accessibility from the 405 Freeway, calls for a superior quality redevelopment that will significantly enhance the image of the community and set the standard desired for future high -quality development in the Edinger Corridor. This Request For Proposal provides property owners located within the Site with the opportunity to participate in the proposed redevelopment of the Site. All participation shall be subject to the approval of the Agency and shall be consistent with the Redevelopment Plan and the "Rules Governing Participation and Preferences by Property Owners and Business Occupants for the Huntington Beach Redevelopment Project," dated August 1996 (the "Owner Participation Rules"), incorporated herein by this reference as though fully set forth herein. Pursuant to the Owner Participation Rules, a "property owner" is any person, persons, corporation, association, partnership, or other entity holding recorded fee title to or a long-term lease of real property in the Site for so long as such property owner holds such title or long-term lease. A "long-term lease" is a lease of real property with a term of twenty (20) years or more, with at least ten (10) years remaining on such term. Property owners who are interested in redeveloping the Site must file a Statement of Interest Form (attached) by April 17, 2000 and must submit the Development Proposal requested in this Request For Proposal by May 2, 2000. All property owners must be qualified to perform their total obligations within a period of time to be provided by the Agency, and will be required to secure the performance of their obligations in a reasonably satisfactory manner. The Agency is not obligated to accept any Statements of interest or Development Proposals, and is not obligated to consider any Statements of Interest or Development Proposals after the dates set forth above. B_ Request for Proposal This invitation is the first step taken by the Agency leading to the selection of a developer to rehabilitate and reposition the Site located in the Huntington Beach Redevelopment Project Area. This Request For Proposal is being sent to property owners within the Site who may file a Statement of Interest Form and Development Proposal with the Agency. The Agency has determined that you qualify as a property owner within the Site, and therefore have an opportunity to participate in the potential redevelopment of the Site through the process outlined in this letter. C. Purpose of Request For Proposal The purpose of this Request For Proposal is to ask prospective developers to submit sufficient information regarding development expertise and financial capabilities to enable the Agency to award a developer the right to negotiate an Owner Participation Agreement with the Agency. D. The Site a. location. The Sitc is within the Huntington Beach Redevelopment Project Area and is generally bound by Edinger Avenue on the south, the Southern Pacific Rail Road Right of Way on the west, Center Avenue on the north, and the 405 Freeway and Beach Boulevard on the northeast and east. b. Characteristics. The Site currently exists as a shopping center commonly known as the Huntington Center. The Site is zoned general commercial. 2 C. Development Costs. Site preparation and clearance and all redevelopment costs for the Site will be the responsibility of the developer. d. Public Improvements. Public improvements such as road improvements, sidewalks, open spaces, and other public infrastructure will be the responsibility of the developer_ e. Working Capital. As stated above, the Agency desires the Site to be redeveloped under unified ownership. Therefore, subject to these owner participation procedures, the Agency will consider utilizing its powers to facilitate assembling the Site as necessary to effectuate the redevelopment of the Site. In that event, the Agency may require the developer to advance all or a significant portion of the working capital required by the Agency to assemble the site, by the advance payment of the purchase price, loans, or other mechanism to be negotiated with the Agency. The Agency has made no determination to acquire any portion of the Site at this time. I Submissions a. Deadlines. Development Proposals must be received at the following address no later than May 2, 2000- Redevelopment Agency of the City of Huntington Beach 2000 ,Main Street Huntington Beach, California 92648 Attention: Gus Duran, Housing and Redevelopment Manager No Development Proposals will be considered unless the Agency has previously received a Statement of Interest Dorm (attached) from the developer by April 17, 2000. b. Format for Submissions. The format for submitting Development Proposals consists of the following elements: Identification of Developer. Name, address, telephone and facsimile number of developer. ii. Organization of developer (i.e., individuaI, corporation, partnership, etc.); principals of developer (i.e. corporate officers, principal stockholders, general and limited partners, etc.) and manager to be responsible for proposed redevelopment; and relationship of developer with any parent corporation, subsidiary, joint venture, or other entity. 2. Leases. Statement regarding any lease commitments developer may have on the Site. 3 3. Redevelopment Concept for Site. Description of proposed land uses and the arrangement of these uses. The proposed redevelopment should be described in sufficient detail to form the basis for the developer's preliminary cost estimates Architectural drawings/renderings are not required at this time. ii. The number and size of structures and the type of construction to be used. iii. A break-out of the estimated total cost of the proposed redevelopment and a statement of any basic assumptions affecting the feasibility of the proposed redevelopment. iv. A schedule of performance outlining the estimated time for each step of the redevelopment process. 4. Financial Capability. Copy of certified financial statement of developer, prepared in accordance with accepted accounting practices and dated within six (6) months prior to submission of the Development Proposal. ii. Copies of any annual reports, financial rating reports or other documents indicating the financial condition of developer. iii. Statement indicating how developer proposes to finance the redevelopment of the Site (including proposed source of financing, amount of equity investment, and probable terms and conditions of financing). iv. List of names and addresses of bank or other financial institution(s) and references. Letter of recommendation from developer's bank would be helpful. S. Develorment Experience. The Agency is particularly interested in the developer's ability to assemble and manage a team of redevelopment participants including architects, planners, engineers, builders, financial consultants, marketing specialists and management personnel. i. Dist of development projects in which developer and/or proposed associates have participated, including any urban renewal or redevelopment areas, showing the location, type and dollar volume of the work. ii. Descriptions and illustrations of the proposed architect's work on projects which have been built or are under construction. 4 Ili. If developer plans to retain and manage the completed development, submit description of developer's experience in ownership and management of completed developments. If a management firm is to be employed for this purpose, submit sufficient data on the frm's experience to enable the Agency to determine its ability to manage the completed development. Please feel free to include any other information which you may feel is appropriate or pertinent. F. At7ency Evaluation of Information Submitted. The Agency will evaluate Statements of Interest and Development Proposals which are submitted on time. The Agency will consider factors such as: a. The degree to which the Development Proposal would achieve the redevelopment objectives for the Site, including whether the Development Proposal conforms to and meets the goals and objectives of the Redevelopment Plan. b. The developer's demonstrated ability to complete redevelopments of this type successfully and in a timely manner. C. Whether the Development Proposal is feasible (financially and otherwise) or in the best interest of the Site and community. Based on the information submitted, the Agency may select a developer from among those submitting Statements of Interest and Development Proposals to negotiate with towards an Owner Participation Agreement. The Agency reserves the right at its sole discretion to reject any and all Statements of Interest and Development Proposals_ Please direct any questions to Gus Duran, Department of Economic Development, at (714) 374-1529. Enclosure Sincerely yours, Ato� 4� /0 David C. Biggs Director of Economic Development 5 STATEMENT OF INTEREST FOR PARTICIPATION IN THE HUNTINGTON BEACH REDEVELOPMENT PROJECT I hereby express my interest in participating in the Huntington Beach Redevelopment Project: 1. Name of Property Owner/Tenant: Phone: 2. Home Address: 3 _ Address of Property o-,%rned or rented in the Project Area: 4. Name of business in the Project Area: Phone: 5. I own ( ); am a tenant ( ); and wish to rehabilitate ( ); build ( ); sell { } my present property. If tenant, indicate: month -to -month ( ); or Iease ( }; expiration date of lease:- b. My present type of business is: 7. Mature of proposed participation: I understand that submission of this Statement of Interest does not in any way obligate me to participate in the Project. Signed: Return to: Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, Califomia 92648 Burlington Proposal ATTACHMENT #2 FROM : TUCHMAN 8 ASSOCIATES PHONE NO. : 2133850595 Apr, 28 2000 10:2BAM P2 TUCHMAN & ASSOCIATES ATTORNEYS AT LAW 3435 wILSHiRE BOULEVAF40 30TH FLOOR LOS ANGELES, CAUFORNIA 90010 PHONE 213 38S.8000 • FAX 213-38S 0S45 April 28, 2000 David Biggs City of Huntington Beach Economic Development 2000 Main Street P.O. Box 190 Huntington Beach, CA 92648 Re: In re Burlington Coat Factory Our File No. 9956 Dear Mr. Biggs: Burlington Coat Factory hereby submits its Proposal pursuant to the Statement of Interest filed on April 13, 2000. Burlington Coat Factory proposes to remain on the premises under the same terms and conditions which exist under its present lease. In the alternative, Burlington Coat Factory will participate by moving to similar space with the same square footage so long as the terms and conditions of its lease remain the same or similar. Ezralowl is under a contractual obligation to include Burlington Coat Factory in any proposal it submits. To date we have not been contacted by Ezralow. Very truly yours, BURLINGTON COAT FACTORY PALTL TANG TUC ASSOCIATES AV L. TUCHMAN �l "Ezralow" shall mean The Ezralow Company or any of its affiliates or related entities, including without limitation, Huntington Center Associates LLC. cpnM , TL'!--H AN $ ASSOCIATES PHONE NO. : 2133850595 Apr. 12 2000 12:00PM P2 STATEMENT OF INTEREST FOR PARTICIPATION IN THE HUNTINGTON BEACH REDEVELOPMENT PROJECT I hereby express thy intetest in participating in the Huntington Beach Redevelopment Project: 1. Name of Property Owner/Tenmr. Factory Warehouse of Huntington Beach, Inc., c/o Burlington Coat Factory warehouse Ca o at-ion.,-1.8.3.0 ranee l in,, hurl ing _on NJ , 08016 Phone. (609) 387-7800 (extension 2022) 2 calAddress: 7777 Edinger Street, Huntington Beach, CA 92647 3. Address of Property owned or rued in the Project At= 7777 Edinger Street, Huntington Beach, CA 92647 4. Name of business in the Project Area: 'Burlington Coat Factory Phone: (714) 379-6077 (local) (609) 387-7800 ext 2022 (corporate) 5. I own ( }; am a tenant (K ); and wish to rehabilitate ( }; build ( }; sell ( ) my present property. If tenant, indicate: month -to -month ( ); or lease ( ); expiration date of lease: 2025 *See Attached Lease for Special Provisions & Attachment 8 6. My present Type of business is: Retail 7. Nature of proposed participation: Continue Tenancy Under Terms and Conditions of Lease Agreement (Attached) 8. See Attachment 8 for further details - I understand that =bmissiaat of this Statement of Interest d� = in any way obligate me to participate in the PkgjC L Sigiie Title: Rzam to: ite&velopmew Agenq of the City of Huntington Beach 2000 Main Street Huntiogwo Beach, Califon= 92642 ,, ......� i V C: Cl L- F151 T & ASSOCIATES PHONE NO. : 2133850595 Apr. 12 2090 12:06P[`I P3 Statement of Interest for Participation In The Huntington Beach Redevelopment Project Attachment "S" Burlington Coat Factory Warehouse of Huntington Beach, Inc. ("BCF") has a long term lease ("Burlington Lease") with Huntington Center Associates LLC ("HCA"), t:le landlord of the Huntington Beach Mall ("Shopping Center"). The Burlington Lease ends in the year 2025. The lease has specially drafted clauses protecting BCF from redevelopment of BCF's demised premises undertaken by the landlord. These special clauses were built into the lease agreement when the lease was entered into in 1995. HCA, the owner of the Shopping Center, has refused to negotiate in good faith and comply with the terms and conditions of the lease agreement, which require redevelopment proposals be submitted to BCF. In the event of razing of the structure, the parties are required to submit the dispute to binding arbitration. BCF filed a petition to compel arbitration in the Orange County superior court. Argument was heard on March 31, 2000- The court dismissed the petition without prejudice because it considered the matter premature. HCA argued at the hearing that they did not know whether they were going to leave the Structure standing or destroy the structure altogether. BCF is proceeding to file a lawsuit against HCA for breach of contract, as the court hearing the petition suggested it should, in the event HCA does not include BCF in its proposals. These special provisions of the lease greatly enhance the value of the leasehold interest, and the value of this leasehold interest, even on a time adjusted basis, is many millions of dollars. BCC' wants to participate in the redevelopment of the Shopping Center under terms and conditions which are fair and reasonable, and in conformity, or near conformity to its original lease agreement. BCF has a steady flow of customers. BCF has a loyal customer base. BCF consistently performs by consistently generating millions in net sales per year. In its Fiscal year of June 1998 to May 1999, BCF had over $14 million in net sales. The tax benefits to the city are self-evident. BCF provides a unique appeal to a divergent market, and there is no store like it in the immediate vicinity. BCF does not want to inhibit redevelopment. BCF wants to thrive at the center. The economic downturn of the mall is completely unrelated to the tenancy of BCF. If BCF can generate revenues of this magnitude even in a so-called economically blighted environment, then it is TU::HMAN i& ASSOC 1 ATES PHONE No. : 2133e50595 Apr. 12 2000 12:91PM P4 reasonable to assume that with an increase in traffic and more tenants that redevelopment will bring even more revenue and a larger tax base will be generated. Rs required by the Rules Governing Participation and Preferences By Property Owners and Business Occupants For the Huntington Beach Redevelopment Project (the "Rules"), BCF must be given reasonable preferences (over other potential tenants or lessees) to lease or rent premises within the newly rehabilitated or developed facilities. In addition to the Rules, the lease preserves BCF's status as a tenant within the Shopping Center in spite of redevelopment of BCF's demised premises. With that being said, HCA has yet to communicate its intentions with respect to the location of SCF's new premises within the redeveloped center, nor has HCA delivered its proposed plans to BCF. 3 of 5 LEASE AGREEMENT re1wmn MCA HUNTINGTON ASSOCIATES, L_ P a D ARVI s timparmermltip as Landlord and BUR=NGTON COAT FACTORY WAREHOUSE OF RUN'TINGTOX BEAM INC. a California corporation dba Burlington Coat Factory as Tenant for prwncm " r Wn I within HUNT[NGTON SEACH MAUL 1ftiN-M. GTON SEACH. CALIFORNLA ATTX)M9YS F0K LA.,4oLom COL UNS a: EATON 21515 Howdu ms BOUW4 rd Swra 450 Torranoa, CA 905M TokVw a (310) 540.2020 owed: , V 1�y5 ATTORNLrY(SI FOR TIUMANT: L_ .:L:NG.TOC AP ARTICLE I CERTAIN LEASE PROVISIONS 1 ARTICLE II DEMISED PREMISES 5 ARTICLE III TERM 6 ARTICLE IV RENT 7 ARTICLE V CONSTRUCTION 7 ARTICLE VI USE AND OPERATION 10 ARTICLE VII INDEMNITY AND INSURANCE 11 ARTICLE VIII FIRE AND OTHER CASUALTIES 15 ARTICLE IX REPAIRS, MAINTENANCE AND ALTERATIONS 17 ARTICLE X CONDEMATION 19 ARTICLE XI COMMON AREAS AND COMMON AREA COSTS 20 ARTICLE XII ASSIGNMENT AND SUBLETTING 23 ARTICLE XIII TENANT'S ADDITIONAL AGAEEIZNTS 26 Tenant's Affirmative Agreements 26 Tenant's Negative Agreements 27 Signs 27 ARTICLE XIV PERCENTAGE RENT 28 Payment of Percentage Rent and Gross Sales Reports 28 Gross Sales 29 Books and Records 30 ARTICLE XV UTILITIES 31 ARTICLE XV3 REAL ESTATE TAXES 33 ARTICLE XVII CERTAIN ADDITIONAL DEFINED TE]WS 33 Common Areas 33 Common Area Costs 34 concessionaire 14 Gross Lsaeable Area 34 Landlord 34 -i- Z.! 33 rzL1 NG.ICC J TABLE CONTENTS PAGE ARTICLE XVII CERTAIN ADDITIONAL DEFINED TERMS (CONT-D.) Landlord's Managing Agent 35 Lease Year 35 Occupant 35 REA 35 Shopping Center 35 ARTICLE XVIII DEFAULTS AND REMEDIES 41 ARTICLE XIX SURRENDER OF DEMI5EU PREMISES 44 ARTICLE XX SUBORDINATION 45 ARTICLE XXI GENERAL PROVISIONS 47 Quiet Enjoyment 47 Relationship of Parties 47 Governing Laws 147. Holding Over 47 Inspection of Demised Premises 47 Successors 48 Estoppel Certificate 48 Brokerage 48 Notices 48 obligation Joint and Several adhere Tenant More Than One Person or Entity 49 Construction of Lease Agreement 49 No waiver 49 No Oral Modifications 49 Right of Redemption 49 Unavoidable Delays 49 Interpretations, Captions and Definition of Person 50 No Oral Agreement 50 Short Form Lease 51 TABLE OF CONTENTS ARTICLE XXI GENERAL PROVISIONS (CONT'D.) PAGE Notice to Mortgages and Ground Lessor 51 No Assumption By Mortgagee 51 Authority 51 Accord and Satisfaction 51 Effect of Invalidity 52 Right to Lease 52 Approvals and Consents 52 Hazardous Materials 52 REIT Qualifications 56 Counterparts 56 Survival of Obligations 56 SIGNATURES •57 GUARANTY MIBIT A - Site Plan MIBIT B - Tenant's Approved Signage :.13o.4]BURL: NG-.CN._' THIS LEASE AGREEMENT (this "'_ease"). made this �,x day of �A R _ 19 (the "Effective Date") by and between Landlord: MCA HUNTINGTON ASSOCIATES, L.P., a Delaware limited partnership and Tenant: BURLINGTON GOAT FACTORY WAREHOUSE OF HUNTINGTON BEACH, INC., a California corporation rj*Va4*--2V%F In consideration of the Rent to be paid and the covenants to be performed by Tenant hereunder, Landlord does hereby lease and demise to Tenant, and Tenant does hereby lease and take from Landlord, the Damised Premises hereinafter described, upon the terms and conditions hereinafter set forth: ARTICLE I CERTAIN LEASE PROVISIONS As used herein, the following terms shall have the meaning hereinafter specified: (a) Demised Premises, as more fully set forth in Article II: Approximately 133,500 square feet of Gross Leasable Area located on the first and second floors of Building III as shown on Exhibit "A" attached hereto and made a part hereof by this. reference. (b)(i) Term, as more fully set forth in Article III: Approximately Thirty (30) years (ii) Delivery Date, as more fully set forth in Article II: The date Landlord delivers exclusive physical possession of the Demised Premises to Tenant with Landlord's woric (as hereinafter defined in Section 2.2) complete. (iii) Required Opening Date, as more fully set forth in Article VI: The one hundred twenty-first (121st) day following the later of (a) the Delivery Data or (b) the "Plan Approval Date" (as hereinafter defined in this Article I(b)(iii)]. The term "Plan Approval Date" means the data that Landlord has approved Tenant's final drawings for Tenant's work (a■ defined in Section 5.1). Landlord and Tenant acknowledge and agree that the running of the aforesaid one hundred fifty (150) day construction period from the Plan Approval Date is specifically contingent upon Tenant submitting to Landlord or resubmitting to Landlord, as the case may be, Tenant's drawings for Tenant's work within the time periods set forth in Section 5.1 of this lease and that the Plan Approval Date steal a pushed -back by one (1} day for each day that Tenant delays or fails to submit or resubmit its drawings to Landlord in a timely manner as herein provided: provided, however, in the event, Landlord 'ails to approve or disapprove Tenant's drawings within ten (10) business days after receipt thereof as provided in Section 5.1 herein, one (1) day for each day thereafter that Landlord fails to approve or disapprove Tenant's drawings shall be subtracted from the number of days of Tenant delays. For example, _: the Plan Approval Date is :larch 15, 1995, and if t.`.e ;13 6 . 4 3 HL)RLING 04. 3 total nu=ber of days of Tenant delays is ten (10) days, the Plan approval Date shall be pushed -back to :larch 10, :995. Further, if t:1e total number of days of Tenant delays is ten (10) days and the total number of days of Landlord delays is five (5) days, the Plan Approval Date shall be pushed back to March 10. '_995. (iv) Rent Commencement Date, as more fully set forth in Article III. The earlier of (a) the date upon whicn Tenant initially opens the Demised Premises for business or (b) the Required opening Date. (v) L,sase Expiration Date: January 31, 2025 (c)(i) Fixed Minimum Rent per antrum, as more fully set forth in Article IV: Four hundred Sixteen Thousand Two Hundred Fifty and No/100 Dollars ($416,250.00) per antrum from the Rent Commencement Date through the last day of the calendar month immediately prior to the fifth (5th) anniversary of the Rent Commencement Date: then Four Hundred Forty -Nine Thousand Six Hundred Twenty -Five and No/100 Dollars ($449,625.00) per antrum through the last day of the calendar month immediately prior to the tenth (loth) anniversary of the Rent Commencement Date; then Four Hundred Eighty -Three Thousand and No/100 Dollars ($483,000.00) per annum through the last day of the calendar month immediately prior to the fifteenth (15th) anniversary of the Rent Commencement Date; then Five Hundred Sixteen Thousand Three Hundred Seventy -Five and No/100 Dollars ($516,375.00) per annum through the last day of the calendar month immediately prior to the twentieth (20th) anniversary of the Rent Commencement Date; then Five Hundred Forty -Nine Thousand Seven Hundred Fifty and No/100 Dollars ($549,730.00) per annul through the last day of the calendar month immediately prior to the twenty-fifth (25th) anniversary of the Rent Commencement Date: then Five Hundred Eighty -Three Thousand One Hundred Twenty -Five and No/100 Dollars ($533,125.00) per antrum for the remainder of the Term. (ii) Fixed Minimum Rent per month, as more fully set forth in Article IV: Thirty -Four Thousand Six Hundred Eighty - Seven and 50/100 Dollars ($34,687.50) per month from the Rent Commencement Date through the last day of the calendar month immediately prior to the fifth (5th) anniversary of the Rent Commencement Date: then Thirty - Seven Thousand Four Hundred Sixty -Eight and 75/100 Dollars (637,468.75) per month through the last day of the calendar month immediately prior to the tenth (loth) anniversary of the Rent Commencement Date: then Forty Thousand Two Hundred Fifty and N0/100 Dollars ($40,250.00) per month through the last day of the calendar month immediately prior to the fifteenth (15th) anniversary of the Rent Commencement Date: then Forty - Three Thousand Thirty -One and 25/100 Dollars ($43,031.25) per month through the last day of the calendar month immediately prior to the twentieth (20th) anniversary of the Rent Commencement Date: then Forty - Five Thousand Eight Hundred Twelve and 50/loo Dollars (545,812.50) per month through the last day of the calendar mantft immediately prior to the twenty-fifth (25th) anniversary of the Rent Commencement Data: then Forty -Eight Thousand Five Hundred Ninety -Three and 75/100 Dollars ($48,593.75) per month for the remainder Of the Tern. (d)(1) Percentage Rent Rate, as r_.ore fully set forth in Article XIV: Two percent (2t) I :..-36. a JBUR :._:::,:CN . Base Sales per annum, as more fully set forth :n Az*lcle XIV: Twenty Million and No/100 Dollars (S20,000,000.00) per annum from the Rent Commencement Date through the last day of the calendar month immediately prior to the fifth (5th) anniversary of the Rent Commencement Date: then 7Venty-One Killion Six Hundred Thousand and No/loo Dollars ($21,600,000.00) per annum through the last day of the calendar month immediately prior to the tenth (loth) anniversary of the Rent Commencement Date: then Twenty -Three Million Two Hundred Thousand and No/100 Dollars (523,200,000.00) per annum through the last day of the calendar month immediately prior to the fifteenth (15th) anniversary of the Rent Commencement Oats: then Twenty -Four Million Eight Hundred Thousand and No/100 Dollars ($24,800,000.00) per annum through the last day of the calendar month immediately prior to the twentieth (20th) anniversary of the Rent Commencement Date: then Twenty -Six Million Four Hundred Thousand and No/100 Dollars ($26,400,000.00) per annum through the last day of the calendar month immediately prior to the twenty- fifth (25th) anniversary of the Rent Commencement Date: then Twenty -Eight Million and N0/100 Dollars ($28,000,000.00) per annum for the remainder of the Term. (e)(i) Permitted Use, as more fully set forth in Article VI: For the operation of a multi-departmented store !or the retail sale of a wide variety of goods and services and for no other use or purpose. (ii) operation of business within the Demised Premises to initially be a typical first class Burlington Coat Factory store. (iii) Tenant's initial Store Name: Burlington Coat Factory (f) Intentionally omitted. (q)(i) Address for notices to Landlord: lK9.Huntington Associates, L.P. c/o -LaSalle Partners 355 S. Grand Avenue Suite 4280 Los Angeles, California 90071 Attention: David Jones and MCI Huntington Associates, L.P. c/o The Macerich Company P.O. Sox 2172 233 Wilshire Boulevard, Suite 700 Santa Monica, California 90407 Attention: Legal Department With a copy of notices to the Shopping Center Manager at the address hereafter set forth in Article I(h)(iii) for the payment of Rent. (g)(ii) Address for notices to Tenant: 1803 Route L30 N Burlington, New Jersey 08016 Attention: Legal Department :.136.43BU-i T_1NG' CN. 3 ,g)(iii) Address _'or payment of Rent: MCA Huntington Associates, L.P. Huntington Beach Mall 7777 Edinger Avenue, Suite 300 Huntington Beach, California 92647 Attention: Manager (h) In the event Tenant's Gross Sales !as such term is hereinafter defined in Section 14.2(a)) from the Demised Premises for calendar year 2005, or calendar year 2011, or calendar year 2017, as cart3l-l-e-d to Landlord by Tenant's chief financial df-fcer are less than Tenant's Minimum Gross Sales (as such term is hereinafter defined in this Article I(h)) for calendar year 2005, or calendar year 2011, or calendar year 2017, Tenant may, at its option, upon written notice to Landlord, which notice ("Tenant's Termination Notice") must be given, if at all, not later than the February I immediately following the expiration of the calendar year in question terminate this lease effective as of the January 31 immediately following the first (1st) anniversary of the expiration of the calendar year in question. The term "Tenant's Minimum Gross Sales" as used herein shall mean the product obtained by multiplying Tenant's Minimum Base Sales [as hereinafter determined and defined in this Article I(h)) by a percentage equal to the percentage of increase in the Consumer Price Index (as hereinafter defined in this Article I(h)) published for the month in which the Rent Commencement Date occurs as compared to the Consumer Price Index published for the month of January of the calendar year in question. The term "Tenant's Minimum Base Sales" as used herein shall mean the product obtained by multiplying the Gross Leasable Area of the Demised Premises by One Hundred Twenty -Five Dollars ($125.00). The term "Consumer Price Index" as used herein means the United States Department of Labor, Bureau of Labor Statistics Consumer Price Index for All Urban Consumers, Los Angeles -Anaheim -Riverside Average, Subgroup "All items", (1982-84-100). In the event that tha Consumer Price Index is not available, the successor or substitute index shall be used for the computations herein set forth. In the event that the Consumer Price Index or such successor or substitute index is not published, a reliable governmental or other non -partisan publication evaluating the information theretofore used in determining the Consumer Price Index shall be used by Landlord for the computations herein set forth. For the purposes of the computations herein set forth, the basis for any substitute or successor index or such governmental or non -partisan publication shall be converted to a basis of 100 only in the event that the basis used in such index or publication is less than 100. Tenant's right to terminate this lease pursuant to the provisions of this Article I(h) is conditioned upon Tenant not being in default under this lease beyond the expiration of the applicable cure period. In the event Tenant is not open for business in the Demised Premises during all of the calendar year in question, Tenant's Gross Sales during such calendar year shall be deemed to be Tenant's Gross sales during the twelve (12) consecutive month period that the Demised Premises was last open for business. In the event Tenant is not open for business in the Demised Premises during a part of the calendar year in question (the "Closure Period"), Tenant's Gross Sales during such Closure Period shall be deemed to be Tenant's Gross Sales during the same period that the Demised Premises was last open for business, or Tenant's average daily Gross Sales during the calendar year in question, whichever is greater. L136,43BURLINGTOw.3 References contained in this article 1 to additional provisions of this -ease are For convenience and designate some of the. Art:cies and Sections where references to the particular Certain Lease Provisions appear. Each reference in this lease to any of the Certain Lease Provisions contained in this Article I shall be construed to incorporate all of the terms of such additional provisions, and in the event of any conflict between any of the Certain Lease Provisions of this Article I and any other provision of this lease, the latter shall control. The listing in this Article I of monatary charges payable by Tenant shall not be construed to be an exhaustive list of all monetary amounts payable by Tenant under this lease. ARTICLE iI DEMISED PREMISES SECTION 2.1 The Demised Premises having a total approximate Gross Leasable Area (as hereinafter defined in Article XVII(d)] as set forth in Article I(a) comprise a portion of that certain retail shopping center commonly known as Huntington Beach !call (the "Shopping Center" as more fully set forth in Article XVII(j)I- The Demised Premises and the Shopping Center are depicted on Exhibit "A" (Site Plan) attached hereto. The Demised Premises are demised and leased subject and subordinate to all liens, encumbrances, easements, restrictions, agreements, covenants, ground and underlying leases, any rights of way, any other matters or documents of record, including any document placed of record.by Landlord, zoning laws and regulations affecting or governing the Demised Premises and general and spacial taxes not delinquent. Without limiting the foregoing, it is the intent of the parties hereto that this lease shall be subject to and subordinate to the RZA (as hereinafter defined in Article XVII(f)], that Tenant and all persons occupying the Demised Premises, or any part thereof, shall take the leasehold estate granted hereby subject to the REA and will not violate by omission or commission any of the terms or provisions of the REA. Landlord represents to Tenant that to the best of Landlord's knowledge that none of the matters referred to in this section 2.1 will restrict Tenant from opening the Demised Premises for business as a Burlington Coat Factory store and thereafter using the Demised Premises for the Permitted Use set froth in Article I(e)(i) herein or materially limit any of Tenant's rights under this lease except as set forth in the REA. Notwithstanding anything to the contrary contained in this lease, in the event Tenant is unable to open the Demised Premises for business as a Burlington Coat Factory store because of any of the matters referred to in this Section 2.1 (the "Opening Restrictions"), Tenant shall furnish Landlord written notice of such fact describing in reasonable detail the nature of such Opening Restrictions. Landlord shall have the right, but not the obligation, to elimate the Opening Restrictions necessary for Tenant to open the Demised Premises for business as a Burlington, Coat Factory store within sixty (60) days after receipt of notice of such opening Restrictions (the "opening Restrictions Satisfaction Period"). In the event Landlord fails to eliminate the opening Restrictions necessary for Tenant to open the Demised Premises for business as a Burlington Coat Factory store prior to the expiration of the Opening Restrictions Satisfaction Period, Tenant shall have the right as its sole remedy for such failure to terminate this lease upon written notice to Landlord, which notice must be given, if at all, not later than fifteen (15) days after expiration of the opening Restrictions satisfaction Period. In the event Tenant's right to terminate this lease is exert=sed as herein provided, this lease shall thereafter be null and void and neither party shall have any further obligations or liabilities under this :ease. L136.33BURLINGTON.3 6 SECTION 2.2 Tenant acknowledges and agrees that (i) Tenant shall accept possession of the Demised Premises from Landlord in "as is" broom clean condition, subject to completion of Landlord's work: (ii) Landlord is performing no work with respect to the Demised Premises, except Landlord shall, at its sole cost and expense, remove all interior partition walls located in the Demised Premises except for those interior partition walls indicated and shown on Sheets D1 and D2 of the Demolition Plans prepared by Robert Kubicek Architects and Associates, Inc. dated February 24, 1995 as not being removed by Landlord as a part of Landlord's demolition work, remove all existing floor coverings located in the Demised Premises which contain concentrations of asbestos fibers at levels regulated by the Governmental Authorities of the state of California (i.e. concentrations of asbestos fibers in percentages greater than one -tenth of one percent (<0.14)), remove the escalator between the second floor of the Demised Premises and the third floor of the building of which the Demised Premises is a part and cap the escalator opening and perform Landlord's Asbestos Abatement work (as defined and set forth in Section 21.28(a) herein) (collectively, "Landlord's work") prior to delivering physical possession of the Demised Premises to Tenant: (iii) except for Landlord's work, Landlord shall have no responsibility for any work or improvement which may be required to prepare the Demised Premises for Tenant's use or for any work in remodeling the Demised Premises: (iv) Tenant shall, at its sole cost and expense, complete any items of work which may be required upon the Demised Premises and undertake the renovation and remodeling of the Demised Promises prior to initially opening the Damised Premises for business, all In accordance with the provisions of Article V or this lease; and (v) Landlord, Landlord's managing Agent (as hereinafter defined in Article XVII(f)] and the Landlord Parties (as hereinafter defined in Section 1.1) have, except as otherwise specifically provided in this lease, made no- representations or warranties as to the condition of the Demised Premises, the suitability of the Demised Premises for the conduct of Tenant's business or the date on which the Demised Premises shall be available for occupancy by Tenant. Tenant hereby releases Landlord, Landlord's managing Agent and the Landlord Parties from and against any and all claims whatsoever for damages for any delays in the date on which the Demised Premises shall be available for occupancy by Tenant. Landlord reserves the right, provided that Landlord gives Tenant's store manager reasonable prior notice of Landlord's intention to perform such work (except in case of an emergency where no notice shall be required) to install, maintain, use, repair, and replace pipes, ducts, conduits, vents and wire leading in, through, over or under the Demised Premises, it being understood, however, that Landlord will use its good faith efforts to avoid unreasonable interference with or disturbance of Tenant's operations within the Demised Premises to the extent reasonably practicable under the circumstances in connection with any repairs and/or installations made by Landlord. ARTICLE III TERM This lease shall begin and be of full force and effect as to both Landlord and Tenant as of the Effective Date. The Term of this lease shall ccmmence on the Rent Commencement Date and expire at midnight on the Lease Expiration Date, unless sooner terminated as herein expressly provided. If the Rent Commencement Date and/or the Lease Expiration Date cannot be ascertained as of the date hereof, then the parties agree that upon the request of either party, they will execute and deliver a supplemental agreement setting forth the Rent Commencement Date and/or the Lease Expiration Date when same are ascertainable. 1136.43BURLINGTON.3 ARTICLE .7 RENT SECTION 4.1 The rental reserved under this lease to Landlord during the Term, which Tenant covenants and agrees to pay to Landlord as herein provided, without prior demand therefor and without any deduction or set-off whatsoever, shall consist of fixed --"Inimllm-rant,--percentage rent and additional rent. (separately, �:Zixsd-Minimum Rent," "Percentage Rent" and "Additional Rent" and .collectively; -"Rent"). All Rent and other sums payable by Tenant to Landlord pursuant to this lease shall commence to accrue on the Rent Commencement Date, shall be paid in lawful money of the United States of America and shall be paid and delivered to Landlord at Landlord's address set forth in Article I (g) , or at such other place as Landlord may from time to time direct by notice to Tenant. The Rent Commencement Date shall not be delayed or affected by failure or refusal of Tenant to take possession of the Demised Premises or any portion thereof in violation of its obligation hereunder to do so or by any failure of Tenant to complete Tenant's Work by the Required Opening Date except as otherwise provided in Section 21.17 herein. SECTION 4.2 The Fixed Minimum Rent in the applicable annual amounts set forth in Article I (c) (i) shall be paid by Tenant to Landlord in the applicable monthly installments sot forth in Article I(c)(ii), in advance, on the first day of each month during each Lease Year (as hereinafter defined in Article XVII(g)] of the Term of this lease, except that the first monthly installment of Fixed Minimum Rent shall be paid to Landlord upon the Rent Commencement Date of this lease. If any month within the Term of this lease is less than a full calendar month, then the Fixed Minimum Rent for such fractional month shall be on a per diem basis based upon the number of days in such month. SECTION 4.3 Percentage Rent shall be payable by Tenant to Landlord in accordance with the provisions of Article I(d) and Article XXV. SECTION 4.4 All sums required to be paid by Tenant pursuant to the provisions of this lease, other than Fixed Minimum Rent and Percentage Rent, shall be as Additional Rent. ARTICLE V CONSTRUCTION SECTION 5.1 Tenant covenants and agrees to renovate and remodel the Demised Premises and to construct and/or install its leasehold improvements, trade fixtures, signage and other personal property therein (collectively, "Tenant's Work") in a good and workmanlike manner, at Tenant's sole cost and expense, in accordance with drawings approved in writing by Landlord. Tenant's Work shall include all required work with respect to the electrical, mechanical, heating, ventilating, air conditioning, sprinkler systems, plumbing, and other systems and installations serving the Demised Premises. Tenant's work shall be designed, engineered, installed and performed in accordance with the design and construction criteria set forth in the tenant design i construction criteria booklet for the Shopping Center ("Landlord's Desiqn i Construction Criteria"). Tenant shall submit to Landlord within thirty (30) days after the Effective Date of this lease, four (4) sets of working drawings (blueline prints) and one (1) set of reproducible drawings (sepia set) covering Tenant's work prepared by Tenant's licensed architect and/or licensed engineer, at Tenant's expense, :which drawings shall be In conformity with Landlord's Design a Construction -riter=a. Tenant's working L13 6 . i 3 BL'RLINGTON . 3 drawings shall be subject to the approval of Landlord which approval shall not be unreasonably withheld or delayed: provided, however, Tenant's drawings for the interior layout of the Demised Premises shall not be subject to :,andlord's approval. Landlord agrees to approve or disapprove Tenant's drawings within ton (10) business days after receipt thereof. If Landlord shall notify Tenant of any objections to the portions of the working drawings which require Landlord's approval such objections shall be specified in reasonable detail and Tenant shall :cake necessary revisions and resubmit final drawings to Landlord for approval within fifteen (15) days after such notice. If Landlord shall not approve the working drawings, Tenant and Landlord shall use their best efforts to cooperate and agree on all of the modifications necessary to obtain Landlord's approval of the working drawings. Landlord's approval of the final drawings shall be evidenced in writing which, at Landlord's option, may be by letter delivered to Tenant or by endorsement to that effect on two (2) sets of the final drawings, one (1) set to be retained by Landlord and one (1) set by Tenant. upon written approval by Landlord of the final drawings for Tenant's work, Tenant shall promptly thereafter submit said approved final drawings to the appropriate governmental agencies and shall promptly seek all necessary approvals and permits and pay all necessary fees incidental to Tenant's work. There shall be no material deviations from or changes in the aforesaid approved final drawings without the prior written consent of Landlord. Promptly after receipt of all approvals and permits, Tenant shall cause Tenant's Work to be commenced and thereafter diligently prosecute to completion in a good and workmanlike manner, all in conformance with the approved final drawinge for Tenant's Mork, Landlord's Design i Construction Criteria and all Governmental Regulations (as hereinafter defined in Section 6.1) of all Governmental Authorities (as hereinafter defined in Section 6.1) having jurisdiction of the Demised Premises. There shall be no penetrations of the roof or installation of radio, television or other antennas, without the prior written approval of Landlord. Notwithstanding anything to the contrary contained in this lease, Tenant shall be permitted to provide satellite communications services to the Demised Premises. Accordingly, Tenant shall be permitted to install on the roof of the building of which the Demised Premises is a part, a satellite dish, antennae and transmission equipment and wire, cable, conduit and associated equipment and facilities (collectively, "Communications Equipment") to provide communication services to the Demised Premises: provided such communications Equipment shall (a) be installed in accordance with the applicable provisions of Landlord's Design i Construction Criteria (and then maintained) by Tenant at its sole cost and expense and in accordance with (x) plans and specifications thereof prepared by Tenant and approved in writing by Landlord (and containing such degree of particularity as to size, location, appearance, structural load, materials and the like as Landlord shall reasonably request), and (y) all applicable Governmental Regulations of the Governmental Authorities (including, without limitation, all FCC and other licenses and approvals required in connection with the Communications Equipment): (b) Tenant shall, at Its sole cost and expense, immediately repair any damage caused to the Demised Premises and/or the building of which the Demised Premises is a part as a result of the installation of such communications Equipment: (c) Tenant shall install the Communications Equipment free of liens and encumbrances as required by Section 5.2 of this lease: (d) Tenant shall, at its sole cost and expense, remove the Communications Equipment at the expiration or earlier termination of this lease and repair any damage caused to the Demised Premises and/or the building of which the Demised Premises is a part as a result of such removal: (a) Tenant shall indemnify, defend (with counsel satisfactory to Landlord) and hold Landlord, Landlord's Managinq Agent and the Landlord Parties harmless from and against all Claims (as hereinafter defined) arising or accruing as a result of the installation and maintenance ,135.;7-SuR.INGTCN. of the Communications Equipment: and (f) The co=erc=al general :iabil_ty insurance maintained by Tenant pursuant to the provisions of Section 7.2(a) shall include a contractual liability endorsement insurinq the performance by Tenant of the indemnity agreement contained in (a) above protecting against any Claims in connection with the installation, use, maintenance and removal of the Communications Equipment. Any and all roof penetrations required by Tenant and approved by Landlord shall be at Tenant's expense, and at Landlord's option shall be engineered and ::stalled by Landlord's general contractor or roofing subcontractor. Tenant's cost for such roof work shall not exceed the prevailing competitive rate charged by reputable independent engineers and roofing contractors located within the trade area served by the Shopping Center. SECTION 5.2 Tenant shall do all things reasonably necessary to prevent the filing of any ;mechanics' or other liens or encumbrances against the Shopping Center, or any part thereof, or upon any interest of Landlord or any mortgages or any ground or underlying lessor in any portion of the Shopping Center, by reason of work, labor, services or materials supplied or claimed to have been supplied to Tenant or any one in possession of the Demised Premises, or any part thereof through or under Tenant. If any such lien or encumbrance shall at any time be filed against the shopping Center, or any portion thereof, Tenant shall notify Landlord in writing thereof and shall either cause same to be discharged of record within twenty (20) days after notice of the filing of same or, if Tenant in Tenant's discretion and in good _faith determines that such lien should be contested, Tenant shall within twenty (20) days after notice of the date of the filing of same furnish to Landlord such security as may be necessary and/or required to prevent any foreclosure proceedings against the Shopping Center, or any portion thereof, during the pendency of such contest. If Tenant shall fail to discharge any such lien or encumbrance or fail to furnish to Landlord such security as hersinabove provided within the time period herein provided, then, in addition to any other right or remedy of Landlord resulting from Tenant's said default, Landlord may, but shall not be obligated to, discharge such lien or encumbrance either by paying the amount claimed to be due or by procuring the discharge of such lien by giving security or in such other manner as is, or may be, prescribed by law, and Tenant agrees to reimburse Landlord, as Additional Rent, promptly, upon demand, for all costs, expenses and other sums of money in connection therewith, with interest thereon at an annual rate equal to the two percent (2i) over the commercial rate of interest charged from time to time by Bank of America in Los Angeles, California, as such bank's "prime rate" or the maximum lawful rate legally permitted in the state in which the Shopping Center is located, whichever is less (the "Default Rate"). All materialmen, contractors, artisans, mechanics, laborers and any other persons now or hereafter contracted with Tenant for the furnishing of any labor, services, materials, supplies or equipment with respect to any portion of the Demised Premises and/or the Shopping Center are hereby charged with notice that they must look exclusively to Tenant to obtain payment for same. Landlord shall have the right to post and maintain on the Demised Premises, file and/or record notices of non - responsibility, and such other notices as Landlord may deem to be proper for the protection of Landlord's interest in the Demised Premises. Tenant shall before the commencement of any work which might result in any lien or encumbrance being filed against the Shopping Center or any part thereof give Landlord at least twenty (20) days prior written notice of its intention to commence such work in sufficient time to enable Landlord to post, file and/or record such notices of non -responsibility or such other notes as Landlord may deem proper for the protection of Landlord's interest in the Shopping Center. Upon completion of Tenant's work and upon completion of any Alterations ;as hereinafter defined in Section 9.31, Tenant agrees to cause a timely Notice of completion to be N %136.4 3 BL.RL:NG:'CY. 3 recorded in the office of the Shopping Center :s located In 3093 of the civil Code of the statue. :7 recorder of the county in which the accordance with the terns of Section State of California cr any succeeding SECTION 5.3 At all times during the performance of Tenant's work or any other construction work by Tenant with respect to the Demised Premises, Tenant shall have and maintain in force builder's risk insurance (completed value form, if available) and worker's compensation insurance affording applicable statutory coverage and containing required statutory limits. Prior to commencement of Tenant's work, Tenant shall provide Landlord a duplicate original or certificate of insurance evidencing compliance with the provisions of this section 5.3. all such policies shall comply with the provisions of Article VII. SECTION 5.4 Any access to or possession of the Demised Premises by Tenant prior to the Rent Commencement Date shall be on and subject to all the other terns, provisions, covenants and conditions of this lease, except for the payment of Rent. ARTICLE VI USE AND OPERATION SECTION 6.1 Subject to and in compliance with all applicable present and future lave, ordinances, orders, rules, regulations, codes, directives, statutes and requirements (collectively, "Governmental Regulations") affecting the Demised Premises of all duly constituted federal, state, county, municipal and local governments, and of all governmental and quasi -governmental agencies, boards, commissions and departments thereof (collectively, "Governmental Authorities") having jurisdiction of the Demised Premises and all applicable rules and regulations of the local fire insurance rating service office and any other similar insurance service office, organization or group of which Landlord's insurance carriers are members (collectively, "Insurance Service Office"), the Damised Premises shall be used by Tenant solely for the Permitted Use as set forth in Article I(e)(i), and for no other use or purpose. SECTION 6.2(a) Subject to the provisions of Section 22.17 herein, Tenant covenants and agrees that it will use its good faith efforts to complete Tenant's work and open its business in the Demised Premises to the public "adequately fixturized, staffed and stocked" (as such term is hereinafter defined in Section 6.2(b)] not later than the Required Opening Date but in no event later than sixty (60) days following the Required Opening Date. Thereafter, Tenant covenants and agrees to use, occupy and �ndutt its business in the entire Demised Premises for fn ermiited Use continuous and without interruption until the dAv nr gr .to the Canth ? iversary of a Tenant in t all ly oggn Preen see for business (t11¢. enant's O�erating_Covenaat") in the manner se o in this lease and under 2Yanant' s Store Name as set forth in Article I(e)(iii) other than such portions of the Demised Premises as are reasonably required for storage and office space subject, however, to all of the terms, covenants and conditions of this lease. (b) Tenant covenants and agrees that during the period of Tenant's Operating Covenant and, thereafter, if Tenant elects to remain open for business, that Tenant shall (L) subject to the provisions of Section 21.17, be open and remain open for business to the public daily during all hours on all days that tre Occupants of any two (2) of Buildings I, II or IV as shown on Exhibit "A" are open for business but in any event during all hours and on all days that Tenant's other Burlington Coat Factory stores are open for L13 6. 4 3 BUR, NGTC14 . 3 1 i business in southern California: (ii) adequately fixturize and staff its store with sufficient trade fixtures and employees (as determined in Tenant's sole reasonable business judgment) to handle the maximum profitable business and 'keep and maintain within and upon the Demised Premises an adequate Inventory of merchandise (as determined in tenant's sole reasonable business judgment) of such size, character and quality sufficient to accomplish the same ("adequately fixturized, staffed and stocked") on all days and during all hours that Tenant is required or elects to remain open for business to the public: (iii) maintain displays of merchandise in the display windows, if any, and keep such display windows, exterior signs and exterior advertising displays adequately illuminated continuously during such hours that the Shoppinq Center is open for business to the public as determined by.Landlord: and (iv) utilize for orrice, clerical or other :ion -selling purposes only such space in the Demised Premises as is reasonably required for Tenant's business therein. (c) After the expiration of Tenant's Operating Covenant, Tenant shall have the right to cease doing business at the Demised Premises and/or to vacate the Demised Premises by giving Landlord ninety (90) days prior notice to that effect (such notice herein a "Go -Dark Note"). rurther, if Tenant does not give Landlord a Go - Dark Notice, but for a period of more than ninety (90) days, Tenant ceases doing business at the Demised Premises and/or vacates or abandons the Demised Premises, and if such cessation of business and/or vacating of the Demised Premises is not the result of con- demnation, casualty, remodelling or the occurrence of an event described in Section 21.17 herein, then Tenant shall be deemed to have given Landlord a Go -Dark Notice on the ninety-first (91st) day following the date on which Tenant's cessation of business at the Demised Premises began or the ninety-first (91st) day following the date on which Tenant vacated or abandoned the Demised Premises. If Tenant shall give Landlord a Go -Dark Notice (or if Tenant is deemed to have given Landlord a Go -Dark Notice as aforesaid), Tenant shall have the right to cease doing business at the Demised Premises and/or to vacate or abandon the Demised Premises, and Tenant shall comply with the provisions of Section 12.1 herein, but Tenant agrees that for the remainder of the Term. It shall. con nue all Rent and other cEWrges in accordance with the provisions of s lease, s e ever, to Tenant's right to terminate this lease pursuant to the provisions of Article I(h) herein and subject to Landlord's right to terminate this lease as hereinafter provided in this Section 6.2(c). In the event Tenant gives Landlord a Go - Dark Notice (or if Tenant is deemed to have given Landlord a Go - Dark Notice) pursuant to the provisions or this section 6.2(c), Landlord shall have the WtApn, but not the obligat =, to termi- nate this lease at any time there-&-fUer upon at least thirty (30) days' prior written notice (provided Tenant does not reopen for business within such thirty (30) day period) by giving Tenant notice to that effect (herein the "Termination Notice"). In the event Landlord gives Tenant a Termination Notice pursuant to this Paragraph, then this lease shall terminate on the date set forth in the Termination Notice. ARTICLE VII INDEMNITY AND INSURANCE SECTION 7.1(a) Tenant covenants with Landlord that from and after the Delivery Date, Tenant will indemnify, defend (with counsel satisfactory to Landlord), and hold harmless Landlord, Landlord's Managing Agent and their respective past and present officers, directors, shareholders, beneficiaries, trustees, agents, servants, employees and independent contractors (collectively, the "Landlord Parties"), and Landlord's Designee(s) ;as hereinafter defined in Section 7.2(c)) from and against any and all claims, 36. 43BL7R_': tom •_ti, suits, proceedings, actions, causes of action, responsibility, liability, demands, damages, )udgments, penalties, ccsts, expenses, losses, executions and charges of any kind or character (collectively, "Claims") on account of any real or claimed damage to property of Tenant or anyone claiairq under, by or through Tenant or injury to or death of persons from any occurrence whatsoever in or on the Demised Premises, or any occurrence in or on the remainder of t;le Shopping Center resulting out of any act or omission or negligence of Tenant, or any Concessionaire (as hereinafter defined in Article XVII(c)], or their respective past and present officers, directors, shareholders, invitees, customers, agents, sarfants, employees and independent contractors (collectively, the "Tenant Parties"), or resulting out of any default, breach, violation or non-performance by Tenant of any provision of this lease, or resulting out of Tenant's work, or any repairs or Alterations which Tenant may make or cause to be made upon the Demised Premises, including any mechanics' or other liens resulting from the foregoing, but Tenant shall not be liable for any Claims to the extent such Claims result from the negligence or willful misconduct of Landlord, Landlord's Managing Agent, the Landlord Parties or Landlord's Dasignee(s). Tenant's obligation to indemnify and hold harmless Landlord, Landlord's Managing Agent, the Landlord Parties and Landlord's Designees) under this Section 7.l(a) (and under each and every other indemnification and hold harmless provision contained in this lease) shall survive the expiration or earlier termination of this lease until the last to occur of (a) the last date permitted by law for the bringing of any Claims with respect to which indemnification may be claimed by Landlord, Landlord's managing Agent, the Landlord Parties or Landlord's Designse(s) against Tenant under such indemnification and hold harmless provision, or (b) the date on which any claims for which indemnification may be claimed against Tenant by Landlord, Landlord's Managing Agent, the Landlord Parties or Landlord's Designee(s) under such indamnification and hold harmless provision is fully and finally resolved, and shall include the actual reasonable attorneys' fees and investigation costs and all other coats, expenses and liabilities incurred by any such indamnitee from the first notice that any Claim is to be made. (b) Landlord covenants With Tenant that from and after the Delivery Date, Landlord will indemnify, defend (with counsel satisfactory to Tenant), and hold harmless Tenant and the 'tenant Parties from and against any and all Claims on account of any real or claimed damage to property of Landlord or anyone claiming under, by or through Landlord or injury to or death of persons from any occurrence whatsoever in or on the common Area of the shopping Canter, or any occurrence in or on the Demised Premises resulting out of any act or omission or negligence of Landlord or the Landlord Parties, or resulting out of any default, breach, violation or non-performance by Landlord of any provision of this lease, or resulting out of Landlord's work, or any repairs which Landlord may make or cause to be :Wade upon the Demised Premises, including any mechanics' or other liens resulting from the foregoing, but Landlord shall not be liable for any Claims to the extent such Claims result from the negligence or willful misconduct of Tenant or the Tenant Parties. Landlord's obligation to Indemnify and hold harmless Tenant and the Tenant Parties under this Section 7.1(b) (and under each and every other indemnification and hold harmless provision contained in this lease) shall survive the expiration or earlier termination of this lease until the last to occur of (a) the last date permitted by law for the bringing of any Claims with respect to which indemnification may be claimed by Tenant or the Tenant Parties against Landlord under such indemnification and hold harmless provision, or (b) the date on which any Claims for which indemnification may be claimed against Landlord by Tenant or the Tenant Parties under such indemnification and hold harmless provision :s fully and finally resolved, and shall include the actual reasonable attorneys' fees and .j., 6 . 4 3 BUR C.N. 3 :3 :nvescigation costs and all other costs, expenses and liabilities incurred by any such .ndemnitee .from the _first notice that any Claim is to be made. SECTION 7.2(a) From and after the Delivery Date and continuing thereafter until the and of the Term, Tenant agrees to cbtain and maintain in full force and effect, at its own cost and expense [in addition to builder's risk insurance and worker's compensation insurance required pursuant to Section s.a(a)], commercial general liability insurance for bodily injury and property damage with coverage limits of not less than Two Million Dollars (52,000,000.00) combined single limit, per occurrence and in the aggregate, insuring against any and all liability of the insured for injury to persons (and death) and/or damage to property of any person or persons in or about the Demised Premises arising out of the possession, use, occupancy, management, maintenance, repair, control and enjoyment of the Demised Premises, and all areas appurtenant thereto. In no event shall the minimum limits of suds commercial general liability insurance required of Tenant under this lease be considered as limiting the liability of Tenant under this lease. (b) From and after the Delivery Date and continuing thereafter until the end of the Term, Tenant agrees to obtain and maintain in full force and effect, at its own cost and expense, (i) lire and extended coverage insurance providing protection against any peril included within the classification of "all risk" insurance issued by insurance companies licensed to do business in the state in which the shopping Canter is located, including, without limitation, coverage for vandalism, malicious mischief and sprinkler leakage, covering Tenant's Alterations, fixtures, equipment. furnishings, mareriandise and other personal property from time to time located on the Damised Premises, such insurance to be in an amount equal to the full replacement cost value new. The proceeds of such insurance, so long as this lease remains in affect, shall be retained by Tenant and used by Tenant to repair and/or replace the Alterations, fixtures, equipment, furnishings, merchandise and other personal property so insured. (G) All commercial general liability insurance policies required of 'tenant under this lease shall be written an primary policies, not contributing with or in excess of the coverage which Landlord, Landlord's Managing Agent or Landlord's Designee(s) may carry, and shall name, as additional insureds, Landlord, Landlord's Managing Agent and such other person or persons designated by Landlord to Tenant that have an insurable interest in the Demised Premises including the holders of any mortgage affecting the Demised Premises and any lessors under any ground or underlying leases liening the Demised premises [collectively, "Landlord's Designee(s)"], and shall (i) be issued by insurance companies licensed to do business in the state in which the Shopping Center is located, with a general policy holders' rating of not less than A and a financial rating of not less than Class VIII as rated in the most current available "Bast's" Insurance Reports, and (ii) contain a provision that the insurance companies writing such policies will give to Landlord, Landlord's ?Managing Agent and Landlord's Designee(s) thirty (30) days notice in writing in advance of any cancellation, lapse or reduction respecting such insurance. All commercial general liability insurance policies shall contain (i) a cross liability endorsement to the effect that Landlord, Landlord's Managing Agent and Landlord's Designee(s) although named as additional insureds shall nevertheless be entitled to recovery under said policies for any loss or damage occasioned to them by reason of the negligence of Tenant, its Concessionaires or the Tenant Parties and (ii) a contractual liability endorsement specifically insuring the performance by Tenant of that cart of the Indemnity agreement relating to :13 6 .: 3 BL;-.1L:NGTCN. 3 : i liability for an]u ry to or death of persons and damage to property contained in Section 7.1(a). SECTION 7.3 A duplicate original or certificate of all policies of insurance procured by Tenant in compliance with its obligations under this lease shall be delivered to Landlord at least fifteen (15) days prior to the time such insurance is first required to be carried by Tenant, and thereafter at least thirty (30) days prior to the expiration of any such policy. In the event of Tenant's failure, in whole or in part, at any time during the Term, to obtain and maintain insurance required to be carried by Tenant under the provisions of this lease or to provide Landlord such evidence thereof within fifteen (15) days after Landlord's written request therefor, Landlord shall have the right (but shall not be obligated) to procure such insurance and Tenant shall pay to Landlord promptly, on demand, as Additional Rent, the costs and expenses thereof with interest thereon at the Default Rate. Any insurance required to be provided by Tenant under Section 7.2 may be satisfied by inclusion of the Demised Premises within the coverage of a so-called blanket policy or policies of insurance carried and maintained by Tenant; provided, however, that Landlord, Landlord's Managing Agent and Landlord's Designee(s) shall be named as additional insureds thereunder as their interest may appear and that the coverage afforded Landlord will not be reduced or diminished by reason of the use of such blanket polices of insurance, and provided further that the requirements set forth herein are otherwise satisfied. Tenant agrees to permit Landlord at all reasonable times to inspect any policies of insurance of Tenant which Tenant has not delivered to Landlord. SECTION 7.4 Tenant agrees to use and occupy the Demised: Premises and to use all other portions of the Shopping center which it is permitted to use by the terms of this lease at its own risk, and Tenant (for itself and all persons claiming under, by or through Tenant) hereby releases Landlord, Landlord's Managing Agent, the Landlord Parties and Landlord's Designee(s) from all Claims an account of damage to property or injury to or death of persons occurring in, on or about the Demised Premises and/or the Shopping Center, except to the extent such Claims result from the breach of this lease by Landlord or result from the negligence or willful misconduct of Landlord, Landlord's Managing Agent, the Landlord Parties or Landlord's Designee(s). SECTION 7.5 If at any time as a result of or in connection with Tenant's use of the Demised Premises, the fire and extended coverage insurance rate(s) applicable to the Demised Premises or the building of which the Demised Premises is a part, shall be higher than that which would be applicable for the Permitted LDse, Tenant agrees that it will pay to Landlord, as Additional Rent, promptly, on demand, such portion of the additional premiums for all fire and extended coverage insurance policies in force with respect thereto as shall be attributable to such higher rate(s); provided, however, in no event shall Tenant be required to pay to Landlord any increase in Landlord's fire and extended coverage Insurance rates caused by another Occupant of the Shopping Center. If Tenant installs any electrical equipment that overloads the lines in the Demised Premises or the building in which the Demised Premises is located, Tenant shall, at its own cost and expense, promptly make whatever changes are necessary to remedy such condition. SECTION 7.6 Landlord covenants and agrees to obtain and maintain throughout the Term fire and standard extended coverage insurance that shall include the Demised Premises (excluding Tenant's fixtures, equipment, furnishings, merchandise and other personal property from time to time located on the Demised Premises) providing protection against any peril included within the classification of "all risk" insurance issued by insurance companies 'licensed to do business in the state in which the Shopping Center is located in an amount not 'less than that required by all mortgages which may now or hereafter lien the Demised Premises but in no event :n an amount 'less than eighty percent (80%) of the replacement cost of the Demised Premises exclusive of excavations, foundations and footings. Any insurance provided by Landlord under this Section 7.6 may be provided by means of a policy or policies of blanket insurance covering additional items or locations or insureds provided that the requirements of this Section 7.6 are otherwise satisfied. The cost of maintaining the insurance carried by Landlord pursuant to this Section 7.6 shall be included in Common Area Costs (as hereinafter defined in Article kVt2(b)I- Tenant shall have no rights in any policy or policies of insurance maintained by Landlord pursuant to the provisions of this Section 7.6 and shall not be entitled to be named as an insured thereunder. ARTICLE VIII FIRE AND OTHER CASUALTIES SECTION 8.1 If the Demised Premises or the buildings comprising the Shopping Center shall be damaged or destroyed during the Term by fire or any other casualty, Landlord shall (subject to Landlord being able to obtain all necessary permits and approvals therefor, including, without limitation, permits and approvals required from any agency or body administering environmental lags, rules or regulations and except as hereinafter provided in Section 8.2) repair the same. SECTION 8.2 If however, (a) the Demised Premises shall be damaged or destroyed (1) by fire or other casualty (i) to the extent of fifty percent (50%) or more of the cost of replacement thereof, or (ii) so that fifty percent (50%) or more of the Gross Leasable Area contained in the Demised Premises shall be rendered untenantable, or (2) by any casualty other than those covered by fire and standard extended coverage insurance policies carried by Landlord pursuant to Section 7.6, or (b) if the Demised Premises shall be damaged in whole or in part during the last thirty-six (36) months of the Term, or (c) if Landlord's mortgagee shall require that the insurance proceeds be applied against the principal balance due on such mortgage, or (d) if the buildings comprising the shopping Center are damaged to the extent that Landlord is not required to rebuild same pursuant to the terms of the FLEA, or (a) if the enclosed mall of the Shopping Center is damaged to the extent that Landlord is not required to rebuild same pursuant to the terms of the REA, then, in any such event, Landlord may, at its option, either terminate this lease or elect to repair. the Damised Premises, the buildings comprising the shopping center, and/or the enclosed mall, as the case may be, and Landlord shall notify Tenant as to its election within ninety (90) days after such fire or other casualty: provided, however, except during the last thirty-six (36) months of the Term of this lease, Landlord's right to terminate this lease is contingent upon Landlord contemporaneously terminating the leases of all similarly affected tenants in the Shopping Center. Tenant shall have the right to terminate this lease upon thirty (30) days written notice to Landlord in the event the Demised Premises shall be damaged or destroyed to the extent of twenty-five percent (251) or more of its replacement cost during the last thirty-six (36) months of the Tens. Further, except during the last thirty-six (36) months of the Term of this lease, in the event Landlord rather than rebuilding the Demised Premises elects to terminate this lease as herein provided and if Landlord within a three (3) year period following the date of termination of this lease commences to rebuild the Demised Premises for a retail use, then Landlord shall offer to enter into a new _ease with Tenant for the remainder of the Term of this lease on the same terms and ccndit_or.s as provided L136.:7S RL::7GT:N.. !6 in this lease. if Landlord or 'Tenant elect to terminate this lease, then the Tern shall end at the end of the calendar month in which such electicn is :Wade. If Landlord or Tenant do not elect to terminate this lease, then Landlord shall perform such repairs and rebuilding as set forth in Section 8.3 and Tenant shall perform such repairs and rebuilding as set forth in Section 6.4, and the Term shall continue without interruption and this lease shall remain in full force and effect. Tenant hereby expressly waives all rights to terminate this lease under Sections 1932(2) and/or 1933(4) of the Civil Code of California, as the same may be amended from time to time, or under any similar statute now or hereafter in force, or under any present or future laws or case decisions to the same effect. SECTION 8.3 of Landlord or Tenant do not elect to terminate this lease as provided in Section 8.2, Landlord shall promptly after settlement of insurance claims and the obtainment of all necessary permits and approvals diligently reconstruct the Demised Premises (but in no event shall Landlord be required to restore any damage to Tenant's trade fixtures, equipment, furnishings, merchandise, signs and other personal property) to substantially the same condition existing on the date of the casualty. All work to be performed by Landlord shall be done in such manner that upon completion thereof, that portion of the Demised Premises repaired or rebuilt shall contain substantially the same amount of Gross Leasable Area as immediately prior to the damage or destruction. SECTION 8.4 If Landlord or Tenant do not elect to terminate this lease as provided in Section 8.2, Tenant shall, at its own cost and expense, repair and restore Tenant's trade fixtures, equipment, furnishings, merchandise, signs and other personal property in a manner and to at least a condition equal to that existing prior to its damage or destruction. Tenant agrees to commence the performance of its restoration work when notified by Landlord that the restoration work to be performed by Tenant can, in accordance with good construction practices, then be commenced, and Tenant shall complete such restoration work and reopen (if closed) the Demised Premises or the portion closed for business within one hundred twenty (120) days thereafter. SECTION 8.5 All proceeds payable from Landlord's insurance policies with respect to the Demised Premises shall belong to and shall be payable to Landlord. If Landlord or Tenant do not elect to terminate this lease as provided in Section 8.2. Landlord shall disburse and apply so much of any insurance recovery as shall be necessary to pay and reimburse Landlord for the costs incurred by Landlord with respect to Landlord's restoration work referred to in Section 8.3. SECTION 8.6 During any period in which the Demised Premises is damaged or destroyed by reason of any fire or other casualty and there is substantial interference with the operation of Tenant's business in the Demised Premises as a result of such damage or casualty which, in Tenant's sole reasonable business judgment, requires Tenant to temporarily close all or a portion of the Demised Premises for business, the Fixed Minimum Rent shall abate in the proportion that the Gross Leasable Area of the Demised Premises rendered unusable for the Permitted Use bears to the total Gross Leasable Area of the Demised Premises, and such abatement shall continue for the period commencing with the date of such fire or other casualty and ending on the date that shall be the earlier of (1) one hundred twenty (120) days after completion by Landlord of such restoration work as Landlord is required to perform under the provisions of Section 8.3, or (ii) the reopening of the Demised Premises or the portion closed for business following such fire or other casualty, or (iii) in the event Landlord or Tenant elects to terminate this lease, until the date of termination. L13 6 .: 3 BU-R_i:+GTCN . 3 _ SECTION 8.7 Landlord and Tenant hereby release and waive on behalf of themselves, _heir respective directors, officers, agents, employees and assignees, and any other party who may look to Landlord and/or Tenant for reimbursement, and (to the extent it is legally possible for it to do so) on behalf of its insurer, the other party from any liability for any loss or damage occasioned to the property of such waiving party or the property of others under its control resulting from any fire or other casualty where such loss or damage is covered by fire and extended coverage insurance required to be carried by such party under the terms of this lease, or is otherwise insured by such party (or if a party to this lease is self -insured, to the extant any such loss or damage would have been covered by fire and extended coverage insurance otherwise required to be carried by such party under the terms of this lease), irrespective of any negligence on the part of the other party which may have contributed to or caused such loss or damage. Landlord and Tenant covenant and agree that each will obtain for the benefit of the other party a waiver of any right of subrogation which the insurer of such party may acquire against the other party by virtue of the payment of any loss or damage covered by fire and extended coverage insurance required to be carried under this lease. ARTICLE IX REPAIRS, MAINTENANCE AND ALTERATIONS SECTION 9.1 Landlord shall within a reasonable period after receipt of written notice from Tenant make or cause to be' made necessary structural repairs to the foundations, exterior walls and all --other structural elements of the Demised Premises (but excluding frames surrounding, all windows, doors, plate glass, storefronts and signs) and to the roof of the building of which the Demised Premises is a part. Landlord shall not be required to make any repairs or installations where the need for same are necessitated, caused or occasioned by (1) any act or omission or negligence of Tenant or its Concessionaires, or the Tenant Parties unless occasioned by a risk covered by Landlord's insurance, (2) any matter (a) referred to in Sections 9.2(b) or 13.1(B), or (3) any fire or other casualty or condemnation, except as provided in Articles VIII and X. Tenant hereby expressly waives all rights to make repairs at the expense of Landlord under sections 1941 and/or 1942 of the Civil Code of California, as the same may be amended from tuna to time, or under any similar statute now or hereafter in force, or under any present or future laws or case decisions to the same effect. Notwithstanding anything to the contrary contained in this Section 9.1, in the event Landlord fails to make the repairs to the Demised Premises and/or the "No Build Area" (as hereinafter defined in Section 11.1) required to be made by Landlord under the terms of this lease within thirty (30) days after receipt of written notice from Tenant specifying in reasonable detail the repairs to be made, -finless such repairs cannot be completed within thirty (30) days in which event Landlord's commencing such repairs within such thirty (30) day period and thereafter diligently prosecuting same to completion shall satisfy the condition of this provision, Tenant shall have the right, but not the obligation, to make said repairs on behalf of Landlord and Landlord shall pay to Tenant the reasonable cost of such repairs together with interest thereon at the Default Rate within thirty (30) days after receipt of paid invoices from Tenant. In the event Landlord fails to reimburse Tenant for the cost of such repairs within the time period herein provided, Tenant shall have the right to deduct the cost of such repairs from Rent otherwise due Landlord under this lease until the cost of such repairs has been deducted in its entirety. Further, if, in an emergency, in Tenant's reasonable opinion, any repairs to the Demised Premises and/or the No Build Area which are Landlord's obligation under the terms of this lease are immediately necessary for the proper use and en3oyment of :!:e :_l.6.332t RLl'JGT_N.. _3 remised ?remises or to avoid damage or :.n]u rf to the Demised Premises or Lts contents, Tenant shall make all reasonable efforts to notify Landlord of the Need for such emergency repairs which notification may be by oral notice or facsimile to the Shopping Center Manager and if such emergency repairs are not Immediately wade, Tenant may forthwith rake such reasonable emergency repairs as necessary to eliminate the emergency on behalf of Landlord, and andlord shall pay to Tenant the reasonable cost of such emergency repairs within thirty (30) days after receipt of paid invoices from 'tenant. In the avant Landlord fails to reimburse ^enant for the cost of such repairs within the time period herein provided, Tenant shall have the right to deduct the cost of such repairs from Rent otherwise due Landlord under this lease until the cost of such repairs has been deducted in its entirety. SECTION 9.2(a) Tenant shall, at its sole cost and expense, keep, replace and maintain the interior, non-structural elements of the Damised Premises and the windows (including surrounding window frames), doors, plate glass, storefronts and signs in good order, condition and repair (except for repairs specifically required of Landlord pursuant to Section 9.2) including, without limitation, al L heatinq, ventilating and air conditioning units and systems serving the Demised Premises, plumbing units and systems including toilet facilities and toilet fixtures, sprinkler systems, electrical systems and equipment and lighting systems and other systems within or exclusively serving the Demised Premises, interior non-structural walls and interior surfaces of exterior walls,. ceilings, floors and floor coverings, showcases, and Tenant's trade fixtures, furnishings and equipment. The obligations of Tenant pursuant to this Section 9.2(a) shall also Include, without limitation, all necessary painting and refurbishment as often as may be required to keep the Demised Promises in good order„ condition and repair, the replacement of any glass (including plate glass) which may be damaged or broken with glass of the same quality and strength, and all installations, repairs, modifications and alterations necessitated pursuant to the provisions of Sections 9.2(b) and 13.1(8). If Tenant refuses or neglects to'make repairs and/or maintain the Demised Premises, or any part thereof, in good order, condition and repair as obligated to do so under the terms of this lease, Landlord shall have the right, upon giving Tenant reasonable written notice of its election to do so, to make such repairs or perform such maintenance on behalf of and for the account of Tenant and Tenant shall pay to Landlord, as Additional Rant, promptly, upon demand, the costs and expenses thereof, with interest thereon at the Default Rate. (b) Tenant shall, at its sole cost and expense, install and maintain in the Demised Premises smoke evacuation equipment, smoke astection equipment, fire extinguishers and other fire protection dsvj,css in compliance With all Governmental Regulations of the Governmental Authorities having jurisdiction of the Demised Premises and as required by the rules and regulations of the Insurance Service Office. If any Governmental Regulations of the Governmental Authorities having jurisdiction of the Demised Premises or the Insurance Service Office require the installation of or any changes, modifications or alterations with respect to any sprinkler system, smoke evacuation system, smoke detection system or additional sprinkler heads or other equipment (collectively, "Fire Protection Installations") by reason of Tenant's business, or the location of partitions, fixtures, equipment or other property placed in the Demised Premises by Tenant, Tenant, at its sole cost and expense, shall promptly make such fire Protection Installations required whether the work involved be structural or non-structural. SECTION 9.3 After completion of Tenant's work, Tenant shall not make any installations, improvements, additions, and/or alterations (individually and collectively, "Alterations" for the purposes of this Section 9.3] to the Demised Premises or any part _1 L136.43BURL: NGTCV.2 _9 thereof without. *Landlord's prior written consent. In tAe event Tenant :!esires to sake any structural repairs or Alterations to the Demised Premises required or permitted to be performed by Tenant under any provision of this lease, such repairs (excluding emergency repairsl and alterations shall -tat be commenced until working drawings therefor shall have been prepared in conformity with Landlord's resign & Construction Criteria and approved by Landlord. All repairs and Alterations shall be at Tenant's sole cost and expense and shall be performed in a good and workmanlike manner using materials of at least the same grade and quality as originally used by Tenant in performing Tenant's work under this lease. All structural repairs and Alterations shall be performed under the supervision of a licensed architect or licensed structural engineer in confor^ance with the approved drawings therefor, Landlord's Design & Construction Criteria and all Governmental Regulations of all Governmental Authorities having jurisdiction of the Demised Premises and once commenced such repairs and Alterations shall be diligently prosecuted to completion to the end that the Demised Premises shall at all times be a complete architectural unit except during the period of work. In performing all repairs and Alterations, Tenant shall have the repairs and Alterations performed in such a manner as not to impede access to the Premises of any other Occupant (as hereinafter defined in Article XVII(k) in the shopping center. Notwithstanding the foregoing, Tenant may, at its sole cost and expense, make Alterations to the Demised Premises without the consent of Landlord provided that (1) no such Alterations shall alter, modify or in any other manner whatsoever affect the structural portions of the Demised Promises or the building of which the Demised Premises is a part, and/or the exterior of the Demised Premises (including, but not limited to, the storefront (including Tenant's entrance into the enclosed mall of the Shoppinq Center) and the exterior signage), and/or the plumbing, electrical, heating, ventilating, air conditioning, mechanical and other systems and installations located outside or not exclusively serving the Demised Premises: (ii) Tenant shall before the commencement of any Alterations give Landlord at least fifteen (15) days prior written notice of its intent to commence any such Alterations: and (iii) Tenant shall, upon Landlord's request furnish to Landlord for informational purposes only Tenant's plans and specifications for such Alterations. ARTICLE X CONDEMNATION SECTION 10.1 If the entire Demised Premises shall be taken under the power of eminent domain by any public or quasi -public authority, or sold to the condemning authority (or to its designee) under the threat of eminent domain, or if such portion thereof shall be no taken as to make it imprudent or unreasonable in the judgment of Tenant reasonably exercised to use the remaining portion of the Demised Premises for the Permitted Use (which taking Is hereinafter referred to as a "Total Taking"), then in such event this lease shall terminate and expire on the date of surrender of possession of the Demised Premises to the condemning authority as a result of such condemnation proceedings. Tenant shall continue to pay the Rent hereunder and, in all other respects, )seep, observe and perform all of the terms, covenants, agreements, provisions and conditions of this lease to be kept, observed and performed by Tenant until the date of such surrender, but not thereafter. In the event Tenant shall have paid Rent for a period beyond such date of surrender, Landlord shall promptly repay such amounts to Tenant. SECTION 10.2 In case of a condemnation of a portion of the Demised Premises which is not a Total :'aking (which taking :s hereinafter referred to as a "Partial Taking"), this ?ease shall remain in full force and effect as to the portion of the Demised 1136.43BURLiNCTCN.: 20 Premises remaining _mmediately after such Partial Taking, without any abatement or reduction :n Rent, except that the Fixed Minimum Rent shall be equitably apportioned according to the Gross Leasable Area so taken, and Landlord shall, at its own cost and expense, restore the remaining portion of the Demised Premises to the extent necessary to render same a complete unit of like quality and craracter as existed prior to such Partial Taking, but the cost thereof shall not exceed the net proceeds of the condemnation award actually received and retained by Landlord. Tenant hereby expressly Waives all rights to petition the Superior Court of the State of California to terminate this lease in the event of a partial taking of the Demised Premises under Section 1265.130 of the California Code of Civil Procedure, as the same may be amended from time to time, or under any similar statute now or hereafter in force, or under any present or future laws or case decisions to the same effect. SECTION 10.3 All compensation awarded or paid upon a Total or Partial Taking of the Demised Premises including, without limitation, any award for diminution of the value of the leasehold shall belong to and be the property of Landlord without any participation by Tenant; provided, however, that nothing contained herein shall be construed to preclude Tenant, at its sole cost and expense, from independently prosecuting any claim directly against the condemninq authority in such condemnation proceedings (or consolidating such claims with Landlord's claims if under tha laws of the state in which the Shopping Center is located only one lump sum award is made by the condemning authority) for lose of business, and/or moving expenses, and/or depreciation to, damage to, and/or cost of removal of, and/or for the value of stock and/or trade fixtures, furniture and other personal property belonging to Tenant and which, pursuant to the provisions of this lease, would remain Tenant's property at the expiration of the Term of this lease; provided, however, that no such claim shall diminish or otherwise adversely affect Landlord's award or the awards of any and all ground and underlying lessors and/or mortgagees. ARTICLE XI COMMON AREAS AND COMMON AREA COSTS SECTION 11.1 Landlord shall operate and maintain, or cause to be operated and maintained, the Common Areas [as hereinafter defined in Article xvil(a)] for their intended purposes in good order, condition and repair. Tenant and its Concessionaire(s) and their respective employees, agents, customers and invitees are, except as otherwise specifically provided in this lease, authorized, empowered and privileged to use the Common Areas (for their intended purposes) in common with other persons during the Term of this lease, subject, however, to the provisions of this Article XI. Landlord shall at all times after the Effective Date have the right and privilege of determining the nature and extent of the Common Areas, and of making such changes, rearrangements, additions or reductions therein from time to time as it deems to be desirable, including, without limitation, the location, relocation, enlargement, reduction or addition of driveways, malls, entrances and exits, automobile parking spaces, employee and customer parking areas, the direction and flow of traffic, establishment of protected areas, landscaped areas and any and all other facilities of the Common Areas, and the right at any time to locate on the Common Areas permanent or temporary kiosks, displays, carts, stands and/or other buildings and/or other improvements of any type; provided, however, in no event shall any Kiosks, carts or stands be located closer than fifty (50) feet of any entrance to the Demised Premises; and further provided that no such charges to the common Areas shall materially and adversely interfere with customer access to or visibility of t~e Demised Premises. Landlord covenants and 136..3BURL.INGTON. 3 21 agrees that Landlord shall not (except as otherwise required by the .;overnmental Authorities) reduce the number of parking spaces in the Shopping Center below 4.3 parking spaces for each 1000 square feat of Gross Leasable Area of buildings available for lease in the Shopping Center. Further. Landlord covenants and agrees that Landlord shall not construct any buildings or other structures or make or permit to be made (except as otherwise required by the Governmental Authorities) any material changes within the applicable No Build Areas shown on Exhibit "A", Page 1 (i.e. "No Build Area No. 1" and/or "No Build Area No. 2"), subject, however, to Landlord's right to make changes to "No Build Area No. 1" and/or "No Build Area No. 2" (as applicable) as more particularly hereinafter provided in Article XVII(j) herein. SECTION 11.2(a) All Common Areas shall be subject to the exclusive control and management of Landlord, and Landlord shall have the right at any time after the Effective Oate and from time to time during the Term of this lease, to establish, modify, amend and enforce uniform reasonable rules and regulations binding and non-discriminatorally enforced as to all occupants of the Shoppinq Center with respect to the Common Areas and the use thereof. Tenant agrees to abide by and conform with such rules and regulations upon notice thereof, and to use its reasonable efforts to cause its Concessionaires, customers and invitees and its and their respective employees and agents, so to abide and conform. Landlord may at any time and from time to time during the Term hereof exclude and restrain any person from use and occupancy of the Common Areas, excepting, however, Tenant, its Concessionaires and other occupants of the Shopping Center and their respective employees, agents, customers and invitees who make use of the Common Areas for their intended purposes in accordance with reasonable non-discriminatorally enforced rules and regulations established by Landlord from time to time with respect to the Common Areas. The rights of Tenant hereunder in and to the Common Areas shall at all times be subject to the rights of Landlord and other Occupants of the Shopping Center to use the same in common with Tenant, and it shall be the duty of Tenant to keep all of said Common Areas free and clear of any obstructions created or permitted by Tenant or resulting from Tenant's business in the Demised Premises. If in the opinion of Landlord unauthorized persons are using any of said Common Areas by reason of the presence of Tenant in the Demised Premises, Landlord may enforce Landlord's right to exclude and restrain all such unauthorized persons by appropriate proceedings. Nothing herein shall affect the rights of Landlord at any time to remove any such unauthorized persons from said Common Areas or to restrain the use of any of said Common Areas by unauthorized persons. (b) Landlord shall have the right (i) to temporarily close, if necessary, all or any portion of the Common Areas to such extent as may in the opinion of Landlord's counsel be reasonably necessary to prevent a dedication thereof or the accrual of any rights of any person or of the public therein, (ii) to close temporarily all or any portion of the Common Areas to discourage non -customer use, (iii) to use portions of the Common Areas while engaged in making additional improvements or repairs or alterations to the Shopping Center: provided, however, Landlord agrees to use its best good efforts to make such improvements, repairs or alterations in such a manner as to minimize interference with customer access to or visibility of the Demised Premises to the extent reasonably practicable under the circumstances, (iv) to transfer, in whole or in part, any of Landlord's rights and/or obligations under this Article XI to any occupant of the Shopping Center or to any other party as Landlord nay from time to time determine provided that in no event shall any such transfer release Landlord from its obligations under this Article XI, and (v) to do and perform such other acts (whether similar or dissimilar to the foregoing) in, to and with respect to, t::e Ccmmon Areas as in the use of gocd :.136.;38URL:YGTON.3 22 business judgment Andlord shall determine to to appropriate for the shopping Center. (c) Tenant agrees to use its good faith efforts to cause its officers, employees, agents and any concessionaires to park their respective automobiles, trucks and other 'vehicles only in such parking areas, within or outside the Shopping Center, designated by Landlord from time to time as the employee parking area. Tenant further agrees, upon request, to furnish to Landlord the motor vehicle license numbers assigned to the vehicles of Tenant and any Concessionaire, and their respective officers, employees and agents. Tenant shall not at any time interfere with the rights of Landlord and other Occupants or their respective officers, employees, agents, customers and invitees to use any part of the parking areas and other Common Areas of the Shopping Center. Landlord reserves the right to impose parking charges (determined by meters or otherwise) provided such charges do not discriminate against Tenant and are required by the Governmental Authorities. SECT2ON 11.3 Commencing on the Rent Commencement Date and continuing for the full Term of this lease, Tenant covenants and agrees to pay to Landlord, as Additional Rent, Tenant's Share of Common Area costs for each Lease Year. Tenant's Share of Common Area Costs for the period from the Rent Commencement Data through and includinq December 31, 1995 shall be Two Hundred Thousand Two Hundred Fifty and No/100 Dollars ($200,250.00) per Lease Year (the "Base CAM Amount"). The Base CAM Amount for any partial Lease Year at the beginninq of the Term shall be appropriately prorated. For Lease Year 1996 and for each Lease Year thereafter during the Term, Tenant's Share of Common Area Costs shall be the Bass CAN Amount increased by a percentage equal to the percentage increase in the Consumer Price Index (as hereinafter defined in this Section 11.3) published for the month of December of each Lease Year as compared to the Consumer Price Index published for the month in which the Rant Commencement Date occurred: provided, however, in no avant shall Tenant's Share of Common Area Costs exceed the "CAM Cap" (as hereinafter defined in this Section 11.3) in effect for the Lease Year in question. The CAL[ Cap for Lease Year 1996 shall be the product obtained by multiplying the Base CAM Amount by 1.03 (i.e. Two Hundred Six Thousand Two Hundred Fifty -Seven and 50/100 Dollars ($206,257.50)1. The CAM Cap for Lease Year 1997 and for each Lease Year thereafter during the Term shall be the product obtained by multiplyinq the CAM Cap in effect for the prior Lease Year by 1.03, Notwithstanding any decrease in the Consumer Price Index in no event shall Tenant's Share of Common Area Costs in any Lease Year be less than Tenant's Share of Common Area Costs in the prior Lease Year. The term "Consumer Price Index" as used herein shall moan the United States 0opartment of Labor. Bureau of Labor Statistics Consumer Price Index for All Urban Consumers, Los Angeles -Anaheim - Riverside Average, subgroup "All items", (1982-84-100). In the - event that the Consumer Price Index is not available, the successor or substitute index shall be used for the computations herein set forth. In the event that the Consumer Price Index or such successor or substitute index is not published, a reliable governmental or other non -partisan publication evaluating the information theretofore used in determining the Consumer Price Index shall be used by Landlord for the computations herein set forth. For the purposes of the computations herein set forth, the basis for any substitute or successor index or such governmental or non -partisan publication shall be converted to a basis of 100 only in the event that the basis used in such index or publication is less than 100. Tenant's Share of Common Area Costs shall be paid monthly, in advance, on the ,first day of each month during each Lease Year of the Term in an amount equal to one -twelfth (1/12th) of the annual amount then payable by Tenant as Tenant's share of Common Area Costs. :136 3BliRLINGTO14.3 ARTICLE XII ASSIGNMENT AND SUBLET'TI::G 23 SEC='ION :2.1 Tenant acknowledges and agrees that Tenant's agreement to operate its business in the Cemised Premises for the Permitted Use set forth in Article I(a)(i) and under Tenant's Store ame sot forth in Article I(e)(iii) continuously and uninterruptedly during the period of Tenant's Operating Covenant as provided in Sections 6.2(a) and 6.2(b) was a prima rl inducement and precondition to Landlord's agreement to lease the Demised Premises to Tenant. Accordingly, except for a Transfer of this lease permitted pursuant to the provisions of Section 12.7 herein, Tenant shall not, and shall not have the power to, transfer, assign, sublet, enter into license or concession agreements, mortgage or hypothecate this lease or Tenant's interest in and to the Demised Premises or any part thereof, by operation of law or otherwise (collectively, a "Transfer" for the purposes of "his Article XII) prior to the expiration of Tenant's Operating Covenant. After the expiration of Tenant's Operating Covenant, Tenant shall have the right to assign this lease or sublease all or a portion (but in no event lass than one (1) entire floor) of the Demised Premises for the Permitted Use to a transfers having at least three (3) other existing stores each operating under a single store name in more than 50,000 square feat (a "Qualified Transferee"), with Landlord's prior written consent, which consent shall not be unreasonably withheld or delayed. Any attempted or purported Transfer without Landlord's written consent (where such consent is required) shall be null and void, have no force or effect and confer no rights upon any third party. SECTION 12.2 Should Tenant desire to enter into a Transfer of this lease. to a Qualified Transferee, Tenant shall give notice thereof to Landlord by requesting in writing Landlord's consent to such Transfer at least forty-five (45) days prior to the effective date of any such Transfer, which notice ("Tenant's Notice"), shall include (i) the full particulars of the proposed Transfer, includinq its effective date, terms and conditions, and copies of any offers, draft agreements, subleases, letters of commitment or Intent, and other documents pertaining to such proposed Transfer: (ii) the identity, financial condition and previous retail business experience of the proposed transferee and (iii) any further infor- mation reasonably relevant to the proposed Transfer which Landlord shall have requested within fifteen (15) days after receipt of Tenant's Notice. Except for those Transfers permitted without Landlord's consent pursuant to the provisions of Section 12.7 herein, Tenant's Notice shall be deemed to be an offer by Tenant to assign this lease to Landlord or to a nominee designated by Landlord or to sublet the Demised Premises or the portion proposed to be sublet to Landlord or to a nominee designated by Landlord for the balance of the Term under all the same terms, covenants and conditions as are contained in this lease. In the event Landlord accepts such offer with respect to either an assignment of this lease or a sublease of the entire Demised Premises, then this lease shall terminate with respect to the entire Demised Premises and the Term shall end an the date stated in Tenant's Notice as the effective date of the assignment or sublease as if that date had been originally set forth in this lease as the Lease Expiration Date. In the event Landlord accepts such offer with respect to a sublease of a portion of trio Demised Premises, then this lease shall terminate only with respect to that portion of the Demised Premises affected by such offer to sublease and the Fixed Minimum Rent and monthly installments of Fixed Minimum Rent during the unexpired portion of the Term shall be reduced, proportionately, so that the Fixed Minimum Rent and monthly installments of Fixed Minimum Rent shall then be based upon the Gross Leasable Area of the remaining portion of the Cemised Premises and the Base Sales shall be adjusted based upon the revised Fixed Minimum Rent. At _13fi. 23 any time within thirty (10) days after Landlord's receipt of the last of the information specified in clauses (1), (ii) and (iii) above, Landlord may by written notice to Tenant elect to (1) consent to the proposed 'ransfer 'upon the terms and conditions approved by Landlord. or (2) elect to recapture the Demised Premises as heretofore provided in this Section 12.2. Failure of Landlord to exercise any option granted Landlord under clauses (1). and (2) above within thirty (30) days after receipt of the last of information specified in clauses (i), (ii) and (iii) above shall be deemed a consent to the proposed Transfer to the Qualified Transferee. Notwithstanding anything to the contrary contained herein, in no event shall any assignment, subletting or other Transfer of any portion of Tenant's interest in this lease cause the Demised Premises to be divided into more than two (2) units without Landlord's prior written consent, -which consent may be given or withheld in Landlord's sole and absolute discretion. Further, in the event of a sublease of an entire floor of the Demised Premises, in no event shall access to the Demised Premises from the enclosed mall of the Shopping center Do encumbered in any manner whatsoever. SECTION 12.3 Intentionally omitted. SECTION 12.4 Intentionally omitted. SECTION 12.5 Notwithstandinq any Transfer by Tenant as provided herein, the provisions of this Article XII shall apply to any further Transfer. If Landlord consents to any such Transfer, Tenant may, within ninety (90) days after the data of Landlord's consent (but not thereafter Without Landlord's written consent), enter into the particular Transfer consented to by Landlord on the terns and conditions approved by Landlord. Each assignment of this lease or sublease of - all or a portion of the Demised Premises entered into by Tenant which is consented to by Landlord or permitted without !Andlord's consent pursuant to the provisions of this Article XII shall be evidenced by an instrument executed by Tenant and Tenant's transferee, which, (i) in the case of an assignment, shall contain a covenant on the part of the assignee to assume for the benefit of Landlord all of the obligations of Tenant under this lease, and (11) in the case of a sublease, shall contain a provision that it is subject to all of the terms, covenants and conditions of this lease. The voluntary or other surrender of this lease by Tenant or a mutual cancellation thereof shall not worJC a merger, and shall at the option of Landlord, terminate all or any existing subleases or suutenancies or shall, at Landlord's option, operate as an assignment to Landlord of such subleases or subtenancies. No Transfer pursuant to this Article XII shall relieve Tenant or any predecessor -in -interest to Tenant or any Guarantor of its obligations to pay the Rent and to perform all of the other obligations to be performed by Tenant under the terms of this lease. Tenant's and Tenant's Guarantor shall, notwithstanding any Transfer, with or without the consent of Landlord, remain primarily liable for trio performance of all obligations of Tenant under this lease. In the event of a default in the performance of Tenant's obligations hereunder after any such Transfer, Landlord may proceed against Tenant and/or Tenant's Guarantor either at the saaae time as it proceeds against such assignee or subtenant or prior to proceeding against such assignee or subtenant. Moreover, nothing herein shall require Landlord to proceed against such assignee or subtenant, and Landlord may elect, in the event of a default in the performance of Tenant's obligations pursuant to this lease, to proceed solely and directly against Tenant and/or Tenant's Guarantor. In such event, Tenant shall be solely responsible to seek such contribution or reimbursement to which it may be entitled from such subtenant or assignee. the acceptance by Landlord of any Rent due under this lease from any person other than Tenant shall not be deemed to be a waiver by Landlord of any provisions of this lease or to be a consent to any Transfer. :..136.:3SURLINGTI: *:.: 25 SECTION :2.6 (a) if Tenant or Tenant's Guarantor :s a corporation ;other than one hereinafter described in this Section 12.6(b)j, sni:1corperated association or partnership, Tenant agrees that any transfer. assigntent or hypothecation by operation of jaw or otherwise by Tenant or Tenant's Guarantor of all or substantially all of the assets of such corporation, association or partnership, or of any voting stock or interest in such corporation, association or partnership so as to result :n the loss of or a change :n the voting control of such corporation, association or partnership by the person or persons owning a majority of said voting stock or such association or partnership interest at the date of this lease shall be deemed a :Transfer within the meaning and provisions of this Article XII, and that any such transfer, assignment or hypothecation or loss of or change in voting control without Landlord's written consent shall constitute an event of default under this lease and in addition to all other remedies available to Landlord for such default, Landlord shall have the right to terminate this lease upon thirty (30) days written notice to Tenant. (b) The provisions of this Section 12.6 shall not apply to a corporation whose entire outstanding voting stock is listed on a national securities exchange or to a corporation if at least eighty percent (80%) of its entire outstanding voting stock is owned by another corporation whose entire outstanding voting stock is listed an a national securities exchange. For the purposes of this Section 12.6, (1) "national securities exchange" shall have the same meaning as defined in the Securities Exchange Act of 1934, as amended: (2) "stock ownership" shall be determined hereunder in accordance with the provisions sat forth in Section 544 of the Internal Revenue Code of 1986 as the same existed on December 22, 1987, after amendment thereof by the Revenue Bill of 1987: and (3) "voting stock" shall refer to shares of stock regularly entitled to vote for the election of directors of the corporation. SEMON 12.7 Notwithstanding anything to the contrary contained in this Article XII, Tenant shall have the right, without the consent of Landlord, but upon not less than thirty (30) days prior notice to Landlord, to Transfer this lease to (i) any affiliate of Tenant or (ii) any corporation resulting from the consolidation or merger involving Tenant or an affiliate of Tenant within any other entity. Any Transfer pursuant to (i) or (ii) above shall be subject to the following conditions: (a) such Transfer shall not relieve Tenant or Tenant's Guarantor from any of its obligations under this lease: and (b) such Transfer shall be subject to all of the terms, covenants and conditions of this lease and such transferee shall expressly assume for the benefit of Landlord the obligations of Tenant under this lease by a document reasonably satisfactory to Landlord. In addition, Tenant shall have the right to operate departments within the Demised Premises without Landlord's consent by means of sublease, concession or license agreements provided such departments shall not exceed in the aggregate more than twenty-five percent (25%) of Gross leasable Area of the Demised Premises, or be separated by demising walls, or entitle Tenant to any additional signage or additional entrances into the Demised Premises, or release Tenant or Tenant's Guarantor from its obligations under this lease and provided further that the Gross Sales of any such subtenant, concessionaire or licensee are included in Tenant's Gross Sales for the purpose of computing Percentage Rent under this lease. All such sublease, concession or license agreements shall be subject and subordinate to all of the terms and conditions of this lease and any and all modifications thereto. L136.:3BURL:NGTON 26 ARTICLE. XIII TE` A_NT' S ADDITIONAL AGREEMENTS SECTION 13.1 Tenant agrees at all tines during the Term, at its_sole cost and expense, to: (A) confine Tenant's trash, rubbish, garbage and other refuse in receptacles located within the Demised Premises so as not to be visible to the public and to arrange for the regular periodic removal thereof. Should Tenant agree to use Landlord's designated sanitation contractor for the Shopping Center, Tenant agrees to pay to Landlord, as Additional Rent, promptly as and when billed the charges for such trash, rubbish, garbage and other refuse removal from the Demised Premises not to exceed comparable prices charged by other reputable sanitation contractors in the trade area served by the Shopping Center: provided, however, Landlord shall have the right to have the charges for such trash, rubbish, garbage and other refuse removal billed directly to Tenant by the sanitation contractor, in which event, Tenant agrees to pay to the sanitation contractor, as Additional Rent, promptly as and when billed the charges for such trash, rubbish, garbage and other refuse removal not to exceed comparable prices charged by other reputable sanitation contractors in the trade area served by the Shopping Center; (B) promptly comply with all Governmental Regulations affecting the Demised Premises of all Governmental Authorities having jurisdiction of the Demised Premises by reason of Tenant's business or for any other reason, including, but not limited to, installations, repairs, modifications and alterations, whether structural or non-structural, foreseen or unforeseen, that are necessitated by any such Governmental Regulations. Notwithstanding anything to the contrary contained in this Section 13.1(B), Tenant shall not be required to make any structural alterations, repairs, modifications or installations to the Demised Premises unless necessitated by (i) the nature of Tenant's particular use of the Demised Premises, or (ii) any act or omission or negligence of Tenant, its Concessionaires or the Tenant Parties unless occasioned by a risk covered by Landlord's insurance; (C) pay -directly to the appropriate taxing authority, before delinquency, any and all taxes, assessments and public charge[.' levied, assessed or imposed during the Term by the Governmental Authorities upon Tenant's business or upon Tenant's leasehold interest, fixtures, furniture, appliances or personal property installed or located in the Demised Premises, or that constitute a lien upon any of the foregoing, or on Tenant's right to occupy, or do business at, the Demised Premises: (D) maintain positive air pressure in the Demised Premises so as to prevent the drawing of heated or cooled air from the enclosed mall of the Shopping Center, and keep the Demised Premises heated or air conditioned, as the case may be, to at least the same minimum temperature (in the case of heat) or the same maximum temperature (in the case of air conditioning) as Landlord shall maintain in the enclosed mall. Notification of such temperatures shall be given to Tenant by Landlord: (E) use the Shopping Center's name, as same may be changed from time to time, in referring to the location of the Demised Premises in all local newspaper, radio and television or other advertising with respect to Tenant's business at the Demised Premises in Orange County, California: (F) store and/or stock in the Demised Premises only such merchandise as Tenant :s permitted to sell at retail pursuant to this lease: ,.13 6. 3 3 BUR'...I NGTC N. 3 27 SECTION 13.2 Tenant agrees that :t will not at any time during the Term: (A) conduct or permit in the Demised Premises (i) any fire, bankruptcy, auction, or "closeout" (other than in the ordinary course of Tenant's business) sale, or (ii) any use for any purpose other than the Permitted Use and operations incidental thereto; (B) use, or permit to be used, any part of the Common Areas or any other areas within the Shopping Center, other than within the Demised Premises, for the sale, display or storage of any merchandise or for the solicitation of customers or for any other business, occupation or undertaking; (C) use any loudspeakers, phonographs, or other devices of similar nature in such manner as to be heard or experienced outside of the Demised Premises; (D) permit the emission of any objectionable noise, odors, fumes, smoke or light from the Demised Premises: (E) permit deliveries to the Demised Premises except through the delivery areas serving the building of which the Demised Premises is a part. SECTION 13.3 Tenant shall, at its sole cost and expense, install and maintain in good repair a new sign(s) for the Demised Premises including the cost of electricity therefor, subject to Tenant's compliance with the following conditions in connection therewith: (1) prior to installation of such sign(s), Tenant shall, at its sole cost and expense, obtain from the Governmental Authorities having jurisdiction of the Demised Promises, all approvals necessary for the installation, erection and maintenance of such sign(s): (ii) Landlord shall have approved, in writing, Tenant's drawings for its sign(s) as to dimension, content, material, location and design prior to the erection thereof: and (iii) such sign(s) when installed shall comply with Landlord's Design i Construction Criteria and all Governmental Regulations of all Governmental Authorities having jurisdiction of the Demised Premises. Excapt as provided in this Section 13.3, Tenant agrees that it will not place on the roof, doors, glass panes and supports of the show windows and the exterior walls of the Demised Premises any sign, symbol, advertisement, neon, flashing, strobe or other light, shade, or any other object or thing visible to public view outside of the Demised Premises, without first obtaining Landlord's approval as to whether the same shall be so installed or placed and, if so, as to the location, number, type, and appearance of each thereof. Tenant shall not display, paint or place or cause to be displayed, painted or placed, any handbills, bumper stickers or other advertising devices on any vehicle parked in the automobile parking areas of the Shopping Center, whether belonging to Tenant or any Concessionaire, or their respective officers, employees and agents. or to any other person, nor shall Tenant or any Concessionaire solicit or distribute, or cause to be solicited or distributed, any handbills or other advertising devices in the Shopping Center. Notwithstanding the foregoing, Landlord hereby approves the location, material, dimension, color, content and design of Tenant's proposed signaqe as set forth on Exhibit "B" attached hereto and incorporated herein by this reference, subject to the approval of such signaqe by the Governmental Authorities• having jurisdiction thereof. / 1 L136..3BURLINGTON.3 ARTICLE XIV PERCENTAGE RENT 2e SECTION 14.1(a) In addition to the payment of Fixed Minimum Rent and Additional Rent provided for in this lease, Tenant shall pay to Landlord for each Lease Year during the Term, as Percentage Rent, an amount, it any, equal to the product of the Gross Sales for such Lease Year in excess of the Base Sales for such Lease Year multiplied by the Percentage Rent Rate set forth in Article I(d)(i). Tenant shall deliver to Landlord within fifteen (15) days after the and of each calendar month of the Term a monthly statement of Gross Sales showing the amount of Gross Sales for the preceding calendar month. Simultaneously with the delivery to Landlord of each annual statement of Gross Sales referred to in Section 14.1(c) herein, Tenant shall pay to Landlord an amount, if any, equal to the product of the Gross Sales reported for the preceding Lease Year in excess of the Base Sales for such Lease Year multiplied by the Percentage Rent Rate set forth in Article l(d)(i). Notwithstanding the foregoing, the amount of Percentage Rent payable by Tenant for the first partial Lease Year of the Term shall be equal to (a) two percent (2%) of the amount by which Tenant's Gross Sales for the period between the Rent Commencement Date and the day prior to the first (1st) anniversary of the Rent Commencement Date (the "Measuring Period") exceeds Twenty Million and No/100 Dollars ($20,000,000.00), multiplied by (b) a fraction the numerator of which is the number of calendar days in the first partial Lease Year and the denominator of which is 365. Percentage Rent, if any, for such first partial Lease Year shall be paid: by Tenant to Landlord within thirty (30) days following the expiration of the Measuring Period. The foregoing provisions shall not effect the computation of Percentage Rent to be paid by Tenant for any portion of the Term subsequent to the first partial Lease Year. Tenant shall submit to Landlord not later than thirty ( 3 0 ) days following the expiration of the Measuring Period an annual statement of Gross Sales made during the Measuring Period in accordance with the provisions of Section 14.1(c). (b) In the event any Lease Year shall be less than twelve (12) full calendar months, then the Sass Sales for such partial Lease Year shall be appropriately adjusted so that the same shall be an amount equal to the product obtained by multiplying the Base Sales by a fraction, the numerator of which shall be the actual number of days in such Lease Year for which Gross Sales are required to be reported and the denominator of which shall be three hundred sixty-five (365). If Fixed Minimum Rent during any :.ease Year is abated, reduced or increased pursuant to the provisions of this lease, or by written agreement of the parties hereto, then the Base Sales shall be appropriately reduced or increased, as the case may be, by a percentage equal to the percentage decrease or increase, as the case may be, in the Fixed Minimum Rent payable for the period during which the change in the Fixed Minimum Rent is in effect. (c) Tenant shall deliver to Landlord within sixty (60) days after the end of each Lease Year an annual statement of Gross Sales showing Gross Sales for the preceding Lease Year and also showing the amounts, if any, excluded from Gross Sales under the provisions of Section 14.2(8)• Each such annual statement of Gross Sales shall be certified by the chief accounting officer of Tenant. Such annual statements of Gross Sales shall be in such form and style and contain such details and breakdowns as Landlord may reasonably require. With respect to the last Lease Year of the Term, the aforesaid payment, if required, shall be made within thirty (30) days after the Lease Expiration Date or the date of earlier termination of the Term of this lease, and the provisions of this Article XIV shall survive the expiration or earlier termination of the Term of this lease. :.1] 5.: 3BURLINGTON. 3 29 SECTION 14.2(a) The tarn "Gross Sales" as used herein means the aggregate dollar amount of the price charged for all goods, :dares, mercandise, beverages and food sold, delivered, !eased or licensed, and all charges for services sold and/or performed by Tenant :n, at, on or from the Demised Premises, whether made for cash, on credit, or otherwise, and (except as hereinafter provided) :without reserve or deduction for inability or failure to collect, including, but not limited to: sales, leases or licenses of goods, -dares, merchandise, beverages, foods or services (i) where the orders therefor originated and/or are accepted in, at, on or from the Demised Premises but delivery thereof is made from or at any place other than the Demised Premises, (ii) made pursuant to mail, teiegraphic, telephone, facsimile or other similar orders received, or filled in, at, on or from the Demised Premises or directed thereto, and/or (iii) made by means of mechanical or other vending devices, in, at or on the Demised Premises. (b) For the purposes of this Article XIV, there shall not be included in Gross Sales, or, if included, there shall be deducted from Gross Sales, as the case may be: (i) the actual net amount of refunds or allowances actually made or allowed by Tenant in accordance with reasonable business practices upon trans- actions included within Gross Sales where the item is returned by the purchaser to and accepted by Tenant (provided that anything given in exchange for returned items shall be included in Gross Sales); (Li) sales, luxury or retailer's excise taxes (not including gross receipts taxes or similar taxes) imposed 1;y duly constituted governmental authority which are added to the selling price (or absorbed therein) and paid directly by the customer and actually paid over to the taxing authority by Tenant: (iii) returns to shippers or manufacturers: (iv) exchange of merchandise between stores and warahouses of Tenant where such exchanges are made solely for the convenient operation of Tenant's business and not for the purpose of consummating a sale which has been made at, in, or from the Demised premises and/or not for the purpose of depriving Landlord of the benefit of a sale which otherwise would be made at, in, on or from the Demised Premises: (v) delivery and alteration charges; (vi) insurance proceeds: (vii) receipts from vending machines and public telephones used exclusively by Tenant's employees: (viii) receipts from the sale of fixtures, machinery and equipment which are not stock in trade: (ix) interest, service or sales carrying charges or other charges, however denominated, paid by customers for extension of credit on sales and where not included in the Merchandise sales price but not charges or expenses in connection with credit cards or bank cards whether paid by the customer or by Tenant shall be excluded from Gross Sales except as hereinafter provided: (x) provided that (a), (b) and (c) below do not exceed in the aggregate a total of more than three percent (3!) of Tenant's Gross Sales in any single Lease Year calculated on a non- cumulative basis: L136.:3BUR r_: GTCN. we (a) the amount of bad checks and/or :uncollected credit sales to the extent previously included :n Gross Sales to the extent :mitten off by Tenant ;or federal income tax purposes, provided that it / subsequently collected, said bad checks and/or uncollected credit sales shall be included within Gross Sales in the Lease Fiscal 'iear In which subsequently collected; and (b) sales to Tenant's employees at a discount in accordance with Tenant's standard employee discount policy; and (c) charges paid to credit card companies. (c) Each sale on a deferred payment basis shall be treated as a sale for the Cull price at the time the sale is entered into, irrespective of the time for payment or the time when title passes. Each and every sale made by a Concessionaire shall be deemed to be a sale made by Tenant for the purposes of this Article XIV. SECTION 14.3 "Base Sales" is the annual amount of Gross Sales in the applicable amount as set forth in Article I (d)(ii), but subject to adjustment in accordance with the provisions of Section 14.1(b) as the result of any increase or decrease of Fixed Minimum Rent as may be specifically provided for in this lease. Percentage Rent Rate is the applicable percentage as sec forth in Article I(d) (i) . SECTION 14.4(a) Tenant shall keep and shall require its Concessionaires, if any, to keep and maintain at all times during the Term in the Demised Premises or, at Tenant's election, at. Tenant's principal accounting office complete and accurate books of account and records of"all Gross Sales in, at, on or from the Demised Premises in accordance with generally accepted accounting principles. Such books of account and records shall include at least those as would normally be required to be kept and examined by an independent accountant in accordance with generally accepted auditing practices in performing an audit of Tenant's Gross Sales and all sales tax returns, which books of account and records shall be eonvanientLy segregated from other business matters of Tenant. Such books of account and records with respect to any Lease Year shall be so kept and maintained, properly added and totalled for at least thirty-six (36) calendar months after the end of such Lease Year (the "Retention Period"). (b) The acceptance by Landlord of payments of Percentage Rent shall be without prejudice to Landlord's right to audit Tenant's books of account and records relating to Gross Sales in order to verify the amount of Tenant's Gross Sales. Landlord and its authorized representatives, including, without limitation, Landlord's Managing Agent, shall have the right upon reasonable prior notice to Tenant during regular business hours until the end of the Retention Period, to audit all such books of account and records relating to Gross Sales. Notwithstanding the foregoing, it is agreed that Landlord's right to audit as provided above shall be limited to once every Lease Year, provided that in the event any audit shall result in a dispute between Landlord and Tenant and such dispute may be resolved by another audit, Landlord shall be entitled to said second audit. Tenant shall produce same on request of Landlord. If it shall be determined as a result of any such audit that there has been a deficiency in the payment of Percentage Rent, such deficiency shall become immediately due and payable to Landlord with interest thereon at the Default Rate from the date when said payment should have been made. In addition, if any such audit shows that the amount of Gross Sales stated on any of Tenant's annual statements of Gross Sales •.as understated by more than =wo percent (21), and as a result thereof additional L1.,o.:39[,-t L:.VGT0N.3 31 Percentage Rent of more than Tro Thousand and No/loo Collars (52,000.00) is due Landlord, then Tenant shall pay to Landlord, all of Landlord's reasonable costs and expenses connected with said audit up to a maximum amount of Two Thousand Five Hundred and No/L00 Dollars (52,500.00) per audit. If at any time prior to the expiration of the Retention Period, Landlord shall reasonably contend that error may exist with respect to any of Tenant's annual statements of Gross Sales, then Tenant's books of account and records of Gross Sales for such applicable annual statement period shall be kept and maintained by Tenant until Landlord's contention has been finally determined even if longer than the Retention Period in question. Any information obtained by Landlord as the result of such audit shall be held in confidence by.Landlord and shall not be divulged by Landlord to any person or used for any purpose except that Landlord shall be permitted to divulge such information (i) when necessary in connection with the trial of any action, proceeding or arbitration between Landlord and Tenant, (ii) in connection with any bona fide prospective sale of the Shopping Center, (iii) to any mortgagee or prospective mortgagee of the Shopping Canter, (iv) to any ground or underlying Lessor, or (v) pursuant to a subpoena that Landlord reasonably believes to have been legally issued and validly served upon Landlord, or (vi) as necessary to Landlord's employees, agents, attorneys and accountants. SECTION 14.5 The term "Tenant" as used in Sections 14.2 and 14.4 shall also include all Concessionaires. ARTICLE Xv UTILITIES, UTILITY AND ACCESS EASEMENTS SECTION 15.1 Tenant agrees to pay promptly, as and when the same become due and payable, all water rents, rates and charges, all sewer rents and all charges for electricity, gas, heat, steam, hot and/or chilled water, air conditioning, ventilating, Lighting systems, and other utilities supplied to the Damised Premises following the Delivery Date and throughout the Term. If any such charges are not paid when due (and the non-payment may result in the establishment of a lien or encumbrance upon the Demised Premises and/or the Shopping Cantor) Landlord may pay the same, and any amount so paid by Landlord shall thereupon become due to Landlord from Tenant as Additional Rent, with interest thereon at the Default Rate from the date of such payment by Landlord until the date of repayment by Tenant. SECTION 15.2 If Landlord shall elect to furnish any utility services to the Demised Premises, Tenant shall purchase its requirements thereof from Landlord at Landlord's cost therefor, not to exceed the rates Tenant would have been charged therefor by the applicable local public utility supplier. SECTION 15.3 Tenant covenants and agrees that at all times its use of electric current shall never exceed the capacity of the feeders to the Demised Premises or the wiring installations therein. SECTION 15.4 Except to the extent caused by the negligence or willful misconduct of Landlord, Landlord's Managing Agent or the Landlord Parties, Landlord, Landlord's Managing Agent and the Landlord Parties shall not be liable in damages or otherwise for any failure or interruption of any utility service being furnished to the Demised Premises. No such failure or interruption shall entitle Tenant to terminate this leas& or stop making any Rent or other payment due hereunder. L!36.43BLRLINGTCN.3 '2 SECTION 15.5 Landlord hereby grants to Tenant, its agents, employees and contractors from and after t~e Delivery Date and continuing during the Term of this lease a non-exclusive easement to use the elevators and stairways of the building of which the Demised Premises is a part for access to the penthouse -of the building of which the Demised Premises is a part for tte sole purpose of enabling Tenant to perform repairs and maintenance to the heating, ventilating and air conditioning equipment, mecnanical equipment, electrical equipment and other equipment located in the penthouse which serves the Demised Premises. ' SECTION 15.6 Tenant hereby grants (i) to Landlord, its agents, employees and contractors and (ii) to the Occupants from time to time occupying the third (3rd) floor of the building of which the Demised Premises is a part and their respective agents, employees, customers and invitees from and after the Delivery pate and continuing during the Term of this lease a non-exclusive easement to use the elevators and stairways of the building of which the Demised Premises is a part for the sole purpose of access to the third floor and penthouse of the building of which the Demised Promises is a part. The easement granted to the Occupants of the third (3rd) floor of the building pursuant to (ii) above is contingent upon Landlord and Tenant agreeing upon an access plan for use of the elevators and stairways of the building by the Occupants of the third (3rd) floor of the building in a manner that does not compromise the security of the Demised Premises. Landlord and Tenant agree to use their good faith efforts to mutually agree upon an access plan for use of the elevators and stairways -of the building by the occupants of the third (3rd) floor of the building. Landlord hereby reserves to itself the use of the exterior of the building and the right to provide direct exterior access to the third (3rd) floor of the building provided that any such direct exterior access to the third (3rd) floor of the building shall not adversely interfere with customer access to the Demised Premises. Further, Tenant hereby grants to Landlord the right, at its sole cost and expense, upon reasonable prior notice to Tenant to install such lines connections and meters as may be necessary to enable the utilities serving the third floor of the building of which the Demised Promises is a part to be separately metered from the Demised Premises. ARTICLE XVI REAL ESTATE TAXES SECTION 16.1 The term "Real Estate Taxes" as used herein shall include any form of real property tax or assessment, excise on rent, and any other governmental imposition, general and special, ordinary and extraordinary, unforeseen or foreseen, of any kind or nature whatsoever (including, but not limited to, assessments for public improvements or benefits) which are laid, assessed, levied, imposed upon, or become due and payable as a lion against the land, the building and all other improvements located on the tax parcel (the "Tax Parcel") of which the Demised Premises is a part, or any part thereof. Landlord represents to Tenant that the building of which the Demised Premises is a part and the land underlying such building (i.e. Building III as shown on Exhibit "A"") is a separate tax parcel. "Real Estate Taxes" shall in no event include Landlord's franchise taxes, general income taxes, inheritance, estate or gift taxes or the taxes described and referred to in Section 13.1(C). SECTION 16.2 Commencing on the Rent Commencement Date, and continuing for the full Term of this lease, Tenant covenants and, agrees to pay to Landlord, as Additional Rent, Tenant's Share of Real Estate Taxes for each Lease Year. Tenant's Share of Real Estate Taxes for the period from the Rent Commencement Date through and including December 31, 1995 shall be One Hundred Thirty -Three Thousand Five Hundred and No/100 Dollars ($133,500.00) per Lease Year (the "Base Tax Amount"). The Base Tax Amount for any partial I.136. 433U'tr LINGTON. 3 33 Lease Year at the beginning cf the Term sail be appropriately prorated. For Lease Year 1996 and each Lease 'fear thereafter during the Term 'Tenant's Share of Real Estate Taxes shall be the Base Tax Amount increased by a percentage equal to the percentage increase in the total Real Estate Taxes levied and assessed against the land, buildings and all other improvements located on the Tax Parcel as compared to the total Real Estate :'axes levied and assessed against the land, buildings and all other improvements located on the Tax parcel for tax fiscal year 1995-1996. Landlord shall furnish to Tenant each Lease Year a copy of the tax bill for the Tax Parcel. Landlord reserves the right to adjust Tenant's Share of Real Estate Taxes based upon the tax fiscal year utilized by the taxing authorities. Tenant's Share of Real Estate Taxes shall be paid monthly, in advance, on the first day of each month during each Lease Year in an amount equal to one -twelfth (1/12th) of the annual amount then payable by Tenant as Tenant's Share of Real Estate Taxes. SECTION 16.3 In addition, to Tenant's payment of Tenant's Share of Real Estate Taxes, Tenant shall pay to Landlord upon receipt of an invoice therefor any tax or excise levied, impossed upon or measured by rent (a "rent tax") provided such rent tax is exclusively limited to rentals receivable from real estate. In the event any such rent tax is applicable to forms of receipts not limited to rentals receivable from real estate (including without limitation, income, business, gross receipts or profit taxes) then Tenant shall have no obligation to pay such taxes pursuant to this Section 16.3 unless a gross receipts tax is levied in substitution for ad valorem taxes and then only to the extent of such substitution. Any rent tax payable by Tenant pursuant to this Section 16.3 shall be computed upon the amount of taxable rentals payable by Tenant under this lease and not upon Tenant's proportionate share of all of Landlord's taxable rentals receivable from the Shopping Center as a whole. ARTICLE XVII CERTAIN ADDITIONAL DEFINED TERKS The following terms, when used in this lease with the first letter of each word therein capitalized, are defined terms and shall have the meanings set forth herein: (a) "Comecon Areas" as used herein means the portions of the Shopping Center which, at the time in question, have Dean designated and improved for common use by, or for the benefit of the Occupants, including, without limitation (if and to the extent facilities therefor are provided by the Landlord at the time in question): the land and facilities utilized for or as parking areas; open and/or enclosed malls: access and perimeter roads; truck passageways and loading platforms therein; service corridors and stairways providing access from store premises to such platforms and truck passageways; above -ground and subsurface passageways and parking facilities; landscaped areas: exterior walks, arcades, stairways, ramps, interior corridors, escalators, elevators, stairs, sstrian walks and balconies; directory equipment; undergrou storm and sanitary sewers, utility lines and the like; washrooms el comfort and first aid stations, drinking foun- tains, toilets and other public facilities: community rooms and auditoriums; parcel pick-up stations; bus stations, taxi stands and other public transportation facilities. Any portion of trip shopping Center so included within Common Areas shall be excluded therefrom when designated by Landlord for a non -common use, and any portion thereof not theretofore included within Common Areas shall be included when so designated and improved for common use. L-6.-;1 3 ,y (b) "Common Area Ccsts" as used herein means the total costs and expenses paid or Incurred by Landlord, andlord's Managing Agent, their respective agents, and/or designees :or operating, managing, acL.inistratinq, insuring, maintaining, repairing and/or replacing all or any part of the Common Areas (and any installations therein, thereon, thereunder �;r thereover). (c) "Concessionaire" as ssed herein means any person, corporation or other entity, who or which conducts any business (whether or not a retail business) in any portion of the Demised Premises as undartanant or subtenant of Tenant or under any concession or license from Tenant or as a subtenant of, or under any concession or license from, any such undertenant or subtenant or person holdinq such concession or license, whether or not 'tenant was authorized under the provisions of this lease to make or grant any such lease, license or concession. (d) "Gross Leasable Area" as used herein :Weans with respect to the Demised Premises and all other areas in the Shopping Center which are available from time to time for the exclusive use and occupancy by an Occupant, the actual number of square feet of floor space on all floors of all such areas measured from the exterior faces of all exterior walls (and from the extensions thereof, in case of openings) and from the center line of interior walls dividing any such areas. (a) "Landlord" as used herein means only the person or entity who or which at the time in question holds the landlord's interest in this lease, it being intended that the covenants and obligations contained in this lease on the part of Landlord shall be binding on Landlord, its successors and assigns only during their respective periods of owning or holding Landlord's interest in this lease, and that in the event of any sale. transfer or exchange of the Demised Premises by Landlord or assignment of this lease (other than as collateral security for a loan) Landlord shall automatically be freed and relieved of all liability under any and all of the covenants and obligations contained in or derived from this lease arising out of any act, occurrence or omission relating to the Demised Premises or this lease accruing after the consummation of such sale, transfer or exchange. Notwithstanding anything to the contrary provided in this lease, it is expressly understood and agreed that (1) there shall be absolutely no personal liability on the part of Landlord, Landlord's Managing Agent or the Landlord Parties or any successor in interest of Landlord or Landlord's Managing Agent with respect to any of the terms, covenants and conditions of this lease, such exculpation of personal liability to be absolute and without any exception whatsoever, and shall survive the expiration or earlier termination of this lease, and (ii) any money judgment obtained against Landlord resulting from any default by Landlord under this lease or other claim against Landlord arising under this lease shall be satisfied only out of Landlord's equity in the Shopping Center and the proceeds of any sale or refinancing thereof (the tern "Shopping Center" for the purposes of this Article XVII(e) only shall mean that portion of the Shopping Center owned by or ground leased to Landlord], and no other real, personal or nixed property of Landlord or any partner, stockholder, officer, director or trustee or joint venturer or co -venturer of Landlord, wherever located, shall be subject to levy on any such' judgment obtained against Landlord and if Landlord's equity in the Shopping Center and the proceeds of any sale or refinancing thereof is insufficient to satisfy such judgment. Tenant will not institute any further action, suit, claim or demand, in law or in equity, against Landlord for or on the account of such deficiency. Tenant hereby waives, to the extent waivable under law, any right to satisfy said money judgment against Landlord except from Landlord's equity in the Shopping Center and the proceeds of any sale or refinancing thereof. 0 CP 40 960?o .�/Z"00,0� VhWM if 41M. LrVil, i 11 *746 In= G1fYA31r1O8 NOY35 Al lilt waguMim'—L I ... . . .. ... ... ... ... ..... ... ... .. I L136.:3N. , 35 (f) "Landlord's Managing Agent" as used herein -eans :'he Macerich Property Management Coapany, a California corporation, or any other person or=rganization with who; Landlord has entered into a-anagement zzntract regarding the Shopping Center. (g) "Lease Year" as used herein means each period of January l through December 31 during the Term, except that the first Lease Year shall be the period from the Rent Commencement Date through the Deceaber 31 next succeeding the Rent Commencement Date and the last Lease Year shall be the period from the January 1 next preceding the Lease Expiration Date or the date of earlier termination of the Ter= of this lease, as the case may be, to and including the Lease Expiration Date or the date of earlier termination of the Term of this lease, as the case may be. (h) "Occupant" as used herein means any person, corporation or other entity (including, without limitation, Tenant) from time to time entitled to the use and occupancy of Gross Leasable Area in the Shoppinq Center, whether as a tenant, or as a Concessionaire of a tenant, or as a tee owner, provided, however, that Landlord shall not be deemed to be an "Occupant" except to the extent, it any, that Landlord is then conducting a retail business with the general public in the Shopping Center. (i) "REA" as used herein means that certain Construction, Operation and Reciprocal Easement Agreement dated July 19, 1965, and recorded on August 4, 1965 as Instrument No. 2170 in Back 7617, Page 539 in the Official Records of Orange County, California, as amended by First Amendment to Construction, Operation and Reciprocal Easement Agreement dated December 31, 1973, and recorded on March 4, 1974 as Instrument No. 2497 in Hoak 1087, Page 1770 in the Official Records of Orange County, California, and re -recorded on March 8, 1974, as Instrument No. 6999 in Book 11091, Page 983, in the Official Records of Orange County, California, as amended by Amendment No. 2 to Construction, Operation and Reciprocal Easement Agreement dated April 23, 1987, and recorded an July 17, 1987, as Instrument No. 87-406999 in the Official Records of orange County, California, as the same may be further amended from time to time. (j) "shopping Center" as used herein means the shopping center described in Section 2.1 plus any other parcel(s) of land at any time designated by Landlord to be added thereto (but only so long as any such designation remains unrevoked) which are used for Shopping Center or related purposes, including, but not limited to, employee parking, or t-I%% furnishing to the Shopping Center of any utility or other service for any office and/or professional building or for any other improvement appropriate or related to the operation or functioning of the Shopping Canter, together with all present or future buildings and improvements thereon. Lan4l rd hereby reserves trient at any time after the Effeeti�e flI]�and from time to time dur--nq om- arm s Vie, to renovate, econfi reand/or modernize the Shopping Center in such runner and at euch times as Landlord may, in its s lute discretion, deem advisable for the best in crests and mutual bens i£~of the occupants of the S pi,-�q=Cater. y way of illustration only, and not to be construed as limiting the extent or scope of such renovation, reconfiguration and/or modernization, ian� dlord m4 enlar e, add additional sto o reinfo uce, rec redesign, realign modify a d the bui n s i e " o ing enter uaeli:dinq, without limitation, the ui dinq of which t o emised ?nemeses is a part) including, without limitation, entrances thereto, as wall as other structures, facilities, malls, walkways, landscaped areas, and/or other areas of the Shopping Center, and raze in whole or in part the building`s (including, without li= nation, t e building o ich the Demised. Pry is a Fartl, structures, facilities and/or osier improvecents in the stopping center, and cOnSSr;1Ct new buildings, structures, fac_l-t:es and/or other improvements n t-Fe-SiF~appiKg Ll7a-433URL,_MGTICN. ; '6 Center and enlarge the Shopping Center, aake alterations therein, additions thereto and construct ad)oininq thereto, including, -without limitation, construct -on of parking decks and a"vated Parking facilities (the foregoing are singly and collectively called "Improvements" for the purposes of this Article XM (jj), Without limiting the foregoing, Tenant specifically ackro* edges and agrees that as additional consideration to Landlbcd for Landlord entering into this lease with Tenant that Landlordsmay at any time and from time to time during the Term of this lease do any, or all, or any combination of the following: (A) relocate, reconfigure, redesign and/or realign the existing exterior entrance to the Demised Premises (the "14ow Exterior Entrance"J: provided, however, in no event shall the size and dimansions of the New Exterior Entrance be materially - smaller than the size and dimensions of the existing exterior entrance to the Demised Premises without Tenant's written consent which consent shall not be unreasonably withheld or delayed: and/or (B) convert the Shopping Center from an enclosed mall type of shopping center to a multi -sided strip type shopping center by eliminating all or any portion of the enclosed mall of the Shopping Center, including, without limitation, the portion of the enclosed mall fronting on the Demised Premises, replacing all or any portion of the area formerly covered by the enclosed mall with new Common Area improvements and/or converting and improving all or any portion of the area formerly covered by the enclosed mall as additional; Gross Leasable Area; and/or (C) raze all and/or any portion of the buildings and other improvements currently located within "No Build Area No. 2" as shown on Exhibit "A", Page 1, replace such razed buildings and other improvements with now parking facilities and construct new buildings and other improvements in the Shopping Center in a location (including, without limitation, within "No Build Arita No. 1" as shown on Exhibit "A", Page 1) and in such configuration as determined by Landlord in its sole and absolute discretion, except that in such event no now buildings shall be constructed within "No Build Area No. 2" as shown an Exhibit "A", Page 1; and/or (D) raze all and/or any portion of the buildings and other improvements from time to time located in the shopping Center, including, without limitation, the building of which the Demised Premises is a part and construct new buildings and other improvements in the shopping Center in a location and in such configuration as determined by Landlord in its sole and absolute discretion. In the event Landlord elects to raze the building of which the Demised Premises is a part, Landlord and Tenant agree as follows: Landlord shall, at its sole cost and expense, construct the "New Premises Buildinq Improvements" (as hereinafter defined), and Tenant shall, at its sole cost and expense (except as hereinafter provided with respect to the payment by Landlord to Tenant of the unamortized net book value of Tenant's leasehold improvements to the Demised Premises (hereinafter referred to as the Existing Premises for the purpose of this Article XVII(3)1, construct and/or install the New Premises store Improvements (as hereinafter defined). As used herein, the tern "stew Premises Building Lmprovements" shall mean a new two (2) level shell building (the "*few Premises") containing approximately 60.000 square feet of Gross Leasable Area on each level and containing in the aggregate approximately 120,000 square feet of total Gross Leasable Area, together with slab floor, adequate water and sewer roughed into the New Premises, adequate heating, ventilating and air conditioning units, sprinkler main (but not sprinkler heads), two (2) elevators (passenger and freight), one ('_) escalator connecting the first level of the New Premises with the second level of the New Premises, adequate electrical power at the transformer with an empty conduit roughed into the !row Premises, rain exterior entrance and truck dock serving the New Premises. As used herein, the term "New Premises Store Improvements" shall mean all work with respect to the New Premises which is not included in the New Premises Building Improvements, including, but not limited to, installation of sprinkler heads, ceiling, lighting, restrooms (to code), heating, ventilating and air condiii .,Lng duct work, all electrical work, interior partitions, wall floor coverings and installation of all furniture, equipme trade fixtures, materials and other personal property nec for Tenant to operate its business in the New Premises. Landlord shall, at its sole cost and expense, p& Nue and deliver to Tenant a conceptual design (the "Design") the reconfigured Shopping Center shaving the approximate to tton of the New Premises as well as the location of other build4fts and other improvements to be located in the reconfigured Shepping Center. Tenant shall have the right to approve the Design of the reconfigured Shopping Center including the location of 'the New Premises which approval shall not be unreasonably withheld or delayed. If Tenant shall not approve the Design, Tenant and Landlord shall use their best efforts to cooperate and agree 'on all of the modifications necessary to obtain the approval of Tenant to the Design, and Landlord's project architect (the "Center - Architect") shall promptly revise the Design to incorporate all such modifications which are mutually acceptable to Landlord and Tenant. In the event. Landlord and Tenant despite their best efforts are unable to agree upon the Design for the reconfigured Shopping Center including the location of the New Premises within sixty (60) days after the initial submission thereof to Tenant, then such dispute shall be submitted to the Center Architect, The Center Architect shall review all points of disagreement, shall meet with Landlord and Tenant, individually or separately, shall suggest methods and points of compromise and shall take such other steps and actions as the center Architect shall deem appropriate to resolve all points of disagreement. The Center Architect shall record in writing all agreements reached as to points of disagreement and shall, if any points of disagreement have not been resolved within thirty (30) days after submission of such matters to the Center Architect, promptly notify Landlord and Tenant in writing (the "center Architect's Notice") of all remaining unresolved issues (the "Unresolved Issues")- The Unresolved Issues shall be submitted to final and binding arbitration as follows: Landlord and Tenant shall each within twenty (20) days of receipt of the Center Architect's Notice designate one person, as hereinafter provided, to represent it as an arbitrator. The arbitrators so appointed by Landlord and 'tenant shall within ten (10) days following the aforesaid twenty (20) day period designate one additional person as arbitrator to the end that the total number of arbitrators shall be three (3). The appointment of all arbitrators under this Section shall be in writing and shall be submitted to the other party. Any person designated as an arbitrator shall be knowledgeable and experienced in the development and design of regional shopping centers, but shall not be in the employment of either Landlord or Tenant, directly, indirectly or as an agent, except in connection with the arbitration then proceeding. The arbitrators shall meet or otherwise confer as deemed necessary by the arbitrators to resolve the Unresolved Issues and a decision of a majority of the arbitrators will be final and binding upon Landlord and Tenant. The decision of the arbitrators shall be in writing and shall be L'_75.�78URL=tiGTCN.7 3d c made as promptly as possible after the designation of tit* third (3rd) arbitrator, but in no event later than thirty (30) days from the date of the designation of the third (7rd) arbitrator. A copy of the decision of the arbitrators shall to signed by at least two (2) of the arbitrators and given to each party in the ;canner provided in Section 21.10 of this lease for the giving of notice. The fees, costs and expenses of the arbitrators and arbitration proceeding (except for a party's attorney's fees) shall be paid and shared equally by landlord and Tenant. vo damages dhall be awardable in arbitration. The decision of the arbitrators may be entered as a judgment in a court of competent )urisdiction. Any arbitration conducted under this Section shall be in accordance with the rules of the American Arbitration Association+ to the extent such rules do not conflict with the procedures herein set forth. The costs and fees of the Center Architect shall be paid by Landlord. The New Premises Building Improvements shall be constructed by Landlord in accordance with the approved :orking drawings and specifications therefor, in a good and workmanlike manner and in accordance with all applicable Governmental Requirements of the applicable Governmental Authorities. Landlord shall, at its sole cost and expense, prepare and deliver to Tenant for approval working drawings and specifications for the New Premises Building ' Improvements within a reasonable period of tise following the date Tenant has approved the Design for the reconfigured Shopping Center. Tenant shall not unreasonably withhold or delay its approval of the working drawings and specifications so long as (i) the New Premises as depicted thereon (i.o. on the working drawings and specifications) meet all applicable requirements of the REA and all applicable Governmental Requirements of all Governmental Authorities having jurisdiction, and (ii) the design presents an exterior appearance of the New Premises which is compatible in quality and appearance With that of the other buildings a,qd other improvements which have been or are to be constructs "I the Shopping Center. If Tenant shall not approve the workin wings and specifications for the New Promises Building Imp ents, Landlord and Tenant shall use their best efforts to coo a and agree on all of the modifications necessary to obtain thr roval of Tenant to the working drawings and specifications, the Center Architect shall promptly revise the working dravirts and specifications to incorporate all such modifications wtz are mutually acceptable to Landlord and Tenant. If Landlord aril Tenant cannot agree upon the working drawings and specification& Within thirty (30) days after the initial submission thereof to•Ibnant, then such working drawings and specifications shall be submIlted to the Center Architect. The Center Architect shall review all boints of disagreement, shall meet with Landlord and Tenant, indually or separately, shall suggest methods and points of eompr se and shall take such other steps and actions as the Center hitect shall deem appropriate to resolve all points of disagreement. The Center Architect shall record in writing all agreements reached as to points of disagreement and shall, if any points of disagreement have not been resolved within fifteen (15) days after submission of such matters to the Center Architect, promptly determine all remaining issues. The Center Architect shall promptly notify Landlord and Tenant in writing of such determinations and such determinations shall be final and binding upon Landlord and Tenant. The costs and fees of the Center Architect shall be paid by Landlord. The New Premises Store Improvements shall be constructed and/or installed by Tenant in accordance with the approved working f drawings and specifications therefor, in a good and workmanlike manner, in accordance with all applicable Govern=ental Requirements of the applicable Governmental Authorities and the applicable provisions of Section 5.1 and 9.3 of this lease. Tenant shall,_at its sole cost and expense, prepare and deliver to Landlord not 1136. 43B(:PL=tiG':JN.3 39 later than sixty (60) days follows-q the date Landlord and Tenant have agreed an the workings drawings and specifications for the New Premises Buildinq Improvements, work=ng drawings and specifications for the vew Prea-ses Store Imprrvements. Tenant's workings drawings and specifications for the New Premises Store Improvements shall be subject to the approval of Landlord which approval shall not be unreasonably withheld or delayed; provided, however, Tenant's working drawings and specifications for the interior layout of the 'few Premises shall not be subject to Landlord's approval. If Landlord shall not approve the working drawings and specifications for the New Premises Store Improvements, Landlord and Tenant shall use their best efforts to cooperate and agree on all of the modifications necessary to obtain the approval of Landlord to the working drawings and specifications, and Tenant's architect shall promptly revise the :corking drawings and specifications to incorporate all such modifications which are mutually acceptable to Landlord and Tenant. If Landlord and Tenant cannot agree upon the working drawings and specifications within thirty (30) days after the initial submission thereof to Landlord, then such working drawings and specifications shall be submitted to the Center Architect. The Center Architect shall review all points of disagreement, shall meat with Landlord and Tenant, individually or separately, shall suggest methods and points of compromise and shall take such other steps and actions as the Center Architect shall deem appropriate to resolve all points of disagreement. The Center Architect shall record in writing all agreements reached as to points of disagreement and shall, if any points of disagreement have not been resolved within fifteen (15) days after submission of such matters to the Center Architect, promptly determinla 4L11 remaining issues. The Center Architect shall promptly notify Landlord and Tenant in writing of such determinations and such determinations shall be final and binding upon Landlord and Tenant. The costs and fees of the Center Architect shall be paid by Tenant. Landlord shall use good faith efforts to deliver to Tenant, and Tenant agrees to accept from Landlord, possession of the New Premises sixty (60) days prior to the anticipated substantial completion of the Now Premises Building Improvements. The term "New Promises Delivery Date" shall mean the date upon which Landlord delivers possession of the Now Premises to Tenant. Tenant shall be entitled to enter the New Premises, at its own risk, from and after the New Premises Delivery Date for purposes of completing the New Premises Store Improvements, provided that all inventory, materials, supplies, fixtures and equipment of Tenant placed within the New Premises shall be placed therein at the sole risk of Tenant, and Landlord shall not be liable for any damage, injury, loss or theft thereof or thereto. The term "substantial completion of the New Premises Building Improvements" shall mean that the New Premises Building Improvements are substantially complete subject to minor punch list items. Landlord shall use good faith efforts to cause substantial completion of the New Premises Building Improvements to occur within sixty (60) days after the New Premises Delivery Date. Upon delivery of the New Premises to Tenant, Tenant shall construct and/or install, at its sole cost and expense, the New Premises Store Improvements as herein provided free of mechanics' and materialaens' liens as required by Section 5.2 of this lease. Portions of the New Premises Building Improvements work may be performed concurrently with the performance of the New Premises Store Improvements work. Landlord and Tenant shall use their best efforts to cooperate with one another during the period they are concurrently performing the New Premises Building Improvements work and the New Premises Store Improvements work, respectively, and, without limiting the foregoing, 'tenant shall perform the New Premises Store Improvements work in a manner reasonably calculated to minimize interference with, or delay in the construction of, the New Premises Building Improvements. Landlord covenants and agrees to indemnify, defend and hold Tenant and the Tenant Parties harmless fro= and against all Claims of any 40 k-nd incurred cr arisinq from the performance by Landlord or the landlord Parties of the New Premises Building Improvements :cork, excluding any Claims arising or accruing as the result of the negligence c, willful misconduct of Tenant or the Tenant Parties. Tenant covenants and agrees to indemnify, defend and hold Landlord, t;le Landlor! Parties and Landlord's Designee s) harmless from and against all claims of any kind incurred or arising from the performance by Tenant or the Tenant Parties of the New premises Store Improvements :cork, excluding any Clairas arising or accruing as the result of the negligence or willful misconduct of Landlord, the Landlord Parties or Landlord's Designee(s). Landlord shall procure and pay for all approvals, permits and licenses of all Governmental Authorities having jurisdiction with respect to the construction of the New Premises Building Improvements. Tenant shall procure and pay for all approvals, permits and licenses of all Governmental Authorities having jurisdiction with respect to the construction and/or installation of the New Premises Store Improvements. Upon completion of the New Premises Building Improvements by Landlord and the New Premises Store Improvements by Tenant, Landlord shall obtain a Certificate of Occupancy for the New Premises. Tenant shall continuously operate its business in the Shopping Center in the Existing Premises in accordance with the terms of this lease until such time as Tenant is ready to open for business in the New Premises; provided, however, Tenant shall have the right to cease operating for business in the Existing Premises for at reasonable period of time before it opens for business in the New Premises (in order to accommodate Tenant's move to such New Premises), such reasonable period of time not to exceed thirty (30) days before the date Tenant opens for business in the New Premises. The term "completion of the New Premises Building Improvements" shall mean the Naw Premises Building Improvements are complete (including minor punch list items). Landlord shall use good faith efforts to cause the completion of the New Premises Building Improvements to occur on or before the date which is thirty (30) days after the date upon which substantial completion of the New Premises Building Improvements occurs. Tenant agrees to construct and/or install the New Premises Store Improvements work and open for business in the New Premises not later than the New Premises Required Opening Date, which shall be defined to be the last to occur of (i) thirty (30) days after substantial completion of the New Premises Building Improvements, (ii) ninety (90) days after the Now Premises Delivery Date, or (iii) fifteen (15) days after completion of the New Premises Building Improvements: provided, that, in no event shall Tenant be required to open for business in the New Premises during the period from November 15 to January 2 in any Lease Year. Within fifteen (15) days after the date that Tenant opens for business in the Now Premises, Tenant shall re -deliver the Existing Premises to Landlord in the manner and in the condition set forth in Section 19.1 of this lease. Tenant shall be permitted to remove Cram the Existing Premises all of its personal property and unattached moveable fixtures, installations and equipment which pursuant to the terms of this lease would remain Tenant's property at the expiration of the Tern of this lease. The title to any and all personal property, fixtures, installations and equipment remaining in the Existing Premises after the fifteenth (15th) day following the date Tenant opens for business in the New Premises shall automatically vest in Landlord and Landlord shall not be obligated to pay Tenant any compensation therefor: and, Tenant waives any and all claims against Landlord for any damage or loss to Tenant resulting from Landlord's retention and/or disposition of any such personal property, fixtures, installations and equipment. L175.4:SURL=NGTO..3 For the period between the date Tenant opens for business in the New Premises and the date Tenant re -delivers --he Existing Premises, each of the Existing Premises and the New Premises shall constitute the "Demised Premises" under this lease: provided, however, that from and after the date Tenant opens for business in the New premises and provided Tenant is no longer open for business in the Existing Premises, Tenant shall be relieved of its obligation to pay Fixed Minimum Rent, Percentage Rent, Real Estate Taxes and Common Area Costs attributable to the Exist.nq Premises. Upon re -delivery by Tenant of the Existing Premises, the New Premises shall constitute the "Demised Premises" under this lease. Rent for the New Premises shall commence to ac_grue on the earlieF of a the date Tenant opens for business in the New Premi es or (b) the New Premises Required Openincl DAte. The Axed Minimum Rent and Common Area Costs for the New Premises shall be ' C-As th& Fixed Minimum Rent and Common Area Costs applicable to the Existing Premises, notwithstanding the fact that the Gross Leasable Area of the New Premises is less than the Gross Leasable Area of the Existing Premises. The Percentage Rent Rate and Base Sales figures for the New Premises shall be the same as the Percentage Rent Rate and Base Sales figures applicable to the Existing Premises. The Real Estate Taxes for the New Premises shall be the same as the' Real Estate Taxes applicable to the Existing Premises, notwithstanding the fact that the Gross Leasable Area of the New' Premises is less than the Gross Leasable Area of the Existing Premises, except that (i) the term "Tax Parcel" as used in Section 16.1 of this lease shall mean the Tax Parcel of which the New Premises is a part, and (ii) the bass year for calculating Tenant's Share of the increases in Real Estate Taxes shall be the tax Yiscal year in which Tenant opens for business in the New Premises. In the event Tenant is relocated to New Premises as herein provided, such relocation shall be at Tenant's sole cost and expense, except Zandlord. as its sole contribution for such relocation, Agrees to reimburse Tenant (provided Tenant is not then in default under this lease beyond the expiration of the applicable notice and/or cure period) for the &ban un&zortized net book value of Tenant's leasehold improvements to the Existing Premises (but only to the extent said Itasehold improvemen s were paid for by Tenant) amortized in accordance with generally accepted accounting principles over the shortest period of time allowable under the rules and regulations promulgated from time to time by the internal Revenue service within thirty (30) days after the date Tenant has (i) opened for business in the New Premises, and (ii) re -delivered possession of the Existing Premises to Landlord in ne manner and in the condition required by Section 19.1 of this lease, and (iii) delivered to Landlord a copy of the Certificate of occupancy for the Nov Premises, and1(iv) delivered to Landlord a copy of Tenant's recorded Notice of Completion with respect to the New Premises Store Improvements work. Lw4thin ninety (90) days after the date Tenant opens for business in the Existing Premises, Tenant shall deliver tcLLandAord a written) stateme.gt (the "Leasehold Improvement cam -statement") se zing forth_in _ reasonab,Ze._detail the costs inc ed by Tenant for' its leasehold improvements to the-ERroting remises, signed 'and- certified as correct 'by Tenant's chief ! n�ncial officer, together with paid i voices_.for.said LtA ehoid improvements and suc other back-up information as Landlord_aay reasonably request to enable Landlord to substantiate the cost of Tenant's leasehold improvements to the Existing Preoises" and. to verify t at -the Leasehold Inproveme t- Cbst Statement does not include any costs that are not directly attributable to Tenant's leasehold improvements to the Existing Premises. The term "leasehold improvements" as used herein shall in no event include Tenant's trade fixtures, equipment, furniture, signs and/or other personal property belonging to Tenant, and which pursuant to the terms of this lease, would remain the property of Tenant at the expiration of the Tern of this lease. Landlord shall have the right upon reasonable prior notice to Tenant to examine and audit '"136.43BURLING ON.3 ;Z Tenant's books and records with respect to the test of Tenant's leasehold improvements to the Existing Premises. Except for tre payment of, the then unamortized net booX value of Tenant's leasehold improvements to the Existing Premises, Tenant shall pay all costs and expenses in connection with the construction and installation of the New Premises Store Improvements, including, 'without limitation, the costs and expenses of moving and/or relocating its trade fixtures, equipment, furniture, signage, :merchandise and other personal property from the Existing Premises to the New Premises. It is expressly understood and agreed that Landlord shall at all times and in all instances have complete exclusive control of the location, design, structure, construction, and aesthetics of the Improvements, as well as all activities undertaken by Landlord in connection therewith. No exercise by Landlord of any rights herein reserved shall entitle Tenant to any damage for any injury or inconvenience occasioned thereby nor to any abatement of Rent. Any portion of the Shopping Center which is taken for any public or quasi -public use under any statute or by right of eminent domain (or conveyed to the condemning authority under the threat of eminent domain) or dedicated to public use or ceded or conveyed to any governmental authority for street or other purposes shall be thereafter excluded from the Shopping Center. ARTICLE xmi DEFAULTS AND REMEDIES SECTION 18.1 This lease is entered into upon the condition that Tenant shall faithfully and punctually perform all of the covenants, agreements, provisions and conditions by it to be performed as set forth in this lease. The following shall each be deemed to be an event of default by Tenant under this lease: (i) the failure of Tenant to pay any Rent, or any other sum or charge due to Landlord and/or to any other party in accordance with the provisions of this lease, as and when due, if such failure continues for a period of time in excess of fifteen (15) days after notice thereof from Landlord to Tenant (which notice shall be in lieu of, and not in addition to, any notice required under California Code of Civil Procedure Section 1161, g1 sea., as amended); or (li) if Tenant fails to complete Tenant's work and open the Demised Premises for business to the public adequately fixturized, staffed and stocked within sixty (60) days following the Required opening Date, or thereafter, if the Demised Premises is not occupied by Tenant and open for business to the public adequately fixturized, staffed and stocked on the days and hours required by this lease during the period of Tenant's Operating Covenant; or (iii) if Tenant vacates or abandons the Demised Premises ("vacates or abandons" is herein defined to include, without limitation, any absence by Tenant from the Demised Premises for fourteen (la] consecutive days or longer while Tenant is in default of any provision of this lease beyond the expiration of the applicable cure period); or (iv) the making by Tenant of any general assignment for the benefit of creditors, the filing by or against Tenant of a petition to have Tenant adjudged bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Tenant, the sage is dismissed within thirty (30) days], the appointment of a trustee or receiver to take possession of substantially all of Tenant's assets located at the Demised Premises or of Tenant's interest in this lease, where possession is not restored within thirty (30) days, the attachment, execution or other judicial seizure of substantially all of Tenant's assets located at the Demised Premises or of Tenant's interest in this lease, where such seizure is not discharged within thirty (30) days, or Tenant's convening of a meeting of its creditors or any L. 36.438LRLINGTON.] 43 class thereof for the purpose of effecting a moratorium upon or composition of its debts, (v) the failure of Tenant to faithfully and punctually Ferfortm or cbserve any other covenant, agreement, provision or condition on the part of Tenant to be performed or observed if such failure continues for a period of time in excess of thirty (30) days after notice thereof from Landlord to Tenant (which notice shall be in lieu of, and not in addition to, any notice required under California code of Civil Procedure Section 1161, pt seq., as amended): provided, however, that if the nature of Tenant's failure is such that more than thirty (30) days are reasonably required for its cure, then Tenant shall not be deemed to be in default for the purposes of this Section 18.1 if Tenant commences to cure such failure within said thirty (30) day period and thereafter diligently prosecutes such cure to completion: then upon the occurrence of any one or more of the aforesaid events of default enumerated in this Section 18.1, Tenant, upon demand, shall forthwith pay Landlord all Rent and other sums then due to Landlord under this lease and Landlord, in addition to any other remedies available to it hereunder and at law and/or in equity, at its option, may terminate this lease and all rights of Tenant hereunder by giving written notice to Tenant of such intention to terminate (in which case Tenant shall have no further claim hereunder) or Landlord may continue this lease in full force and effect for so long as it does not terminate Tenant's right to possession of the Demised Premises (in which case, Landlord may enforce all of its rights and remedies hereunder, including the right to recover Rent required to be paid by Tenant as same becomes due) and the following provisions shall apply, as the case may be: A. Termination: (1) In the event Landlord terminate!% this lease as a result of an event of default by Tenant, Landlord may recover possession of the Demised Promises by any lawful means and remove all persons and property therefrom, and Landlord shall be entitled to recover from Tenant as damages all amounts which Landlord is entitled to recover pursuant to Section 1951.2 of the Civil code of California, as the sane may be amended from time to time, or under any successor thereto, including, but not limited to, all of the following: (a) the worth at the time of the award of any unpaid Rent and other charges which have been earned at the time of termination: plug (b) the worth at the time of the award of the amount by which the unpaid Rent which would have been earned after termination until the time of the award exceeds the amount of the loss of such Rent and other charges that Tenant proves could have been reasonably avoided: plus (c) any other amount necessary to compensate Landlord for the detriment proximately caused by Tenant's failure to perform its obligations under this lease. (2) For the purposes of this Subparagraph A, all Rent other than Fixed Minimum Rent shall be computed at a rate equal to the average amount paid or payable by Tenant for the three (3) Lease Years prior to such termination unless three (3) Lease Years of the Term of this lease have not elapsed, in which case such amount shall be annualized based upon the average monthly amount payable for the entire period of Tenant's occupancy of the Demised Premises. (3) As used in clauses (a) and (b) of this subparagraph A.(1), the term "Worth at the time of the award" shall be computed by allowing interest at the Default Rate. (4) The amount recoverable by' Landlord pursuant to clause (c) of this subparagraph A.(1) shall include, without limitation, any costs and expenses incurred by Landlord in maintaining or preserving the Demised Premises after such default by Tenant, preparing the Demised Premises for reletting to a new tenant, accomplishing any repairs or alterations to the Demised Premises for the purpose of such reletting, repairing any damage thereto occasioned by the act or omission of Tenant and any other costs necessary or appropriate to relet the Demised premises. r-• Ll36-;I3C:RT_:`GTZ:;.. S. Lease Not Terminated: (1) In the event landlord elects not to terzinate V.is lease as a result of an event of default 5v Tenant, then this :ease shall continue in full force and effect, and Landlord may enforce all of its rights and remedies hereunder and at law and/or in equity, including, wlthout limitation, the right to recover Rent as same becomes due as more particularly provided pursuant to Section 1951.4 of the Civil Code of California, as the same may be amended Gram time to time, or ::der any successor thereto. However, Tenant shall continue to have the right to possession of the Demised Premises and thereafter Tenant shall have the right to assign this lease or sublet the Demised Premises with Landlord's prior written consent, .which consent shall not be unreasonably withheld, but which consent may be contingent upon the satisfaction of any or all of the terms and conditions set forth in Section 12.3 herein. (2) For the purpose of this Sub- paragraph S., Tenant's right to possession of the Demised Premises shall not be deemed to have been terminated by efforts of Landlord to relet the Demised Premises, by its acts of maintenance or preservation with respect to the Demised Premises, or by appointment of a receiver to protect Landlord's interests hereunder. No re-entry or taking possession of the Demised Premises by Landlord shall be constzved as an election to terminate this lease nor shall it cause a forfeiture of Rent remaining to be paid during the balance of the Term, unless a written notice of such intention to terminate be given to Tenant. C. Landlord reserves the right to terminate this lease at any time after an event of default by Tenant which is not cured by Tenant within the applicable notice and/or cure period, if any, by giving written notice to Tenant of Landlord's intention to terminate prior to the date of cure. D. The term "Tenant" as used in clause (v) of the first grammatical paragraphof this Section 18.1 shall also include Tenant's Guarantor and/or assignee of Tenant's interest in this lease. The term "an affiliate of Tenant" as used herein means any other person (as such term is hereinafter defined in Section 21.18), directly or indirectly, controlling, controlled by, or under common control with Tenant. For purposes of this definition, "control" with correlative meanings (including "controlling", "controlled by" and "under common control with"), as applied to any person, means the possession of a legal and equitable interest in the person sufficient to grant the power to direct or cause the direction of the management and policies of that parson. SECTION 18.2 In the event of any event of default by Tenant which is not cured by Tenant within the applicable cure period, Landlord may (but shall not be obligated to) at any time, after five (5) days written notice to Tenant, except in emergency situations (for which no notice shall be required), cure such default for the account, and at the expense, of Tenant. If Landlord at any time so elects or is compelled by any other person to cure such default or is compelled to incur any other expense arising out of such default by Tenant (including, without limitation, Landlord's reasonable attorneys' fees and disbursements in instituting, prosecuting or defending any suits, actions or proceedings to enforce Landlord's rights under the provisions of this lease or otherwise) the sum(s) so paid by Landlord, with all interest (at the Default Rate), costs and damages, shall be paid by Tenant to Landlord within ten (10) days following demand. such expenses may be recovered in the same action or proceeding forming the basis of default. SECTION 16.3 If either party.incurs any expense, including reasonable attorneys' fees, in connection with any action or proceeding instituted by either party by reason of any default or alleged default of the other party hereunder, the party prevailing in such action or proceeding shall be entitled to recover its said ;5 reasonable expenses from the ether party. Such reasonable expenses, including attorneys' fees, shall be deemed to have accrued on the commencement of such action and shall to paid whether or not such action is prosecuted to 3udgment. SECTION 18.4 Intentionally emitted. SECTION 18.5 If Tenant shall neglect or fail to pay within ten (10) days after the same is due and payable, any Fixed Minimum Rent, Percentage Rent or Additional Rent, or any other amount required to be paid under this lease, Tenant shall pay to Landlord, in addition to such unpaid amounts, interest upon such unpaid amounts from the due date thereof to the date of payment at the Default Rate. ARTICLE XIX SURRENDER OF DEMISED PREMISES Upon the Lease Expiration Date or earlier termination of the Tenn of this lease, Tenant agrees, without necessity for notice, to quit the Demised Premises and surrender possession thereof to Landlord, broom clean, in first class condition, ordinary wear and tear not requiring maintenance and repair and casualty damage excepted, together with all keys and combinations to locks, safes and vaults and Alterations, fixtures and equipment which may have been made in, on or to the Demised Premises (except as hereinafter provided in this Article), all of which shall thereupon become the property of Landlord without any claim thereto by Tenant. on or before the end of the Term, Tenant shall remove from the Demised Premises all its property including movable trade fixtures and equipment installed at Tenant's cost and expense, and any or all of such property not so removed shall, at Landlord's option, become the exclusive property of Landlord or be disposed of by Landlord, at 'tenant's cost and expense, without further notice to, or demand upon, Tenant. Tenant shall promptly repair in a good and workmanlike manner all damage to the Demised Premises caused by the removal therefrom of such property. ARTICLE xx SUBORDINATION SECTION 20.1 This lease and all of Tenant's rights hereunder shall be subject and subordinate to all ground or underlying leases or subleases that include the Demised Premises, including, without limitation, a sale leaseback lease or leaseback leases to which Landlord is or may become a party as a tenant or a subtenant thereunder, and to the lien of all mortgages, in all amounts and all advances thereon, which may now or hereafter lien the Demised' Premises, and to all renewals, replacements, modifications, consolidations and extensions of any thereof: provided, however, Tenant agrees that any such lessor or mortgagee may elect to have this lease be Dade superior to any ground or underlying lease or the lien of its mortgage. and in the event of such election and upon notification by Landlord or such lessor or mortgagee to Tenant to that effect, this lease shall be deemed superior to said ground or underlying lease or to the lien of any such mortgage, whether this lease is dated prior to or subsequent to the date of said ground or underlying lease or mortgage. Notwithstanding anything to the contrary contained in this Section 20.1. so long as Tenant is not in default hereunder beyond the expiration of the applicable cure period. this lease shall remain in full force and effect in accordance with its terms from the Effective Date and throughout the Term. , ! 36 . ; 3 BuR_-7146 1' • - 46 SECT;OK 20.2 The previsions of Section 20.1 shall be self - operative and no turther instruments _! subcrdination shall be required by any such lessor or mortgagee; provided, however, if Landlord requests confirmation of the subordination provided for in Section 20.1, :'enant shall, 4itnout charge therefor, within ten (10) days after demand, execute, acXnawledge and deliver to Landlord (in recordable form if requested) any certificate or instrument that may be required by any such lessor or mortgagee to evidence such subordination and non -disturbance. Any such certificate or instrument may, at the option of any such lessor or mortgagee, contain any or all of the provisions set forth in Section 20.3 and/or 20.4. Upon request and without charge therefor, Tenant shall, within ten (10) days after demand. execute. acknowledge and deliver to the holder of any mortgage that liens the Demised Premises and/or to any lessor under a ground or underlying lease (including a purchaser under a sale leaseback transaction) that included the Demised Premises an instrument acknowledging any assignment by Landlord of Landlord's rights under this lease to any such holder or lessor in connection with such nortgage and/or such ground or underlying lease. If any ground or underlying lessor or mortgages requests that this lease be made superior, rather than subordinate, to any such ground or underlying lease or mortgage, Tenant shall, without charge therefor, within ten (10) days after demand, execute, acknowledge and deliver to Landlord (in recordable fora if requested) any certificate or instrument evidencing such priority which any ground or underlying lessor or mortgagee may at any time request in connection therewith. In the event that Tenant fails to execute and deliver any such certificates) or instrument(s) within ten (10). days following written request therefor Landlord may treat such failure an the part of Tenant as a default of Tenant's obligations under this lease. S£CPIOH 2O.3 At the request of the holder (or successor in Interest) of any such mortgage or the lessor under any such ground or underlying lease, Tenant shall attorn to and recognize such holder (or successor -in -interest) or lessor as Tenant's landlord hereunder upon the terms and conditions of this lease for the remainder of the 'Perm. Upon such attornment this lease shall con- tinue in full force and effect as a direct lease between Tenant and such holder (or successor -in -interest) or lessor except that such holder (or successor -in -interest) or lessor shall not be (i) liable for any previous act or omission by Landlord, Landlord's Hanaging Agent or the Landlord Parties under this lease, (ii) subject to any offset of Rent which may have theretofore accrued to Tenant against Landlord, (iii) bound by any modification of this lease not expressly provided for herein unless such modification shall have been expressly approved in writing by such holder (or successor -in - interest) or lessor (unless (a) at the time any such modification was executed and delivered by Tenant, Tenant had no knowledge or notice as to the interest of such holder (or successor -in -interest) or lessor or (b) such modification was approved by a predecessor in interest of such holder (or successor -in -interest) or lessor or (c) such modification was executed prior to the existence of such mortgage or ground or underlying lease], or (iv) bound by any previous prepayment of Rent for a period greater than one (1) month in advance unless such prepayment shall have been expressly approved in writing by such holder (or successor -in -interest) or lessor. Tenant shall, without charge therefor, within ten (10) days after demand, execute an instrument in form and substance reasonably satisfactory to any such holder (or successor -in - interest) or lessor confirming the foregoing provisions of this Section 20.3 and Tenant shall deliver the same to Landlord or to such holder (or successor -in -interest) or lessor as Landlord may direct. SECTION 20.4 :f at any time during the :'erm Landlord shall be the holder of a leasehold estate by virtue of a ground or underlying lease covering premises which include the Demised Pre==ses, and if such leasehold estate shall terminate or be terminated for any reason, and as a result thereof. Landlord owns neither the fee nor leasehold estate of the land comprising the Demised Premises t*ien, at the request of the fee owner of the land comprising the Demised Premises, Tenant agrees to attorn to and recognize said fee owner as Tenant's landlord hereunder upon the terms and conditions of this lease for the remainder of the Term. Upon request of any such fee owner and without charge therefor, Tenant shall within ten (10) days thereafter execute and deliver to such fee owner an instrument confirming the foregoing provisions of this Section 20.4, in form and substance reasonably satisfactory to such fee owner. SECTION 20.5 The term "mortgage" as used herein shall include a mortgage, a deed of trust, a deed to secure debt, a security deed and any other conveyance or agreement for security purposes, which may now or hereafter Lien Landlord's estate and interest in the Shopping Center, cr any part thereof, and/or Landlord's interest in the buildings and improvements now or hereafter constructed in the Shopping Center, or any part thereof. The term "mortgagee" and/or "holder of a mortgage" as used herein shall ineLude the holder of or the beneficiary under a mortgage. SECTION 20.6 :notwithstanding anything to the contrary contained in this Article XX, Tenant's obligation to subordinate its rights hereunder to the lien of any future mortgage, ,future deed of trust or other future subordination shall be conditioned upon Tenant receiving from any party seeking such superior position a written agreement in recordable form reasonably satisfactory to Tenant to the effect that so lonq as Tenant pays the Rent due under this lease and otherwise complies with the terms hereof, Tenant's occupancy hereunder shall not be disturbed. Tenant shall agree to attorn directly to any such party. Landlord represents to Tenant that as of the Effective Date that there are no mortgages liening Landlord's estate and interest in the Shopping Center. ARTICLE XXI GENERAL PROVISIONS SECTION 21.1 Landlord represents and warrants that Landlord has the full right and lawful authority to enter into this lease and perform Landlord's obligations under this lease and it Tenant shall discharge the obligations herein set to be performed by Tenant, Tenant shall have and enjoy from the Delivery Date and then throughout the Term the quiet and undisturbed possession of the Demised Premises and all appurtenances appertaining thereto. SECTION 21.2 Neither party hereto shall be deemed, in any way or for any purpose, to have become, by the execution of this lease or any action taken hereunder, a partner of the other party in its business or otherwise or a joint venturer or a member of any joint enterprise with such other party. SECTION 21.3 This lease shall be governed exclusively by the provisions hereof and by the internal laws of the state in which the Shopping Center is located without regard to the principle of conflicts of law. SECTION 21.4 :f Tenant shall remain in possession of the Demised Premises after the end of the Term without notice from Landlord to the contrary or without the execution of a new lease or other written agreement signed by both Landlord and Tenant, then Tenant, at the option of Landlord, shall be deemed to be =Cczpyinq the remised ?remises as a month-to-ran:'i tenant at a nont.ily c::arge equal =o cne tunared =renty percent :tat] =f _he monvily _nstallaer,t of Fixed xinimus Rent payable for =ate _ast ncntn of tr'e Teri. otherwise suolect to all Cf _he other covenants, agree-ents, provisions and conditions of tnss !ease. SEC'r_Oq 21.5 At all reasonable times durinc 'Tenant's tuslness hours and upon reasonable prior notice to Tenar.t'S store manager (and in emergencies at all tames without notice). Tenant agrees to Permit =andlord and its author -,zed representatives, :ncludinq, without '_imitat_on, Landlord's Managing Agent, to enter the Demised Premises for any purpose permitted by law, _ncludinq, without limitation, for the purpose of W examining the Ce= sed Premises to ascertain if the Demised Premises is in good order, condition and repair, (ii) posting of notices of nonresponsiDility or other notices which Landlord may deem necessary for its protection, (iii) showing the Demised Premises to prospective purchasers, mortgagees, ground or underlying lessors, or tenants, (iv) performing any obligations of Tenant which Landlord is authorized by this lease to perform, (v) performing services required of Landlord under this Lease, (vi) making any repairs or performing any work in, on or about the Demised Premises in connection with any of Landlord's rights or obligations under this lease, or (vii) taking possession of the Demised Premises due to an event of default in the manner provided for in this lease, provided, however, that Landlord's access shall not, under the circumstances, unreasonably interfere with Tenant's use and enjoyment of the Demised Premises. SECTION 21.6 Subject to the provisions of Article XII, and except as otherwise specifically provided in this lease, the terms and provisions of this lease shall be binding upon and inure to the benefit of Landlord and Tenant and their respective successors, assigns, heirs, administrators, executors and representatives. SECTION 21.7 At any time and from time to time, within tan (10) days after request by Landlord and without charge therefor, Tenant shall execute, acknowledge and deliver to Landlord, Landlord's Managing Agent or to Landlord's Designse(s), a written statement: (1) 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); (2) certifyinq the Effective Date, the Rent Commancement Date and the Lease Expiration Date: (3) acknowledging that all conditions to be performed by Landlord under this lease have been performed, or stating those claimed by Tenant not to have been performed: (4) acknowledging that there are no defenses or offsets against Landlord, or stating those claimed by Tenant: (5) certifying the Rent payable pursuant to this lease and that the obligation for the payment of Rant has commenced (if that be the case) and the date to which Rent has been paid in advance, if any; and (6) containing such other certifications and acknowledgments as may be reasonably requested by Landlord, any mortgages or prospective mortgages of Landlord or any prospective purchaser of Landlord. Landlord agrees to execute and deliver without charge to Tanant, a comparable certificate from time to time upon Tenant's xritten request in connection with a permitted Transfer of this lease. It is intended that any such statement may be relied upon by any prospective purchaser of the fee or any leasehold of the Shopping Center and/or any mortgagee or prospective mortgagee or any assignee of any thereof or any assignee or sublessee of Tenant. SECTION 21.0 Except for Pentz i Partners ("Pentz") and except for The 5amual Schaul Company ("Schaul") whose fens are to be paid by Landlord to Pentz pursuant to the terms of a separate agreement between Landlord, Pent% and Schaul, Tenant represents and warrants that :t has not had any dealings with any other realtors, brokers or agents in connection with the negotiation of this lease and agrees to pay, and to indemnify, defend (with counsel =easonably _Ija..IBL7RL:Nr_ :%. ;4 satisfactory to Landlord) and ':old Landlord harmless !ram and against any and all Claims ,or any compensation, commission D.- charges clai»ed by ?entz and/or Schaul (other than the fees to :e paid by Landlord to 2entz pursuant to the terms of the separate agreement between Landlord. ?entz and Schaul) and/or any other realtors, brokers or agents clai=ing to have dealt with 'tenant and not Landlord with respect to this lease and/or the negotiation thereof. SECTION 21.9 Intentionally omitted. SECTION 21.10 all notices, statements, demands, requests, consents, approvals, authorizations, offers, agreements or other communications (collectively referred to in this Section 21.:0 for convenience as a "notice") which may be given or are required to be given under this lease or by law shall be in writing and shall be affective (i) upon delivery thereof in person to the intended addressee or (ii) when received or when delivery is first attempted as shown on the return receipt if sent by an overnight delivery service addressed to the intended addressee at the addresses) appearing in Article I(g) of this lease or such other address(es) as either party shall designate by notice from time to time in the same manner as provided for in this Section 21.10, or (iii) when received or when delivery is first attempted as shown on the return receipt if sent by United States mail, postage prepaid, certified mail, return receipt requested, addressed to the intended addressee at the address(es) appearing in Article I(g) of this lease or such other address(es) as either party shall designate by notice from time to time in the same manner as provided for in this Section 21.10. A notice to Landlord shall not be effective unless -and until a copy thereof shall also be given to Landlord at the address set forth in Article I(g)(iii) or at such other address as Landlord shall designate by notice from time to time in the same manner as provided for in this Section 21.10. SECTION 21.11 If at any time the term "Tenant" shall include more than one (1) person or entity, or shall be a partnership or joint venture, then the obligations hereunder of such persons and/or entities and/or partners and/or venturers shall be joint and several. SECTION 21,12 Each agreement, term and provision of this lease to be performed by Landlord or Tenant shall be construed to be both a covenant and a condition. SECTION 21.13 The failure of sither party to insist in any one or more cases upon the performance of any of the covenants, agreements, provisions or conditions of this lease or to exercise any option contained herein shall not ba construed as a waiver or a relinquishment for the future of any such covenant, agreement, provision, condition or option. Receipt by Landlord of Rent or of any other payment or the acceptance by Landlord of performance of anything required by this lease to be performed by Tenant with or without knowledge of the breach of a covenant shall not be deemed a waiver of such breach. No waiver of any covenant, agreement, provision or condition of this lease shall be deemed to have been made unless expressed in writing and signed by the party against whom such waiver is charged. SECTION 21.14 This lease may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any change, modification or discharge is sought. SECTION 21.15 In no event shall Landlord attempt to hold Tenant's Guarantor Burlington coat Factory Warehouse corporation, Inc. liable beyond its guaranty obligations under this lease. Ll36.:33L'RL INGTON. 3 50 SECTION 21.16 :Tenant hereby expressly waives any right of redemption or relief from forfeiture under Sections 1174 and/or 1179 of the California Code of Civil Procedure, as the same may be amended from time to time, or under any similar statute now or hereafter in force, or under any present or future laws or case decisions to the same effect in the event that'7enant is evicted or dispossessed from the Demised Premises pursuant to legal process for any cause, or in the event of Landlord obtaining possession of the Demised Premises pursuant to legal process by reason of the violation by Tenant of any of the provisions, covenants, agreements or conditions of this lease, or otherwise. •G i�.�� SECTION 21.17 The provisions of this Section 21.17 shall be licable if there shall occur on or after the date hereof any (i) ike(s), lockout(s) or labor dispute(s); (ii) inability to obtain 1 or or materials, or reasonable substitutes therefor; (iii) acts of God, Governmental Regulations, enemy or hostile governmental action, civil commotion, fire or other casualty, condemnation or other conditions similar to those enumerated in this item (iii) beyond the reasonable control of the party obligated to perform. or (iv) delays due to the act or omission of the other party. A cause shall be beyond the reasonable control of a party when, on an objective basis, such cause would similarly affect any person or entity similarly situated (such as a fire, labor strike or transportation strike). A cause shall not be beyond the reasonable control of a party when, on an objective basis, such cause is peculiar to a party (such as financial inability or ordering materials known to require a long lead-time without providing a sufficient lead-time when placing the order). If Landldrd.or Tenant shall, as the result of any of the above -described events, fail punctually to perform any obligation on its part to be performed under this lease, then such failure shall be excused and not be a breach of this lease by the party in question, but only to the extent occasioned by such event. If any right or option of either party to taXe any action under or with respect to this lease is conditioned upon the same being exercised within any prescribed period of time or at or before a named date, then such prescribed period of time and such named date shall be deemed to be extended or delayed, as the case may be, for a period equal to the period of the delay occasioned by any above -described event. rn the event of any occurrence which a party believes constitutes a cause beyond the reasonable control of such party and which will delay any performance by such party hereunder, such party as a condition precedent for claiming an excuse in performance of any obligation based upon such unavailable delay shall promptly notify the other party in writing of the occurrence and nature of such cause, the anticipated period of delay and the steps being taken by such party to mitigate the effects of such delay. Notwithstanding anything herein contained, however, (a) the provisions of this Section 21.17 shall not be applicable to Tenant's obligations to pay, when due and payable, Rent or any other sums, ponies, costs, charges or expenses required to be paid by Tenant hereunder, or to any obligation of Tenant that can be fulf;lled by the payment of money, (b) lack of funds or inability to procure financing shall not be deemed to be an event beyond the reasonable control of Landlord or Tenant, and (c) the Required opening Date shall be as set forth in Article I(b)(iii); provided, however in the event :Tenant is unable to complete construction of Tenant's work and cpen the Demised Premises for business by the date which otherwise would be the Required Opening Date because of the reasons set forth in this Section 21.17, the Required Opening Date shall to extended for a period equal to the length of such delay. L135. 138URLiVG T^` . 11 51 SECTION 21.18 As used in this lease and then required by the context, each number (singular or plural) shall include all numbers, and each gender shall ircLude all genders. The Table of Contents, captions and headings throughout this ?ease are for convenience of reference only and the words contained therein shall in no way be held or deemed to define, limit, explain, modify, amplify or add to the interpretation, construction or meaning of any provision of, or the scope or intent of this lease and shall not in any way affect this lease. Time is and shall be of the essence of each term and provision of this lease. Subject to the provisions of Section 21.25, all notice periods provided for herein shall be in lieu of, and not in addition to, any notice periods required under the applicable laws of the state in which the Shopping Center is located. The term "person" as used herein means person, firm, association, partnership, trust estate or corporation, as the case may be. SECTION 21.19 It is understood and agreed that there are no oral or written agreements or representations between the parties hereto affecting this lease, and that this lease supersedes and cancels any and all previous negotiations, arrangements, representations, brochures, displays, projections, estimates, agreements and understandings, if any, made by or between Landlord and Tenant with respect to the subject matter hereof, and none thereof shall be used to interpret, construe, supplement or contradict this lease. This lease, and all amendments thereto, is and shall be considered to be the only agreement between the parties hereto and their representatives and agents. All negotiations and oral agreements acceptable to both parties have been merged into and are included in this lease. There are no other representations, covenants or warranties between the parties and all reliance with respect to representations is solely upon the express representations, covenants and warranties contained in this lease. SECTION 21.20 Upon the request of either party, Landlord and Tenant shall execute and thereafter record with the County Recorder of the County in which the Demised Premises is located a short fora lease giving notice of the existence of this lease and the Term. The requesting party shall pay, at its sole cost and expense, any transfer, stamp or other taxes imposed as a result of the recordation of such short form lease. SECTION 21.21 After receiving notice tram any person, firm or other entity that it holds a mortgage which includes the Demised Premises as part of the mortgaged premises, or that it is the lessor under a ground or underlying lease which includes the Demised Premises as a part of the premises demised by such lease, a notice from Tenant to Landlord alleging a default under this lease on the part of Landlord shall not be effective unless and until a copy of the same is given to the holder of such mortgage or to such lessor in accordance with the provisions of Section 21.10, provided that Tenant has been furnished with the mailing address(es) of the holder of such mortgage or such lessor. The curing of any of Landlord's defaults by the holder of such mortgage or by such lessor within thirty (30) days after expiration of the cure period provided in this lease shall be treated as curing and performance by Landlord. SECTION 21.22 With respect to any assignment by Landlord of Landlord's interest in this lease, or the Rent payable hereunder, which assignment is made to the holder of a mortgage as additional security for the interest of the holder of such mortgage which includes the Demised Premises, Tenant agrees that: (i) the execution and delivery thereof by Landlord, and the acceptance thereof by the holder of such mortgage shall never be treated as any assumption by the holder of such mortgage of any of the obligations of Landlord hereunder, unless the holder of suds AIN -- 3 i . 3 8C'R;.:\GT0:.. 3 52 mortgage shall. by notice to Tenant, specifically otherwise elect: and (ii) that, except as aforesaid, the holder of such mortgage shall be treated as having assu=ed Landlord's obligations hereunder only upon the foreclosure of such holder'smortgage, the taking of possession of the premises liened by such mortgage, and the commencement by such mortgagee to collect Rent and other charges provided for herein directly from Tenant. SECTION 21.23 The persons or person executing this lease on behalf of Tenant and Tenant's Guarantor hereby represent(s) and warrant(s) that Tenant is a corporation duly incorporated in the state of California, that Tenant's Guarantor is a corporation duly incorporated in the state of Delaware and that the person(s) executing and delivering this lease on behalf of Tenant and Tenant's Guarantor is or are an officer or are officers of Tenant and/or Tenant's Guarantor and that he, she or .hey as such officers has or have been authorized by all required corporate action to execute this lease and the guaranty of lease attached hereto and deliver same to Landlord. upon request of Landlord, Tenant agrees to deliver to Landlord instruments reasonaoly satisfactory to. Landlord evidencing compliance with the foregoing provisions of, this Section 21.23. SECTION 21.24 Any payment by Tenant or receipt by Landlord of an amount of Rent lesser than the Rent herein reserved shall be deemed to be only on account of the amount of Rent reserved herein. Any endorsement or statement on any check or any letter accompanying any check or otherwise as payment as Rent shall not be deemed an accord and satisfaction. Landlord's acceptance of any check or payment shall be without prejudice to Landlord's right -to recover the balance of Rent due or to pursue any other remedy available to Landlord pursuant to this lease or otherwise. SECTION 21.25 If nny term or provision of this lease or any portion of a term or provision hereof or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this lease, or the application of such term or provision or portion hereof to persons or circumstances, other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this lease and each portion thereof shall be valid and be enforced to the fullest extent permitted by law. SECTION 21.26 Landlord reserves the absolute right to effect such other tenancies in the Shopping Center as Landlord, in the exercise of its sole business judgment, shall determine to best promote the interests of the Shopping) Center. Tenant does not rely on the fact, nor does Landlord represent, that any specific tenant or number of tenants shall during the Term of this lease occupy any space in the Shopping Center. SECTION 21.27 In any instance in which any party to this lease shall be regpested to consent to or approve any matter with respect to which consent or approval is required by any of the provisions of this lease, such consent or approval shall be given in writing, and shall not be unreasonably withheld or delayed, unless the provisions of this lease with respect to a particular consent or approval shall expressly provide that the same shall be given or refused in the sole and absolute discretion of such party. SECTION 21.28(a) Tenant covenants and agrees that Tenant shall at all times from and after delivery of possession of the Demised Premises to Tenant, be responsible and liable for, and be in complete and strict compliance with all applicable present and future Governmental Regulations of all Governmental Authorities having jurisdiction of the Demised Premises relating to or arising directly or indirectly out of or in connection with the use, analysis, generation, :manufacture, production, purchase, '_-.b 3.. i3 transportation, storage, treatment, release, removal or disposal of "Hazardous Materials" in, on, under or about the Demised Premises by Tenant, its Concessionaires and the Tenant Parties with respect to Hazardous Materials introduced into the Demised Premises by Tenant,, its Concessionaires or the Tenant Parties. The term "Hazardous Materials" as used herein shall include, without limitation, whether now or subsequently listed in any listing or publication of the Governmental Authorities defining hazardous materials, the following. (1) any "hazardous waste" as defined by the Resource Conservation and Recovery Act of '976 (42 U.S.C., Section 6901, gy. =g.) ("RCRA"), as amended from time to time and regulations promulgated thereunder: (2) any "hazardous substance" being "released" in "reportable quantity" as such terms are defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C., Section 9601, kr. I&q.) ("CERCLA"), as amended from time to time and regulations promulgated thereunder: (3) asbestos: (4) polychlorinated biphenyls: (5) urea formaldehyde insulation: (6) "hazardous chemicals" or "extremely hazardous substances", in quantities sufficient to require reporting, registration, notification and/or special treatment or handling under the Emergency Planning and Co=unity Right -to -Know Act of 1986 (42 U.S.C., Section 11001, 21. sect.) ("EPCRA"), as amended from time to time and regulations promulgated thereunder: (7) any "hazardous chemicals" in levels that would result in exposures greater than those allowed by' permissible exposure limits established pursuant to the Occupational Safety and Health Act of 1970 (29 U.S.C., Section 651, gj. 2SQ.) ("0S1'J►"), as amended from time to time and regulations promulgated thereunder. (8) any substance which requires reporting, registration, notification, removal, abatement and/or special treatment, storage, handling or disposal under Sections 6, 7 or 8 of the Toxic Substances Control Act (15 U.S.C., Section 2601, It. zgq.) ("TSCA") as amended from time to time and regulations promulgated thereunder: (9) any toxic or hazardous chemicals described in Occupational Safety and Health Standards (29 C.F.R. 1910 1000, g&. ggq.) in levels which would result in exposures greater than those allowed by the permissible exposure limits pursuant to such Governmental Regulations: (10) any 'hazardous wastes' as defined in the California Health and Safety Code (Section 25117), or as 'hazardous substances` as defined in the California Health and Safety Code (Section 25316), or as a chemical that is known to the State of California "to cause cancer or reproductive toxicity" under the Safe Drinking water and Toxic Enforcement Act of 1986 (California Health and Safety Code, Section 25249.5, it. wed.), as amended from time to time and regulations promulgated thereunder: (11) the contents of any storage tanks, whether above or below ground: and (121 anything defined as hazardous, toxic or "controlled industrial waste" under any present or future Governmental Regulations relating to "Environmental Protection", "Environmental Hatters", "Industrial Hygiene" (as such terms are hereinafter defined in this Section 2i.28(a)], use, analysis, generation, manufacture, production, purchase, transportation, storage, treatment, release, removal and disposal of Hazardous Materials. The terms "Environmental Protection", "Environmental Matters" and "Industrial Hygiene" as used herein shall include, without limitation, any matter which affects the environment or which may affect the environment, the use of sophisticated electrical and/or mechanical equipment, chemical, electrical, radiological or nuclear processes, radiation, sonar and sound equipment, use of lasers, and laboratory analysis and materials. The term "Governmental Regulations" relating to Hazardous Materials shall mean all applicable governmental regulations promulgated by the Governmental Authorities relating to air pollution, water pollution, noise control and/or transporting, staring, handling, discharge, disposal or recovery of on -site or off -site hazardous substances or materials, including, without limitation, the following, as same may be amended from time to time: (i) the Clean air Act (42 U.S.C., Section 7401, ?S• gq.): (ii) _:7e Marine ?rocection, Research and Sanctuaries Act (33 U.S.C., Section 1401-1445); (iii) the Clean hater act (33 U.S.C., Section 1251, gi. 212.1; (iv) RCRA, as amended by the Hazardous and Solid :Waste Amendments of 1984 (42 U.S.C., Section 6901, ej. sea.): (v) C_RCLA. as amended by the Superfund Anendtents and Reaut::orization Act of 1986 (42 U.S.C., Section 9601, gs,. sea.); (vi) TSCA; (vii) the Federal Insecticide, Fungicide and Redenticlde Act, as amended (7 U.S.C., Section 135, r.Z. Sg2.1; (viii) tie Safe Drinking Water Act (42 U.S.C., Section 300(f), S.J. sea.); (ix) OSHA; (x) the Hazardous Liquid Pipeline Safety Act (49 U.S.C., Section 2001, ra. sea.); (xi) the Hazardous Materials Transportation Act (49 U.S.C., Section 1801, gjt. sea.): (xii) the Noise Control Act of 1972 (42 U.S.C., section 4901, _t. sev.); (xiii) EPCRA: (xiv) National Environmental Policy Act (42 U,S.c., Section 4321-4347): and (xv) the Safe Drinking Water and Toxic Enforcement Act of 1986. (b) Tenant shall be deemed to be (1) the person in control, (2) an operator of the Demised Premises and (3) the person in charge with respect to the Demised Premises for purposes of reporting requirements under CERCLA, as amended. Tenant agrees (i)• that should it or its Concessionaires or the Tenant Parties know of the release or escape or threatened release or escape of any Hazardous Materials, in, on, under or about the Demised Premises, including, without limitation, the release or escape or threatened release or escape of any Hazardous Materials in connection with Tenant's work, or in connection with any repairs or Alterations made by Tenant to the Demised Premises or any part thereof, that - they :rill promptly notify Landlord of such release or escape or threatened release or escape, and (ii) that it vill provide ail warnings of exposure to Hazardous Materials in, on, under or about the Demised Premises in strict compliance wit9 all applicable Governmental Regulations. (c) Tenant covenants and agrees that Tenant shall at no time use or permit the Demised Premises to be used in violation of any Governmental Regulations relating to Hazardous Materials. Tenant shall assume sole and full responsibility for, and shall promptly remedy at its sole cost and expense, all such violations involving Hazardous Materials introduced by Tenant, ics Concessionaires or the Tenant Parties into the Demised Premises, provided that Landlord's written approval of any remedial actions shall first be obtained which approval shall not be unreasonably withheld. Further, Tenant shall not enter into any settlement agree=ent, consent decree or other compromise relating to Hazardous Materials in any way connected with the Demised Premises, without first notifying Landlord of Tenant's intention to do so and affording Landlord ample opportunity to appear, intervene or otherwise appropriately assert Landlord's inte:est with respect thereto. Tenant shall at no time use, analyze, generate, manufacture, produce, transport, store, treat, release, dispose of or permit the escape of, or otherwise deposit in, )n, under or about the Demised Premises, any Hazardous Materials, or permit or allow its Concessionaires or the Tenant Parties to do so, without Landlord's prior written consent. Tenant's compliance with the ter -as of this Section 21.28(c) and with all Governmental Regulations relating to Hazardous Materials shall be at Tenant's sole cost and expense. Tenant shall pay or reimburse Landlord promptly upon demand for any costs or expenses incurred by Landlord (with interest thereon at the Default Rate), includiig Landlord's actual attorneys', engineers', consultants' and .they experts' fees and disburse=eats incurred or payable to determine, review, approve, consent to or monitor the requirements for compliance with Gov*rn=encal Regulations relating to paeardeus Materials, including, without limitation, above and below ground testing. If Tenant fails to comply with the provisionsof this Section 21.28(c), Landlord small have the right, but not tre obligation, without in any way li=i`:rg Landlord's other rights and reaedzes, to enter _pon the Cem;sed i5 Premises or to take such other actions as Landlo:d deems necessary or advisable tc clean up, remove, resolve, or mini^=ze tr.e impact of, or otreraise deal with, any Hazardous Materials on or affecting the Demised Premises following the receipt of any notice or infor-ation asserting the existence of any Hazardous Materials introduced by Tenant, its Concessionaires or the Tenant Parties into the Demised Premises. All costs and expenses paid or incurred by Landlord in the exercise of any such rights shall be payable by Tenant to Landlord upon demand with interest thereon at the Default Rate. It shall be an event of default under this lease, entitling Landlord to exercise any of its rights and remedies under this lease, if any provision of this Section 21.28 is not strictly complied with at all times. Upon the Lease Expiration Date or earlier termination of the Term of this lease for any reason whatsoever, Tenant agrees to deliver the Demised Premises to Landlord free of any and all Tenant Installed Hazardous Materials [as such term is hereinafter defined in Section 21.28(d)I so that the condition of the Demised Premises shall conforn to and be in strict compliance with all Governmental Regulations relating to Hazardous Materials. (d) Landlord shall have the right, upon written notice to Tenant, at any time and from time to time during the Term of this lease, at its sole cost and expense (except as hereinafter provided), to cause an environmental survey (the "Survey") to be made of the Demised Premises by an environmental consulting firm (the "Consulting Firm") designated by Landlord to determine whether the Demised Premises contains any Hazardous Materials. I.andlord- shall upon completion of such Survey promptly furnish to Tenant a copy of such Survey prepared by the Consulting Firm. In the event said survey shall disclose the presence of Hazardous Materials in, on, under or about the Demised Premises, and if it is determined based upon the original approved final drawings for Tenant's work, or on the basis of any subsequent drawings submitted to Landlore pursuant to the terms of this lease, or on the basis of other information and data available to Landlord that the existence of said Hazardous Materials arose out of or is in any way connected with the use, analysis, generation, manufacture, production, purchase, transportation, storage, treatment, release, removal and disposal or escape of Hazardous Materials or products containing Hazardous Materials by Tenant, its Concessionaires or the Tenant Parties during the period of Tenant's occupancy of the Demised Premises (the "Tenant Installed Hazardous Materials"), Tenant shall reimburse Landlord for the cost of the Survey within fifteen (15) days after receipt of an invoice therefor, and (i) Tenant shall, within thirty (30) days thereafter, at its sole cost and expense, cause all of said Tenant installed Hazardous Materials to be abated and removed from in, on, under or about the Demised Premises and transported from the Shopping Center for use, storage or disposal in compliance with all Governmental Regulations relating to Hazardous Materials and Landlord's hazardous materials abatement criteria by a hazardous materials abatement contractor (the "Abatement Contractor") licensed in the state in which the Shopping center is located and approved by Landlord: or (ii) Landlord may, at its sole option, upon written notice to Tenant, cause all of said Tenant Installed Hazardous Materials to be abated and removed from in, on, under or about the Demised Premises and transported from the Shopping Center for use, storage or disposal in compliance with all Governmental Regulations relating to Hazardous Materials by a hazardous materials abatement contractor Selected 'by Landlord, in which event, the costs and expenses of such abatement, removal and disposal, as reasonably estimated by Landlord, shall be paid to Landlord by Tenant, as Additional Rant, within ten (10) days after receipt of an invoice therefor. In the event Tenant fails to timely perform its obligations under this Section 21.28(d), Landlord shall have the right (but shall not be obligated) to perform Tenant's obligations under this Section 21.28(d), in which event, Tenant shall pay to Landlord, as Additional Rent, promptly. upon demand, the ==sts and expenses thereof, :;th interest :.~.ereon at the Default Rate. (e) Landler:! represents to Tenant that Landlord has caused an environmental s_r•rey of the accessible areas of the Demised Premises to be -err_^ ed by ATC/Diagnostic Env_ronmental Inc. ("ATC") to deter=-,ne the presence of asbestos -containing construction :mater_als in the accessible areas of the Demised Premises containing concentrations of asbestos fibers at levels regulated by the ;overnnental Authorities of the state of California (i.e. ctncentrations of asbestos fibers in percentages greater than one -tenth of one percent (>O.it) . The survey by ATC included visual ctservation for asbestos -containing construction materials, sampling of suspect materials and laboratory analysis (collectively, the "Tests"). The Tests performed by ATC on the sampled materials reveal that such sampled materials do not contain asbestos fibers percentages greater than one -tenth of one percent (>0.1%) except for the asbestos -containing materials located as shown or. Vie Asbestos Survey Report prepared by ATC ( the "Pre -Existing Asbestos"). Except for the "Remaining Asbestos (as hereinafter defined), Landlord agrees to cause all other Pre - Existing Asbestos to be abated and removed from the Demised Premises prior to delivering possession of the Demised Premises to Tenant (collectively, "Landlord's Asbestos Abatement work"). The term "Remaining Asbestos" as used herein means the asbestos - containing joint ctmpound located at the joints and seams of tho interior partition walls of the Demised Premises indicated and shown on Sheets. 01 and D2 of the Demolition Plans prepared by Robert Kubicak Arctitects and Associates, Inc. dated February 24, 1995 as not being removed by Landlord as a part of Laandlord's demolition work. Tenant acknowledges and agrees that in no event shall Landlord be responsible for any remedial action with respect to the Remaining Asbestos and that Tenant shall, at its sole cost and expense, be responsible for any and all remedial action with respect to the Remaining Asbestos. Except for any remedial action with respect to the Remaining Asbestos, in no event shall Tenant (and Landlord shall) be responsible for any remedial action with respect to any other asbestos or other Hazardous Materials existing In the Demised Premises unless such asbestos or other Hazardous Materials were introduced into the Damised Premises by Tenant, its Concessionaires or :he Tenant Parties during the period of Tenant's occupancy of the Danisad Premises. SECTION 21.29 Landlord and Tenant agree that all Rent paid to Landlord under this lease shall qualify as "rents from real property" as defined in Internal Revenue Code ("Code") Section 856(d), and as further defined in Treasury Regulation ("Regulation") Sec -_;on 1.856-4. Should the requirements of the abovementioned Code Section and Regulation Section be amended so that any Rent (Fixed Minimum Rent, Percentage Rent and Additional Rent) payable to Landlord under this lease no longer qualifies as "rents from real =reperty" for the purposes of the code and associated Regulations, the Rent payable to Landlord under this lease shall be adj_sted so that such Rent will qualify as "rents from real property" under the Code and Regulations, as amended: provided, however, _hat any adjustments required pursuant to the provisions of this section 21.29 shall be made so as to produce the equivalent (in economic terms) Rent as was payable by Tenant prior to such adjustment. SECTION 21.30 This lease may be executed and delivered in counterparts, eact cf which shall be deemed to be. a duplicate original hereof. 'his lease may also be executed in multiple counterparts and stall be effective when counterparts hereof, when taken together, bear the signatures of or on behalf of all of the parties set forth =elow comprising Landlord and Tenant. SECTIO,4 21.:1_ .he parties expressly agree that (1) all ::nperformsd obliga=_=ns of either party pursuant to tnis lease that shall have accrued z for to the Lease Expiration Date or earlier termination of this lease and (ii) all provisions of tftis '_ease which contemplate-erformance by either party after the Lease Expiration Date or earlier termination of this lease shall sur-:ive the Lease Expzrati=-. Cate or earlier to^:nation, -_ ;.._s lease. - I L:3 6 . 3 3 BURLINGTON. 3 3" I14 WITNESS WEEREOF. _he parties have executed this lease as of the day and year firs_ above written. MCA HUNTINGTON ASSOCIATES, L.P., a Delaware limited partnership By: MCA Huntington Inc., a Dela are corp a ion, its Can ra rtn r WITTNNE�SS/: (ATTEST) BY:. Z" (Landlord) BURLINGTON COAT FACTORY W&REMCUSE OF HUNTINGTON BEACH, INC., a Californian corporation WI 5 5: (ATTEST) rp 1 BY:17 By: (Tenant) (CORPORATE SEAL) In consideration cf, and as an inducement for =he granting, execution and delivery of a certain Lease dated (therein the "lease" by MCA HUNTINGTON ASSOCIATES, L.P., the Landlord therein named ;herein the ";andlord") to 3L'RL:uGTON BOAT FACTORY WAREHOUSE OF HUNTINGTON BEACH, INC., a California corporation, the Tenant therein named (herein the "Tenant"), and :n further consideration of the sum of Ten Dollars (510.00) and other good and valuable consideration paid ay Landlord to the undersigned, the receipt and sufficiency of which are hereby acknowledged, the undersigned, BURLINGTON COAT FACTORY WAREHOUSE CORPORATION a Delaware corporation (herein and :n tt:e lease the "Guarantor"), hereby guarantees to the Landlord, its successors and assigns, the full and prompt payment of Rent, as defined in the lease, and any and all other sums and charges payable by Tenant, its successors and assigns, under the lease, and hereby further guarantees the full and timely performance and observance of all the covenants, terms, conditions and agreements of the lease to be performed and observed by Tenant, its successors and assigns: and Guarantor hereby covenants and agrees to and with Landlord, its successors and assigns, that if default shall at any time be made by Tenant, its successors or assigns, in the payment of Rent, or if Tenant should default in the performance and observance of any of the terms, covenants, provisions or conditions contained in the lease, Guarantor shall and will forthwith pay such Rent to Landlord, its successors and assigns, and any arrears thereof, and shall and will forthwith faithfully perform and fulfill all of such terms, covenants, conditions and provisions, and will forthwith pay to Landlord all damages that may arise in consequence of any default by Tenant, its successors or assigns, under the lease, includinq without limitation, all attorneys' fees, and. disbursements incurred by Landlord or caused by any such default and or by the enforcement of this Guaranty. It at any time the term "Guarantor" shall include more than one (1) person or entity, the obligations of all such persons and/or entities under this Guaranty shall be joint and several. Guarantor's obligatians-under this Guaranty shall be for the period from the Effective Date through the day prier to the twelfth (12th) anniversary af_the Rent C'�mmencement Date (as such terms 'are definQd''in the lease)-;- t7ie`reaftar; Guarantor's obligations under this Guaranty shall be automatically extended for periods of six (6) years, on the twelfth (12th), eighteenth (18th), twenty-fourth (24th) anniversary of the Rent Commencement Date if Tenant has not exercised its option (if available) to terminate the lease pursuant to the provisions of Article I(h) of the lease. Guarantor hereby expressly understands and agrees that this Guaranty is an absolute and unconditional Guaranty of payment and of performance and that Guarantor's liability under this Guaranty shall be primary and that this Guaranty shall be enforceable against Guarantor, its successors and assigns, without the necessity for any suit or proceedings on Landlord's part of any kind or nature whatsoever against Tenant, its successors and assigns and without the necessity of any notice of non-payment, non-performance or non -observance or of any notice of acceptance of this Guaranty or of any other notice or demand to which Guarantor might otherwise be entitled, all of which the Guarantor hereby expressly waives. Guarantor hereby expressly understands and agrees that any failure or delay of Landlord to enforce any of its rights under the lease or under this Guaranty shall in no way affect Guarantor's obligations under this Guaranty. Guarantor hereby expressly waives to the fullest extent permitted by applicable law each of the following: the right to require Landlord to proceed against Tenant, exhaust any security which W ' Landlord now nods __ -_ay -.zid c:~Le =� ___n enant Zr _u S,:e any other light or :ezedy available to landlord: any and all r:grt to participate in any security teposit held by Landlord now or _n the future: all defenses used upon the disability of-enant, or release of Tenant's liability for any reason whatsoever: any and all rights it may have now or :n the future to require or demand that Landlord pursue any right or remedy Landlord may have as against Tenant or any third party: the provisions of California Civil code Sections 2809, 2810, 2819, 2845, 2847, 2848, 2849, and 2850 as the same nay be amended from time to time or under any successor thereto, or under any similar statute now or hereafter in force, or under any present or future laws or case decisions to the same effect: the provisions of California code of Civil Procedure Sections 580(a), 580(d), and 726 as the same may be amended from time to time or under any successor thereto, or -under any similar statute now or hereafter in force, or under any present or future laws or case decisions to the same effect; and any and all other defenses of whatsoever nature to the fullest extent which they may be waived under applicable law. Guarantor hereby expressly understands and agrees that the validity of this Guaranty and the obligations of the Guarantor hereunder shall in no wise be terminated, affected, diminished or impaired by reason of the assertion or the failure to assert by Landlord against Tenant, or against Tenant's successors or assigns, of any of the rights or remedies reserved to Landlord pursuant to the provisions of the lease. Guarantor hereby expressly understands and agrees that this Guaranty shall be a continuing Guax nty, and that the liability of the GuarannEor Hereunder in no way be affected, modified o'r diminisFie'd��_r�eeis�an oZ any�`assignment,— r neua`7;- codification or extens on o! the lease or by reason of any modification or waiver of or change in any of the terms, covenants, conditioils or provisions of the lease by Landlord and Tenant, or by reason of any extension of time that may be granted by��ptcLandlord to Tenant, its successors or assigns, or by reason o€ any bany, insolvency, reorganization, arrangement, assignment for the benefit of creditors, receivership or trusteeship affecting Tenant, whether or not notice thereof is given to Guarantor. Guarantor warrants and represents to Landlord that it has the legal right and capacity to execute this Guaranty. In the event that this Guaranty shall be held ineffective or unenforceable by any court of competent jurisdiction, then Guarantor shall be deemed to be a tenant under the lease with the same force and affect as if Guarantor were expressly named as a joint tenant therein. Guarantor hereby expressly understands and agrees that all of the Landlord's rights and remedies under the lease or under this Guaranty are intended to be distinct, separate and cumulative, and, no such right or remedy therein or herein mentioned is intended to be in exclusion of or a waiver of any other right or remedy available to Landlord. As used herein, the term "successors and assigns" shall be deemed to include the heirs and legal representatives of Tenant and Guarantor, as the case may be. ri ..uarantcr -ere_ .arrants 3na a�-B5e^t5 _'at '_nan_ Is a Wholly cldned Of zne anc :`at =.`.e guarantor _s by t:,e laws of _re state :.n -rhic.. .t _s _::carporated, and any other state having ;ur:sdict_on over -z, as '.ell 3s _y its zharzer and by-laws d41y aut::or_zed to exec -ate t'i!s Guaranty. This Guaranty shall be governed by and ctnstrued .n accordance with the laws o: .he ;arlsdicticn :n which the premises demised pursuant to t1m '_ease :s located, r w TN E55 wPi$R CF the Guarantor has executed this Guaranty the .day -of %j 19 BURLINGTON COAT FACTORY WARERCUSE CORPORATION, a t Delaware corporation Att t or witness: e �a 77,� r f sy: Address: 1830 Route 130 N Burlington, New Jersey 08016 11 ,u 11 11 16I111alOG 11 (1) -I LEASE PLAN tY• w ..•i.rry N» r••.r.r .wly y .►_-. r. l.....1 1.•... .I ,i. t•ww CM • !r. lir•w• •.rlr.r .. w...• ... }� r N... •.r rr �... rr '� •Mil. .I 1► /r1 M ra Ml••.•, •.Jn.• �i. A.M..• •M rl.1 14 r• 0 ► . •.rlr Vr ri• MM r •..4 !w• ti+ 1M.. i•LM�. .. ••.wr. •M rrlMMrw .. wr r. r•i. •! 1.•I�r• r /.►.+.r •• .rl� ..IIwMI ►.�Y M w•.rrs.rr�• .N �r.r.• .,. M.r.4 K. p•• I. rw r M..�• Ir�llr� �l•i r r+•i.•I .I 1•r.NM 1►N uy M/•rr• I. r....1 . a M r �/ /rrf • r,r� M rM•/ m .iNl w1•r •r I. U.t Ma• q••I wr M.Y/r� Ir.l.. r1 r•ir .w MI! M Ir.w ►r• •• • ••►n..r.r�, ivr•.M r ry.r.►C I•rrl MIft4 M •Pft4Kl* M. 1./461. �Y 1.•r v1/•1filly ►.JAB' I�f�fll I1- ►�i 1.1-11 I.i-I,l. IV f g O i0 100 - iO0 C.+.r . • �M YrW, Rr�..� I..w w�IM •.�'� .�.n, M.I. M r.. wr M •MM M � �. ry w�.w.w. �.+.►. ...r.+.. r�r.i n.fw Fw• •.i/� Iw. tiY ..w.. Yw �... lb. •�ru Wh.. .b rrl.r.r... �.� w r.M .� 1��1.♦ r � � F ti rr �r r.r. Y Ma rrM....s .�I+r ...�•. 1W r.►� r r rwrM w..r . rr.� � rrr .b Mr• �►.• r M N r.• .W M 4/iM [UMr rJ Yr nw MK. M w N� .. r.►wr..w, Mir M r w•+r IMr wwA .� yr•+YM1 w� M.� ► M Irw .y 1pt- D �v�p� �++�•�rn+l oe�r rnctrr - rnK...� ea q ,c�rar,rrr�,evs •5 i��• Ezralow Proposal ATTACHMENT #3 HUNTINGTON CENTER ASSOCIATES, IA.0 23622 Calabasas Road Suite 100 Calabasas, California 91302 April 14, 2000 Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Attention: Mr. David C. Biggs RECEIVED APR 17 2000 DEPARTMENT OF ECONOMIC DEVELOPMENT Re: Statement of Interest Regarding Redevelopment of Huntington Center Within the Huntington Beach Redevelopment Project Area (7777 Edinger Avenue, Huntington Reach, CA Dear Mr. Biggs: As you know, we are the owner of the Huntington Center, exclusive of the building and underlying parcel owned by Montgomery Yard. Pursuant to the City's March 3rd request for our Statement of Interest and Request for Proposal for Redevelopment of Huntington Center, we enclose our completed Statement of Interest for Participation in the Huntington Beach Redevelopment Project. Please do not hesitate to call us if you have any questions. Very truly yours, Bryan Ezralow, Trustee of the Bryan Ezralow 1994 Trust, Manager of the corporate Manager of HUNTINGTON CENTER ASSOCIATES, LLC, a Delaware limited liability company cc: Mr. Gus Duran STATEMENT OF INTEREST FOR PARTICIPATION IN THE HUNTINGTON BEACH REDEVELOPMENT PROJECT I hereby express my interest in the Huntington Beach Redevelopment Project: Name of Property Ownerffenant: Huntington Center Associates, LLC, a Delaware limited liability company ("HCA"); Attention: Messrs. Bryan Ezralow and Douglas Gray. Phone: (818) 223-3535 (Mr. Ezralow) and (949) 623-8383 (Mr. Gray). Home Address: 23622 Calabasas Road, Suite 100, Calabasas, California 91302 and 7545 Irvine Center Drive, Suite 200, Irvine, California 92618. 3. Address of Property owned orrented in the Project Area: Huntington Center, 7777 Edinger Avenue, Huntington Beach, California (Parcels 2 through 9 of Parcel Map No. 86-200), exclusive of the Montgomery Ward improvements and underlying land (Parcel 1 of Parcel Map No. 86-200). 4. Name of business in the Project Area: Huntington Center, also known as the Huntington Beach Mall. Phone: (714) 897-2534 (Ms. Pat Rogers, Huntington Center on -site manager). I own (x); ; and wish to rehabilitate (x) in part; and build (x) in part; sefit) my present property. if tenant, indicate! I!I0LIth-tU-111U11tlI ,al lease fate oficase. 6. My present type of business is: real estate development, operation, and management, including without limitation regional retail shopping centers and power centers. Nature of proposed participation: HCA proposes to participate as owner and developer in the redevelopment of the Huntington Center into a high quality, master planned, regional commercial retail, dining, entertainment facility with supporting services (tentatively called The Crossings at Huntington Beach) which will be compatible with the surrounding neighborhood and City of Huntington Beach and consistent with the purposes and objectives of the Redevelopment Plan for the Huntington Beach Redevelopment Project and the goals and policies of the Huntington Beach General r STATEMENT OF INTEREST FOR PARTICIPATION IN THE HUNTINGTON BEACH REDEVELOPMENT PROJECT (continued) Plan. Additional information will be included in HCA's development proposal to be submitted to the City under separate cover. I understand that submission of this Statement of Interest does not in any way obligate me to participate in the Project. SignReturn to: an4.—Ezralow, as Trustee of the Bryan Ezralow 1994 Trust, Redevelopment Agency of the Manager for Huntington Center Associates, LLC Title: Manager Date: April 14, 2000 2 City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 WHITMAN BREED ABBOTT & �MORGAN LI,I.1 Lobmov 633 WEST FIFTH STREET TOKYO Twe-jTy FIRST FLOOR Writer's direct Los ASGEI.Es. CALIFORNIA 90071-2040 dial number: 213-696-2400 (213) 896-2494 FACSIMILE: 21a-696.2450 May 2, 2000 Via Messenger and Federal Express Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Attention: Mr. Gus Duran Re: HUNTINGTON CENTER ASSOCIATES, LLC Development Proposal Pursuant to March 3, 2000 Request for Proposal for Redevelopment of Huntington Center Within the Huntington Beach Redevelopment Project Area Dear Sir: N'FNV YORK GREEN-WICIE NE WA R IE PAL.11 BEACEE As you know, we are counsel to Huntington Center Associates, LLC ("FICA"), the owner of the Huntington Center, exclusive of the Montgomery Ward parcel and improvements. FICA is an affiliate of The Ezralow Company, LLC ("Ezralow") and is managed by one or more entities controlled by Ezralow. Investor members in HCA include SunAmerica, Inc. and various affiliates of Lubert-Adler Real Estate. Pursuant to the City's March 3, 2000 Request for Proposal for Redevelopment of Huntington Center Within the Huntington Beach Redevelopment Project Area (the "RFP"), FICA has authorized us to submit HCA's Development Proposal as follows below. The format used below is taken from that adopted in the City's RPF, and all section references are to the provisions of subsection E(b) of the RFP: Identification of Developer. i. Huntington Center Associates, LLC c/o The Ezralow Company, LLC 23622 Calabasas Road, Suite 100 Calabasas, California 91302 Attention: Mr. Bryan R. Ezralow President Telephone: (818) 223-3535 Facsimile: (818) 223-3536 ICH 050200 caworkldocsVfp_hb RECEIVED Ir n1 1 9 2000 DEPARTMENT OF ECONOMIC DEVELOPMENT W HITMAN BREED A13BOTT & MORGAN LLP Development Proposal in Response to Request for Proposal May 2, 2000 ii. Huntington Center Associates, LLC ("HCA")is a Delaware limited liability company the manager of which is Huntington Management Ent., LLC, a Delaware limited liability company (which is managed by BMLF/l-Iuntington, LLC, a Delaware limited liability company of which Bryan Ezralow, Trustee is Manager). The other members of FICA are (i) SunAmerica, Inc., (ii) Lubert-Adler Real Estate Fund I1, L.P.. (iii) Lubert- Adler Real Estate Parallel Fund 11, L.P., and (iv) Lubert-Adler Capital Real Estate fund I1, L.P. The principals of FICA are Bryan Ezralow, Douglas Gray, Gary Freedman, David Leff, and Cristina Agra -Hughes. 2. Leases. FICA is in active and productive discussions with prospective retailers and other occupants regarding the Site, including without limitation, those described in detail to the City by Douglas Gray and other representatives of FICA, all of which is incorporated herein by reference. Additional information will be provided as it becomes available and as you may request. 3. Redevelopment Concept for Site. Enclosed is a draft preliminary Specific Plan containing HCA's proposed redevelopment concepts for the Site entitled "The Crossings ar Huntington Beach" (the "Redevelopment Concept") which incorporates, among other provisions, descriptions of proposed land uses and arrangements of those uses. The Redevelopment Concept is incorporated herein by reference. ii. The Redevelopment Concept includes descriptions and depictions of the number and sizes off structures and the type of construction to be used. iii. A break-out of the estimated total cost of the proposed redevelopment has been provided to the City and is incorporated herein by reference. The basic assumptions affecting the feasibility of the proposed redevelopment include: (i) HCA's selection by the Agency as redeveloper, (ii) the Agency's entering into suitable agreements concerning HCA's redevelop- ment of the Site, and (iii) HCA's ownership or control of the Site sufficient to accomplish the redevelopment of the Site as approved by the Agency. iv. HCA's preliminary schedule of performance, subject to selection of FICA by the Agency as redeveloper and approval by the Agency of a redevelop- ment project, is to commence demolition of outmoded existing improve- ments of the Site in the latter part of this year (perhaps October 2000). Demolition is estimated to take approximately sixty (60) days, after which JCH 050200 caworkldocslrfp-hb WHITMAN BREED AB 30TT & MORGAN LLP Development Proposal in Response to Request for Proposal 3 May 2, 2000 construction of the redevelopment will commence and is anticipated to take approximately twelve (12) to sixteen (16) months. 4. Financial Capability_. FICA has provided its financial information to the City which is incorporat- ed herein by reference. it FICA has provided copies of its corporate reports and other documents regarding its financial condition and related matters to the City which are incorporated herein by reference. iii. FICA has provided various redevelopment financing information to the City which is incorporated herein by reference. FICA is a financable entity and FICA's interest in the Site is suitable lender security, as evidenced by FICA's financing of its acquisition of its portion of the Site in November 1999 with its existing institutional lenders. In addition, the operating and related agreements of FICA and subentities provide for the collection of capital from the members, as required, and such members have the financial capability to respond. FICA is in discussion with various institutional and other lending sources regarding redevelopment financing. iv. FICA's and Ezralow's banking reference is: Ms. Paige Serden, Vice President, City National Bank, 400 N. Roxbury Drive, Suite 800, Beverly Hills, CA 90210, telephone (310) 888-6473. Please advise if you need additional banking references. A letter of recommendation has been re- quested from City National Bank and will be provided under separate cover. 5. Development Experience. FICA has provided a list of development projects and particulars regarding such projects to the City which are incorporated herein by reference. Over the last thirty (30) years, E7ralow has developed more than 1,000,000 square feet of prime commercial and multi -tenant space, 20,000 apartment units, and has completed or is now developing retail projects totaling an additional approximately 1,000,000. In addition to clean -sheet development projects, Ezralow has rehabilitated earthquake damaged multi -family hous- ing site and warehouse facilities and has redeveloped retail projects present- ing complex development and construction issues. Specific details related to the foregoing arc contained in the materials provided to the City. JCH 050200 c=lwork,docs%rfp_hb WH ITMAN BREED ABBOTT & MORGAN LLr' Development Proposal in Response to Request for Proposal May 2, 2000 4 ii. HCA's proposed architects are Greenberg Farrow Associates ("GFA"), 15101 RedhiIl Avenue, Suite 200, Tustin, California, 92780, Attention: Mr. Frank Coda, telephone (714) 259-0500. GFA has been in business as retail and commercial architects, designers, and planners for twenty (20) years and have designed and planned in excess of five hundred (500) projects, includ- ing previous Ezralow retail projects and others now under construction. iii. HCA and Ezralow build to own, generally speaking, and Ezralow's com- mercial and retail management division conducts all management, including the existing Center and the redeveloped Center. Presently, Ezralow manag- es approximately 3,500,000 square feet of Ezralow and affiliates' projects. 6. Additional Information. HCA and Ezralow enjoy established relationships with the retail community, including the business representatives and brokers of the prospective tenants and other occupants HCA would consider for the redeveloped Center. As president and vice president of Ezralow Retail Operations, an affiliate of Ezralow, with extensive experience in retail development, Douglas Gray and Paul Bernard are in constant contact with the retailers whose presence is essential to the success of the redeveloped Center. ii. HCA owns (or is the benefitted party under easements or licenses with third parties, including Southern California Edison) all of the Site, except for the Montgomery Ward parcel and improvements (Parcel 1 of Parcel Map No. 86-200, as shown on the survey of the Site provided to the City). HCA is also the landlord under various leases with tenants of the existing Center who are anticipated to remain in the redeveloped Center, including without limitation Barnes & Noble, Romano's Macaroni Grill, and other tenants of the existing improvements on the easterly portion of the Site. iii. Burlington Coat Factory Warehouse of Huntington Beach, Inc. ("Burlington") entered into a lease with HCA's predecessor -in -interest on April 28, 1995 for a portion of the Site corresponding to Parcel 6 of Parcel Map No. 86-200 (the "Lease"). The term of the Lease is approximately thirty (30) years expiring on or about January 31, 2025. HCA, as landlord under the Lease, has made no election under the Cease or otherwise to raze or otherwise change the building owned by HCA of which Burlington's premises are a part. Accordingly, the Redevelopment Concept enclosed herewith includes a redevelopment concept for your consideration incorpo- rating the existing building tenanted by Burlington. JCH 050200 caworkldocslrfp.hb WHITMAN BREED ADBOTT & MORGA.; LLP Development Proposal in Response to Request for Proposal May 2. 2000 Please provide a copy of the form of Owner Participation Agreement or comparable redevelopment agreement the City may use in connection with the redevelopment of the Site if HCA is selected as redeveloper. Please do not hesitate to call Bryan Ezralow, Douglas Gray or us if you have any questions. cc Mr. Bryan Ezralow (w/o Mr. Douglas Gray (w/o e11%.L.! Ms. Cristina Agra -Hughes (w/encl.) !CH 050200 cA orkldocslrfp.hb & Morgan LLP 5 001,d (rim on. pw" fs L4 !,*, I's r,f ff 11 ' %WI LAI ��'Il l;r �l�::-.�J�i, '., ,'4'.t-.... �.: '�--.� 4." 4 l4ZT, jusr !MW - �,4 The Crossings at Huntington Beach City of Huntington Beach SPECIFIC PLAN NO. 13 Prepared by Iluntington Property Associates LLC. will, Greenberg Farrow Architects Hall & Foreman I.inscott Law & Greenspan Adopted 2000 Ordinance No. March 20, 2000 TABLE OF CONTENTS 2. INTRODUC"I'ION 1.0 Purpose and Intent 2 1.1 Authority and Procedures 2 1.2 Scope and Format 3 1.3 Project Area Description 5 1.4 General Plan Designation 7 1.5 Zoning Provisions 7 1.6 State Mandated Requirements 8 DrVELOPMENT CONCEIT 2.0 General Development flan 2.1 Regional Commercial Uses 15 2.2 Open Space and Pedestrian Walkways 17 2.3 Circulation Plan 19 2.4 Public Facilities 21 2.5 Design Guidelines 30 2.5.1 Project Area Character 30 2.5.2 Site Planning Guidelines 30 2.5.3 Common Area Guidelines 32 2.5.4 Architectural Guidelines 41 2.5.5 landscape Guidelines 49 2.5.6 Signage Guidelines 53 3. DEVELOPMENT REGULATIONS 3.0 I'u rpose 55 3.1 General Provisions 55 3.2 Definitions 55 3.3 Development Standards 57 3.3.1 Permitted Uses 57 3.3.2 Intensity 57 3.3.3 Building Height 57 3.3.4 Setbacks 57 3.3.5 landscaping 57 ;i.;i.G Signs 57 3.3.7 Light i ng 57 3.3.8 Parking {i I 4. IMPLEMENTATION 4.0 Administration 65 4.1 Development Phasing Plan 65) 4.2 Methods and Procedures GG 4.3 Master Plan 66 4.4 Site Plan Review 68 4.5 Reuse/Change of Use: Review 69 4.6 Environmental Determination 69 4.7 Request for Deviation 69 4.8 Specific Plan Amendment 70 4.9 Severability 71 The Crossings at Huntington Beach Specific Plan 3 APPENDICES (Volume Two) A — Legal Description B — General Plan Consistency C — Standard Conditions of Approval and Environmental Mitigation Measures D — Sign Standards List of Exhibits Exhibit 1 Vicinity Maps 5 Exhibit 2 Aerial Photograph 6 Exhibit 3 Illustrative Conceptual Master flan 10 Exhibit 4 Project Description 12 Exhibit 5a Development Concept (Level 1) 13 Exhibit 5b Development Concept (Level 2) 14 Exhibit 6 Open Space and Pedestrian Walkways 16 Exhibit 7 Circulation Plan 18 Exhibit 8 Water System Plan 22 Exhibit 9 Sewer System Plan 24 Exhibit 10 Design Guidelines 29 Exhibit l 1 Color and Materials of Common Areas 38 Exhibit 12 'typical Tenant Storefront 45 Exhibit 13 Iandscape Concept Plan 48 Exhibit 14 Plant Materials Palette 50 Exhibit I Sa Permitted Uses Chart 58 Exhibit 15b Temporary and Seasonal Eve nIs Chart 59 Exhibit 16 Development Regulations Chart 60 Exhibit 17 Parking Standards and Details 61 Exhibit 18 Development Regulations Check List 62 Exhibit 19 Conceptual Phasing Plan 64 The Crossings at Huntington Beach Specific Plan 4 INTRODUCTION Section one The Crossings at Huntington Beach Specific Plan INTRODUCTION 1.0 PURPOSE AND INTENT The Crossings at Hunlington Beach Specific Plan establishes the planning concept, design theme, development regulations and administrative procedures necessary to achieve an orderly and compatible development of the project area, and to implement the goals, policies and objectives of the Huntington 11cach general Plan. The intent is to establish a public/private partnership to enable the creation of a community center setting and achieve a high quality in retail and entertainment design. The Crossings at Huntington Beach Specific Plan identifies the location, character and intensities for a regional commercial complex. The Specific Plan establishes the alignment and design of an on -site circulation system and all facilities and infrastructure necessary to facilitate a master planned development. The Specific flan creates a compatible design theme for the project area and establishes the development regulations necessary to accomplish the identified objectives. 'fhe Specific Plan is regulatory in nature anti serves as zoning for The Crossings at Huntington Beach. Subsequent development plans, Parcel Maps and other entitlement requests for the project area must Ex - consistent with both the Specific Plan and the Huntington l;cach General Plan. An Environmental Assessment has been conducted (No. 98-4) and a list of mitigation measures and conditions of approval have been prepared as a companion report to the Specific flan. 1.1 AUTHORITY AND PROCEDURE The State of California requires that all cities and counties prepare and adopt a comprehensive General Plan for the physical development of their area of .jurisdiction. Following the adoption of the General Plan, the entity is required to develop and adopt regulating programs (zoning and subdivision ordinances, building and housing codes, and other regulations), which will implement the policies described in the General Plan. California State law authorizes cities with complete General Plans to prepare and adopt Specific Plans (Government Code Sections G.54 50 et. seq.). Specific Plans are intended to be a bridge between the local General Plan and individual development prOpos<als. Specific Plans contain both planning policies and regulations, and may combine zoning regulations, capital improvement programs, detailed development standards and other regulatory methods into one document which can be tailored to meet the needs of a specific area. Local planning agencies or their legislative lxxiies may designate areas within Ilucir jurisdiction as ones for which a Specific Plan is "necessary or convenient" (Government Code Section G5451). The Crossings at Huntington Beach Specific Plan 6 A Specific Flan may either be adopted by ordinance or resolution (Government Code Section 65507). Should the legislative body wish to change a proposed Specific Flan recommended by the Planning Commission, the change must first be referred back to the Commission for consideration, if not previously considered (Government Code Section 65504). Adoption or amendment of a Specific Plan constitutes a project under the California Environmental Quality Act (CEQA) and the State's Environmental Impact Report (EIR) guidelines. If the initial environmental review shows that the proposed or amended plan could significantly affect the environment, the Jurisdiction must prepare an EIR and submit it in draft form for- public review. The need for an EIR in a particular case is determined by the local government. A Specific Plan and an FIR on a Specific flan overlap extensively; they must address many of the same concerns and the process for preparing them is nearly identical. 'Therefore, environmental assessment should be an integral part of preparing or revising a Specific Plan. The preparation, adoption and implementation of The Crossings at Huntington Beach Specific flan by the City of Huntington Beach is authorized by the California Government Code, "Title 7, Division 1, Chapter 3, Article n, Sections 65450 through 65457. The Huntington Beach General Plan was recently rewritten and adopted by the City Council (May 13, 1996). The artiended General Plan maintains the commercial designation for the project area. The Crossings at Huntington Beach Specific Plan is consistent with the goals and policies of the Huntington Beach General Plan. 1.2 SCOPE AND FORMAT The Crossings at Huntington Beach Specific flan is divided into four sequential sections. Section One is the Introduction and describes the purpose and intent of the document along with a brief explanation of Specific flan procedures and authoriialion. Section One also presents the Project Area Description and is intended to establish the reasons why the Specific Plan process is logical and necessary for this pot -lion of the City. This section presents a general description of the Specific Plan area; special characteristics and existing conditions which make this area unique have been identified. Section Two describes the Development Concept. 'Tlre design concept evolves from the objectives identified and existing conditions discussed in Section One. This section also presents the circulation, public facilities, infrastructure and landscaping which will support the development concept and reinforce the design theme. Section Two also includes the Design Guidelines. "Phis section identifies and descril:x:s the intended character for the area and provides a frarnework for project implementation. The Crossings at Huntington Beach Specific Plan 7 Section 'Three establishes the Development Regulations for the Specific. Ilan area and for individual project development. Section "Three presents it detailed description of [lie Development Stirrulards whic:ll are necessary to guide and control new projects and carry out ilie goals aild policies of the Specific flan and the City's General hall. Section Four presents the Implementation process and discusses how individual projects and tenant improvements will Ix reviewed and approved. 'this section outlines the project iipproval pi•ex•edures and descritxs the prcx•ess for project appals and the melluxis by wliicli Ilse Specific flan can be modified or anuended. An Aplkiuiix (printed under separate cover) contains all the special studies and reports wliicli have contributed to the formation of flit Stkcific flan. The Appendix (volume Two) includes the Legal Dex:riptloll of the sitc, a Central flan Consistency Analysis, identifies the Mitigalloll Measures and Conditions of Approval desired in the Environmenial Analysis and includes the prolx)sed Sign Standards. View LV (?it+'.wtl% + of !lurit/ 1kwt-h crrlr:rrrc v ritarr CivNcv J Ivint • l'r.•nr �1�A.vrr.vu� �:� lri�lrr L;Irr{tw•Ar•cvuri The Crossings at Huntington Beach Specific Plan 1.3 PROJECT AREA DF.SCRIF'I'ION The Crossings at Huntington Beach Specific Flan covers 63 acres located in the northern portion of the City of Huntington Beach. The area is generally bounded on the north by Center Avenue, on the cast by Ileach Boulevard, on the south by Edinger Avenue, and on the west by Southern Pacific railroad right -of - wiry. A legal description of properties in the Specific Flan project area has been included in the Appendix. Boise Ave, �Os f3 J� a� McFadden Ave. '! Gowen ► st C A co" Qi Edinger m D a m The crosdnq. 5 at Hx�ntington u3 Bucn Site Location C PASADENA • • LOS ANGELES SANTA MONICA LOS + AMOELES OffERNATK)OM AARPORT 1 BEAC • torus �� TORRANCE AZRF�RaHELM oar oAnoeN DOME •LONG • n BEA SAWTA• LONG =#W AMA tom SSITE;� " V'N HUNTINGTON BEACH � Regional Location The project area is surrounded by a variety of land uses and activities. 'fire San Diego Freeway (405) and an office retail complex create the northern boundary. To the south, office and retail uses are located across Edinyer Avenue. To the east, commercial uses ary located across Beach Boulevard. To the west, is the Southern Pacific Railroad Line. The property across from the rail line is designated commercial. Vicinity Maps The Crossings at Huntington Beach Specific Plan 9 • P ' � t i t- �> �� 77 • 1 �\ .`\ `'�,••l�.�y�r+ii��7�'ti .'r � f � \T �''w f , r.• i` - '. � "_: •--. - _— : '""►�—.�,�— �� '`'. t, � :ems- 71 T+ �• ''"r _1 Ss�• i.�-� .•r-=-. � :l�_r."Y';+«�r'+� �r � r� � ` -��` .:; ��~` ! ' n �', � \ ,{ FT— i4p i I ....... � f•� •'c-s. r* �''r�: '��.�,: � ~','ICU . rr''• `�=\,. ,'��. �''•,1. 11�'I �•�� . � S t is �¢U/.r��y�Y�/•i+•il�4':�5. ;r�'�, ,.�a f ,s,� � ; ` 3` {�fii�^(■"�I� i�11�.� 1 � °-Iil � j� ; � � � 1 }I I •//[ f } ��-�� R • f;Y �c .4=�'� i�� 't- ,rl� a. ,�r� �• ' :1.� �• A f� .�'� .� • `t' , )� I• "� .� �. A. ._ '4F�'- �' L � L 'ryY' V!'l�.dl � / , 1. f i.` � I � �I ,l�•.�t;i af� •I r/l�'� i i — '�.. �1�`1 ' r:�..r`�� I•I•��•�i '` � '�y. ±' � ■'��.:�a�'�1I •� .f.l '-��•.! 1.4 GENERAL PLAN DESIGNATION The entire Crossings at Huntington Beach is currently designated as CR-F2-SF-MU(F9)-Commercial Regional-0.5 FAR -Specific Plan Overlay -mixed use overlay-1.5 (MU-0.5 (0/25du/acre in the City's General Plan. The site has been designated for commercial land uses since the mid 1960's. The commercial regional designation anticipates anchor department stores, promotional retail, restaurants, entertainment, and similar region -serving uses. The site has been designated to be within a Special Development Area requiring that a Specific Plan with special regulations and standards be established for "North Huntington Center." Vie w of Slarbucks rind Bal rres & Noble from Center A venue View ofMervyn's firm CenlerAvenuc 1.5 ZONING PROVISIONS The Crossings at Huntington Beach is presently zoned General Commercial ("CG") to accommodate a full range of retail and service businesses. The site is also within a sub -area of the merged Redevelopment Project Areas. The adoption of this Specific Plan will supersede the existing zoning and establish a new set of development regulations. The Crossings at Huntington Beach site currently consists of a number of activities. The site contains approximately 960,000 square feet of retail commercial space, some of which is currently unoccupied. This site has been approved and developed in numerous phases over the past 30 years. Current market pressures and extent of adjacent competing retail activities are driving the need to develop a new exciting commercial center for the City. The Crossings at Huntington Beach Specific Plan 11 1.6 STATF MANDATIED KI:Qt11KFMF.NTS To comply with the State of California legislated mandates, the City of Huntington Beach has adopted several plans to deal with regional issues including Air Quality, Congestion Management, Growth Management and 'Transportation Demand Management Plans. All development within the Specific flan area shall comply with the applicable previsions of the following plans: South Coast Air Quality Management Plan The SOr11I1 Coast Air Quality Management Plan (AQMP) requires measures to reduce traffic congestion, improve air quality, and requires that cities develop Air Quality components within their General flans. These measures include Regulation XV, a program which requires employers of more than one hundred (100) persons to prepare trip reduction plans, and a requirement for jurisdictions to prepare an air quality compcment in ilre General flan. The City of Huntington Beach is subject to all local jurisdiction requirements set forth by the AQMP. The City has adopted an Air Quality Element and Transportation Demand Management Ordinance, which incorporates AQMP Measures. Congestion Management Plan The Congestion Managerneni Plan (CMP) is required by Assembly Bill 471 (Proposition 1 11), subsequently modified by Assembly Bill 1791. This Bill requires every urbanized county to adopt a CMP; the County of Orange has prepared a CMP which includes the City of Huntington Beach. The CMP requires rniiigation of traffic impacts of development, as well as trip reduction programs. "flee City of Huntington Beach has completed the mandated components of the CMP including level of service standards, trip reduction pixvAranr, and a capital irnprovemetits program for traffic and transit. Growth Management flan A Growth Management Plan (GMP) is required to implement the passage of Orange County Measure M approved in the 1990 election. Its purpose is to ensure that fire planning, management, and implementation of traffic improvements and public facilities are adequate to meet current and projected needs. The City has an approved Growth Management Element, which meets the requirements for Measure M funding, and an adopted Transportation Demand Management Ordinance. Transportation Demand Management Transportation Demand Management ('1'I)M) measures are generally directed at increasing auto occupancy, decreasing peal: horn usage, and managing demand for transportation facilities. The City's TDM Ordinance is part of its compliance with the Growth Management Plan. The Crossings at Huntington Beach Specific Plan 12 bee '7 IW IRV. KIMA—, '4 ONE Illustrative Conceptual Master Plan Exhibit 3 ivolo: 7711s 1/111sinJI1VL' shoI4's a h f k l/w/k a/ develcyi1new .4 cwarko on the pityCel s1h'. The Crossings at Huntington Beach Specific Plan 14 -J ±=CkFt; AVFNUi�,! - ' Fl ----------- rlql llil'TVTII Ill'Thilml a 125— N AN DIEC40 FREEWAY - 405 TFR AVENUE % 1111"L milt BIE �CH'13( .-W UW1111 iiii" 111141 ill willi 1 qri1111' .. Willis I EDINGER AVENUE-----;_ Illustrative Conceptual Master Plan Exhibit 3A Alote: 1711s 1,111I.S11.,16 VL. s/14 ) 11's a hyl k YffiefiL -al i fe re/i 11 imc wl stL -wit -w on the I yn.yi -,.-/ sine. The Crossings at Huntington Beach Specific Plan 15 DEVELOPMENT CONCEPT 2.0 GENFFZAL DFVF.I.OPMF.NT PLAN The Crossings at Huntington Beach Specific Flan development concept provides for a planned retail, dining, and entertainment complex in the northern portion of the City of Huntington Beach. The Specific I'lan establishes the general type, location, parameters and character of all development within the site's boundaries, while allowing for creative design ideas on individual projects consistent with an overall concept. The Crossings at Huntington Beach will be a 63 acre master planned regional commercial retail, dining, entertainment facility with supporting services. The Specific flan is designed to allow for development in a manner that is compatible with the surrounding nelghborhood and City of Huntington Beach. The Crossings at Huntington Iteach Specific rlan provides an opportunity for a variety of quality commercial uses, consistent with the City's General flan. The Crossings at Huntington Beach Specific Plan provides the framework and guidelines necessary to create a unique:, high quality, visitor serving, retail/dining/entertainment complex. 'rhe site's natural features and proximity to regional transportation systems make the area ideal for a variety of compatible uses and activities. The development concept is designed in concert with the area's history of commercial activities and the community's need for a strong self-sufficient economy. The Crossings at Hturlington !teach provides for a range of employment opportunities in professional, retail, service, food service, and entertainment; and will broaden the employment base of the community. The Specific Plan establishes a clear development concept to assure the facilitation of a cohesive complex. Design measures encompassing site planning, area landscaping, building architecture, streetscapes, pedestrian linkages, setbacks and siSnage have been established. Concern with and adherence to these details will combine to create a unique and intc;,grated development. An illustrative conceptual master plan (Exhibit 3) depicts a scenario utilizing the various guidelines described in the Specific Flan. The plan provides a potential layout identifying building orientation and placement, parking design and access, r,)adway configuration, entryways and landscaping{. The plan is not intended to reflect an ultimate design situation, however, a large variety of other development pattern, and activities may evolve which arc also consistent with the Specific Ilan policies, guidelines and regulations. The project statistical summary is shown on Exhibit 4 and the level one and level two development concept is shown is Exhibit 5a and 5b. The Specific Plan recognizes that development will occur over I period of time and, therefore, must an#ic•ipate future concerns for the area. In Girder to address this concern, flexibility has been incorpx)rated into the Specific Hall Development Regulations (Section Three). This flexibility in development guidelines is intended to acconimcxtate future market trends and tenant needs, without sacrificing the intended high -duality character of the project area. The Crossings at Huntington Beach Specific Plan 16 To be demolished 646 719 Theater Anchors Retail Restactrants dditlon to Strip Center SUBTOTAL Anchors Strip Center Pads RestW I all tJ Banks SUBTOTAL 100 000 175 000 Note Area distributions ate tpproxjmate and may c hang is the project is developed 470 187 71 800 106 000 8 240 77 246 7 300 894,2331 20319401 Project Description (statistical summary) The Crossings at Huntington Beach Specific Plan Exhibit 4 17 NOW: Alva d/s/111,10011S JIV Upploninalc and may L lwnNe as lhclm yc l is develolvd. Project Description (statistical summary) The Crossings at Huntington Beach Specific Plan Exhibit 4A ff:3 ri rtr l; is 1 7 •�if:i.,.il:li• �llfiiia�l�liiillll� � �,,, � �,'I .I .e II•i I irili':!lilliilillilll - �. `i �;t� r' 1 r_ 1. j..�Il,.11lll � G: um •:. I L:.'.I:I. SAN DIECO FRk F%VAY - 405 M 1; •. 'ti•:. VON ��_ -1- - - - i{``t _Mil , ,I -i _. 'i � '�_ .r �•,')' 1 .7.:L:L:1 :!11„Il.,�1h 111'I: !u. .I! .I lili.: ..... �y• \ .. .I. '': :LJ ,'—Ila: SII,,II , EDIHGf.K, AVENUE Development Concept Level 1 Exhibit 5a The Crossings at Huntington Beach Specific Plan 19 1 r p'1II11nIL II 1 Iil- 1 ;1111.111 1111�111anudtl:lll llllll III I11111; lf� �;- • _ . �l' ~��+ ari; l:,ll::i!�i;u+Illlrnsmrll:Tir,� l �, , IUlljilil�ill IRRII III AINIiHlllf I!1111'f'::;iil!VIIII:I = (— _ f11/ „ ',Il'li: ii'I�ji!�'II;1 �' : =• �-�� r'- rl' _i: :I— .. � �i ��_"��' - L11•NIk AVINUF _►: _i: : :1 -�I_ j. I � _ - d j 14 ♦!�i Hipp -E I �� .�� ... � '.` .. - + I 'w w! . I'I': - }illll'il•il� III•I I i IriTr- .7 � :i�.i•I _ •.I I .II. I: I' .I. I,'I! \\4 �ILL"I :I .yi ri, 111T.,:�u I .n�u.lII I 1 I_-�` —; I i ii_ — -- = •-- + I,= , —,—. _.. [DINCEK, AVENUE is SAN DIKAO FREEWAY - 40i A(:}l Development Concept Level 2 Exhibit rb The Crossings at Huntington Beach Specific Plan 20 ��a �'�I I I ;I i II'.�.�:�I�,��I� I ��I. II � IIIII: I,:I �II�,• ..,u.:; : - -- ..`nue��•ir - 41 �� ':•i,-liur••�i�i�rilu•� .'�- r• '- -.. .�, . -r.r �.' r,JJI{Ir_ ,I ,T 1 i°I1,i. If - _ ..\.'4NTERAV{NVE J- y' „ SAN DIEGO FREEWAY - 40.5 �f jji 71 - li .I � - - - - - _;1 � � _ � � �- Iu•, I - f i I __ `�'ru,• ,I I. -'- -;- -•- --- J :`C _ •,� ., - I�i it If .�, � - — I � � I, _1 � ,. I. r .. ••: —�. N't l..__U.. J_.,:I_..., I.,.:. I.:,a:, 1221 k IL:.d.•I:,,:_.,I .`^.,L_,:.q .,. •, !I. II .u, ..IL,II .. .I .• il�., EDINGER, AVENUE - -- I• - _.,_ l._ �_. Nis Development Concept Level l Exhibit 5c The Crossings at Huntington Beach Specific Plan 21 i } 'F11rrPi il:1i 11hii i lil lll'f it h,illitll :i I :II IinIJ lil !I�_f"-+. 1 _ �� Jy(- ;i i rf'i�lltl:llllllilllllllill lil'I'illllfil?liflll'lll iai�ll�M. I'iillii II. = r '>V - _ =:r \�•'.� ' i^ ``.� }�` SAN UIEGO FREEWAY - 405 _1_ _1_ _ li ._ _g I ; •�}_ 1:7 l FF I •,i.i ,I•,,I .I. I ., N \ I�I'Vi: f1F I / ..u...J � � ♦ I •I .I I ;--„•l .1�,. . •I' Ii,l 1- - _!i•I - _ _ l- -�� _ _ _ _ I` .I �=�1= -1- -,- - --I.1_�1 ^l•ir ;Iti `l c r—= '•'lll Id :I:..I:.! L:.I':I. II, I ,.l !:I:IlLlllgl . •f II,I I 1lI:I I:JIII L•.lal.l!Lalllk.l!I'_1 'I!I:Ld!Wia... a: LI!I j_... !•,II,!r_I .LLI!.Ih I:: L•.h!,II',Ln_m u ----�''.'I+� WINGER lj NIS Development Concept Level 2 Exhibit 5d The Crossings at Huntington Beach Specific Plan 22 The objective of the Specific Plan is to implement the goals and policies of the Huntington Reach General flan by defining the physical development of the Crossings at Huntington Reach site. Included in this approach are the establishment of land use, circulation, infrastructure, landscape and architectural design characteristics for the project area. The Specific flan consists of a number of major components which will guide the development process including the Circulation flan, Public I'acilities flans, Landscape Concept, Design Guidelines, and Development ReKulations. Tire Specific flan recognizes that the major portion of the project area has been developed around the existing facility. However, any reuse, subdivision, and subsequent new development shall be subject to the provisions of the Specific Plan. Refer to Section 4.5 Site Plan Review. The Specific flan identifies and requires sufficient infrastructure and public facilities to adequately and efficiently support any and all anticipated uses and activities. These improvements will be phased to coincide with or precede individual development projects. This upfront effort will allow for buildout of the Specific Plan in an expedited manner, subject to compliance with the Specific flan and the Environmental Analysis. The Crossings at Huntington Reach Specific Plan identifies effective land planning and design regulations techniques in a flexible format which can take advantage of ideas and opportunities presented by future tenants and users. 2.1 REGIONAL. COMMERCIAL USES The Crossings at Huntington Reach Specific Flan recognizes unique development opportunities within the project area. The purpose of the Specific flan is to create it distinct cluster of activities and allow for individual project development and tenant ckcupancy to occur in it timely manner, within an overall Master Plan Concept. This approach recognizes development phasing patterns, market conditions and establishes sufficient flexibility to provide for the opportunity of a variety of activities within the Specific Ilan area. The City of Huntington I;each General flan identifies typical permitted uses under the Commercial Regional land use category. These uses include, but ar•e not limited to, anchor department stores, outlet stores, promotional ("big box") retail, retail commercial, restaurants, entertainment, professional offices, financial institutions, automobile sales facilities, and similar regional -serving uses. future activities for the area will depend on market conditions and may include a variety of activities consistent with the City's General flan. These development activities may be either an expansion of existing facilities and/or independent new projects. The project area can accommodate a total development of 1,100,000 square feet of regional commercial uses. The Crossings at Huntington Beach Specific Plan 23 t I_ - . !-,'—4.t+NtMAVIENUP-1I r� � TLi171 I � �M�MI M�MIMMNMM�I�«. ; � _— - — . - ; - ��' •• �� l ,;. I i• •i, i , 7 �.... :.; _. SAN I )IR,() I RE I WAY - •illy [JY7fK 1\lNIJI ` j;�- �-------------------- ram_. .�.� •,~ ;�• �. .,�j • I�i'�;�. I. = ' _ _ ... I I �'i'ai' 'i' • _ i 17 .I. _ ! ji I �� :.I. .rl; .n:. :'I•.I ! ..LI I f,dlll I. - .I,. .p,i i I,...: i 111 . I , L..•�.. I. LUINGL�AVLNUL M� Open Space / Pedestrian Walkways Flan Exhibit G The Crossings at Huntington Beach Specific Plan 24 rjt=CffM*(MM-AV`FNU�E-=1f =x•W- _ _ — -- ..- �.._I'i ...�- \. \ i~ �j Q•n'n •1ii ll� III I i II I: iII Ills L �*""�� ~----------..�-`�7r •N� —` :'.T, �� _ _ I. II.W. pare �.n �� Jllf-f�l•�ir•ri{i•Illll� ':! �t1.r :=7 =+�1 } �:��-;• \\';. 17 = _ �i�'•h1�ir1;Al1�•�1 ffliil"fllll;�l:.l'I._ l�+.l'I'.I:irllllllii:� 47 wt 'nrriiJ , , E ,SSE.. �- �� -- C'J SAN DIEGO FREEWAY - 405 IEK AVENUE . \ pII S17 tnaa k.a� - } �••• i - - - - -t_ - _- - - -I. R!` 1 1 �� J _ ur Ilan L. I II. [Lf bj•1LI If�I�j]lillirl' I M �-'� _ - r _ _ _ _ - t -- +�`• r \\` �'+ — is _ w- , / �• r Av. 411 V., H1111111I.H11 1 - � � �' � � ♦. �. 1 �I��11;1111'11111 = // �.e +• , � � - --' I I I = 'a I1+ �' I k :. i:- ■=. k: _ r�-.' �' k; 7�L► t� �� 1� = a� i� _ _ 'iit _ �i'•. r"i`au//lam �� })•�t ,I 7. - - = i _ B AC = r'{= / H B( -I, i..: r'. I = rti ir- - - _ _ - _ - - "(lu — �MrM`�••�, II ii „iii,---' _ �A��Rtt N�� •!' I , I' EDINGER AVENUE y'y �i41 i Open Space/Pedestrian Walkways Plan The Crossings at Huntington Beach Specific Plan Exhibit 6A 25 0 REGIONAL COMMERCIAL USF POLICIES: 2.1.1 Any expansion beyond the initial site plan approval, shall be through the site plan review process (see section 4.5). 2.1.2 Retail, dining, entertainment, and related uses drawing from it regional commercial/market area shall be the primary intended activity within the project area. 2.2 OPEN SPACE AND PFDFSTKIAN WALKWAYS The Crossings at Huntington Reach Master Plan identifies open space areas which can accommodate outdoor commercial activities, seasonal recreation and entertainment activities, and casual pedestrian meeting places. 'These pedestrian plazas become the central focus of a number of commercial nodes within the project area. In addition to the major plaza areas, there are a number of entry nodes which serve as the interfacing links between the vehicular and the pedestrian areas. The clustering of open space plazas are connected through pedestrian walkways. These walkways also serve as a link between the variety of Village commercial facilities and the Entry Plaza, the Village Strada, the Plaza and the Colonnade. A pedestrian walkway system is also used to connect the Crossings at Huntington Reach with public transportation facilities and surrounding network of public streets (see Exhibit 6). OPEN SPACE AND PEDESTRIAN WALKWAYS POLICIES: 2.2.1 Individual developments and activity areas within the specific plan area shall be linked through a series of pedestrian walkways which culminate in an interconnected system of pedestrian plazas creating a variety of open spaces. 2.2.2 A pedestrian walkway system will link or connect all future development pads to the central portion of the Crossings at I luntington Reach. 2.2.3 All pedestrian walkways shall be designed and landscaped consistent with the overall theme of the Crossings at I luntington I;each. 2.2.4 Pedestrian walkways as shown on Exhibit 6 shall be incorporated on the Landscary and Technical Site Plans and shall comply with American Dimbilities Act requirements. The walkways may include shade trees, seating, decorative pavers, and lighting. The Crossings at Huntington Beach Specific Plan 26 Chrulatinn Legend • rub -A.— Lm k,.A.,.d k—n ..n (00 -Wy - lMw y r.*—. . 4y.Jlrw7 wrvrrm l� M4rr i 1,....ir rnr.wrr. 1 No MI N%PlIW—A Mya.rd 6- L.y Circulation Plan Exhibit 7 The Crossings at Huntington Beach Specific Plan 27 CwuialKM karnd p .vM. llAv�p law. Circulation Flan Exhibit 7A The Crossings at Huntington Beach Specific Plan 28 - 7 a Cist uUKmi I L13end CX)--C4--+t'Q' AVFKM'7� I Ilh: n SAN DIEGO FREEWAY t4f4TFK AVENLA Ix N 1 7t= 7= �.t 7 4- =F - --- --- --- 7 T :ILL 7. ri =�7 7 r7. r r jj. .1!!] =�7 7; �-JLWLLI.. 1:1M.11M.-Al ALLA11111.1.17 ILJ:'-lilb -:III. LRA I I I I N 1! W '11.11L.:AL', '111. 1 1 .... :!.1!JLLTJL1LW 1 1. Ill All EDINGER, AVENUE x 405 .j BEtkH 6( Circulation Plan Exhibit 7B The Crossings at Huntington Beach Specific Plan 29 %rTlmTnmirf3ilLWrmm I, mnNMI'Mi : ITIMnIII rz, nu:uiir.: nniilijmm�mmmiumi•-. =1 M _;" C_ =T___ C==- r4 i ~uuu_�� F,,,n�ns,�!uumul:wun: uun,,auuuuuwiulll!V' C, uculmwn legend • ��w.+a+l.��unJ M...�a. �j .4. M.wrA�a��a. It�•M, s�M�a. Y.Y. i��.►J Y.a I..�.0 SAN DIEGO FREEWAY - 405 Circulation Plan Exhibit 7C The Crossings at Huntington Beach Specific Plan 30 2.3 CIRCULATION PLAN The Circulation Plan illustrates the general alignments, classifications, location and design of cross -sections for public streets and private drives within the area of the Specific Plan. The Circulation Plan is consistent with the Huntington Beach General Plan's Circulation Element. Primary access to the City of Huntington Beach and the Crossings at Huntington Beach is provided by Interstate 405 (San Diego Freeway). The City's General Plan designates the intersection of Beach Boulevard and Edinger Avenue as an internal node and a primary entry node to the City. Access to the project site is provided by a system of arterial highways including: • Beach Boulevard, a north -south principal arterial street (120 foot right-of-way), designated as a state highway, a primary path/image corridor, major urban scenic corridor, and transit service route. • Edinger Avenue, an east -west major arterial street (120 foot right-of-way), designated as a truck route, primary path/image corridor, and minor urban scenic corridor and transit service route. • Gothard Street, a north -south primary arterial street (100 foot right-of-way), designated as a transit service route corridor. • Center Avenue, an east -west secondary arterial street (80 foot right-of-way), designated as a transit service route. Internal circulation is currently provided by a network of private drives/streets serving as access to individual portions of the project area. Circulation is further enhanced by a number of signalized entry drives and public transportation facilities (Exhibit 7). The circulation plan relies on a hierarchy of circulation features ranging from major arterials to local streets. The system is designed to accommodate traffic to the project area and around the area while discouraging through traffic intrusion through the project site. In order to efficiently facilitate new development on - site, primary access will be from interior drive aisles. Direct access from adjacent arterials will be subject to review and approval of the Director of Public Works. Primary access locations into the project area have been located and designed to provide full turning movements. The locations relate to existing driveways and median designs, and are anticipated to adequately serve the projected traffic volumes for the project area. Specific future development proposals may require modifications to these anticipated access locations. The two driveways along Edinger, adjacent to the Montgomery Ward TBA shall be closed when a change of use occurs in the existing TBA building. The circulation system shall be master planned to accommodate easy access between activity nodes of the Specific Plan. All street improvement construction shall be completed in advance of occupancy of new development. The Planning Director and the Director of Public Works shall approve phasing plans for street improvement construction, consistent with development construction phasing. The Crossings at Huntington Beach Specific Plan 31 Alternative forms of transportation should also receive careful consideration. The current OC'FA bus route passes the project area on Edinger Avenue and Center Avenue. The project Circulation Plan identifies existing and proposed bus turnout locations along Winger Avenue and Center Avenue. As a supplement to vehicular access to the project area, potential future access such as a light rail system and stop may be available from the existing rail line on the western boundary of the site. In addition, the Development Concept encourages the creation of a pedestrian walkway system. As a means of achieving it strong landscape image, pedestrian walkways are required and shall be provided throughout the development to facilitate pedestrian access from adjacent developments to the project site. The pedestrian walkway system shall include walkways around the perimeter of the site in the street right-of-way. CIRCb.'IATION PLAN POLICIES: 2.3.1 Primary access to the project area shall be from the existing signalized intersections along Edinger Avenue and Center Avenue. New access locations into the project area shall occur only where traffic patterns and median openings allow, subject to review and approval of the Director of Public Works and Fire Chief. 2.3.2 A new primary access into the project shall be pursued where the Sall Diego Freeway on and off rumps intersect with Center Avenue, subject to cal-'frans, Department of I hghways approvals, design review and approval of the Directors of Public Works and Planning, and thc lire Chief. 2.3.3 Additional new driveway access points from the arterial highways adjacent to the project area shall be limited and allowed only when the project, size, I(xation or type of use, warrants such access, subject to review and approval of the Director of Public Works and lire Chief. 2.3.4 Deceleration and acceleration lanes for driveway access IX)ints may lv required, depending on the location of the proposed access point. Eight turn in and right turn out accesses to the arterial highways shall be considered on an individual project basis, subject to the review and ,approval of' the Director of Public Works. 2.3. i Shared access facilities and reciprocal vehicular access to and between individual on -site activities may be rcquested and/or required by the Director of Planning for adjacent uses and parcels. 2.3.6 Alternative transportation farms such as it light rail stop shall be coordinated with Orange County Transportation Authority and pursued by the Crossings at Huntinglon teach should it liylit rail urban transit system be developed in the future. 2.3.7 Pedestrian sidewalks shall be incorporated into the project as a component of the landscape plan. Sidewalks shall be installed throughout the development to facilitate pedestrian access from adjacent developments to the project site. The pedestrian walkway system shall include walkways around the perimeter of the site in the street right-of- way, and through the parking lot to the project area. The Crossings at Huntington Beach Specific Plan 32 2.3.8 Public landscape areas within the right-of-ways may requive a separate Parkway Landscape Agreement for continued maintenance of the area. 2.3.9 On -street parking shall not be permitted anywhere in the project area, on both public streets and private drives. 2.3.10 Additional traffic impact analysis may be required, due to unanticipated project developments not anticipated in the approved traffic study subject to review and approval by the Directors of Planning and Public Works. 2.3.11 Circulation system improvements have been master planned to accommodate ultimate buildout of the Specific Plan. On -site and off -site circulation improvements shall be completed prior to occupancy of the particular developments with which the improvements are associated. 2.4 PUBLIC FACILITIES The Public Facilities Plans identify existing and proposed infrastructure, storm drain, sewer and water facility improvements to .,wrve development within the Specific Plan area. A specific analysis of infrastructure requirements and detailed design, construction and phasing plans can be found in the final civil report and Ex)und under a separate cover. PUBLIC FACILITIES POLICY: All public facilities infrastructure 1receS&11y to serve development within the Specific Plan area shall be completed concurrent with project development, subject to review and approval of the Director of Public Works. The Crossings at Huntington Beach Specific Plan 33 2.4.1 WATER SYSTEM Domestic water for the property will be provided by the Public Works Water Division of the City of Huntington Reach. The Water Division has use of both underground and imported water sources to service the area. The underground supply comes from nine existing wells, and imported water delivered to the City of Huntington Reach by the Metropolitan Water District (MWD) at three locations. The Specific flan area is part of the City's Master Plan for Water Service and the ultimate development anticipated will be adequately served by the City's systems. MWD is the major wholesale water purveyor* to the City of Huntington Reach which, in turn, is the retail provider to all water users in the City, including the subject property. The existing and proposed water supply systems are shown on the Water System Plan (Exhibit R). The existing center has a looped water systern. Water, is delivered to the site by the City of Huntington Reach's 12-inch line located in Edinger Avenue and a 12-inch water main on Beach Boulevard. The proposed modifications to the center will require that a portion of the looped system be reconstructed, identified in the exhibit as "Proposed Water Line." The required hydrant flow for fire sprinklers in development is 4,000 gallons per minute (gptn) at 20 pounds pet, square inch (psi). The existing and proposed upgraded systems will deliver 4,000 gpm at 47 psi. Proposed architectural site changes will be reviewed by the lire Department for code compliance and may require additional fire hydrant installation. 'These hydrants (if any) will be connected to the existing or proposed water line loop. The number of hydrants on the system is not relevant to the flow delivered and, therefore, does not affect the system. The required fire suppression sprinkler flow rate is approximately 2,:i00 gpm. The existing and proposed systems will deliver 2,500 gpm at 60 psi. It is not anticipated that the proposed modifications to the Crossings at Huntington Beach will require water flow for fire protection above that which the existing system can deliver. All on -site water, improvements will be designed to the City of Huntington Reach water standards for future City acceptance and maintenance. Locations of fire hydrants and apparatuses will be rvviewed by the I'ire Department and Water Division of the City of Huntington Reach to ensure adequate fire flow and pressure. A final dis{err analysis will lie performed Burin? fire site enigineerin stgge to properly size lire syvlerrr, delernrine final f1linnrents, arrd dclernrine if additional writer improvemcvrts are necessary. The Crossings at Huntington Beach Specific Plan 34 2.4.2 SEWER SYSTEM The City of Huntington Beach is responsible for the review and approval of the collection of wastewater within the project area. The Orange County Sanitation District (OCSD) is responsible for the treatment of wastewater. The City system ultimately is collected by the Sanitation District via their trunk and distribution lines to convey sewage to District Plant #5, located in Fountain Valley, and District Plant #2 in Huntington Beach. The Sewer System Plan (Exhibit 0) depicts the existing sewer system serving the project area. Sewage from the subject property is collected via a private on -site collection system with a singular outfall point at the southwest corner of the site. A 69 inch sanitation district trunk line runs beneath the concrete channel located along the west property line. No chan�,es to this connection will be necessary. An existing on -site private system consists of a series of 4, f, 8, and 10-inch lines collecting into one 10- inch line which is proposed to connect with the county system referenced above. Due to the reconfiguration of the development, it will be necessary to remove or abandon -in -place several sanitary sewer lines and replace them as shown on Exhibit J. This relocation will place the new sanitary sewer system south of the existing 10-inch waterline. The existing waterline in this area will remain. The westerly 750'+/- of the replacement line will be upsized to a 10-inch line so as to allow construction at a flatter slope. The existing 10-inch sanitary sewer line exiting the site is adequately sired to carry the anticipated flaws from the reconstructed center. llowever; final destgii ururlysis will lie I)erforrned during the site eras?incerirlg surge to properly size the syslern, dctern)Me firuil uligninenl.s, Eind ifelcrrrtine if uddiliorrul ,sewer irnprovcrncrrts rare Accessary. The Crossings at Huntington Beach Specific Plan 35 2.4.3 STORM DRAINAGF. The City of Huntington Reach and the Orange County Flood Control District are the agencies responsible for the flood control system in the project vicinity. A regional flood control channel exists along the western boundary of the site. The existing drainage system consists of two main lines, "A" and "B". Line "C" drains a small area westerly of the existing ,Montgomery Ward store in addition to secondary line "D", and numerous connecting laterals. All lines drain westerly into -a City of Huntington Reach I1ood Control Channel (Huntington Beach Storm Channel C 5- 5C2). Drainage area boundaries have been identified based on existing inlets and catch basins. There is a small drainage area located at the northerly perimeter of the Crossings at Huntington Beach which drains into a small basin located in the northwest corrier of the site. Line "A" is comprised of a 42 inch Reinforced Concrete Pl fxe (RCP) and a variable sire Reinforced Concrete Box (RCB) section. The RCB is covered by a grate opening for the entire length. Line "B" consists of variable size RCK Line "C" has a direct connection to the City storm channel and drains approximately 2.57 acres. Secondary Line "D" connects to an existing detention in the north-western corner of the site and drains the area adjacent to Center Avenue along the perimeter of the project. Hydraulic calculations performed on the existing storm drain system revealed that ponding in a 100 year event will be as follows: average deptlis of 1 foot and a maximum depth of 2.8 feet were determined for the ponding over line "A." Average depths of 9 inches and a maximum depth of 1.4 feet were determined for the ponding over line "B." The storm drainage disc har,c rates from the remodeled Crossings at Iuntington Beach will remain similar with the exception of the discharge from the enclosed shopping area. This area will now bc•c•ornc an open air shopping complex. Drainage areas will be redistributed allowing line "A" to remain in it's existing position. The entire length of line "B" will be removed and replaced with a larger capacity conduit. As a result, no ponding will cxcur at any point on site during a 100 year everi1. Line "D" will connect to line "B" near the outfall. The existing detention pond will be removed and be regraded as a additional parking area. Line "C" is not affected by the proposed remodel. There will tx a need to add various new lines to connect to Line "A" and line "B: to drain the open air section of tl}c Crossings at Huntington Beach. final storm drain sizes will be determined when final design calculations are performed. The Crossings at Huntington Beach Specific Plan 36 2.4.4 WKrFR QUALITY Water quality in California is regulated by the U.S. Environmental Protection Agency's National Pollution Discharge Elimination System (NPDES), which controls the discharge of pollutants to water bodies from point and non -point sources. A NIVES permit or other F.P.A. review will be required for individual construction projects. Prior to issuance of any grading permit, the developer shall submit a "Notice of Intent" (NOI), along with the required fee to the State Water Resources Control Board filed under the terms covered by the State NVDrS General Construction permit. Through the NPDES Permit process, the City currently requires contributors to rion-point runoff pollution to establish Best Management Practices (BMP's) to minimize the potential for pollution. Under this program, the developer is responsible for identification and implementation of a program of BMP's which can include special scheduling of project activities, prohibitions of certain practices, establishment of certain maintenance procedures, and other management practices to prevent or reduce the pollution of downstream waters. Typical elements of such a BMP program would include addressing the use of oil and grease traps, detention basins, vegetation filter strips, and other common techniques in order to preclude discharge of pollutants into local storm drains and channels. 2.4. 5 UTILITIES "there are several public utility service providers in the Specific Ilan area. Adequate facilities exist for the current service needs of the area, however, additional facilities may be required as additional development occurs. 2.4.G ELECTRICITY Electrical service to the area is provided by the Southern California Edison Company. Existing transmission and distribution lines are adequate to service current and potential future needs. Individual development projects may be required to relocate or underground existing facilities concurrent with other improvements and consistent with the City's Undergrounding Ordinance (17.64). An exception to this provision is the 66Kv line. 2A.7 NATURAL. GAS Natural gas service in the Specific provided by the Southern California Adequate facilities exist for current future needs. Individual projects may relocate existing facilities concurrent development. Ilan area rS Gas Company. and projected be required to Willi project The Crossings at Huntington Beach Specific Plan 37 2.4.8 TREPHONE Telephone service in the Specific Plan area is provided by General 'Telephone (GTE). Individual projects should coordinate with GTE for the relocation of existing facilities and installation of new service. 2.4.9 CAI LF TE LFVISION Cable television service within Huntington Ekkach is provided by Time Warner Communications. Individual projects should coordinate with the Cable Company for the installation of new service. 2.4.10 SOLID WASTE DISPOSAL Rainbow Disposal Company currently provides solid waste disposal services for the area. based on service projections and anticipated demand increase, an adequate level of service will Ix maintained. No solid waste disposal facilities are planned to be located in the Specific Plan area. The Crossings at Huntington Beach Specific Plan 38 The Crossings at Huntington Beach Specific Plan Design Guidelincs Exhibit S 39 2.5 2.5.1 DESIGN GUIDELINES PROJECT AREA CHARACTER The Design Guidelines establish the character and style for the development of this retail, dining and entertainment complex with buildings and streetscapes that have a distinctive visual identity. The Guidelines accommodate individual project identities and promote interrelationships between complementary building storefronts and exterior spaces. The major elements of the Design Guidelines include: site planning, overall project/tenant architecture, exterior pedestrian amenities, landscaping, and signage. All development projects within the Specific Plan area shall conform to the Design Guidelines and shall incorporate appropriate theme elements. The Design Guidelines are to be used by the Crossings at Huntington Beach owner and the City of Huntington Beach as part of the Site Plan Review process. The Design Guidelines are general and may be interpreted with some flexibility in their application to specific projects. Variations may be considered for projects with special design characteristics that still meet the objectives of the Guidelines. The Design Guidelines shall be used to promote a high level of design quality while at the same time provide some flexibility, necessary to encourage creativity on the part of individual/tenant designers. The Design Guidelines have been prepared to articulate the intended development standards of the Specific Plan. The Guidelines establish a framework for developers/designers of individual projects; and design criteria, which the City will use to evaluate proposed developments. The Specific Plan's architectural vocabulary blends all of its design disciplines into a theme of a coastal Italian Village. Care has been taken to reveal this expression while at the same time encouraging individual tenant identity. The City of Huntington Beach is defined by many elements including the Pacific Ocean. Living next to the Pacific creates many lifestyle and recreational opportunities for residents and visitors alike. Activities such as surfing, swimming, boating and fishing, along with the city's natural features; California's longest uninterrupted sand beach, Bolsa Chica Wetland Preserve and its famous ocean sunset vistas define what a coastal town is all about. Many of the architectural features of The Crossings at Huntington Beach will celebrate this coastal living. 2.5.2 SITE PLANNING GUIDELINES The positive shopping experience begins at landscaped entrances to the site, which lead to convenient and ample parking. The center's open-air spaces of plazas, courtyards and passageways will be arranged in a non -linear pattern. Additionally, the main plazas will be accented by water features. A pedestrian walkway will connect east to the existing adjacent Village Retail center. Italianate themed graphics add to the continuity of all the linked spaces. To facilitate the development of The Crossings at Huntington Beach into a unique resource for the community the following site planning policies shall apply: The Crossings at Huntington Beach Specific Plan 40 SITE PLANNING POLICIES 2.5.2.1 Site layout for the project is designed to route people and velticles through the site in it clear, identifiable, efficient and effective manner by incorporating unique pedestrian walkways and Iughlighting main drive aisles with landscaping and paving. 2.5.2.2 At least one water element and one public art feature shall Ix incorporated into the common project area. 2.5.2.3 loading and storage areas fatting Edinger are designed to resemble a facade. The facade will be integrated into the project environment. See example of Elevation of Tenant storefronts in section 2.5.4 ort pages 41-47. 1171L.I ial Enfry.S;4;11ai;c.• 2.5.2.4 Entry drives shall lx a ininimurn of thirty (30) feet wide. 2.5.2.5) Building orientation and access shall be designed to be visible from the Surrounding strec-ts and/or pedestrian plazas. 2.5.2.6 Parking shall be provided onsite in it manner that is convenient and compatible witli the layout and design of the overall project and consistent with the standards in Exhibit 16. Satellite pad buildings are encouraged to provide a minimum setback without parking between the building and the street (see General Plan Policy 10.1.15.0. 2.5.2.7 Security provisions, including lightirtg, building entrance visibility and drive locations, shall be carefully considered. 'l YY/L.j/ Parki/tt 16), 90tk�. The Crossings at Huntington Beach Specific Plan 41 2. 5.a COMMON AREA GUIDELINES The Crossings at Huntington Beach is divided into several unique spaces. The Italian Village Setting will be carried oui through distinctive architectural design elements including towers, dome~ and arches, cobblestone stivets and walks, water features and site amenities that reflect quaint and harmonious lifestyle of the Italian Village. A wide color palette with contrasting accent elemenis will create a lively exciting experience for visitors to the Crossings at Huntington lkmcli. (See section 2.5.3, page ;its). t. � r ,:.1••• I. I, �.� I, ,I. � I .n i, .,I .' .....L.I .'IU' I:' :I':�I �1.11�,1r1,, I � _ ._ Ijf� •�I - {jI I I I i'I •. I •�,��. 1I Li l.. rl�i li - ,:I ,Y.,I'L.,. 11. I _`I ' 'J��HH�� ,• f .. SAN I)If 011 Ki'l WAY 4oi ............ .......... �:'C: :1.LI:_. •'r, � � •w.. �. I jg I� j i �t� �rLYi rw r+"� T r r t�0i111ECit0�1 IFr� ;�•'• ' I. �'• �y f'y1�Yy;7iy�.[y �• • Z:. �ylfuJil, �!1• V• \� . �I act '.f ` l', i ':I ' '. L' I 'I' �!'I�Y.I 'kl '';• I -; � �, � ,Ri Mtt l—I !', ''1 it v I � .. s Ii_ — - r_ .. _ -�. Am gar . .�,,.,: L,I, ..I I:�LIJL?. _ I li I I. I 1 1 — IT I M I _ _ - E�..II _ :.II II ,I II ;I:I,I I.I III: I„I,I,I (`!'�. II ', I. .I'.I,I I .• I i _ _ rI HANC.tK AYlN111 ` The Crossings at Huntington Beach Specific Plan 42 I", I; i rim I i I 71,1M. rini il Illrin it: -0 T-Ti ^• —J _ ��` =n iE-1 5 T JS Ell + 9 . 4 & , D .. .iijDli I I \ T cf .-ED CER AVENUE SAN DIEQ) FREEWAY - 401 8 ACH 8( The Crossings at Huntington Beach Specific Plan 43 rz. Srry d IN r - a.,, , Y-+ '.j, s,-, ;:�, r ^� 'S:E' ''e.]`'� �Fx. 3• � � �.'.,jc �..�� rF- > . !• j �,j �r" YEp3{ } tt ... z - . - •t^ �' .- - � ..�_, r �. , ai,_:f-:_•`6�.z' R tr� -'.-. .� ..� `�, ♦aiSft, ^�u,ss �„.,�4^K.',� ' 3f ittR � -Hi. "f'• ,, my r...,,J.,-n..u.' -ic. -> r y r s r j ti �F r ji) 'dF '�• --�, t� p1 1i Sr eCq,, f o. y a � .� t � � � � i±4 >�; � s,.. .s �1j! � � ^�1y� ft�lr�y..� �t� f 1'f r +- t, � e •,.53 } i at i �, ,y, T aeotl� �z�:_�•,t, `f� vi�c� d w� {it #a ir�4{ v4 6 t, yam_ p� � 9 .•s„aa �+q f:> ,s , , • t - -'�'NA t V �z i it R'. THE VILLAGE STRADA Acting as the "Main Street' of The Crossings at Huntington Beach, the Village Strada will have pockets of landscaping, outdoor dining tables, children's play areas, and seating for a respite from a long day of shopping. Under canopies and trellises the filtered light will guide the shopping visitor along the shop fronts. The Crossings at Huntington Beach Specific Plan 45 THE PLAZA The Plaza (or Town Square) is the center of the Italian Village. It creates the foreground for the theater entry and is the central pedestrian access from the Strada, and the South and North passages into the Villages. Accented by cobble streets, water features and the arched entry and dome of the theater, the Plaza is the hub of the Village. THE COURTYARD AND COLONNADE Once past the arched entry to the theater, the Courtyard expands to provide smaller shops and merchants along with kiosks and the queuing area for the theater. Once past the domed theater entry you enter the Colonnade, which continues the retail experience for the visitor. The continuation of the Italian Village theme will follow throughout the Courtyard and Colonnade with alleys of trees, intimate dining and seating areas and an architectural flare reminiscent of old Florence. The Crossings at Huntington Beach Specific Plan 146 r,. �� rl,. -:;,��} _' _ vim' _ '>a►;. � _'�, Ulk Mm • .. -- .�� ..�.. ��.. �.�. J. f_ ��.,�.'t-•-•r-r �•„ram-= O r ✓ 'tr.lir � i�� yl t . . qp- .9 'k COMMON AREA POLICIES: 2.5.3.1 Common Area Lighting will create a strong, attractive night identity for the project. Selected Elements will be highlighted with illumination. 'these Elements are selected for their ability to enhance the dimension MId Character to the bUddlrlg arellitecture, as well as to promote the appropriate degree of prestige to the PIK)ject. Li�lllir{� s1 f�,1,s,�r�c�luv 2. 5.31 Illumination of buildings and landscaping will le indirect to create a strong positive image. Concealing light fixtures within buildings and landscaping can highlight attractive features. Use of a variety of lighting levels al entries, plazas, parking lots, and Other areas where, evening activity is expected, will ercate an exciting night time environment. f:ukir{�� /ot 1ar111w 2.5.3.;i Exterior lighting shall be located and desigrled to evenly illuminate the parking areas. Patlieular attention sliall Ix paid to the illumination of all sidewalks and connecting walkways. All light standards shall Ie consistent with respect to design, materials, color and color of light, and with the overall architectural style of the project. All lighting shall be confined within the project. 6i :WA -way llsYurr, Stair 1is/1111. earl AL -cent h.%hur The Crossings at Huntington Beach Specific Plan 48 2.5.3.4 Hardscape in the common areas will consist of non 2.5.3.6 grid -like patterns, which recall the historical cobble stone walks and streets of an Italian Village. The water elements are creatively incorporated to provide visual delight and interest. 2.5.3.5 Mechanical equipment shall be screened from view of the surrounding public streets. Mechanical equipment shall not be exposed on the wall surface of a building. Screening material and color. shall be compatible with the overall building design and colors. Backflow devices, electrical transformers and other mechanical equipment, located on grade, shall not be located within the front or streetside setbacks, and shall be screened -from public view - or undergrounded, with the exception of public safety features. These items shall be screened to the best extent possible with landscape materials and/or low level screen walls. Landscaping in the common area will consist of espaliered vines on columns and trellis elements, potted planters to add detail near storefronts, and large and small planting beds throughout the plazas and passageways. Landscaping may consist of groundcover grasses, shrubs, vines and.trees. 2.5.3.7 Trash enclosures and loading docks shall be concealed with screen walls, and ornamental gates and screens. The facade will be integrated into the project environment. were possible. The Crossings at Huntington Beach Specific Plan Landscaping shall be provided 2.5.4 ARCHITECTURAL GUIDELINES Many of the elements of the Crossings at Huntington Beach architecture reflect that of an Italian Village living environment. 'rhe Architectural Guidelines are intended to establish a character, style and quality for each architectural category. The categories are: New Anchor Stores anti 'Theater's General Tenant Storefronts Existing Major Department Stores The description of these guidelines is not intended to discourage individual innovation and creativity, but to simply provide a framework within which an overall sense of place will be reinforced. Building design shall comply with the following architectural policies. 2.5.4A New Anchor Stores and 'Theaters The new anchor stores on the lower level create a new retail zone below the theaters. The large mass of the upper level theater provides a backdrop for the facades of the new anchors and allows the visitor to focus on their stores. The theater will be set as to allow it to be viewed from the 405 freeway. NEW ANCHOR S'rORES ANDTHEATERS HEATERS POLICIES: 2.5.4A.I Building massing and articulation shall possess a balance in form and composition. The large planes of the theater and major tenant walls should be enhanced with patterns and graphics consistent with the overall design theme of the center. The Crossings at Huntington Beach Specific Plan 50 2.5.4A.2 Building entries shall have a clearly defined primaiy pedestrian entry. >. i.4A.3 Building materials and colors shall be guided by, but not restricted by, the approved Common Area palette. The elevation shows the second level theater walls will be articulated with patterns and will provide the lower level anchor stares with area to create large identifying entry articulation. t�lc.'14' ��/ Niyl'1I1 �'Ic'IYf1TiLT 2.5.41; General Tenant Storefronts The concept for the Gener'ai Tenant Storefronts is one of an Italian Village. A tenant storefront design would include vernacular of various architectural elements. 'Then, linking each individual tenant storefront to another would create a shopping experience of boutiques and shops that would fill a walking street. Arches, cohrnrrrs, tower elements, domes and canopies would be mixed in with display bays, balconies and balustrades for a distinctly up- scale look garnered from many European styles and themes. There are two basic types of General Tenant Storefronts: Storefronts facing the 'exterior' toward I:dinge r Avenue and Center Avenue, and storefronts facing the 'interlor' toward the Coninion Areas. Both storefront types may be one or two levels. The Crossings at Huntington Beach Specific Plan 51 'I'o achieve this Italian Village concept, genera! tenants in relation to each other may have varying parapet Iteights, window ofx'nings, heights and rhytllnls, canopies and signage. The basic objectives of tenant storefront guidelines are to ensure ltiglt duality design and use of materials consistent with that of the project and to produce a variety of three-dimensional storefront designs, each uniquely different front its neigllbOt'S but tied together with common theme materials. GENERAL'i-ENANT STOREI'RONT POLICIES: 2.5.411.1 All storefront desigrts and plans shall lx' subject to tlic approval of the landlord and the City of I-lurltinlgton hell. 2. 5.41;.2 Storefronts are encouraged to have multiple planes to create a variety of volumes and spaces and to maximize each store's visibility. 2.5.41t—i 'Tenant storefront materials may include but are not restricted to: O ac tle: Translucent; Polished metals Glass block Smootli brick Itched glass Slllootll plaster Clear glass Class Fibre Reinforced Concrete CI'itC'klcglass Porcelain the Metal grillwork a, inted wood Gland c:crarllic tilt Sillooth or Lk)lislled stone Powder coated or ancxti•red ►petal Cast concrete or plaster (i.e. Columns, cornices) 2.5.413.4 Tenants' storefront may project from the face of the building as long as this does not extend beyond the face of the upfx•r lt'vel overhauls and maintains the required mall clearances. EA. vaLiU1i Oy/ Pit -aIsh)Iv/I-IWIASlit 4t'11I�: VW.-IVI TWA:111S, N?11 A)III rhYl m.tizlml he&h1s, cam y)ic and .il�lla�c' UA' The Crossings at Huntington Beach Specific Plan 52 Examples ofstreetfivnt collection concepts 2.5.413.5 Storefront_ designs shall comply with the design guidelines and may require modification in the event that they are too similar to a neighboring store. 2.5.4I3.6 Tenants are encouraged to vertically extend their facade design from leaseline to leaseline and from slab to top of parapet or bottom of upper floor above. 2.5.413.7 Tenants are encouraged to have awnings or canopies at their storefronts. E amples of a wrung use The Crossings at Huntington Beach Specific Plan 53 w4� � -- s 0 ail .�:: .I ;7.rL tt.�l 2. 5.4C Existing Major Department Stores The existing, operating department store is Meivyns. 'I•he Mervyns building will undergo facade improvements during construction and shall comply with policies 2.5.4C.2 through 2. 5.4C.4 listed below. Should Montgomery Wards, in the future, file an application for expansion or renovation, the following policies shall apply: EXISTING MAJOR DUARTMEN'r STORE POLICIES: 2. 5.4C:.i The facade improvements shall occur if expansions or renovations to the store are proposed. All improvements shall be subject to DRI; approval and compliance with the Specific flan. 2. 5.4C.2 The facade improvements shall be compatible with the mall ai*:hitectural theme discussed in design guidelines. 2.5.4C.3 The renovation designs shall be subject to the approval of the Crossings at Huntington Reach management and the City of Hunting I; -each. 2.5.4C.4 Building materials and colors shall be guided by, but not restricted by, the approved Common Area palette. National retail store materials and colors will also be considered. The Crossings at Huntington Beach Specific Plan 55 FiRM"i1T F-Iiiiii --m IV Ci'-', T 1 1, '1," 77. -7 T r 7 T-,- r r 7- E Rb* � : I -T- 1P a rrFT-, W6 .4 T 4 V vp* To, , • r. I 7 : `4-610 Viol 'A W Op IR 4WO -L La As: W -f I lit I.. G 'ER PON Pm* VEN. .... ... rm U=, Landscape Concept Plan Exhibit I I The Crossings at Huntington Beach Specific Plan 56 r -.- �rmwuu►�nw..rxu...un,.�n�. I I � ' SAN DIEGO FREEWAY 405 Amp + +'\C4MtR AVMLUE I� S rat'` ` i�=,•_ �,,, — * 1.-�/ 23 h ' �; � '� r��• .iI�3..n. L;r ..7a ; .•cr � to7 i EDINGER,_AYENUE - I -00 ! Landscape Concept Plan Exhibit 11 A The Crossings at Huntington Beach Specific Plan 57 2. 5.5 IANDSCAPE GUIDELINES The landscape for The Crossings at Huntington Reach is an integral component of the overall project design. This design concept is urban in nature and has strong elements of a Coastal Italian Village . 'These elements include the use of stung vertical elements such as Italian cypress and Palms at the main entrances in strategic areas for emphasis and continuity. Some of the other- elements that fit well with an Italian Village environment include the following which are indigenous to the California coast. i.e.: RougainviIlea, Ivy Geraniums, Hibiscus, Lupine, Azalea, Indian Hawthorn and tree varieties such as Silk five, Alder, Strawberry tree, Deodar Cedar, Carob, C'arrotwood, Crepe ]]Myrtle and the like. The Landscape Concept is composed of these elements as well as other elements which are complimentary to and assist in the implementation of an integral landscape design. These Landscape- Guidelines establish the design character arid visual qualities for development within the Specific Plan. LANDSCAPE GUIDELINE POLICIES: 2.5.5.3 landscape design shall provide formal or, informal grouping of deciduous and evergreen trees, flowering slu•ubs, and groundcover. Trees shall be of even size and shape at the time of installation. Replacement trees shall be compatible with the new landscape plan. A minimum of five (5) per -cent of the net site area shall be landscapx or plazas. 2.5.5.4 Plant materials shall be selected to create an informal pattern of landscaping to reinforce the character of file tree plantings. A formal pattern of landscaping shall be created on -site at the project entries. 'frees shall be selected based upon the size of the planting area to allow for mature growth without causing future datrla;�e to the improvements. A consulting, certified ISA arborist shall review and approve final tree planting plans for corn pl is lice. 2. rp.5.1 Site layout shall respect and preserve as much of 2.5.5.5 the existing site features, including trees where pc-issible. A professional consulting arborist shall I:x: used to help determine whether existing trees can be saved during construction. 2. ).:�.2 Existing healthy trees, whets feasible, shall be preserved or relocated on site. All trees shill be a minimum Twenty-four (2-1) inch lx0x size. Sln•ubbery (evergreen and flowering) shall be low to medium in height; inIrlinturn size shall be five (5) gallon. All grass selections shall be matte from the approved water efficient materials list. Street free planting in the parkway areas shall include a minimum of one (I) thirty six (36) inch box tree for each forty five (4 5) feet of lineal frontage. At the discretion of the Director of Public Works, this planting may be nuxtified to one (1) twenty four (24) inch lxix every thirty (30) feet. "free planting shall be grouped in informal drifts and tree quantities shall be determined by the length of the property adjacent to the street divided by the recommended spacing of each tree variety. All parkway planting sliall be subject to review and approval of the Director Of Public Works. The Crossings at Huntington Beach Specific Plan 58 PLANT PALETTE - SITE INSCRIPTION 1107ANICAI, NAME' WMMONNAMI.' FRONTAGE TREE BAI.IHINIA BL.AKEANA HONGKONG ORCHIPTRF.E LAGEKSTROEMIA FAURF.I CRAPE AiYRTLE MFTROSIDEROS EXCELSLJS NEW ZEALANDCIiR1. ,41ASTREE MONTAGE HEDGE I.IGUSTRUM J. TF.XANLIM' TEXAS PRIVET NERILJM OLEANDER 'PL'FITE FINK' DWARI' OLEANDER FRONFAGE ACCENT SIiRLJH BOUGAINVILLEA SP. lk-)UGAINVII.I.F.A LAN'I'ANA SP. 1.ANrl'ANA ITONTAGE GROLJNDCOVER GA7.ANIA SP. GA7_ANIA Ai ESEMBRYANI'HEMEJM SP. ICL PLANT ENTRY DRIVETHEMETREI: PHOENIX DA(.TYLIFERIA DATE PALM LMITY DRIVE TREE JACARANDA MINIOSIFOLIA IACAKANDA KOELREUTERIA PANICLJL.ATA GOLDENRAIN TREE PYRL.JS CALLERYANA 'BRADFOFFY BRADFORD PEAR UNITY DRIVE ACCENT' SHRUB AZALEA SP. AZALEA ENTRY DRIVE EDGE SHRIM PIiORMILJM TENAX FLAX ENTRY DRIVE LOW SIIRUH TRACHELOSPERMUM JASMINOIDF.S SPAR JASMINE END ISL.AN1) TREE. I.AGF.RSTROEMIA FAUREI C:KAPE MYRTLE RHAPIOLEPIS'MAJESTIC BEAITFY' INDIA HAWFI-10KNTREI: fORM END ISIANI? I.OkV SHRLIEi LANI'ANA SP. LAr`rl'ANA TRACHELoSPERAIEJM JASMINOWLS SFAR JASMINI: ROSMARINIJSOFFICINALIS SPKI:ADING ROSEMARY END ISIAND ACCENT' SHRUB ROSA SP. SHRL111 ROSE PARKING LOTTREE PLATANLISACERIFOLIA'BLOODGOOD' LONDON PI.ANETREI:—C,encrallytoofaigcfor ,mall L1I.MUS PARVIFoI.IA TREJEGREEN' 'TRUE GREEN ELM INIanclti— WC would rcq++irr AGONIS I'LEXIJOSA PF.PPERAIINT TREE ,inallc•r (at maturity) growing trcc5 HCISQUETREE WASHINGTONIA ROBUSTA MEXICAN FAN PAI.M SCREEN TREES ELJ('A1.PTLJS SP. EI ICALYPFUS PINL.IS SP. PINES AGONIS FLEXIJOSA PEPI'EKMIN"FTREE PARKING GARAGESCREEN TREE TRISI'ANIA CONFERTA BRIS13ANE BOX PARKING GARAGE PLAN"IING 1k)UGAINVILI.FA SP, R)UGAINVILITA 'FRACHELOSPERMLJM JASMINOIDES STAR JASMINE SPECIMEN TREES ERITHRINA CAFFKA KRTIRHCk),'11 COKALTREE SEII'ICE DOCK FICUS M. NITIDA 'GREEN GEM' FICUS COI.LJMNS SCREEN TREES PODOCARPUS MACROPHYLLUS NTW PINE PRUNLIS C'AROLINIANA CAROLINA LAI.JRE1. CHERRY Plant Materials Palette Exhibit ] 2 The Crossings at Huntington Beach Specific Plan 59 2.5.5.6 Pedestrian walkway systems shall be designed to unify the entire project area and provide pedestrian site access to buildings, parking and site activity areas from the perimeter project area and from within the site. Pedestrian walkways shall be a minimum of five (5) feet clear in width with no vehicular overhang. 2.5.5.7 Perimeter landscaping around the project areas shall provide a consistent edge treatment using a limited variety of plant materials. 2.5.5.8 Parking lots shall be planted at the rate of one (1) tree for every ten (10) parking stalls. Parking lot trees shall be twenty-four (24) inch box trees. All tree planting areas shall be a minimum net width of four (4) feet in one direction and a net width of four (4) feet in the other direction. Small trees (at maturity) shall he utilized in these planting areas. Parking lot treatments shall be consistent and contribute to the project landscaping unity. Parking lots shall be planted with trees in such a manner as to provide maximum shade. An alternative which clusters or groups parking lot trees may be considered. Larger trees may also be considered as substitutes for a number of smaller trees, subject to review and approval of the Director of Public Works. Perimeter parking lots adjacent to arterial streets shall be provided with additional landscape treatment to ensure that the parking areas are adequately screened from adjacent street views. Berming in these areas is encouraged and shall be a maximum of three (3) feet high and have a natural appearance in form. However, the fact that a successful retail shopping center must be seen from the adjacent streets will be the determining factor in the selection and placement of all perimeter landscaping. Shrubbery shall be planted in areas where berms are not practical, such as along the perimeter of the parking areas. Shrub planting shall be provided in a minimum five (5) gallon size and spaced a maximum of three (3) feet apart. Shrubbery shall not exceed three (3) feet in height. Hedges shall be trimmed from the ground and maintain an eight (8) inch clearance from the ground. Where cars overhang the curbs, ground cover planting shall be required; a maximum overhang of two (2) feet shall be permitted. The overhang area shall not be considered as part of the required minimum percentage of on -site landscaping or minimum planter width. The Crossings at Huntington Beach Specific Plan 60 2. 5. 5.9 Perimeter landscaping shall preserve or construct a minimum ten (10) foot wide landscape buffer between the arterial highway and private project improvements, including buildings, walls, parking areas, etc. Landscape improvements within the public right-of-way, adjacent to private improvements, shall Lx constructed by the project developer and maintained by the property owner consistent with the overall landscape theme. The design shall be consistent with the approved Edinger Corridor concept. 2.5.5.10 Landscape medians, located in the arterial highways adjacent to the project area, shall be maintained by the City. 2.5.5.11 Entry drives shall be constructed in conformance with the Specific flan (Policy 2.5.2.3) and City design standards (Public Works Standard Plans) subject to the review by the Director of Public Works. Project access points shall be designed to provide entering and exiling drives with adequate views of approaching pedestrians and vehicles. Entry drives shall provide convenient access to parking lots at various site locations. In addition to street trees and on -site landscaping, each entry shall be designated by ground cover --planting, shrubs, and large specimen trees on each side of the entry. These trees shall be located a minimum of ten (10) feet back from the intersection of driveways and property lines to avoid line -of -sight conflicts. Enhanced paving (pavers, interlocking bricks, stamped concrete, or ether similar material) shall be provided at all driveway entrances from the public right-of-way to the project. Major driveway entrances, as identified on the Circulation flan, Exhibit 7, shall incorporate enhanced materials from the property line to Ilic back of the adjacent landscape planter or a minimum of 15 feet. Minor driveway entrances shall provide a minimum of eight feet of enhanced treatment. Pedestrian connections consisting of enhanced paving materials shall be provided along the front of the satellite buildings (Barnes and Noble, Circuit City, and Staples) and within the pedestrian walkway connecting these outlying buildings to the main mall. Enhanced paving materials shall also be provided throughout the public plazas and from Edinger Avenue at the main project entrance (across from tiller Lane) along a pedestrian path to the main plaza. 2.5.5.12 Interior plaza areas and courtyards shall be provided as fcxal Ix)ints. These areas shall be an integral part of the building architecture and be connected by a walkway system to the public pedestrian walkways. 2.5.5.13 Irrigation systems shall comply with the City's "Water Efficient Landscape Requirements." (Ordinance # 1452). The Crossings at Huntington Beach Specific Plan 61 2.5.5.14 All landscaping shall conform with the requirements of Chapter 232 (landscape Improvements) of the Huntington Beach Zoning and Subdivision Ordinance, the City Arboricultural and Landscape Standards and Specifications and City Standard Plans, in addition to the Specific flan Policies. Z.5.5.15 landscape screening is intended to soften and blend the connection of the building areas with the landscape of the parking lots. Trees shall be provided to soften, and visually relieve, parking and utility areas and to provide summer shade. Trash enclosure areas, where appropriate, shall be provided with tree and shrub planting screens to soften the enclosure. Mechanical equipment and transformer areas shall have landscape screening and/or low-level screen walls. Valves, meters, back flow preventers, etc., where appropriate, shall be screened by shrub plantings and/or low level screen walls. 2.5.5.16 Landscape lighting shall be provided in selected areas to aesthetically enhance the site. Pedestrian walkways shall include adequate night lighting for Ilublie safety. 2.5.5.17 Conservation water measures shall be incorporated in the landscape design. A minimum of seventy-five (75) percent of the required landscape area shall be planted with ground cover and the balance (a maximum of 25 percent) with turf. The use of shrubs, hedges, and berming shall be provided to screen cars in the parking lots from street view. 2.5.6 SIGNAGE GUIDELINES The Signage Guidelines identify it framework to advertise it place of business, providing directions or information can be accomplished without detracting from the overall design quality of the project area. The Signage Guidelines also contribute to the overall project area urban retail design theme. Design, color, materials and placement are all irtrporlarit in creating signs that are architecturally attractive and integrated into the overall project area design. The intent is to create and promote a quality visual environment by allowing only signs which are compatible with their surroundings and which effectively communicate their message. Signs shall be designed to be architecturally compatible with the colors and materials of the adjacent building. All signing shall be consistent with the Crossings at Huntington I;each's sign standards (appendix D). The Crossings at Huntington Beach Specific Plan 62 DEVELOPMENT REGULATIONS H H A it' mum 9 The Crossings at Huntington Beach Specific Plan Section Three 63 DEVELOPMENT REGULATIONS 3.0 P1JRPOSF The purpose: of this section is to provide specific development regulations and standards that will [x: applied to development preliects in the Specific Plan. Upon adoption by the City of Huntington I;each, the Crossings at Huntington Reach Specific flan will be tire zoning document for the project area. 3.1 GENERAL PROVISIONS The provisions contained herein shall govern the design and development of The Crossings at Huntington Reach Specific flan area. Standards and/or criteria for development and activities not specifically addressed in this Specific flan may require referral to the current provisions of the Huntington Reach 7.oning and Subdivision Ordinance and Municipal Code. Whenever it use has not [veil Specifically listed as being a perrrrittcd use, the City of Huntington Reach shall determine if the use is consistent with tine intent of this Specific flan and compatible with other permitted uses. fit addition, all projects must comply with the following policies. 3.1.0 DEVELOPMENT REGULATIONS I'0I.1CII:S: 3.1.1 Not withstanding provisions to the contrary, all grading shall bc approved by both lire Planning Director anti Director of Public Works, or designee. 3.1.2 Construction may commence only after the Planning Director finds that the project is consistent with the regulations and applicable policies and guidelines of tine Specific Plan. 3.1.3 All structures in existence at the tinre of Specific Plan adoption (with the exception of Auto Repair, Maintenance, Service and the bank building ) shall b deemed in conformance with the Specific flan. 3.2 DEHNITIONS I'or the Purposes of tits Specific flan, words, phrases and terms shall have the meanings as defined below. Terms not specifically defined in the Specific flan shall have the same definition as used in the City of Huntington Reach ZA-ming and Su[xiivision OrdithinCe in OfCd at the time of any individual request. When not inconsistent with fire context, words used in the present tense include the future tense; words used in the singular number include the plural rttrrrrber'; and words of the masculine gender include the frminine and neutral gender. The word "s}tall" is always mandatory and the word "may" is permissive. The Crossings at Huntington Beach Specific Plan 64 3.2.1 Architectural Features. Architectural features include elements that cornplinlent the building architecture such as, but not limited to, walls, architectural towers and domes (with The Crossings at Huntington peach Iogo), spires, and arches. Architectural features may include signage as depicted in the altached signkge 'guidelines. 3.2.2 Communication Antenna. All types of receiving and Iransmitting antenna, except satellite dish antenna and wireless communication facilities. 3.2.3 Deviations. An adjustment in one or more Development Regulations in order to accommodate special circunlstarlces and/or unique architectural features. 3.2.1 Entryway. The px)int of ingress and egress from a public or private street to the individual project. 3.2.5 rinal approval. Ten (10) days after approval by the discretionary body and no appeal of that decision has been filed. 3.2.6 Modification (Minor). An amendment to the exhibits and/or text which does not change the meaning or intent of the Specific Plan. 3.2.7 Modification (Major). An amendment to the exhibits and/or text which is intended to change the invaiiitlg or intent of either the Master Plan Concept, Design [.Guidelines, or Development Regulations. Major mcOlfications require a toning 'Text Amendment and action by the Planning Commission and City Council. 3.2.8 Private drive. A privately owned and maintained roadway used to provide vehicle access through the property. 3.2.9 Renovation. Any request to remodel, improve, renovate, upgrade, or refurbish the interior or exterior of an existing building, including mllnor• improvements to accommodate new tenants or an upgraded look for an existing tenant. 3.2.10 Site plan. A plan prepared to scale, showing accurate and complete dimensions of all buildings, struetur'es, landscaping, parking, drive aisles, uses, etc. and the exact manner of development proposed for a specific parcel of land. ;3.2.1 1 Street. A public or approved private thoroughfare or road easement which affords the principal means of access to abutting property. 3.2. l 2 Structural alteration. Any change in, or alterations to, the structure of a building involving: the hearing wall, column, barn or ceiling joints, roof rafters, roof diaphragms, foundations, retaining walls or similar components. 3.2.13 Ultimate right-of-way. The adopted maxirnurn width for any street, alley or thoroughfare as established by: the general plan, a precise plan of street, alley or private street alignment, a recorded parcel map, or a standard plan of the Department of Public Works. Such thoroughfares shall include any adjacent public easement used as a walkway and/or utility easement. The Crossings at Huntington Beach Specific Plan 65 3.2.14 Use. The purpose for which land or building is arranged, designed, or intended, or, for which it is occupied or maintained. Wall or fence. Any structure or devise forming a physical barrier. This definition shall include: wood, concrete, concrete block, brick, stone or other masonry Inalerlal. 3.2.16 Zone. A district as defined in the State Conservation and Planning Act, shown oil the official -zoning maps and to which uniform regulations apply. 3.2.17 'Zoning maps. The official zoning maps of the City of Huntington Ikach which are a part of the comprehensive zoning ordinance. 3.3 DEVELOPMENT STANDARDS The Development Standards shall serve as the mechanism for the implementation of the Crossings at Huntington Beach land uses. The standards set forth in Ihis Section will assure° that future development within the Pacific promenade is implemented in a manner consistent with the intent of the project area Master Plan. The standards contained herein provide flexible mechanisms to anticipate future needs and achieve compatibility between land uses and the surrounding community. Standards and guidelines are designed to be compatible with the existing land use categories of the City. The primary land uses in the Crossings at Huntington Iteach shall be regional commercial, retail, dining, and entertainment. 3.3.1 Permitted Uses. Permitted uses shall be required to meet all applicable provisions of the Huntington Leach Zoning and Subdivision Ordinance Code. A list of permitted uses is provided in Exhibit 15. 3.3.2 Intensity. The maximum intensity shall be consistent with the City's General flan. 3.3.3 Building height. The Inaxinuun allowable building height shall be seventy-five (75) feet. Rooftop mechanical equipment and parapet walls may exceed the maximum permitted building height by fifteen (1 5) feet. Special themed architectural struclrlres or elements such as towers or domes may be allowed tip to one hundred -twenty (120) feet. 3.3.4 Setbacks. Refer to Exhibit 1 G. 3.3. , landscaping. LIndscaping shall be permanently maintained in an attractive manner in all setback and parking lot areas fronting on, or visible from, adjacent public Streets. 3.3.6 Signs. All signs in the project area shall conform to the provisions of the sign standards in Appendix D. 3.3.7 LI Ming. All illumination of interior circulation streets, parking areas, and project sites, shall be coordinated to provide consistent Illumination intensity. Emphasis shall I.x placed on areas of high vehicular and pedestrian activity. Light fixtures and standards shall be consistent with building architectural Style. Public streetlights shall comply with the City of Huntington [;each guidelines for street lighting. The Crossings at Huntington Beach Specific Plan 66 New building construction (over and above that permitted by the development described in Exhibit 4) of the following uses sliall be permitted within the Crossings at Huntington Beach Specific Flan subject to review and approval of a Site Flan Review by the Planning Director. Other changes in occupancy, such as, like for like tenant changes, new tenants established within existing buildings, and/or intensification of tenant uses shall be subject to building permit plan check review to verify compliance with parking and the Specific Elan review. Day Care facilities Aquarium Government Offices Parking -su t•face -structured -va let Banks and otter financial institutions I' iblic assembly areas ' Commercial recreation and live entertainment Utilities and facilities Food Markets (Specialty Markets n.t.c 10,000 s.f.) General Retail Day Spa Hotels, Motels Movie neater. Kestattt•attts fast fM1 with dt•ive-thVougl► -with outdoordining ' with 31CO1101 sales ' with live entellairiment and dancing OF1'1C'E: Business and Professional E'ersonal Services 0'1'EIE:R PERM11'I'E:D RMIL — - —C:ar stereo and alarin installation, dintegrak'cl interim -- a►rclrvrlma or x1ail builcligr E'oilable calls anct kiosks Note: Ullrc'trrrrrvfx°prrirutic'clsrrl�jcc1hirtrvic'wbvllref'1<<rrrrrrr7Dirw1or.'A'equires•anenlerlaininerlllkr•rrril Permitted Uses Chart Exhibit I3a The Crossings at Huntington Beach Specific Plan 67 The following temporary and seasonal events may be permitted outdoors within the common areas only, subject to approval of the Fire Department and Police Department. All teniporary and seasonal events within the parking lot shall follow permit procedures described in the Huntington Leach zoning and sul-xiivision ordinance. J Art Shows Auto shows Carnivals Circus Commercial I'dining Concerts Contests Farrner•'s Market Fund Raiser's Health Fairs Live Entertainment Miscellaneous Exhibitions Outdoor Retail Sales Fet Shows Seasonal Displays and Events 'I'heatricaI Performances Note: 01her.tiiInlA•u• 1em/hurray II.VC-s mqy he /VJ-111iltrcl.+rrhlc°c1it) review by lire f &IIIlrrN !h'rt-,'10r: Temporary and Seasonal Events Chart Exhibit lab The Crossings at Huntington Beach Specific Plan 68 Minimum project area (AC:) 50 Minimum lot size (AC) None Minimum lot frontage Norse Maximum building height 75 feet Maximum nurnl_xnr of stories 4 stories Maximum additional height for parapet walls, mechanical equipment, conirttt.inication antetinas etc. 15 feel Maximum architectural featut•e Ilei,9,11t 120 feet Maximum lot coverage 501;0 Maximum floor area ratio Corn ly with zoning and tilllldlvltil011 Ot'dlr]:1f1C'c' Maximum setback (see No. 3 bdow) Streit side (Edinger Ave., lkach Blvd. and Center Ave.) Interior side (West PLO) 50 feet, of 25 feel if setback if fully landscaped l0 feet Minimum landscaping 5k,o of total site Minimum perimeter landscaping Street side (rdinger Ave., Leach Blvd. and Center Ave.) Interior side (West PLO) 10 feet 5 feet Minimum standard parking stall size J feet x 18 feet Mlnmt4lm f:ompao parking shill size 8 feet x 17 feet Minimum drive aisle width 25 feet for 00 degree stalls Minimum parking required Shared analysis based upon)olnt use of par'krng analysis Maximum compact spaces 20:'u of total spaces Parking lot layout Primarily 90 degree Stalls Parking structure d(sign Comply with ronirtg and subdivision ordinance Public art requirement At least one piece of public art and one fountain oil site Wireless cotttrtuutication facilities lComply with zoninX and subdivision ordinance Development Regulations Chart Exhibit 14 The Crossings at Huntington Beach Specific Plan 69 Parking Standards & Detail Exhibit 15 3..3.8 Parking. All developments will be required to meet the minimum on -site parking standards as provided in this Specific Plan document. The following shall apply: • Standard parking stall sire may be nine (9) feet wide by eighteen (18) feet deep and may be reduced to provide it landscape curb or wheel stop (in parking structure) at sixteen (16) feet with a two (2) foot overhang to expand the landscaping. This additional landscape area will not be credited toward the required landscape percentage or ,,nirrimrutn himiccnpw width. • A compact parking stall size of eight feet zero inches (8'-0") wide by seventeen (17) feet deep may be proposed for up to a maxinium of twenty (20) percent of the total proposed parking spaces. • Total parking required by the Huntington Beach Zoning and Sufxiivision Ordinance (sec below) shall be installed for each phase of the project Prior to final building inspection. Parking shall be provided in accordance with the New Shared Parking Study. A shared parking program may allow for a reduction of the code required parking by up to twenty five (25) percent, based upon it shared parking analysis. It is estimated that the New Shared Parking Study will prti�vide a ratio of 4.5 spaces for every 1,000 square feet of development. • Handicap accessible parking spaces shall Ix Provided as required by the Uniform [Building Code and Title 24. The Crossings at Huntington Beach Specific Plan 70 Intensity (F.A.R.) Building Height Setback Front Interior Side Exterior Side Landscape Perimeter Landscape Front Interior Side Exterior Side Arterial Highway Development Regulations Check List Exhibit 16 The Crossings at Huntington Beach Specific Plan 71 Ito 1--a 9 n' 9P a0l 71 MOWN m KLA IMPLEMENTATION Guidelines, or- Development Regulations. Maj01• modifications require a Zoning Text Amendment and action by the Planning Commission and City Council. 4.0 ADMINISTRATION 4.1 DEVFLOPMENT CONSTRUCTION PHASING PLAN The City's Planning Director shall administer' the provisions of the Crossings at Huntington Reach The proposed Specific Plan project is anlicipmed to Specific Plan in accol•dance with the State of California occur in one (1) phase. The existing sti'ip center GOveI'll Inent COdC, Subdivision Map Act, the (11arnes & Noble, Staples, and Circuit City) will receive 1-11intillgton Reitch Municipal Code, and the City's a facelift, new enhanced paving, and landscaping. The General Plan. demolition, irifrast!'uctutt and utility wort: of the new C011tifI1401011, Will tV SChe'dulCd and b1lilt Such that the The Specific Plan development pl'ocedlll-es, iemalllnlg center' I'milins In Oper,01011 \vitll Ininiltl11111 1'Cgulatlons, standards and specifications shall lrlcOlivenketlCe to lI]e 1'elnanllrlg tenants. Cons}t'UC'f1011 sli vi-sede the relevant provisions of the City's Zoning is aim .clpated to take t 5-18 months 11'oni Stai't of Code (1'luntingtorl Beach 'ZomnS and StiWivislon demolition. Ordinance) as they curl'elitlycxist or may be, amended in the future. Any development mgulation and 4.2 MINTIODS AND PROCEDURES building 1'CgUIrC'lllent not addressed in the Specific PLUL shall be sub hjecl to the. City's adopted iegulations The nieth'-xls and prL1Cec111res f0l' inlplenlentatioll Of in place at the time of an individual request. the Specific Plan shill be on it project by project basis. The adoption of the Speclf c Plan alone lvlll riot The Specific flan may be amended. The Planning 1•equire infrastructure improvements to the project Dir•e'ctol' shall have the discl'etloll to detel-mine If al -ea. Physical III pl'ovenle1115 will Only coincide With requests fOr modification to the Specific flan arc the C'On11111' IL 111Cnt Of the fil'St pl'ojCd. 'TI1C Spc'C1flc minor or, major. Minor- modifications may be flan is it !•egulato!•y document and is not intended to accomplished ad kill 11istratively by the 1111'ector with a he it Developinctit Agreement. rel-,ort to the Ilanning Commission. Majol• modifications will lvquire the processing of it 'Zoning 4.3 MASTER PLAN Text Amendment, subject to file City's p!•ocessing regulations in place at the time of the request. A Master Plan Concept (Exhibit 3) foi- the project area Ociitifyin,,g prinmiy land uses, circulation system, Minol' III'Miflcatlon is it simple amendment to the Inf1'irstl•lictul•e.' layoul, public facilities and landscape exhibits and /or- text which dot's riot change the scheme has been pl'epat'ed In conjunction with the meaning or intent of' the: Specific plan. Major Specific flan. All profxlsed projects shall be consistent modificalions are amendments to the exhibits and/or with the intent of the Master Plan Concept. test which are intended to change the mcll im; or h1h,111 a?1' either the Master flan Concept, Design The Crossings at Huntington Beach Specific Plan 73 SAN DIEGU FREEWAY 405 ` ER AVENUE\ CH8( -40 4 Site Plan Review Process Exhibit 17 The Crossings at Huntington Beach Specific Plan 74 4.4 SITE MAN REVIEW Following the implementation of Phase I and Phase Il development described in Exhibit 4 individual development projects within the Crossings at Hunting gton lkcach Specific flan project area shall IV implemented through a Site flan Review process. A Site flan Review shall b-e required for all new development activity, with the exception of interior improvements, general maintenance and repair or other- minor construction activities that do not result in an intensification of the use. These exceptions may be subject to other Building and f'ttblic Works permits and approvals prior to coinmencentent. Application to the City for it Site flan Review shall include it narrative of the projxosed activity along with preliminary development plans and drawings. The narrative shall consist of a project description identifying the intended services offered with Square feet, hours and days of operation, number of employees, and other information as appropriate. Supplemental to tole application submission, project plans shall be prepared including the following preliminary plans: site plan, floor plans, elevations, landscaping, grading, fencing and signage plans; other - plans may be required depending on the complexity of the prtioject. The entire parcel shall be plotted with dimensions and all pertinent data and include dimensions to the nearest intersecting public street and identify all street names. In addition, all existing and proposed physical features and structures on the subject property and abutting properties shall be plotted. 'I'll(' application shall also include it Ivyal description of the p1,01.)V •ty, idelit] ficalion of tile uses for. each room 011 the 11001' plans and a list of all the building materials and exterior colors. An application fee for this service shall be established by a separate resolution of the City Council. The Planning Director has the authority to approve, conditionally approve, or deny it Site flan Review. A Site flan Review application may also require analysis and comments from various departments of the City. In order to approve a Site flan Review application, the Planning Director shall make the following findings: • The request is consistent with the City's [general Plan and all applicable requirements of the Municipal Code; and • The requested activity will not be detrimental to the general welfare of persons working or resiciirtg in the vicinity nor detrimental to the value of the property and improvements in the ncightxonc�xxi; and • The requested activity will not adversely affect the Circulation Plan; and • The mluested activity will comply with the provisions of the Crossings at Huntington Beach Specific flan and other applicable regulatlons or special conditions required of the project. The action of the Planning Director shall be final unless ap[kaled to tole Planning Commission by the applicant within ten calendar days of action. Such Appeals for a Site flan Review shall tv subject to the procedures outlined in the City's Zoning and Subdivision Ordinance. The Crossings at Huntington Beach Specific Plan 75 A Site Plan Review approval shall be valid for a period of one year. Additional one year extensions may be requested for a maximum of two years. Such an extension request must be made in writing by the original applicant, property owners, and/or authorized designee, a minimum of thirty days prior to the expiration of the current approval. If construction activity does not commence within the approval or extension period, the entitlement shall be terminated. All final decisions on site plan review proposals shall be the responsibility of the Planning Director. 4.5 REUSE/CHANGE OF USE REVIEW Any proposal to reuse and/or change the use of a 4.7 previously approved and constructed development, within the project area, will be subject to additional review by the Planning Department. The additional review will follow the same procedures outlined in the Site Plan Review process. A "like for like" change of use shall only be subject to the requirements for a new certificate of occupancy; however any new construction beyond that shall require a new Site Plan Review. In addition any proposed physical modifications to the existing structure and/or site shall be subject to additional review and approval of the Planning Director prior to the issuance of building permits. The Planning Director may refer individual projects to Design Review Board for review and as final arbiter of compliance with the Specific Plan. Any decision by the Planning Department may be appealed within ten calendar days to the Planning Commission. 4.0' ENVIRONMENTAL DETERMINATION The extent and intensity of all anticipated development activity for the Crossings at Huntington Beach area has been identified in the Specific Plan. Development project requests consistent with the Specific Plan shall not be subject to additional environmental review unless otherwise required by C.E.Q.A. However, the Planning Director may request an additional environmental assessment for unique or unusual circumstances, that have not been previously addressed in the environmental review. The Planning Director shall impose any applicable environmental mitigation measures, as specified in the environmental analysis, as conditions of approval on individual Site Plan Reviews. Such conditions of approval shall describe the time period and manner in which the mitigation measure must be satisfied. REQUEST FOR DEVIATION The Crossings at Huntington Beach Specific Plan Development Regulations are intended to encourage projects which create an aesthetically pleasing appearance, enhance the environment, and facilitate innovative quality architectural design with an adaptation to the surrounding environment. Deviations pertain only to the Development Regulations of the Specific Plan and may be granted at the time of Site Plan Review for special circumstances and/or unique architectural features. Requests for Deviation may include but are not limited to building height, setbacks, open space, parking, and landscaping. Deviation requests, up to ten (10) percent of any single standard, may be considered by the Planning Director. Deviations greater than ten (10) percent must be approved by a Variance application before the Zoning Administrator, subject to the procedures outlined in the City's Zoning and Subdivision Ordinance. Development and construction The Crossings at Huntington Beach Specific Plan 76 phasing of selected provisions and features may be approved by the Director concurrent with a Site Plan Review and shall not require a Request for Deviation or Variance to the Specific Plan. Deviations shall be allowed when, in the opinion of the Planning Director, significantly greater benefits from the project can be provided than would occur if all the minimum requirements were met. Some additional benefits which may make a project eligible fur consideration include: greater open space, greater setbacks, unique or innovative designs, public open space, and tl►e use of energy conservation or innovative technology. The Planning Director may approve the Request for Deviation in whole a• in part upon making the following findings. Promotes better design, environmental and land planning techniques and contribute to the economic viability of the community, through aesthetically pleasing architecture, landscaping and site layout; and Will not be detrimental to the general health, weIfare, safety and convenience of Ilie neighkwhcxxi or City in general, nor detrimental or injurious to the value of property or improvements of the neighborhood or of the City in general; and Is consistent with objectives of the Specific Plan in achieving a project :adapted to the area and compatible with the surrounding environment; and Is consistent with the goals and policies of the City's General Ilan, and comply with State and Tederal Law. 4.8 SPECIFIC PLAN AMENDMENTS Specific Plan Amendments, other than a Minor Modification as previously described (Section.4.0), shall be made through the Zoning 'Text Amendment process; subject to consideration and approval of the Planning Commission and City Council in accordance with the provisions of the Huntington Reach Zoning and Subdivision Ordinance. Such Amendments may include changes to the Master Plan Concept, Design Guidelines tx►licies and the introduction of alternative Development Regulations. 4.9 SEVERARILITY If any section, subsection, sentence, clause, phrase, or portion of this title, or any future amendments or additions hereto, is for any reason held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this title, or any future amendments or additions hereto. The City hereby declares that it would have adopted these titles and each sentence, subsection, clause, phrase, or portion or any future amendments or additions thereto, irrespective of the fact that any one or more sections, subsections, clauses, phrases, portions or any future amendments or additions thereto may Ix! declared invalid or unconstitutional. The Crossings at Huntington Beach Specific Plan 77 The Crossings at Huntington Beach Specific Plan 78 L r arr .'''+ ,. ��L: �.�,'�•�''.•�: A � ',,�: '�f 4��+_' I -{'gip.+ �t..-... �f� _ Hr�. ,I�'��' I 'A1� ,�. ry ��• „-1.%.i,i .fw 'tw-fl i.S...��' r .��.,a ,. IIU e••' L-r -•r .I � r.. .� a t ,��•' - ,-. s. i '�� , !., .l.; �yV 'iY- I r= �;�iyi.t.,yq 'r r• / r f i-2'� �! 'r�i {ter• ,'&, j1 •.��m � •• •--r....�.�3• C,..'� CIS t ! L i �� • � � �• � f �. i+d 1'! •t �.`r� J I ,t +1 �' r ��t�" :T ... �� e_�+. ,j•"1�'� • •+•I� � � • .. I � ! } �' !� - �� l ��• � '��r� ;f �? I ► �'f��A�I �' iJti�,�; f1aA v.� �:,•'�� }ler:t �+,`�+.. �'.��+ �?!Y''�=.t� � 7 I ry•. ��` �',� ' .f_v - . - �Y+•. - .T....'f.rr•. �• �.II.. ,-. -: .r, � • �x•i� / r' i , "�i..Y' � :, •.. - � i), yr' . ::J C� : 1 I .'•�'' 1 � s�^"'t"! L' ��-'. c,.'�...��P • �ry to , i �,.� i. - ,i. �.; The Crossings at Huntington Beach City of Huntington Beach SPECIFIC PLAN NO. 13 Prepared by Huntington Property Associates LLC. will, Greenberg Farrow Architects Hall & Foreman Linscott Law & Greenspan Adopted , 2000 Ordinance No. March 20, 2000 TABLE OF CONTENTS 2 1NTRODUC11ON 1.0 Purpose and Intent 2 1.I Authority and Procedures 2 1.2 Scope and rot -mat 3 1.3 Project Area Description 1 A General I'lan Designation 7 1.5 Zoning Provisions 7 1.6 State Mandated Requirements 8 DfVI:LOPMI:N'1' CONCFI'I' 2.0 General Development Plan 11 2.1 Regional Commercial Uses 15 2.2 Open Space and Pedestrian Walkways 17 2.3 Circulation Plan 19 2.4 Public facilities 21 2.5 Design Guidelines 30 2.5.1 Project Area Character 30 2.5.2 Site Planning Guidelines 30 2.5.3 Common Area Guidelines 32 2.5.4 Architeclunal Guidelines 41 2.5.5 Landscape Guidelines 49 2. 5.6 Signage Guidelines 53 3. DEVELOPMENT REGULATIONS 3.0 Purpose 55 3.1 General hiwisions 55 3.2 Definitions 55 3.3 Development Standards 57 3.3.1 Permitted Uses 57 3.3.2 Intensity 57 ;i..i.;i Building I leight 57 3.3.4 Setbacks 57 3.3.5 landscaping 57 ;.3.6 Signs 57 3.3.7 Lighting 57 3.3.8 I .irking GI 4. IMPLEMENTATION 4.0 Administration G 5 4.1 Development Phasing Plan 6 5 4.2 Methods and Procedures GG 4.3 Master Plan 66 4.4 Site Plan Review G8 4.5 Reuse/Change of Use Review G9 4.6 Environmental Determination 69 4.7 Request for Deviation 69 4.9 Specific Plan Amendment 70 4.9 Severability 71 The Crossings at Huntington Beach Specific Plan 3 Al' TNOICES (Volvmie Two) A— Legal Description G — General Plan Consistency C — Standard Conditions of Approval and Environmental Mitigation Measures D -- Sign Standards List of Exhibits Exhibit 1 Vicinity Maps 5 Exhibit 2 Aerial Photograph 6 Exhibit 3 Illustrative Conceptual Master flan 10 Exhibit 4 Project Description 12 Exhibit 5a Development Concept (Level 1) 13 Exhibit 5b Development Concept (Level 2) 14 Exhibit 6 Open Space and Pedestrian Walkways 16 Exhibit 7 Circulation Plan 18 Exhibit 8 Water System flan 22 Exhibit 9 Sewer System Plan 24 Exhibit 10 Design Guidelines 29 Exhibit 1 1 Color and Materials of Common Areas 38 Exhibit 12 Typical Tenant Storefront 45 Exhibit 13 Landscape Concept flan 48 Exhibit 14 Plant Materials Palette 50 Exhibit 15a Permitted Uses Chart 58 Exhibit 15b Temporary and Seasonal Events Chart 59 Exhibit 1 G Development regulations Chart 60 Exhibit 17 Parking Standards and Details G1 Exhibit 18 Development Regulations Check list 62 Exhibit 19 Conceptual Phasing Plan 64 The Crossings at Huntington Beach Specific Plan 4 INTRODUCTION Section One The Crossings at Huntington Beach Specific Plan INTRODUCTION 1.0 PURPOSE AND INTENT The Crossings at Huntington Reach Specific Plan establishes the planning concept, design theme, development regulations and administrative procedures necessary to achieve an orderly and compatible development of the project area, and to implement the goals, policies and objectives of the Huntington Beach General Plan. The intent is to establish a public/private partnership to enable the creation of a community center setting and achieve a high quality in retail and entertainment design. The Crossings at Huntington Reach Specific Plan identifies the location, character and intensities for a regional commercial complex. The Specific flan establishes the alignment and design of an on -site circulation system and all facilities and infrastructure necessary to facilitate a master planned development. The Specific Plan creates it compatible design theme for the: project area and establishes the development regulations necessary to accomplish the identified object Ives. The Specific Plan is regulatory in nature and serves as zoning for The Crossings at Huntington Reach. Subsequent development plans, Parcel Maps and other entitlement requests for the project area must be consistent with both the Specific Plan and the Huntington Beach General Plan. An Environmental Assessment has been conducted (No. 98-4) and a list of mitigation measures and conditions of approval have. been prepared as a companion report to the Specific Plan. 1.1 AUTHORITY AND PROCEDURE The State of California requires that all cities and counties prepare and adopt it comprehensive General Plan for the physical development of their area of jurisdiction. Following the adoption of the General Plan, the entity is required to develop and adopt regulating programs (zoning and subdivision ordinances, building and housing codes, and other regulations), which will implement the policies described in the General Ilan. California State law authorizes cities with complete General flans to prepare and adopt Specific Plans (Government Code Sections 65450 et. seq.). Specific Plans are intended to be a bridge between the local General flan and individual development proposals. Specific flans contain both planning policies and regulations, and may combine zoning regulations, capital improvement programs, detailed development standards and other regulatory methods into one document which can be tailored to meet the; needs of it specific area. Local planning agencies or their legislative bodies may designate areas within their jurisdiction as ones for which a Specific Ilan is "necessary or convenient" (Government Code Section 65451). The Crossings at Huntington Beach Specific Plan 6 A Specific Plan may either be adopted by ordinance or resolution (Government Code Section G5507). Should the legislative body wish to change a proposed Specific Plan recommended by the Planning Commission, the change must first be referred back to the Commission for consideration, if not previously considered (Government Code Section 65504). Adoption or amendment of a Specific Plan constitutes a project under the California Environmental Quality Act (CF.QA) and the State's Environmental Impact Report (FIR) guidelines. If the initial environmental review shows that the proposed or amended plan could significantly affect the environment, the jurisdiction must prepare an MR and submit it in draft form for public review. The need for an FIR in a particular case is determined by the local government. A Specific Flan and an FIR on a Specific flan overlap extensively; they must address many of the same concerns and the process for preparing them is nearly identical. Therefore, environmental assessment should be an integral part of preparing or revising a Specific flan. The preparation, adoption and implementation of The Crossings at Huntington Beach Specific Plan by the City of Huntington Reach is authorized by the California Government Code, 'Title 7, Division 1, Chapter 3, Article 9, Sections 65450 through 65457. The Huntington Beach General Plan was recently rewritten and adopted by the City Council (May 13, 199G). The amended General Plan maintains the commercial designation for the project area. The Crossings at Huntington Beach Specific Plan is consistent with the goals and policies of the l luntington Beach General Plan. 1.2 SCOPE AND FORMAT The Crossings at Huntington Reach Specific Plan is divided into four sequential sections. Section One is the Introduction and describes the purpose and intent of the document along with a brief explanation of Specific flan procedures and authorization. Section One also presents the Project Area Description and is intended to establish the reasons why the Specific Plan process is logical and necessary for this portion of the City. This section presents a general description of the Specific Flan area, special characteristics and existing conditions which make this area unique have been identified. Section Two describes the Development Concept. The design concept evolves from the objectives identified and existing conditions discussed in Section One. This section also presents the circulation, public facilities, infrastructure and landscaping which will support lire development concept and reinforce the design theme. Section Two also includes the Design Guidelines. This section identifies and describes the intended char.ieter for the area and provides a framework for project implementation. The Crossings at Huntington Beach Specific Plan 7 Sectiofl'I'Inre establishes Ilse Developrnenl lheAtrlalions for the Spkcific: Ilan area and for individual project development. Section Three presents a detailed deu•ripliort of the Ocveloprflcrrl Standards which are necess:rr•y to 'guide and control flew projects and carry 0111 the 'goals and policies of the specific flan and the Crly's General }Tern. %Ldion I'cxrr presents tile Irerplcrnrrilation prcx�essarrct discusses liow individual projects and tenant imprvvemerrts will lx.- reviewed and approved. This section outlines tine project approved proceduivs and describes the process for project appeals and the methods by wliich the Specific flan can lx modified of - An Appendix (printed under separate cover) contains all the special studies and reports wlriclr have contribrrtc I to the formation of the Specific Plan. Tlic. Appendix (Volume Two) includes the LLXaI Description of the site, a General Nan Consistency Analysis, identifies the MitiXition Measures and Condition,, of Approval desired in the Knviromnenial Analysis and includes the propxtikd Sign Standards. Vie!w L )I* Ot tcshNs al I lit iiliii�IL w 14-at -hL111f1:111t4.,l1t)111(i•111cl,Arolm• The Crossings at Huntington Beach Specific Plan V14•It•:V'A I/n.-rrI,)., Ir►)11r l.ilrl{NL-rAri.-Illit - n 1.3 PROJECTAREA DESCRUTION The crossings at Huntington Rach Specific Plan covers Ga acres located in the northern portion of the City of Ilurilinglo?) lk*u01. The alva is genendly bounded on the north by Center Avenue, on the east by Beach Boulevard, on the south by Winger Avenue, and on the west by tioulhern Pacific railroad right-of- way. A legal description of properties in the Specific Plan ptx)ject aiva has Lven included in the Appendix. Balsa Ave r. �s J� McFadden Ave. '! G cam. Edinger The Crossings at Hund.oton 9.ach Site Location m e wy • PASADENA • SOS ANGELES • SANTA MONICA .� ios + AWERNA 770WAc AIRPORT • Loruo rolwANCE WACH AIRPaRr ANAHEIM • oARom GNDVE •Loma • DFA Wma eEACW SAxrA• A� ;per SSITE " ��' HUNTINGTON BEACH �L Regional Location The project area is surrounded by a variety of land uses and activities. The San Diego freeway (405) and an office detail complex create the northern boundary. To the south, office and relail uses are located across Edinger Avenue. To the east, commercial uses are located across Beach Boulevard. To the west, is the Southern Pacific Railroad Line. The property across from the aril line is designated commercial. Vicinity Naps The Crossings at Huntington Beach Specific Plan 9 14 il.'/ tt`` 1► r "� � ,1 �� •1 1 �� ! _ try • i I� •�}�r}�-f:ilf.�.. '�:. ' 1. ,x iiiiIP 4 IA �� !{� tel: W . � � . �)I Y•� i ! � t I � ,tlt�" _ 7i t� .=r!� i•S+ �► .1� ' � , � r� r �� t � � t_ ,! � ' c•: 'fir' �1' � v , + '� �-�„ ��r ► � � �1 :` ' � _ r. .' • � i ; _ � ++��ir�yatt.=�t��-,i�: �i' �i/.i'uF!}'r�4`t'i�' t�� 1'� IY.SA,,..!}�1`�'L ��•�i _ , `` ,! � ��, r.•, .= 4' •`�a.�!r. I ,t t ti�`•'��.'.• h►II;..�A�' ai. �.�'•I`J' �t�w�i��•' � , - •w'R ' �' •..•�1 1. `t�y� rr�. .{r4� .__ � - 1'yr'� �• . �f� �'f!� _ _1 � � � Aerial Photograph 1997 Acrial Photograph Exhibit 2 The Crossings at Huntington Beach Specific Plan 10 1.4 GENERAL PLAN DESIGNATION The entire Crossings at I luntington Iteach is currently designated as Cd'-f2-,SI'-MU(fYl)-L'vrrrrrrcrr'irrl i ccgiorrrrl-(7 5 JAK-.Slx.-ci1'ic fhin Overby -mixed rrw 0WI-lay-1. 5 (MII-0. 5 (C)/25du/Ircrc in the City's Gcnenal Plan. The site has been designatcd for can1111CI IZ41 land uses since the mid 1960's. The coninicrciai regional ctcsignatiorl arllicipafes anchor dcpartrnem stairs, promotional retail, restaurant,, cnlertainmenl, and similar rggion-servins, uses. The site has been designated to be within a Special Development Area requiring that a Specific Elan with special regulations and standards be established for "Norlli Huntinglon Center." View A-u- res k Noble frvnr CcnrerAVome Vir• it, of"t fee rpr's fit ern C onter A vemic I 1.5 "ZONING PROVISIONS The Crossinys .It 1I111111ngton Beach is presently zoned General Commercial ("CG") to accommodate a full ranse of retail and Service busine,us. The site is also within a sub -area of the merged Redevelopment Prajecl Areas. The adoption of this SEx,cific flan will Supersede the existing zoning and establish a new scat Of devcloprttertt re�ul,11011S. The crossm.4s .11 I1ttntirl4011 I;each silt currently consists of a number of activities. The site contains approximately 960,000 square feet of retail commercial space, some of which is currently unoccupied. This site has been approved and developed in nummous phases over the past 30 years. Current market pressures and extent of adjacent competing retail activities are driving the need to develop a new exciting commercial center for the City. The Crossings at Huntington Beach Specific Plan 11 1.6 STATE MANDATED REQUIREMENTS TO Comply with the Suite of California legislaled mandates, the City of Huntington Beach has adopted several plans to deal with regional issues including Air Quality, Congestion Management, Growth Management and Transportation Demand Management flans. All development within the Specific Plan area shall comply with the applicable provisions of the following plans: South Coast Air Quality Management Plan The South (:oast Air Qualily Management flan (AQMP) requires measures to reduce traffic congestion, improve air quality, and requires that cities develop Air Quality components within their 6wnenll flares. TlIc W rneasiiitis include R gelation XV, ;t Nrc)gr.utr which reyuitV.4 rmphOyer:S ul' rn0r-e thatr one hundred (100) persons to prepare trip reduction plans, and a requirement for jurisdictions to prepare an air quality component in the General Plan. The City of Huntington Beach is subject to all local jurisdiction requirements set forth by the AQMP. The City has adopted an Air Quality Element and Transportation Demand Management Ordinance, which incorporates AQMP measures. Congestion Management Plan The Congestion Management Plan (CM11) is required by Assembly Bill 471 (Proposition 1 11), subsequently modified by Assembly Bill 1791. This Bill requirles every urbanized county to adopt a CMP; the County of Orange has prepared a CMP which includes the City of Huntington Beach. The CMP requires mitigation of traffic impacts of development, as well as trip reduction programs. The City of Huntington Ileach has completed the mandated components of the CM P including level of setvice standards, trip reduction program, and a capital improvements program for traffic and transit. Growth Management flan A Growth Management Plan (GMP) is required to implement the passage of Orange County Measure M approved in the 1990 election. Its purpose is to ensure that the planning, management, and implementation of traffic improvements and public facilities are adequate to meet current and projected needs. The City has an approved Growth Management Clement, which meets the rcgrnremenis for Measurti M fiindirt;{, .uut an adc 11C(t TI-M SlxIrtatiOtl Dcntand Mi-tnagentent Ordinance. Transportation Demand Management Transportation Demand Management (TDM) measures are generally directed at increasing auto occupancy, decreasing peak hour usage, and managing demand for transportation facilities. The City's TDM Ordinance is part of its compliance with the Growth Management Plan. The Crossings at Huntington Beach Specific Plan 12 a �, 42 w 1,,4;' � 1III1 ... +' . -. r',r� --�.F- '� _ 11-1— -� .'- �it�i •ar flt; j ,l -:'i �� - ��. — I ,, .��' I ' .i •c •�" � I�IJ r-��•` c��yFill ► �� it rrY i •I. .l-,.''maw ��rwaa�—.'a...�lii�!ij�'�!�:`_/I 1— �M —•� 11.11110.1 .11 1:1 T WLCAJ... rimi-r. :— i .,:wW. 77 IV .11 1 1.. W, . ❑(r.- 'TW ' '", .7' -.1 'rii '-, rfril 5. In TIM 'I rr.1 1 F1 U, 464 T�J koi A lim Ic F. T- 4, W -j A.. 41.4 Sir 4 J; qw 9w 49P tip QP 4 p y fig- gr lbrdip a. iW' iw =E Qb 4& 4& NL i�Y ". 1111lo-t .1 SER�A1 N it I K -UL— ff Illustrative Conceptual Master Plan Exhibit 3 NOIL" 771j.5 a hyluthelk-al devel, yvnelaswenarib on the prvica silo, The Crossings at Huntington Beach Specific Plan 14 I N DIEGO FREEWAY - 40.5 I 1 , M�I� I` in7 I h! _ Illustrative Conceptual Master Plan Exhibit 3A Note• This illuslrulivc shows a hyluffielic•al C/oVe/op/11c111 sc char iv on /he Ptt?jck•1 silo. The Crossings at Huntington Beach Specific Plan 15 DEVELOPMENT CONCEPT 2.0 GENERAL DEVELOPMENT PLAN 'rhe Crossings at Huntington !leach Specific Plan development concept provides for a planned retail, dining, and entertainment complex in the northern portion of the City of Huntington Mach. The Specific Plan estarblishes the general type, location, parameters and character of all development within the site's boundaries, while allowing for crealive design ideas on individual protects consistent with an overall concept. The Crossings at l iuntington leach will be it 63 acre master planned regional commercial retail, dining, entertainment facility with supporting set -vices. The Specific flan is designed to allow for development in it manner that is compatible with the surrounding neighborhood and City of Huntington Reach. 'rhe Crossings at Huntington lkach Specific Plan provides an opportunity for it variety of quality commercial uses, consistent with the City's General Plan. The Crossings al Huntington Reach Specific Plan provides the framework and guidelines necessary to create a unique, high quality, visitor sewing, retail/dining/entertainrment complex. 'I'lie site's natural features and proximity to regional transportation systems make the area ideal for a variety of compatible uses and activities. The development concept is designed in concert with the area's history of commercial activities and the community's need for a strong self-sufficient economy. The Crossings at Huntington I;each provides for it range of employment opportunities in professional, retail, set -vice, food service, and entertainment; and will broaden tl'e employment base of the comrmrrriity. The Specific flan establishes a clear development concept to assure: the facilitation of a cohesive complex. Design rmeasures encompassing site: planning, area landscaping, building architecture, streetscapes, pedestrian linkages, setbacks and signage have been established. Concern with and adherence to these details will combine to create a unique and integrated development. An illustrative conceptual master plan (Exhibit 3) depicts a scenario utilizing the various guidelines described in the Specific flan. The plan provides a potential layout identifying building orientation and placement, parking design and access, roadway configuration, entryways and landscaping. The plan is not intended to reflect an ultimate design situation, However, a large variety of other development patterns and activities may evolve which are also consistent with the Specific Plan policies, guidelines and regulations. The project statistical summary is showrr on Exhibit 4 and the level one and level two development concept is shown is Exhibit 5a and 5b. The specific Plan recognizes that development will occur over a period of time and, therefore, must anticipate future concerns for the area. In order to address this concern, flexibility has been incorporated into the Specific flan Development Regulations (Section Three). This flexibility in development guidelines is intended to accommodate future market trends and tenant needs, without sacrificing the intended high -quality character of the project area. The Crossings at Huntington Beach Specific Plan 16 N4►lc•: Art u rlr:tiYrihutic►as urz• ul prrt�a inrulc urrcl rrruy c-hur{tic• as Me pigl •c.Y is rle.•vclipal. Project Description (statistical summary) Exhibit 4 The Crossings at Huntington Beach Specific Plan 17 17v lye demol►shed 517,231 Mealer Anchors h'Clrlil �1�Icli!►�>►► l��.ti7ri1� Li►►lc►• Anchors .tiln•) Center Res!!llminls 1 allks SU BTOTA1, 21 1,488 1007000 175,000 NOW: Awn clish ihulions aw aly1 .vi» wle and nary c•han'Ve as the hn jccl it do wtolvel. 343,556 71,900 1 OG,000 K,z40 77,•Lel6 7,300 7G7,G 121 , 33,0L81 Project Description (statistical summary) Exhibit 4A The Crossings at Huntington Beach Specific Plan 19 i 41 �D ;r','s}'�s'' i fµ ti lj':•:4.'!711.y.1• r. "I'r�, syu yln,.ra,R r: :� �t3rfic O I - ; ww�.,xi,; ,,r;;;;,#'y ,� ' ' i iilaill (�fr� :��;;��w ``' ' :.✓ l,- +i' ,e >ijj '.•'i,•• = c'yr. •'.� '�! bM ✓♦ter uuu Sii•iii��1'lr''"'jtf + SAP! NEGO IFRE.EWAY • 405 j I ._. ��_ .. � �' � I. �.� e •_.,......_._.,_ ._._ , __ I I,,.:.ili'�III �; .' -� a .ra �JL I I II. 't �l `l t • Ir' r � , I !: � r!,I � ,' I' ir' ti,- ,: �. r - >, ti �r- ■�- ► - r: �i, 4 .I' f�l� I . .,' .a � A r .; 01 :',ntl� 'I ' .� i- I� •,'..,, 'I I j I R1. .,, Lr,• .�IIII �I --' ---�...._ _ ,Wlllpllp 4'.Inulnl,iYlcla:uwgn,�!falllll.l::l.lalll:::vu' � �� I : :•L,:ul.!.n . r.li�:.I:I:::H.i 11 !) l! EUIniGER, AVENUE -"— Cull I _ Development Concept Level 1 Exhibit 5a The Crossings at Huntington Beach Specific Plan 19 1111011 ' -1Wi "11MI1111111110:011(MrMiL SAN DIEGO FREEWAY - 405 4' s L J Development Concept Level 2 Exhibit 5b The Crossings at Huntington Beach Specific Plan 20 rCIPINM AvFrvC1P� ,+ul.11�rllaunf'.I L�}.,IrnIIIIIWilllllllll l.11an udl•Ilnnnu,l.l;+'�— �: 4l .. ;`\ lurlllTlurrrnin�IliinTrilimu F. `,lili Ililll�l€11111;1 �,. _I= _ _ _.- �_. •'� SAN DIEGO FREEWAY . 40S ', I �I•. ,-k' ' t' _ ,�. I •j \ ai NTEI(AVEWE I• ` it I'€ _ €. I I• —. . - — I I ` t ij II I1= M! II Ilf I1;::111 is €�� L��1t 1�1 I� !!!�I I� �� 1�1I�{lII !{ � — J- _tip.., - � 'fi'll �:I"Il, .rul� 1• il�'.�• ! iI _ � 'i/r" •��1][Ll_I � •---.. 11 II irl II illi�i'� _,.,.. ' II•I1I''li'j I I Wilk jf1f NIL III I'1� ` I'Lpw l•lu , 11110 - I _ t.11111_I:Ill:.11:I IIIIILLIIIII IIIIIta.lallll_:I_I I LI_ Hll lilllla!Illdatl 11'.,1.l.:al!_LlllllaCie1:111111'—ILIILL:IIuJ.� I hlh ll.l.!:II •IIIIIL.11lllll l.allullll +.IL +�!L I�.� I � ��,_�_. _..II '1 .. .' :• I .— .._.. ._-. . EDINGER AVENUE �-- Development Concept Level 1 Exhibit Sc The Crossings at Huntington Beach Specific Plan 21 COW It AVFNtA— >,;"Vli in Iii I M I W 1111lil•, j�arul lll.udllllumll 10 lllllu it'.IJ.,u .- 1 _ !. _ ,�/ if .IIIUII IIIll llllll',lian 111111:11"11'.fl11 III ` 1:•, l+ i ill lfil ilh Stillillnl I' I �, I, I . '1 , •;� \ I il'i;llllll'1i!illi',` 17 _ -►- -_ _ SAN DIEW FREEWAY • 405 I Ir ll nll61111111111I ; r �. I I � II i �• .. ..' � Ill I .,f- _f_ Ll�a�l_I��:�'I —._ � ' _-- �- ••�f � 1 '1'�I;II i i�ifl�ll I;I J.�_ I I' ,µ� ; ' (.\; Illl.li �i .�• � •'+'.Cjj1 '.. 1 -L. _ ' k - -• -r- -- -[- -[- -- y ,"FUjrlj 4 na'. - -- - � - -- -11.III:II::.11.11ll5lu..�- _ � - I r. � ' ` � 4.i Ir: � r•. _ . ._ .. _ ITlnul_l.11:.a..l.l.a6a1 a..l:L.hpI:III,tI!.,IILJ:IInII•U I _ _I ;L.1;Ld,II II!Ilr.IIL II+ Llu lull) III - —..— 4— _ __ _�,.\pllLiY111r1u!LIItLiLLLLLLIu-EDINGER,iJll!d AVENUE luli�ulul.lu.:�ll l,a _ rvrs Development Concept Level 2 The Crossings at Huntington Beach Specific Plan Exhibit 5d 22 The objective of the Specific flan is to implement the goals and policies of the Huntington Leach General Plan by defining the physical development of the Crossings at Huntington beach site. Included in this appraich are Ilre establishment of fund use, circulation, infrastructure, landscape and architectural design characteristics for the project area. The Specific Ilan consists of a number of major components which will guide the development process including the Circulation Flan, Public Facilities Plans, Landscape Concept, [resign Guidelines, and Development Regulations. The Specific Plan recognizes that the major portion of file project area has been developed around the existing facility. However, any reuse, subdivision, and subsequent new development shall be subject to the provisions of the Specific Plan. Refer to Section 4.5 Site Plan Review. The Specific Flan identifies and requires sufficient infrastructure and public facilities to adequately and efficiently support any and all anticipated uses and activities. These improvements will be phased to coincide with or precede individual development projects. This upfront effort will allow for buildout of the Specific Plan in an expedited manner, subject to compliance with the Specific Flan and the Environmental Analysis. The Crossings at Huntington Beach Specific Plan identifies effective land planning and design regulations techniques in a flexible formal which can take advantage of ideas and opportunities presented by future tenants and users. 2.1 REGIONAL COMMERCIAL, USES The Crossings at Huntington Beach Specific Plan recognizes unique development opportunities within the project area. The purpose of the Specific Plan is to create a distinct cluster of activities and allow for individual project development and tenant occupancy to occur in a timely manner, within an overall Master Plan Concept. This approach recognizes development phasing patterns, market conditions and establishes sufficient flexibility to provide for the opportunity of a variety of activities within the Specific flan area. The City of Huntington Beach General Plan identifies typical permitted uses under the Commercial Regional land use category. These uses include, but are not limited to, anchor department stores, outlet stores, promotional ("big box") retail, retail commercial, restaurants, entertainment, professional offices, financial institutions, automobile sales facilities, and similar regional -serving uses. Future activities for the area will depend on market conditions and may include a variety of activities consistent with the City's General Plan. These development activities may be either an expansion of existing facilities and/or independent new projects. The project area can accommodate a total development of 1,100,000 square feet of regional commercial uses. The Crossings at Huntington Beach Specific Plan 23 . I. .. ..... I I ' .-v 1- -11 , I Lj (4Nji1(A%tNU[ .!I! -L. L III I ;.I LLL- LLLLL i --------------- ----------- jr I_ EI.� L, J 1- j4 IT LOINCLK Al SAN [MG0 f RF FWAY - 405 Open Space / Pedestrian Walkways Plan Exhibit 6 I The Crossings at Huntington Beach Specific Plan 24 f' muim im 11 ml!,1 {'IiJ{ lllll!11 I lllll�� jr}++jj� �I f 1: I • t .�.{�.M� III °d,_ •:� SAN DIEGO FREEWAY - 405 �1 C4HIN AVOWS me too ...... lillilill•�lili{{{I� �, _ `� �- i y • �sVVVVVVV4VHiifV� - '�� ' � ��rl. i • _.__ '1 1�...`� ___ —. _. .. ! � _ _, —„_. !�- I�� — avl..van -Wray..,_ _._. .". _ . ,41 BI ACr V �1 I Open Space/Pedestrian Walkways Plan Exhibit 6A The Crossings at Huntington Beach Specific Plan 25 REGIONAL COMMrRCIAL USE POLICIES: 2.1.1 Any expansion beyond the initial site plan approval, sli�rll be through the site plan review process (see section 4.5). 2.1.2 Retail, dining, entertainment, and related uses drawing from a regional commercial/market area shall be the primary intended activity within the project area. 2.2 OPEN SPACE AND PEDESTRIAN WALKWAYS The Crossings at Huntington Reach Masler Plan identifies open space areas which can accommodate outdoor commercial activities, seasonal recreation and entertainment activities, and casual pedestrian meeting places. These pedestrian plazas become the central focus of a number of commercial nodes within the project area. In addition to the major plaza areas, there are a number of entry nodes which serve as the interfacing links between lire vehicular and the pedestrian areas. 'rhe clustering of open space plazas are connected through pedestrian walkways. These walkways also serve as a link between the variety of Village commercial facilities and the Entry Plaza, the Village St r ada, the Plaza and the Colonnade. A pedestrian walkway system is also used to connect the Crossings at Huntington leach with public transportation facilities and surrounding network of public streets {see Exhibit (;).' OPEN SPACE. AND f 1:1 sr]ZIAN WALKWAYS POLICIES: 2.2.1 Individual developments and activity areas within the specific plan area shall be linked through a series of pedestrian walkways which culminate in an interconnected system of pedestrian plazas creating a variety of open spaces. 2.2.2 A pedestrian walkway system will link or connect all future development pads to the central portion of the Crossings at Huntington Beach. 2.2.3 All pedestrian walkways ~hall be designed and landscaped consistent with the overall theme of the Crossings at Huntington lk-arch. 2.2.4 Pedestrian walkways as shown on Exhibit 6 shall be incorporated on the Landscape and Technical Site Plans and shall comply with American Disabilities Act requirements. The walkways may include shade trees, seating, decorative pavers, and lighting. The Crossings at Huntington Beach Specific Plan 26 Circulation Legend f„1w.rrn l.wy..11...l.rw... u,.� (7 �F•ll.I..waf l.W�,r. 1 1W.h11NV.CkA c.,w" w. spy �. �.... . V.y� V� s w Circulation Plan Exhibit 7 The Crossings at Huntington Beach Specific Plan 27 I';-. rTI T (r'1hH11'. 7fl,1111-di V111M.7m -rTiirrt;TlTrilltln;i;tiiiiiiri.T: Ali, litfil"I CA ft'l iwl I- Lik ILI jut 1.1.1 • A! t :2. "1 It AVI kWh L �4 J- A- 11: A• 7' :L A- --:= MSMLEMV� 71 I KilLILLO I Ck(uJ.UkjnLVSVM JL T- JL -T + :K: I v V, 1� lwil 66. J: ='7 T7 _ram r I"%w1gl!ELU1! il7LJ LgWL L:4"'J�LLJ Circulation Plan Exhibit 7A The Crossings at Huntington Beach Specific Plan 28 X 4�fNffft AVFNtJFJ 7: 111%AMIJ V), f 2) SAN DIEGO FREEWAY - 405 (4NIERAVINVE A ��4!IS1-�_ [I: R1 1, 1 1!!% k ti IIJIMP IIIHIIIIII III V I Mill) ril T T- M-11 GsL%Aji%jnte6eW f,¢li��,V I` � y f � I ACH 8( Circulation Plan Exhibit 7B The Crossings at Huntington Beach Specific Plan 29 7 77-7— -M III IIIIIIIEM 11"ITIMITIn irl '- F ff—� r f —,-u &—t—RI AIL L mirlim Ii :7 H:I VIIII VI 1111111 111RIN111111110 C.- J= F.T= —L5 E15 r =37 14 qn 44 CktAskin LcVwW A A. SAN DIEGO FREEWAY - 405 4MEX AyEt*U( Circulation Plan Exhibit 7C The Crossings at Huntington Beach Specific Plan 30 2.3 CIRCUI.A'I'ION PLAN The Circulation Plan illustrates the general alignments, classifications, location and design of cross -sections for public streets and private drives within the area of the Specific Plan. The Circulation Plan is consistent with the Huntington Beach General Plan's Circulation Element. Primary access to the City of Huntington Beach and the Crossings at Huntington Beach is provided by Interstate 405 (San Diego freeway). The City's General Plan designates the intersection of Beach Boulevard and Edinger Avenue as an internal node and a primary entry node to the City. Access to the project site is provided by a system of arterial highways including: • Beach Boulevard, a north -south principal arterial street (120 foot right-of-way), designated as a state highway, a primary path/image corridor, major urban scenic corridor, and transit service route. • Edinger Avenue, an east -west major arterial street 0 20 foot right-of-way), designated as a truck route, primary path/image corridor, and minor urban scenic corridor and transit service route. • Gothard Street, a north -south primary arterial street (100 foot right-of-way), designated as a transit service route corridor. • Center Avenue, an east -west secondary arterial street (80 foot right-of-way), designated as a transit service route. Internal circulation is currently provided by a network of private drives/streets serving as access to individual portions of the project area. Circulation is further enhanced by a' number of signalized entry drives and public transportation facilities (Exhibit 7). The circulation plan relies on a hierarchy of circulation features ranging from major arterials to local streets. The system is designed to accommodate traffic to the project area and around the area while discouraging through traffic intrusion through the project site. In order to efficiently facilitate new development on - site, primary access will be from interior drive aisles. Direct access from adjacent arterials will lie subject to review and approval of the Director of Public Works. Primary access locations into the project area have been located and designed to provide full turning movements. The locations relate to existing driveways and median designs, and are anticipated to adequately serve the projected traffic volumes for the project area. Specific future development proposals may require modifications to these anticipated access locations. The two driveways along Edinger, adjacent to the Montgomery Ward TBA shall be closed when a change of use occurs in the existing TBA building. The circulation system shall be master planned to accommodate easy access between activity nodes of the Specific Plan. All street improvement construction shall be completed in advance of occupancy of new development. The Planning Director and the Director of Public Works shall approve phasing plans for street improvement construction, consistent with development construction phasing. The Crossings at Huntington Beach Specific Plan 31 Alternative forms of transportation should also receive careful consideration. The current OCTA bus route passes the project area on Edinger Avenue and Center Avenue. The project Circulation Plan identifies existing and proposed bus turnout locations along Edinger Avenue and Center Avenue. As a supplement to vehicular access to the project area, potential future access such as a light rail system and stop may be available from the existing rail line on the western boundary of the site. In addition, the Development Concept encourages the creation of a pedestrian walkway system. As a means of achieving a strong landscape image, pedestrian walkways are required and shall be provided throughout the development to facilitate pedestrian access from adjacent developments to the project site. The pedestrian walkway system shall include walkways around the perimeter of the site in the street right-of-way. CIRCULATION PLAN POLICIES: 2.3.1 Primary access to the project area shall be from the existing signalized intersections along Edinger Avenue and Center Avenue. New access locations into the project area shall occur only where traffic patterns and median openings pillow, subject to review and approval of the Director of Public Works and Fire Chief. 2.3.2 A new primary access into the project shall be pursued where the San Diego Freeway on and off ramps intersect with Center Avenue, subject to Cal -Trans, Department of Highways approvals, design review and approval of the Directors of Public Works and Planning, and the Fire Chief. 2.3.3 Additional new driveway access points from the arterial highways adjacent to the project area shall be limited and allowed only when the project, size, location or type of use, warrants such access, subject to review and approval of the Director of Public Works and Fire Chief. 2.3.4 Deceleration and acceleration lanes for driveway access points may be required, depending on the location of the proposed access point. Right turn in and right turn out accesses to the arterial highways shall be considered on an individual project basis, subject to the review and approval of the Director of Public Works. 2.3.5 Shared access facilities and reciprocal vehicular access to and between individual on -site activities may be requested and/or required by the Director of Planning for adjacent uses and parcels. 2.3.6 Alternative transportation forms such as a light rail stop shall be coordinated with Orange County Transportation Authority and pursued by the Crossings at Huntington Reach should a light rail urban transit system be developed in the future. 2.3.7 Pedestrian sidewalks shall be incorporated into the project as a component of the landscape plan. Sidewalks shall be installed throughout the development to facilitate pedestrian access from adjacent developments to the project site. The pedestrian walkway system shall include walkways around the perimeter of the site in the street right-of- way, and through the parking lot to the project area. The Crossings at Huntington Beach Specific Plan 32 2.3.8 Public landscape areas within the right-of-ways may require a separate Parkway Landscape Agreement for continued maintenance of the area. 2.3.9 On -street parking shall not be permitted anywhere in the project area, on both public streets and private drives. Z3.14 Additional traffic impact analysis may be required, due to unanticipated project developments not anticipated in the approved traffic study subject to review and approval by the Directors of Planning and Public Works. 2.3.11 Circulation system improvements have been master planned to accommodate ultimate buildout of the Specific Plan. On -site and off -site circulation improvements shall be completed prior to occupancy of the particular developments with which the improvements are associated. 2.4 PUBLIC I"ACILITIES The Public Facilities Plans identify existing and proposed infrastructure, storm drain, sewer and water facility improvements to serve development within the Specific Plan area. A specific analysis of infrastructure requirements and detailed design, construction and phasing plans can be found in the final civil report and bound under a separate cover. PUBLIC FACILITIES POLICY: All public facilities infrastructure necessary to serve development within the Specific Plan area shall be completed concurrent with project development, subject to review and approval of the Director of Public Works. The Crossings at Huntington Beach Specific Plan 33 'L.4.1 WATER SYSTEM Domestic water for the property will be provided by the Public Works Water Division of the City of Huntington Beach. The Water Division has use of both underground and imported water sources to service the area. The underground supply conies from nine existing wells, and imported water delivered to the City of Huntington Reach by the Metropolitan Water District (MWD) at three locations. The Specific Plan area is part of the City's Master flan for Water Service and the ultimate development anticipated will be .adequately served by the City's systems. MWD is the major wholesale water purveyor to the City of Huntington !teach which, in turn, is the retail provider to all water users in the City, includinv, the subject property. The existing and proposed water supply systems are shown on the Water System flan (Exhibit 8). The existing center has a looped water system. Water is delivered to the site by the City of }luntington Beach's 12-inch line located in Edinger Avenue and a I2-inch water main on Beach Boulevard. The proposed modifications to the center will require that a portion of the looped system be reconstructed, identified in the exhibit as "Proposed Water Line." The required hydrant flow for fire sprinklers in development is 4,000 gallons per minute (gpm) at 20 pounds per square inch (psi). The existing and proposed upgraded systems will deliver 4,000 gpm at 47 psi. Proposed architectural site changes will be reviewed by the Firs: Department for code compliance and may require additional fire hydrant installation. These hydrants (if any) will be connected to the existing or proposed water line loop. The number of hydrants on the system is not relevant to the flow delivered and, therefore, does not affect the system. The required fire suppression sprinkler flow rate is approximately 2,500 gpm. The existing and proposed systems will deliver 2,500 gpm at GO psi. It is not anticipated that the proposed modifications to the Crossings at Huntington teach will require water flow for fire protection above that which the existing system can deliver. All on -site water improvements will be designed to the City of Huntington peach water standards for future City acceptance and niaintenance. Locations of fire hydrants and apparatuses will be reviewed by the Fire Department and Water Division of the City of Huntington Beach to ensure adequate fire flow and pressure. A final design analysts will be perforated during the site engineering stage to properly size: the system, determine final alignments, and determine if addilional water improvements are necessary. The Crossings at Huntington Beach Specific Platt 34 2.4.2 SEWT.R SYSTEM The City of Huntington Beach is responsible for the review and appnoyal of the collection of wastewater wit lilt the project area. The Orange County Sanitation District (OCSD) is responsible for the treatment of wastewater. The City system ultimately is collected by the Sanitation District via their trunk and distribution lines to convey sewage to District Plant #S, located in Fountain valley, and District Plant #2 in Huntington Beach. The Sewer System Plan (Exhibit 9) depicts the existing sewer system serving the project area. Sewage from the subject property is collected via a private on -site collection system with a singular outfall point at Ilse southwest corner of the site. A 69 inch sanitation district trunk line runs beneath the concrete channel located along the west property line. No changes to this connection will be necessary. An existing on -site private system consists of a series of 47 G, 81 and 10-inch lines collecting into one 10- inch line which is proposed to connect with the county systern referenced above. Due to the reconfiguration of the development, it will be necessary to remove or abandon -in -place several sanitary ,k:wer lines and wplace them as shown on Exhibit 9. This relocation will place the new sanitary sewer system south of the existing 10-inch waterline. The existing waterline in this area will remain. The westerly 760'+/- of the replacement line will be upsized to a 10-inch line so as to allow construction at a flatter slope. The existing lb -inch .initary sewer line exiting the site is adequately sized to carry the anticipated flows from the reconstructed center. However, final design Analysis will be performed daring the site engineering stage to properly sire the system, determine final ahgn»rents, and determine if additional sewer hnprovernents are necessary. The Crossings at Huntington Beach Specific Plan 35 2.4.3 STORM DRAINAGF. 'File City of Huntington Beach and the Orange County Flood Control District are the agencies responsible for the flood control systern in the project vicinity. A regional flood control channel exists along the western boundary of the site. The: existing drainage system consists of two main lines, "A" and "B". line "C" drains a small area westerly of the existing Montgomery Ward store in addition to secondary line "D", and numerous connecting laterals. All lines drain westerly into •a City of Huntington reach Flood Control Channel (Huntington Iteach Storm Channel C5-5CZ). Drainage area boundaries have been identified based on existing inlets and catch basins. There is a small drainage area located at the northerly perimeter of the Crossings at Huntington leach which drains into it smell basin located in the northwest corner of the site. Line "A" is comprised of a 42 inch Reinforced Concrete Pipe (RCP) and a variable sire Reinforced Concrete Rox (RCIO section. The RC13 is covered by a grate opening for the entire Iength. Lint "It" Consists of variable size RCP. Litre T" has tt direct connection to the City storm channel and drains approximately 2.57 acres. Secondary line "D" connects to an existing detention in the north-western corner of the site and drains the area adjacent to Center Avenue along the perimeter of the project. Hydraulic calculations performed on the existing storm drain system revealed that ponding in a 100 year event will be as follows: average deptlis of 1 foot and a maximum depth of 2.8 feet were determined for the ponding over line "A." Average depths of 9 inches and a maximum depth of I.4 fret were determined for the ponding over line "R." 'File storm drainage discharge rates from the remodeled Crossings at Huntington Beach will remain similar with the exception of the discharge from the enclosed shopping area. 'Phis area will now become an open air shopping complex. Drainage areas will be redistributed allowing line "A" to remain in it's existing position. The entire length of line "B" will be reproved and replaced with it larger capacity conduit. As a result, no ponding will occur at any point on site duriny, a 100 year event. Line "D" will connect to line `T" near the oulfall. The existing detention pond will be removed and be regraded its it addilional parking area. Line "C" is not affected by the proposed remodel. There will be a need to add various new lines to connect to Line "A" and line "B: to drain the open air section of the Crossings at Huntington Beach. I'inttl storm drain sizes will be determined when final design calculations are performed, The Crossings at Huntington Beach Specific Plan 36 2.4.4 WATER QUALITY Water quality in California is regulated by the U.S. Environmental Protection Agency's National Pollution Discharge Elimination System (NPDES), which controls the discharge of pollutants to water bodies from point and non -point sources. A NPDES permit or other E.P.A. review will be required for individual construction projects. Prior to issuance of any grading permit, the developer shall submit a "Notice of Intent" (NOI), along with the required fee to the State Water Resources Control Board filed under the terms covered by the State NPDES General Construction permit. 1'irrau,,h the NPDES Permit process, the City currently requires contributors to non -point runoff pollution to establish Best Management Practices (BMP's) to minimize the potential for pollution. Under this program, the developer is responsible for identification and implementation of a program of BMP's which can include special scheduling of project activities, prohibitions of certain practices, establishment of certain maintenance procedures, and other management practices to prevent or reduce the pollution of downstream waters. Typical elements of such a RMP program would include addressing the use of oil and grease traps, detention basins, vegetation filter strips, and other common techniques in order to preclude discharge of pollutants into local storm drains and channels. 2.4.5 UTILITIES There are several public utility service providers in the Specific Man area. Adequate facilities exist for the current service. needs of the area, however, additional facilities may be required as additional development occurs. 2.4.6 ELECTRICITY Flectrical service to the area is provided by the Southern California Edison Company. Existing transmission and distribution lines are adequate to service current and potential future needs. Individual development projects may be required to relocate or underground existing facilities concurrent with other improvements and consistent with the City's tlrrdct'Sratmding Ordinance (17.64). An exception to this provision is the GGKv line. 2.4.7 NATURAL GAS Natural gas service in the Specific provided by the Southern California Adequate facilities exist for current future needs. Individual projects may relocate existing facilities concurrent development. Plan area is Gas Company. and projected be required to with project The Crossings at Huntington Beach Specific Plan 37 2.4.8 TELEPHONE Telephone service in the Specific flan area is provided by General Telephone (GTE). Individual projects should coordinate with GTE for the relocation of existing facilities and installation of new service. 2.4.9 CABLE TELEVISION Cable television service within Huntington Beach is provided by Time Warner Communications. Individual projects should coordinate with the Cable Company for the installation of new service. 2.4.10 SOLID WASTE: DISPOSAL Rainbow Disposal Company currently provides solid waste disposal services for the area. Based on service projections and anticipated demand increase, an adequate level of service will be maintained. No solid waste disposal facilities are planned to be located in the Specific Flan area. The Crossings at Huntington Beach Specific Plan 38 The Crossings at Huntington Beach Specific Plan Design Guidelines Exhibit S 39 2.5 DESIGN GUIDELINES design criteria, which fire City will use to evaluate proposed developments. 2.5.1 PROJECT AREA CHARACITR The Design Guidelines establish the character and style for the development of this retail, dining and entertainment complex with buildings and sireetscapes that have a distinctive visual identity. The Guidelines accommodate individual project identities and promote interrelationships between complementary building storefronts and exterior spaces. The major elements of the Design Guidelines include: site planning, overall panject/tenant architecture, exterior pedestrian amenities, landscaping, and signage. All development projects within the Specific Plan area shall conform to the Design Guidelines and shall incorporate appropriate theme elements. The Design Guidelines .are to be used by the Crossings at Huntington Reach owner and the City of Huntington Reach as part of the Site flan Review process. The ttesign Guidelines are general and may be interpreted with some flexibility in their,application to Specific projects. Variations rmay IV considered for projects with special design characteristics that still meet the objectives ofthe Guidelines. The Design Guidelines shall be used to promote a high level of design quality while at the same Haire provide some flexibility, necessiary to encourage creativity on the part of individual/tenant designers. The Design Guidelines have been prepared to articulate the intended development standards of the Specific flan. The guidelines establish a framework for developers/designer's of individual projects, and The specific Plan'S a►tilritectnral vocabulary blends Al of its design disciplines into a theme ofa coastal Italian Village. Care has been taken to reveal this expression while at the same time encoarraging individual tenant identity. The City of Huntington Reach is defined by many elements including the pacific Ocean. Living next to the Pacific creates many lifestyle and recreational opportunities for residents and visitors alike. Activities such as surfing, swimming, boating and fishing, along with the city's natural features; California's longest uninterrupted sand beach, Rolla Chica Wetland Preserve and its famous ocean sunset vistas define what a coastal town is all about. Many of the architectural features of 'floe Crossings at Huntington Beach will celebrate this coastal living. 2. 5.2 SITE PLANNING GUIDELMS The positive shoppin , experience lvgirls al landsc.•,aped entrances to the site, which lead to convenient and ample parking. The center's open-air spaces of plazas, courtyards and pa.wigeways will be arranged in a non -linear pattern. Additionally, the main plazas will be accented by water features. A pedestrian walkway will connect east to the existirr<g adjacent Village: Retail center. Italianate theaned graphics add to the continuity of al] the linked spaces. To facilitate the development of The Crossings at Huntington Reach into a unique resource for the community the following site planning policies shall apply: The Crossings at Huntington Beach Specific Plan 40 SITE PLANNING POLICIES 2.5.2.1 Site layout for the project is designed to route people and vehicles through the site in a clear, identifiable, efficient and effective manner by incorporating unique pedestrian walkways .and highlighting rniain drive aisles with l arnbc:.aping .and paving. 2.5.2.2 At least one water elemenI and one public art feature shall be incorporated into the common project area. 9.5.2.3 Loading and storage areas tracing Ettinger are designed to resemble a facade. The facade will be integrated into the project environment. See example of Elevation of Tenant storefronts in section 2.5.4 on pages 41-47. Ibleirliul Ehlry.'V VVngyc 2.5.2.4 Entry drives shall be a minimum of thirty (30) feet wide. 2.5.2.5 Building orientation and access shall bc' designed to be visible from the surrounding streets and/or pedestrian plazas. 2.5.2.6 Parking shall be provided onsite in .a manner that is convenient and compatible with the layout and design of the overall project and consistent with the sturrd:arcts ill I;xlaibit 16. ti<atellitr pact bUilditlgs are encouraged to provide a minimum setback without parking between the building and the street (see General flan Policy 10.1.1 5.c). 2.5.2.7 Security provisions, including lighting, building entrance visibility and drive locations, shall be carefully considered. '1)plea/ A11*111s: Bay'h0 The Crossings at Huntington Beach Specific Plan 41 2.5.3 COMMON AREA GUIDELINES The Crossings at I-duntingion Beach is divided into several unique spaces. The Italian Village Setting will be carried out throtrgh distinctive architectural design elements including towers, domes and arches, cobblestone streets and walks, water features and site amenities that reflect quaint and harmonious lifestyle of the Italian' Village. A wide color palette: with contrasting accent elements will create a lively exciting experience for visitors to the Crossings at Hunting Peach. (See section 2.5.3, page 38). 1 1; II .Llli u'rrn,l� IL, Ill llll ll al.11l it , , i•I .. u !Llliir, :I,I h.; I i I 1 I• �• _i I �, l fS7 1 I� it I ; •' .� i I'Y� �,.i%.iM!, f �\ I' I. �. i. \i �.. •tl '1 � , L,I.VIIM k\LNUL !�� I I I A' t rr�j �• ��•' i j � r if � I k�+ I I�{I}r � i IpI. • ' � ' : 5��1t�' �� 1tyt�1, � I 1 I : i I: j� 1 J� 7,F M1:...: .........:.•._... 1. , .1 \.i .- � ��Lfr,lr iS" F I I i '� � III 1 '+�` 77y riY��, .�.: • ;. Y } ��' y�i\• � I _I ' t— ' 1. � ,� - I lily I t1. ;F I �� J'� q\ y� OF ^t'rl► _ _ wr Shy,, I' ` .• + 5 ..��►�Cil�l�'� _ �T�rl� MJS .! P AS� III ii►4 Q �y rr.,� Fl �� •- �r SAN DIR$'O FW WAY - 40S i I I V!,I i 1 �• 1 � Itt � 1 �' �I.Y• [ �I { •. ! I KILL [IIId�II. [ ., I �' [ I � [ 'I Irlll. ll�:a � I' I .,: i a I I I I 1..a � � '�♦�tt lI , 1{ , • n I �� l i f � I r I 1. l . . j I in�',��il � i' �� [ I .I. ! •i L1.,-,.� I � i,""1 � i. I ,a U! rl.,u.' ,yn, II :: :,I I[h.,:•... I wM ,.. a\r,f_ IDNCIR AV1NLIt �- The Crossings at Huntington Beach Specific Plan 42 �s:,VMMImmnIrrr 1l lmmmmmrmmrlmriflllmnnFmTllr'irjrv`,i ?tirinir';i, ITmrtnT-.... mn nuumYlrni�, T �. UIIIII�IIII�II:: I'lllll) :1• _iy AG - •�_ 7 I r,--� ` Sill:IIEI'•Ilililllll� ~{-\J1Jrt"fic L• = t �. :)AN DIEGU rREEWAY - 405 u®�' Co�w�•fion ` �1ilNlllllila:llllll wlliiiikl LI II Q011l!IlIlIllal_IIfOL, I��II,I,I � I�I,11111I-IM:I,:I�I,:,..II�I1:111!I11111111111111�I1= EDINGER AVENUE II , The Crossings at Huntington Beach Specific Plan 43 TI11: I:N'IRY PLAZA Olxning towards Centel- Sired and the 405 I'reeway, the Entry Plaza is the central Northerly focus of The C rossitigs at I-111nti11"4to11 ltcach. 'I'hc dCcorative Ind c0101•fuI hardscape will be the primmy Sathering place for community and retail events. II will contain a sculpture fountain, k�aiin��, and kiosks ilnd become Ilse enlry Portal to the Crossings exIvrience. Tile Entry 11ml fountain alons witli the surroundinX bliildinx arclliteclurc will announce the location ot''I'11e crossln',{s at 1-11111tin;{ton Beach Ik)th Lby and 111glit wills 111e s1ructures.sild Ihc wales' I'eatures wa511e i i11 ICCCIII liS�htillS�. The Crossings at Huntington Beach Specific Plan 44 THE VILLAGE STRADA Acting as the "Main Street" of The Crossings at Huntington Beach, the Village Strada will have pockets of landscaping, outdoor dining tables, children's play areas, and seating for a respite from a long day of shopping. Under canopies and trellises the filtered light will guide the shopping visitor along the shop fronts. The Crossings at Huntington Beach Specific Plan 45 THE PLAZA The Plaza (or 'Town Square) is the center of the Italian Village. It creates the foreground for the theater entry and is the central pedestrian access from the Strada, and the South and North passages into the Villages. Accented by cobble streets, water features and the arched entry and dome of the theater, the Plaza is the hub of the Village. THE COURTYARD AND COLONNADE Once past the arched entry to the theater, the Courtyard expands to provide smaller shops and merchants along with kiosks and the queuing area for the theater. Once past the domed theater entry you enter the Colonnade, which continues the retail experience for the visitor. The continuation of the Italian Village theme will follow throughout the Courtyard and Colonnade with alleys of trees, intimate dining and seating areas and an architectural flare reminiscent of old Florence. The Crossings at Huntington Beach Specific Plan 46 4t� onj r@w, COMMON AREA POLICIES: 2.5.3.1 Common Area Lighting will create a strong, attractive night identity for the project. Selected Elements will be highlighted with illumination. These Elements are selected for their ability to enhance the dimension and character to the building archllectul'e, as well as to promote the appropriate degree of presli'{e to the project. l,iylrlrlrK lit IFa s'lVeway 'L. ,.3.2 illumination of buildings and landscaping will be indirect to clrate a strong positive image. Concealing light fixtures within buildings and landscaping can highlight attractive features. Use of a variety of lighling levels at entries, plazas, parking lots, and other areas where evening activity is expected, will create an exciting night time environment. I'Ifkv hV1rxlun• 2.5.3.3 Exterior lighting sliall Ix, located and designed to evenly illulninale the parking ;irca.,. Particular attelttievl shall IV Ir,1id 10 the il1u111in;1lioll of .111 si&watks Mid coimccnn: walkways. All 11,410 slandards shall IV consistent with respect to (Ies1g11, materials, Color and Color of lighl, and Willi the overall architectural style of the; project. All liKhtirlg Shall be confined within the plx)ject. Walkway !•ixlllfe Accent lixll/le The Crossings at Huntington Beach Specific Plan 48 2.5.3.4 Ilardscape in the common areas will consist of non 2.5.3.6 grid -like patterns, which recall the historical cobble stone walks and streets of an Italian Village. The water elements are creatively incorporated to provide visual delight cued intevest. Z. 5.3. ; Mechanical equipment shall be screened from view of the surroutiding public streets. Meclumical equipment shall not I_x' exposed on the wall surface of it building. Screening material and color shall be compatible with the overall building design and colors. Backflow devices, electrical transformers and other mechanical equipment, located on grade, shall not be located within the front or streetside setbacks, and shall be screened from public view or undergrounded, with the exception of public wifely features. 'These items shall be screened to the best extent possible with landscape materials and/or low level screen walls. Landscaping in the common area will consist of espaliered vines on columns and trellis elements, potted planters to add detail near storefronts, and large and small planting beds throughout the pl izas and passaI;eways. Landscaping may consist of groundccwer grasses, sln•uhs, vines ;Ind trees. 2.9.3.7 Trash enclosures and loading docks shall be concealed with screen walls, and ornamental gates and screens. The facade will be integrated into the project environment. Lindscaping shall be provided were possible. The Crossings at Huntington Beach Specific Plan 49 2.5.4 ARCI-IITECI'URAL GUIDELINES Many of the elements of the Crossings at Huntington Beach architecture reflect that of an Italian Village living environment. The Architectural Guidelines are intended to establish a character, style and quality for each architectural category, The categories are. • New Anclior Stores and Theaters General Tenant Stoitfronts Existing Major Department Stores The description of these guidelines is not intended to discourage individual innovation and creativity, but to simply provide a framework within which an overall sense of place will be reinforced. Building design shall comply with the following archilectural policies. 2. 5.4A New Anchor Stores and Theaters The new anchor stores on the lower Icvel create a new retail zone below the theaters.'I'he large mass of the upper level theater provides a backdrop for the facades of the new anchors and allows the visitor to focus on their stores. The theater will be set as to allow it to be viewed from the 405 freeway. NEW ANCHOR STORES AND'1 HEATERS POLICIES: 2.5.4A.I Building massing and articulation shall possess a balance in form and composition. The large planes of the theater and major tenant walls should be enhanced with patterns and graphics consistent with the overall design theme of the center. The Crossings at Huntington Beach Specific Plan 50 2.5.4A.2 Building entries shall have a clearly defined primary pedestrian entry. 2.5.4A.3 Building materials and colors shall be guided by, but not restricted by, the approved Common Area palette. The elevation shows the second level theater walls will be articulated with patterns and will provide the lower level anchor- stores with area to create Large identifyitiv entry articulation. Vk'it, ol'Ni►rtheleviali n 2.5.413 General Tenant Storefronts The concept for the General Tenant Storeftbrits is one Of ten Italian Village. A tenant storefront design would include vernacular of various architectural elements. 'then, linking each individual tenant storefront to another would create a shopping experience of boutiques and shops that would fill a walking street. Arches, columns, tower elements, domes and canopies would be mixed in with display bays, balconies and balustrades for a distinctly up- scale la-ik ,garnered from many European styles and themes. There are two basic types of General 'Tenant Storefronts: Storefronts facing the 'exterior' toward Edinger Avenue and Center Avenue, and storefronts facing the 'interior' toward the Compton Areas. Both storefront types may be one or two levels. The Crossings at Huntington Beach Specific Plan 51 To achieve this Italian Village concept, general tenants in relation to each other may have varying parapet heights, window openings, heights and rhylluns, canopies and signage. The basic objectives of tenant storefront guidelines are to ensure high quality design and use of materials consistent with that of the project and to prtxduce a variety of three-dimensional storefroril designs, each uniquely different from its neighbors but tied together with common Ilteme materials. GI:NEKAI,'I'I'NAN'I' S'I'OKE;I'RON'I' POLICIrS: 25.411.1 All storefront designs and plans shall be subject to the approval of (lie landlord and the City of iuntington Brach. 2.5.411.2 Storefronts are encouraged to have multiple planes to create a variety of volumes and spaces and to maximize each slore's visibility. 2.5.411.3 'Tenant storefront materials may include but are not restricted to: O aaque: Translucent - Polished nictals Glass block Smooth brick Etched glass Smooth plaster Clear glass Class Fibre Reinforced Concrete Crackle glass Porcelain tile Metal grillwork fainted woad Glazed ceramic tile Smooth or polished stone Powder coated or anodized metal Cast concrete or plaster (i.e. colurn)ls, cornices) 2. .4BA Tenants' storefront may project from the face of the building as long as this does not extend beyond the face of the upper level overhang and maintains the reel u i red rna I1 clearances. Ekv,Nrorr vat), r1N heii;h►s, window rhythrrrsmullrci�-hla,catio1u4.c:rrrIsiVid. O.W./C. The Crossings at Huntington Beach Specific Plan 52 Ekwm/PA-S dV ,till1'i'1111)111 c't ENO *AV1 1 i'11t'c'��Li 2.5.-I It. ; Slorefroni dc•siNrls shall comply Willi 1114 dcsig►1 -4t►liddines and nu►y reduir•e mMif'ication in the event that they are tck, similar to a nci�{hb vinq, slore. Tenanis are encouraXed to vertically extant! Ihell, Parade desig11 !h(Drn leasClule to leaseline and from slap to tol) of Irarlpel or IvItons of arlx'r floor a love . 2. ►.•II{.7 'Tenants are encouraged to have awniny's or C'mopies al their Storefronts. 1.1vallyVL'.ti Ofawili l{ uk� The Crossings at Huntington Beach Specific Plan 53 -M4t :IA. Ll ...... i.. �. .-.:ar uir Y 2.5.4C Existing Major Department Stores The existing, operating department store is Meevyns. The Mesvyns bittilding will undergo facade imptbvenients during construction and shall comply with policies 2.5.4C.2 through 2.5.4C.4 listed below. Should Montgomery Wards, in the future, file an application for expansion or renovation, the following policies shall apply: EXISTING MAJOR DEPARTMENT STORE. POLICIES: 2.5.4C. ] The facade improvements shall occur if expansions or renovations to the store arc proposed. All improvements shall be subject to DR13 approval and compliance with the Specific Plan. 2.5.4C.2 The facade improvements shall be compatible with the mall architectural theme discussed in design guidelines. 2.5.4C.3 The renovation designs shall be subject to the approval of the Crossings at Iluntington l3eaeh management and the City of Huntington Beach. 2.5.4C.4 Pudding materials and colors shall be guided by, but not restricted by, the approved Common Area palette. National retail store materials and colors will also be considered. The Crossings at Huntington Beach Specific Plan 55 Tr- 1T+',...ou�yn °nl ' WI 4WI4 Lc4 I:l I .l �1�5i+i 111+ �pIM ,i �'rT 7 �'� , ' ~ �, \• - • ', ',, .!'Jl'=—___•tilt,,. �l'L ^!•y.nl.�. 'S1R _ � � 'i� tii � � J Vtj �. I,, . i � yt - +�wi{� �i ' •I : `� • `� �i{rt� In "'} I,I11 .. I... tu.IL. IWido.fj 1 — �-. "� �- :y 'iY3. .'� .i. , -. -r'. .�I �yti.'��. ►aIG.•s.a+-TT_ -- �' Landscape Concept Plan Exhibit 11 I The Crossings at Huntington Beach Specific Plan 56 AVINUE. -�T gqp IrIll](111 I-ILWAIM, li MW Al I, SAN DiEGO FREEWAY - 40S % A C4MER AVFr4M BEALICH Loll I'lliumil liml, IWI 1 1 J 11 wl Landscape Concept Plan Exhibit I I A The Crossings at Huntington Beach Specific Plan 57 2.5.5 I ANDSCAIT GUIDELINES The landscape For The Crossings at Huntington Beach is an integral component of the overall project design. 'Phis design concept is urban in nature and has strong elements of a Coastal Italian Village . These elements include the use of strong vertical elements sttch as Italian cypress and Palms al the main entrances in strategic areas for emphasis and continuity. Some of the other elements that fit well with an Italian Village environment include the following which are incligenotrti to the California coast. i.e.: ltougainvillea, Ivy Geraniums, Hibiscus, Lupine, A7,rlea, Indian Hawthorn and tree varieties such as Silk tree, Alder, Strawberry tree, Decxi,rr Cedar, Carob, Carrotwood, Crepe Myrtle and the like. The Landscape Concept is composed of these elements as well as other elements which atv complimentary to and assist in the implementation of an integral landscape design. 'these Landscape Guidelines establish the design character and visual dualities for development within the Specific flan. LANDSCAPE GUIDELINE POLICIES: 2.5.5.1 Site layout shall respect and preserve as much of the existing site featurtis, including Irees where possible. A professional consulting arborist shall be used to help determine whellrer existing trees can be saved during construction. 2.5.5.2 Existing healthy trees, where feasible, shall be preserved or relocated on site. 2.5.5.3 landscape design shall provide formal or informal groupings of deciduous and evergreen trees, flowering shrubs, and groundcover. Trees shall be of even size and shape at the time of installation. Replacement trees shall be compatible with the new landscape plan. A nunirnturi of five (5) percent of the net site area shill be landscape or playkrs. 2.5.5.4 Plant materials shall be selected to creale an Informal pattern of landscaping to reinforce the chanicter of the tree plantinXs. A formal pattern of landscaping shall be created on -site at the project entries. Trees shall be selected Erased upon the sire of tl►e planting area to allow for nmature growth without causing future damage to the improvennents. A consulting, certified ISA arborist slurll review and approve final tree planting plans for counpliance. All trees shall tv a minimum twenty-four (24) inch box sire. Shrubbery (evergreen kind flowering) shall be low to medium in height; minimum size shall Ix - five (5) gallon. All grass selections shall be made from the approved water efficient materials list. 2.5.5.5 Street free planting in lire parkway areas shall include a minimum of one (1) thirty six (36) inch box tree for• each forty five (45) feet of lineal frontage. At the discretion of the Director of F`ublie Works, this planting may be modified to one (1) twenty four (24) inch box every thirty (30) feet. Tree planting shall be grouped in informal drifts and tree quantities shall be determined by the length of the property adjacent to the street divided by the recommended spacing of each tree variety. All parkway planting shall be subject to review kind approval of the Director Of Public Works. The Crossings at Huntington Beach Specific Plan 58 }'LANT PALETTE - SITE 1.)1 VCK11'110N _ T 1107AN1C'AL A"1,'_ _ _ COMMON NAMI.' _ FRONTAGE TREE BAUHINIA BLAKFANA HONGKONG ORCHID TREE LAGERSTROEMIA FAUREI CRAPE MYRTLE MLTROSIDEROS EXCELSUS NEW ZEALAND CHRISTMASTREE MONTAGE IIEDG.E LIGUSTRUM J. TEXANUM' TEXAS PRIVIT NERIUM OLEANDER TE'TITE PINK' DWARFOLEANDER MONTAGE ACCENT SIIRUB BOUGAINVILLEA SP. BOUGAINVILLEA LANTANA SP. LANrl'ANA MONTAGE GROUNDCOVER GA'LANIA SP. GA'LANIA MESEMBRYANTHEMUM SP. ICE F'IANrr ENTRY DRIVE'rHEME TREE PHOENIX DACTYLIFERIA DATE PALM ENTRY DRIVE TREE JACARANDA MIMOSIFOLIA JACARANDA KOELRF.U'ITRIA PANICU[ATA GOLDLNRAINTREE PYRUS CALLERYANA 'BRADFIIRD' BRADFORD PEAR ENTRY DRIVE ACCENT' SHRUB AZALEA SP. AZALEA ENTRY DRIVE EDGY: SHRUB PI IORMIL)M TENAX 11AX I:N'1'RY DRIVE LOW SI IRIIII rRACIIELOSPERML)M JASMINOIL)ES S I'AR JASMINE: END ISLAND TREE IAGERSTROEMIA FAUREI CRAPE: MYRTLE REIAPIOLEPJS'MAJESr[C BEAUTY' INDIA 11A%M10RN TREE FOR,11 END ISLAND LOW SHRUB IAM'ANA SP. IAMrANA TRACHELOSPERMUM JASMINOIDFS STAR JASMINE ROSMARINUS OFFICINALIS SPREADING; ROSEMARY END ISLAND ACCENT SHRUB ROSA SP. SHRUB ROSE PARKING IA-)TTREE PLATANUS ACERII'()LIA 'BLOI)DGOOL)' LONDON PLANE TREE—C.enrrally 1tv large for ,mall IILMUS VARVIFOLIA TRUE: GREEN' TRUE GREEN ELM islands we would ivgksire ADONIS FLEXUOSA PEPPERMINT—IlrE amuller (at malurilyl XrowinX 1rces BosQuETRE:E WASHINGTONIA ROBUSFA MEXICAN FAN PALM SCREE:N "TREES EUCALP MS SP. EUCALYI'1US PINUS SP. PINES AGONIS FLEXUOSA PEPPERMINI'TREE. PARKING GARAGE SCREEN TREE TRISTANIA CONFERTA BRISBANE BOX PARKING GARAGE N.ANTING Ek-)UGAINVII.LEA SP. ROLIGAINVII.I.1:A TRACHF.I.OSP£RMUM JASMINOIDE S STAR JASMINE SPECIMEN TREES ERYTHRINA CAPPRA KIMR1300M CORAL TREE SEI'VICE DICK HCUS M. NITIDA 'GREEN GEM' 11CUS COLUMNS SCREEN TREES PIODOCARPUS MACROPHYLLUS YEW PINE PRUNUS CAROLINIANA CAROL.INA LAUREL CHERRY Plant Materials Palette Exhibit 12 The Crossings at Huntington Beach Specific Plan 59 2.5.5.G Pedestrian walkway systems shall be designed to unify the entire project area and provide pedestrian site access to buildings, parking and site activity areas from the perimeter project area and from within the site. Pedestrian walkways shall be a minimum of five (5) feet clear in width with no vehicular overhang. 2.5. ;.7 Perimeter landscaping around the project areas shall provide a consistent edge treatment using a limited variety of plant materials. 2.5.5.8 Parking lots shall be planted at the rate of one (1) tree for every ten (10) parking stalls. Parking lot trees shall be twenty-four (24) inch box trees. All tree planting areas shall be a minimum net width of four (4) feet in one direction and a net width of four (4) feet in the other direction. Small trees (at malurily) shall lac ulilrzcd in these planting areas. Parking lot treatritents shall be consistent and contribute to the project landscaping unity. Parking lots shall be planted with trees in such a manner as to pit -wide maximum shade. An alternative which clusters or groups parking lot trees may be considered. Larger trees may also be considered as substitutes for a number of smaller trees, subject to review and approval of the Director of Public Works. Perimeter parking lots adjacent to arterial streets shall be provided with additional landscape treatment to ensure that the parking areas are adequately 'screened from adjacent street views. Denning in these areas is encout-aged and shall be a maximum of three (3) feet high and have a nattinal appearance in form. However, the fact that a successful retail shopping center roust be seen from the adjacent streets will be the determining factor in the selection and placement of all perimeter landscaping. Shrubbery shall be planted in areas where berms are not practical, such as along the perimeter of the parking areas. Shrub planting shall be provided in a ntinirnurn five (5) gallon sire and spaced a maximum of three (3) feet apart. Shrubbery shall not exceed three (3) feet in height. Hedges shall be trimmed from the ground and maintain an eight (8) inch clearance from the ground. Where cars overhang the curbs, ground cover planting shall be required; a maximum overhang of Iwo (2) fecal shall be permitled. The overhang area shall not be considered as part of the required minimum percentage of on -site landscaping or minimum planter width. The Crossings at Huntington Beach Specific Plan 60 2.5.5.9 Perimeter landscaping shall preserve or construct a minimum ten (10) foot wide landscape buffer between the arterial highway and private project improvements, including buildings, walls, parkin; areas, etc. Landscape improvements within the public right-of-way, adjacent to private improvements, shall be constructed by the project developer and maintained by the property owner consislenl with the overall landscape therne. The design shall be consistent with the approved Winger Corridor concept. 2.5.5.10 Landscape medians, located in the arterial highways adjacent to the; project area, shall be maintained by the City. 2.5.5.11 Yntry drives shall be constructed in conformance with the Specific Plan (Policy 2.5.2.3) and City design standards (Public Works Standard Plans) subject to the review by the Director of Public Works. Project access points shall be designed to provide entering and exiting drives with adequate views of approaching pedestrians and vehicles. Entry drives shall provide convenient access to parking lots at various site locations. In addition to street trees and on -site landscaping, each entry shall be designated by ground cover —planting, shrubs, and large specimen trees on each side of the entry. These trees shall be located a minimum of ten (10) feet back from the intersection of driveways and property lines to avoid line -of -sight conflicts. Enhanced paving (pavers, interlocking bricks, stamped concrete, or other similar material) shall be provided at all driveway entrances from the public right-of-way to the project. Major driveway entrances, as identified on the Circulation Flan, Exhibit 7, shall incorporate enhanced materials from the property line to the back of the adjacent landscape planter or a minimum of 15 feet. Minor driveway entrances shall provide a minimum of eight feet of enhanced treatment. Pedestrian connections consisting of enhanced paving materials shalt be provided along the front of the satellite buildings (Barnes and Noble, Circuit City, and Staples) and within the pedestrian walkway connecting these outlying buildings to the main mall. Enhanced paving materials shall also be provided throughout file public plazas and from Edinger Avenue at the main project entrance (across from Sher Iane) along a pedestrian path to the main plaza. 2.5.5.12 Interior plaza areas and courtyards shall be provided as fatal points. These areas shall be an integral part of the building architecture and be connected by a walkway system to the public pedestrian walkways. 2.5.5.13 Irrigation systems shall comply with the City's "Water Efficient landscape Requirements." (Ordinance # 1452). The Crossings at Huntington Beach Specific Plan 61 +.1.1 All landscaping shall conform with the r•ecluircmerrts of Chaplet, 232 (Landscape Improvements) of the Huntington Beach Zoning and Subdivision Ordinance, the City Arboricultural and Landscape Standards and Specifications and City Standard Flans, in addition to the Specific flan policies. 2.5.5.15 landscape screening is intended to soften and blend the connection of the building areas with the landscape of the parking lots. Trees shall be provided to soften, and visually relieve, parking and utility arras and to provide summer shade. 'trash enclosure areas, where appropriate, shall be provided with tree and shrub planting screens to soften the enclosure. Mechanical equipment and transformer areas shall have landscape screening and/or low-level screen walls. Valves, meters, back flow preventers, etc., where appropriate, shall be screened by shrub plantings and/or low level screen walls. 2.5.5.16 landscape lighting shall be provided in selected areas to aesthetically enhance the site. Pedestrian walkways shall include adequate night lighting for public safely. 2.5.5.17 Conservation water measures shall be incorporated in the landscape design. A minimum of seventy-five (7 5) percent of the required landscape area shall be planted with ground cover and the balance (a maximum of 25 percent) with turf. The use of shrubs, hedges, and berming shall be provided to screen cars in the parking lots from street view. 2. 5.6 SIGNAGI: Gttlf)ITINI'S The Signage Guidelines identify a framework to advertise a place of business, providing directions or information can be accomplislied witt►out detracting from the overall design quality of the project area. The Signage Guidelines also contribute to the overall project area urban retail design therne. Design, color, materials and placement are all important in creating signs that are architecturally attractive and integrated into the overall project area design. The intent is to create and promote a quality visual environment by allowing only signs which are compatible with their surroundings and which effectively communicate their niessage. Signs shall be designed to be architecturally compatible with the colors and materials of the adjacent building. All signing shall be consistent with the Crossings at Huntington Reach's sign standards (appendix D). The Crossings at Huntington Beach Specific Plan 62 DEVELOPMENT REGULATIONS � .w■w•w•w�Twa ii ii '��10 � a n � ,��I I,frl.i•�' I !,'�I� !! I ■�It� Y tiwi lwl tf'�■ ; 11- ■ �� it '� `� 1kllWL31f�E!11 z — � lil _ ■ �Ns�L ■ - _� _�_ ".. qw rii►�� r .� i:`a,_.la;',u:�air. n- ,li., ll-i-ll41� '-G4 , . i -- ' as r-- - '..,iii:o�o._.. Roli _ IN Section Three The Crossings at Huntington Beach Specific Plan 63 DEVELOPMENT REGULATIONS 3.0 PURPOSE The purpose of this section is to provide specific development regulations and standards that will be applied to development projects in the Specific Plan. Upon adoption by the City of Huntington Beach, the Crossings at Huntington Beach Specific Plan will be the zoning docloment for the project rea. 3.1 GENERAL PROVISIONS The provisions contained herein shall govern the design and development of The Crossings at Huntinglon Beach Specific I'lan area. Standards and/or criteria for development and activities not specifically addressed in this Specific Plan may require referral to the current provisions of fire Huntington Beach boning and Subdivision Ordinance and Municipal Code. Whenever it use has not been specifically listed as being it permitted use, the City of Huntington Beach shall determine if the use is consistent with the intent of this Specific Plan and compatible with other permitted uses. In addition, all projects must comply with the following policies. 3.1.0 DEVEI.OPMENT RFCULATIONS_POLICII:S: 3.1.1 Not withstanding provisions to the contrary, all grading shall be approved by both the Planning Director and Director of 1'ublic Works, or, designee. 3,11 Construction rimy commence only after the Planning{ Director- finds that the project is consistent with the regulations and applicable policies and guidelines of tine Specific flan. 3.1.3 All structures in existence at the lime of specific flan adoption (witli fire exception of Auto Repair, Maintenance, Service and the banK building ) shall be deemed in conformance with the Specific Plan. 3.2 DEFINITIONS For the purposes of the Specific Plan, words, phrases and terms shall have the meanings as defined below. Terms not specifically defined in the Specific Plan shall have the same definition as used in the City of Huntington Beach Zoning and Subdivision Ordinance in effect at the time of tiny individual request. When not inconsistent with the context, words used in the present tense include rile future tense; words used in the singular number include the plural number'; and words of the masculine gender include the feminine and neutral gender. The word "shall" is always mandatory and the word "may" is permissive. The Crossings at Huntington Beach Specific Plan 64 3.2.1 Architectural reatures. Architectural features include elements that compliment the building architecture such as, but not limited to, walls, architectural towers and domes (with The Crossings at 1untington Peach logo), spires, and arches. Architectural features may include signage as depicted in the athiched s{gnage iuidelines. 3.2.2 Communication Antenna. All types of receiving and transmitting antenna, except satellite dish antenna and wireless communication facilities. 3.2.3 Deviations. An adjustment in one or, more: Development Regulations in order to accommodate special circumstances and/or unique architectural features. 3.2.4 Entryway. The point of ingress and egress from a public or private street to the individual project. 3.2. -) rinal approval. Ten (10) days sifter approval by the discretionary body and no appeal of that decision has been filed. 3.2.6 Modification (Minor). An amendment to the exhibits and/or text which does not change the meaning or intent of the Specific flan. 3.2.7 Modification (Major), An amendment to the exhibits and/or text which is intended to change the meaning or intent of either the Master flan Concept, Design Guidelines, or Development Regulations. Major modifications require a "Zoning Text Amendment and action by the Planning Commission and City Council. 3.2.8 Private drive. A privately owned and maintained roadway used to provide vehicle access through the property. 3.2.9 Renovation. Any request to remodel, improve, renovate, upgrade, or refurbish the interior or exterior of an existing building, including minor improvements to accommodate new tenants or an upgraded look for an existing tenant. 3.2.10 Site plan. A plan prepared to scale, showing accurate and complete dimensions of all buildings, structures, landscaping, parking, drive aisles, uses, etc, and the exact manner of development proposed for a specific parcel of land. 3.2.1 1 Street. A public or approved private thoroughfarti or road easement which affords the principal means of access to abutting properly. 3.2.12 Structural alteration. Any change in, or alterations to, the structure of a building involving: the bearing wall, column, beam or ceiling joints, roof rafters, roof diaphragms, foundations, retaining walls or similar components. 3.2.13 Ultimate right-of-way. The adopted maximum width for any street, alley or Ihoroughfar•e as established by: the general plan, a precise plan of street, alley or private street alignment, a recorded parcel map, or a standard plan of the Department of Public Works. Such thoroughfares shall include any adjacent public easement used as a walkway and/or utility easement. The Crossings at Huntington Beach Specific Plan 65 Use. 'I•he purpose for which land or building is arranged, designed, or intended, or for which it is occupied or maintained. 3.2.1 5 Wall or fence. Any structure or devise forming a physical barrier. '['his definition shall include: wood, concrete, concrete block, brick, stone or other masonry material. 3.2.I G Zone. A district as defined in the State Conservation and Planning Act, shown on the official zoning maps and to which uniform regulations apply. 3.2.17 "honing maps. The official zoning maps of the City of Huntington heath which are a part of the comprehensive zoning ordinance. 3.3 DEVELOPMEN'T s-rANDARDS The Development Standards shall serve as the mechanism for the implementation of the Crossings at Huntington Beach land uses. The standards set forth in this section will assure that future development within the Pacific promenade is implemented in a manner consistent with the intent of the project area Master Flan. The standards contained herein provide flexible mechanisms to anticipate future needs and achieve compatibility between land uses and the surrounding community. Standards and guidelines are designed to Iv compatible with the existing land use categories of the City. The primary land uses in the Crossings at Huntington Reach shall be regional commercial, retail, dining, and entertainment. 3.3.I Permitted Uses. Permitted uses shall be required to meet all applicable provisions of the Huntington Reach Zoning and Subdivision Ordinance Code. A list of permitted uses is provided in Exhibit 19. 3.3.2 Intensity. The rnaxintum intensity sliall be consistent with the City's General Plan. 3..3.3 Building height. The maximum allowable building height shall be sevenly-five (73) feet. Kooftop mechanical equipment and p�rrapet walls may exceed the maximum permitted building height by fifteen (1 ,) feet. Special themed architectural structures or elements such as towers or dames may be allowed up to one hundred -twenty 020) fret. 3-3.4 Setbacks. Kcfer to Exhibit 16. 3.3.5 Landscaping. Landscaping shall be permanently maintained in an attractive nianner in all setback and parking lot areas fronting on, or visible from, adjacent public streets. 3.3.6 Signs. All signs in the project area shall conform to the provisions of the sign standards in Appendix D. 3.3.7 Lighting. All illumination of interior circulation streets, parking areas, and project sites, shall be coordinated to provide consistent illumination intensity. t:rnphasis shall tv placed on arras of high vehicular and pedestrian activity. Light fixtures and standards shall be consistent with building architectural style. Public streetlights shall comply with the City of Huntington Iteach guidelines for street lighting. The Crossings at Huntington Beach Specific Plan 66 New building construction (over and above that permitted by the development described in Exhibit 4) of the following uses shall be permilled within the Crossings at Huntington Reach Cpccific Min subject to review and approval of a Silt, I'I:trt Review by Ille 1'lannI , Director•. Olher changes in occupancy, such as, like for like tenant changes, new tenants established within existing buildings, and/or intensification of tenant uses shall be subject to building perrt►it plan rlreck review to verify compliance with parking and the Specific flan review. 7-Aguarium Da Care Facilities Government Offices Parking -surface - st ruct u trd -Valet Ranks and other financial institutions Public assembl areas Commercial recreation and live entertainment Utilities and facilities food Markets (Specialty Markets n.t.e 10,000 s.f.) Gertenal Retail Day Spa I otels Motels Movie Theaters Itestauratits -fast food with dt•ive-thtrough -with outdoor ditiing ' with alcohol sales ' with live entertaintent and dancing orna [Business and I)Dfessiorlal Personal Services OTHER l'1:RM11TED RrrAIL Cat, steveoarid alarm installation ifinle raled1nloan anchorlma ar nelail build t» Pot•table cans and kiosks Note: Olher.vhni it rises may 1e to review!)y the Planning. Dit ctor: ' 1Crytrirrs air errler letirrnterrl per rrri! Permitted Uses Chart Exhibit 13a The Crossings at Huntington Beach Specific Plan 67 'I'lle folloNving temgx)lary and wasonal events may [xe tvi-mitted outdoors within Ilse common areils only, Subject to approval 01,111C hre Deparlivicill and Police Department. All lemporary anti seasonal events within the parking lol .01;Ill follow tvi-1111t procedilivs dek•ribed in the I lilntinglon lk-dell zoning and sulxiivision ordinance. Art Shows Auto shows Carnivals Circus Commercial Filining Concerts Contests Farmer's Market Fund Misers Heallh Fairs Live Entertainment Miscellaneous Exhibitions Outdoor Retail Sales Vet Shows Seasonal Displays and Events Theatrical Performances Note:' 01her• similut• teat} oim y uses may be Fvtmillerf sul jecl to 11r view by lire l'Ixmh g Mxclor. Temporary and Seasonal Events Chart Exhibit I3b The Crossings at Huntington Beach Specific Plan 68 Minimum pro'ect area {AC) 50 Minimum lot size (AC) None Minimum lot frontage None Maximum building height 75 feet Maximum number of stories 4 stories Maximum additional height for parapet watts, mechanical equipment, communication antennas etc. 15 feet Maximum architectural feature height 120 feet Maximum lot coverage 50?0' Maximum floor area ratio Comply with zoning and subdivision ordinance Maximum setback (see No. 3 below) Street side (Edinger Ave., Beach Blvd. and Center Ave.) interior side (West 11.0) 50 feet, or 25 feel if setback if fully landscaped 10 feet Minimum landscaping 596 of total site Minimum perimeter landscaping Street side (Edinger Ave., Beach Blvd. and Center Ave.) Interior side (West PLO) 10 feet 5 feet Minimum standard parking stall size 9 feet x IF, feet Minimum compact parking stall size S feet x 17 feet Minimum drive aisle width 27, feet for 90 degrre Stalls Minimum parking required Shaved analysis based UF)On joint use of parking analysis Maximum compact spaces 20%of total spaces Parking lot layout Primarily 90 degree shells Plinking structure design Comply with zoning and subdivision ordinance Public art requirement JAI least one piece: of public art and one fountain on site Wireless communication facilities JComplX with zoning and suWivision ordinance Development Regulations Chart Exhibit 14 The Crossings at Huntington Beach Specific Plan 69 f % , , Parking Standards & Detail Exhibit 15 3.3.8 Parking. All developments will be required to meet the minimum on -site parking standards as provided in this Specific Plan document. The following shall apply: Standard parking stall size may be nine (9) feel wide by eighteen (18) feet deep and may be reduced to provide a landscape curb or wheel stop (in parking structure) at sixteen (16) feet with a two (2) foot overhang to expand the landscaping. This additional landscape area will not be credited toward the required landscape percentage or rrrinfinum land.wa1v width. • A compact parking stall size of eight feet zero inches (8'-0") wide by seventeen 0 7) feet deep may be proposed for up to a maximum of twenty (20) percent of the total proposed parking spaces. Total parking iequitvd by the Huntington (teach Zoning and Subdivision Ordinance (see below) shall be installed for each phase of the project prior to final building inspection. Parking shall be provided in accordance with the New Shared Parking Study. A shared parking program may allow for a reduction of the code required parking by tip to twenty five (2 5) percent, based upon a shared perking analysis. It is estimated that the New Shared Parking Study will provide a mlio of 4.5 spaces for every 1,000 square feet of development. • Handicap accessible provided as required Code and Title 24. parking spaces shall be by the Uniform Building The Crossings at Huntington Beach Specific Plan 70 Intensity (F.A.R.) Building Height Setback Front Interior Side Exterior Side Landscape Perinieler Landscape Fron t Interior Side Exterior Side Arterial Highway Development Regulations Check List Exhibit 16 The Crossings at Huntington Beach Specific Plan 71 1 =. iyl. akka l 1MID — � � il■ Ial I{i mot!• Uf . � � � � 1 � f�l li' .'GY,�_ _i � r II I I ,I Flo— "' l pil.' F!'j f �� r.+. • T'1 ��r1111:4f1 i lFlj.�_''�1 i__•r — — �Oi![�11�I�f1�{w�a ':' .j L/11y+� rN r !J-1 1'+ �� Sim IMPLEMENTATION Guidelines, or Development Regulations. Major 'Text modifications require a Zoning Amendment and action by the Planning Commission and City Council. 4.0 ADMINISTRATION 4.1 DUrLOPMENT CONSTRUCTION PHASING PLAN The City's Planning Director shall administer the provisions of the Crossings at Huntington (teach The proposed Specific flan project is anticipated to Specific flan in accordance with the State of California occur in one (1) phase. The existing strip center Government Code, Subdivision Map Act, the (Barnes & Noble, Staples,,Ind Circuit City) will receive Huntington [each Municipal Code, and tite City's a facelift, new enhanced paving, and landscaping. The Gene, -al flan. demolition, infrastructure and utility Work of the new construction, will be scheduled and built such that the The Specific flan development procedures, remaining center remains in operation with minimum regulations, standards and specifications shall inconvenience to the remaining tenants. Construclion supersede tlae relevant provisions of the City's Zoning is anticipated to take 1 5-19 months from start of Code (Huntington (teach Zoning and Subdivision demolition. Ordinance) as they currently exist or may be amended in the future. Any development regulation and 4.2 MCUIODS AND PROCEDURES building requirement not addressed in the Specific Plan shall be subject to the City's adopted regulations The methods and procedures for implementation of in place al the time of all individual request. the Specific Plan shall be on a project by project basis. 'rile adoption of tlae Specific Plan .alone will not The Specific Plan may be amended. The Planning require infrastrircture improvements to the project Director shall have the discretion to determine if area. Physical improvements will only coincide with requests for modification to the Specific Plan are the commencement of the first project. The Specific minor or major. Minor modifications may be flan is a regulatory document and is not intended to accomplished ;administratively by the Director with a be a Development Agreement, report to Ilse Planning Commission. Major modifications will require the processing of a Zoning 4.3 MASTER PI AN Text Amendment, subject to the City's processing rVgulafiolls in place at the time of Ilse request• A Maslrr'!'l,ui Concept (Exhibit;i) for tile project area identifying prrmaty land Lases, Circulation systent, Minor modification is a simple amendment to the infrastrue:tur•e Iayout, public facilities and landscape exhibits and for text which does not change the scheme has been prepared in conjunction with the meaning or intent of the Specific plan. Major Specific Plan. All proposed projects shall be consistent Incxiifications aiv amendments to tite exhibits ,and/or wills the intent of the Master Plan Concept. text which are intended to change the rraeaWitg or intent c)!' rather the Master flan Concept, Design The Crossings at Huntington Beach Specific Plan 73 l �• 'i `' SAN DIEGO FREEWAY 405 }.4 �?C>�NT� AVENUE \ =�__ •`� IfHIiiW��kfi �•• • -- .... - --. --..- -- - - .-- . Site Plan Review Process Exhibit 17 The Crossings at Huntington Beach Specific Plan 74 4.4 SITE PLAN REVIEW I'ollowing the implementation of Phase I and Phase li development described in Exhibit 4 individual development projects within the Crossings at Huntington Beach Specific flan project area shall be implemented through a Site Plan Review process. A Site flan Review shall be required for all new development activity, with tite exception of interior improvements, general maintenance and repair or other- minor construction activities that do not result in an intensification of the use. 'These exceptions may be subject to other Building and Public Works permits and approvals prior to coinmencement. Application to the City for a Site Plan Review shall include a narrative of the proposed activity along with preliminary development plans and drawings. The narrative shall consist of a project description identifying tite intended services offered with square feet, hours and days of operation, number of employees, and other information as appropriate. Supplemental to the application submission, project plans shall be prepared including tite following preliminary plans: site plan, floor- plans, elevations, landscaping, grading, fencing and siynage plans; other glans may tv required delvrtding on the complexity of the projecl. The entire p,utiel shall I_k plotted with dimensions and all pertinent data and include dimensions to the nearest intersecting public street and identify all street names. In addition, all existing and proposed physical features and structures on the subject property and abutting properties shall be plotted. The application Shall also include a legal description of Cite prolkrty, identification of the uses for each room on the IlLx)r plans and a list of all the building materials and exterior colors. An application fee for this service shall be established by a separate resolution of the City Council. The }Tanning Director has the authority to approve, conditionally approve, or deny a Site Plan Review. A Site flan Review application may also require analysis and comments from various departments of the City. In order- to approve a Site flan Review application, the Planning Director shall make the following findings: • The request is consistent with file City's General Plan and all applicable requirements of the Municipal Code; and • The requested activity will not be detrimental to the general welfare of persons working or residing in the vicinity nor detrimental to the value of the ff0per•ty artd improvements in the neiglikwhood; and • The requested activity will not adversely affect the Circulation Plan; and • 'file requested activity will comply with the provisions of the Crossings at Iltrntington fie,ach Specific flan and either applicable regulations or special conditions required of the project. The action of the Planning Director shall be final unless appealed to the Planning Commission by the applicant within ten calendar days of action. Such Appeals for it Site flan Review shall be subject to Cite procedures outlined in the City's Zoning and Subdivision Ordinance. The Crossings at Huntington Beach Specific Plan 75 A Site Flan Review approval shall be valid for a period of one year. Additional one year extensions may be requested for a maximum of two years. Such an extension request must be made in writing by the original applicant, property owners, and/or authorized designee, a minimum of thirty days prior to the expiration of the current approval. If construction activity does not commence within the approval or extension period, the entitlement shall be terminated. All final decisions on site plan review proposals shall Lie the responsibility of the Planning Director. 4.5 REUSE/CI-IANGE OF USE REVIEW Any proposal to reuse and/or change the use of a 4.7 previously approved and constructed development, within the project area, will be subject to additional review by the Planning Department. The additional review will follow the same procedures outlined in the Site Flan Review process. A "like for like" change of use shall only be subject to the requirements for a new certificate of occupancy; however any new construction beyond that shall require a new Site Plan Review. In addition any proposed physical modifications to the existing structure and/or site shall be subject to additional review and approval of the Planning Director prior to the issuance of building permits. The Planning Director may refer individual projects to Design Review hoard for review and as final arbiter of compliance with the Specific Plan. Any decision by the Planning Department may be appealed within ten calendar days to the Planning Commission. 4.G ENVIRONMENTAL DETERMINATION The extent and intensity of all anticipated development activity for the Crossings at Huntington Beach area has been identified in the Specific Plan. Development project requests consistent with the Specific Plan shall not be subject to additional enviromnental, review unless otherwise required by C.E.Q.A. However, the Planning Director may request an additional environmental assessment for unique or unusual circumstances, that have not been previously addressed in the environmental review. The Planning Director shall impose any applicable environmental mitigation measures, as specified in the environmental analysis, as conditions of approval on individual Site Flan Reviews. Such conditions of approval shall describe the time period and manner in which the mitigation measure must be satisfied. REQUESTFOR DEVIATION The Crossings at Huntington ntington Beach Specific Plan Development Regulations are intended to encourage projects which create an aesthetically pleasing appearance, enhance the environment, and facilitate innovative quality architectural design with an adaptation to the surrounding environment. Deviations pertain only to the Development Regulations of the Specific Plan and may be granted at the time of Site Plan Review for special circumstances and/or unique architectural features. Requests for Deviation may include but are not limited to building height, setbacks, open space, parking, and landscaping. Deviation requests, up to ten (10) percent of any single standard, may be considered by the Planning Director. Deviations greater than ten (10) percent must be approved by a Variance application before the Zoning Administrator, subject to the procedures outlined in the City's Zoning and Subdivision Ordinance. Development and construction The Crossings at Huntington Beach Specific Plan 76 phasing of selected provisions and features may be approved by the Director concurrent with a Site Plan Review and shall not require it Request for Deviation or Variance to the Specific Plan. Deviations shall be allowed when, in the opinion of the I'lannirtg Director, significantly greater benefits from the project can be provided than would occur if all the minirnumi requirements were met. Some ,idditiomid Ivnefits which may make it project eligible for consideration include: greater open space, greater setbacks, unique or innovative designs, public open space, and the tise of energy conservation or innovative technotngy. The Planning [director may approve the Request for Deviation in whole or in part upon making the following findings. Promotes better design, envirx)nrnentatl and land planning techniques and contribute to the economic viability of the community, through aesthetically pleasing architecture, landscaping and site layout; and Will not be detrimental to the general health, welfare, safety and convenience of the neighborhood or City in general, nor detrimental or injurious to the value of property or improvements of the neighborhood or of the City in general; and Is consistent with objectives of the Specific Plain in achieving a project adapted to the area and compatible with the surrounding environment; and Is consistent with the goals and policies of the City's General Plan, and comply with State and cede ral law. 4.9 sri.,anC PLAN AMENDMENTS Specific Plan Amendments, outer than a Minor Modification as previously described (Section.4.0), shall be made through the Zoning 'text Amendment process; subject to consideration and approval of the Planning Commission and City Council in accordance with the provisions of the Huntington Beach Zoning and Subdivision Ordinance. Such Amendments may include changes to the Master Ilan Concept, Design Guidelines policies and the introduction of alternative Development Regulations. 4.9 SEVERABILITY If any section, subsection, sentence, clause, phrase, or portion of this title, or any future; amendments or additions hereto, is for any reason held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this title, or any future amendments or additions hereto. The City hereby declares that it would have adopted these titles and each sentence, subsection, ctatuse, phrase, or portion or any future amendments or additions thereto, irrespective of the fact that any one or more sections, subsections, clauses, phrases, portions or any future amendments or additions thereto may be declared invalid or unconstitutional. The Crossings at Huntington Beach Specific Plan 77 The Crossings at Huntington Beach Specific Plan 78 fluntinglon Crossing Huntington Beach, CA. TENANTNANIE SQ.F[-. T I A I RF. 100,000 RUI . AILI 0,000 RE . ]-A IL2 4U.000 RETAIL 3 2.1.000 R L'TA I L 4 32.500 HE . I - All, 5 9.650 R LTA It. 6 28.400 M:TA It. 7 42.593 RE FAIL 8 129.488 M., A'A I 1, 9 RETAIL 10 25.000 RETAIL I 1011IRD PARTY OWNER) 140,000 RETAIL 12 35.000 RETAIL 13 I..ZETA11,114 12,600 RETAIL 1.)5 8.500 RETAIL 16 6.OUO RETAIL 17 7.7700 RETAIL 18 1.855 -R-E[-'A] 10.000 RETAIL 20 10,000 RE FASI. 21 7.660 RETAIL 22 7,000 It LTA It, 23 7,760 RFTA IL. 24 It ETA 11, 25 31.160 RETAIL 26 26,300 It ETA I L A 82.900 RETAIL It 40.300 R LT,% I L C 8,240 S/SQ.Ff. REN F ANNUAL ANNUAL MONTH RENT S 166.666.67 $2.000.000 00 S20.00 S19.166.67 S23Q000.00 $23.09 S1900 S63,333-33 $760.000.00 sigoo-Tsm,wo-oo S456.000.00 $18.00 1 S48.75000 S585.000.00 S 19.00 S15,279 17 S 10033 50 00 $19.00 $44,96667 S539.600.00 -T S19.00 S67,42308 S809.07700 S3_11 S33,558-97 S402,707-68 SiTfjo I $20,442.50 S245,310.00 S16-00 $33,333 33 $400.000-00 S18.00 $52,30U.00 $630.000-00 $18-00 S7,200-00 S86,400 OD $17.00 1 S17,850-00 S214.20000 S17-00 7 $12,04167 $144.50000 S17.00 $8,50000 $102.000-00 $19.010 S12,191 67 S146.30000 $2500 S3,864-58 S46.375-00 S1900 S15.833.33 S190.000-00 S19-00 S15,8-,3 33 S 190M0 00 S11.083.33 $133.000.00 S19-00 $19-00 $11.083.33 S 13 3.000.00 $20.00 S 12.933.33 ..$155.200-.00 S18.00 $55,740-00 S668.880-00 S18.00 S46,714000 S560.98000 $18.00 $39,45000 $471-100 00 $8.76 S59,860-00 $718.320-00 $13-96 S46.982-33 S562.588-00 S19.80 $13.596-00 $163.152 00 Page I Huntington Crossing Huntington (leach, CA. RES"I'.I I 7,300 S14.27 i $8,680-92 S104.171,00 REST A i �4,200 --S25-00 �� 58,750 00 5105.000,00 REs.r R 10,000 $19.00 S15,833.33 $190,00000 - R EST C - 7,000 $19-00 - - 511,083 3 ^ S I Y U00.00 - - - -- REST D 1 3,149 ---$29.00 --- 57,610-08 - 591,321-00 24.000 '-- $20.00 $40.000.00 $480,000 00 REST F - - 12,600 $20-00 $21.000-00- $252,000 00 RE5"r G 16.920 1 520-00 $28,200-00 $338,400.00 SII01'ti _ - 76.0.35 - $23-00 $145,752-92 S1,749,U35-00 - TOTAL SQUARE FOOTAGE 1.100,640 VACANT SQUARE FOOTAGE 0 �- °i OCCUPIED 100-00% I -- - GROSS SCHEDULED INCOME: � $15,372.166.68 KECAP CURE: (CAM) - -_ --_ -_- �_S 1,688,896.60 -T_ -- VACANCYO%of shop spacc) S 152.115.60 PERCENTAGE RENT S 105,000-00 - TOTAL INCOME S 17.013.947 68 - - -- I'A�CES(NF W) - S 1,500,000-00 - - - --- INSURANCE - _ S 75.000-00. MANAGEWNT(I.5%,) S 230.582-50 CA NI & Ul-ILITIES (5.40 sq-11�N10-} S I78,368-00 [ IFSERVI=(S.15 sq.ft- Annually) S_ 165.096-00--- TOTAL. EXPENSES — S 2,149,046-50 NEI OPERATING INCOME I S 14,864,901.18 Page 2 Huntington Crossing Development Budget (Detail) Land Costs Purchase Price 48,000,000 Commission 240,000 Legal 25,000 Closing 150,000 Total Land Costs 48,415,000 Fees, Permits & Studies Building Fees & Permits(687,014 X $5.00) 3,435,070 Soils, Surveys 50,000 Environmenta] Toxic 50,000 Architectural - Site & Building 900,000 Landscape 50,000 Engineering: Site Civil 150,000 Electrical 70,000 Geotechnical 75,000 Consultants 250,000 Legal 125,000 Total Engineering Contingency (5%) 257,754 Total Fees, Permits & Studies _ 5,412,824 Direct Construction Costs Demolition(470,034 X $3.00) 1,410,102 Site Work($3.50 X 30acres) 3,920,400 Offsite Work 1,500,000 Pilings (300,000sq.ft. X $12.50) 3,750,000 Landscaping 450,000 Hardscape (200,000 sq.ft. X $18) 3,600,000 Signs & Public Art 800,000 Buildings: Facade work for existing buildings 2,500,000 Theater(100,000 X $125) 12,500,000 1 Story Majors (greater than 10,000 sq.ft_) 108,430 sq.ft_ @ $65 per sq.ft. 7,047,950 2 Story Majors (greater than 10,000 sq_ft.) 270,703 sq.ft. @ $75 per sq.ft. 20,302,725 2 story Shop Space ( less than 10,000 sq.ft.) 36,200 sq.ft. @ $80 per sq.ft_ 2,896,000 1 story Shop Space ( less than 10,000 sq.ft_) 100,110 sq.ft. @ $70 per sq.ft. 7,007,700 Parking Deck 6,831,000 Restaurant Row(53,520 X $70) 3,746,400 Insurance (Builders Risk) 35,000 Total Direct Construction Costs 78,297,277 Indirect Construction Costs Administrative Costs 500,000 Unrecaptured Real Estate Taxes (8 Months) 200,000 Legal 375,000 Leasing Commissions 2,750,000 Accounting 25,000 Liability Insurance 35,000 Total Indirect Construction Costs 3,885,000 Financing Costs Construction Loan Costs 7,208,448 Appraisal Fees 30,000 Loan Title & Recording 15,000 Legal 50,000 Lender Inspection Fees_ 10,000 Total Financing Costs 7,313,448 Total Development Costs 143,323,549 '1'` _ _ _ _ - �---,�-,� � o `' �; � � �� - o r o �1.. `r •�. o � l� '�� ,, ' �,, �+ �� a '� .. c � �1 �� e �1 v � `� U � „ � - n t;. {J c n It p V .� +1y1 j/�/ \` V ti "�� l� p1 �. �. 4� '''' � o � :: �� 0 r n n �,�' , uE' `� � t� 0 n e n �-) P p •, 1 � •` \ � O � J \l ` 0 r a ��. l U � � {h' o �+ o � • o o°O�o�t.• U � o t n � v� .` 0 ,, `. n � ll l4 8�(B88 ��o mho ��Sa� flm4o C� � �fl�� mmm�a Q®D®D 88��3�i�i�i ;', u 4 � o �. ° � 4 r nT�W r` � '�R'�� iY �Y � ��,► �'-""" {'�� , Y�f b ,.�; w 4. e 5 ,d r a •�� ' � � °' � i , �H, it ' �! F� `r' � i�'-� � �� 1 ,X •bt j wa �, :- r; , J' V5, v� ' L4 S 1 s ��,.�9 a } �l t I - 3- > t 5 r}��. ^"' I.+.:sM1""�, � I y�u .�.x! 4+ �.:'�^F?Fr. ^s�,�.�4• 5 SI r+a�'��ln.. R � "'r''=.6i'rr- •.AA®rl�ie_�G _. _,-..-,,.,,-.:-.: , p rgVAL JPIT r }r 4 � q e tr�d�rkb }�• ty j Ft '�, Hti, g ,�, � r •%' r. �•'zc X � 'S'� 14� I I +"'S `8,_„� yk��ti�lC r S�t �� ur i 'iz ,� � t `.. ,+" �IG�i� � I +�ii.++; 4 �•. �4>a��{ � ��i,.i ♦ �a i MI .FF . � ,-. 7Ty r i 4. � t�C� i Y :1� a. •- it r, i/l� t; t �,`� � `� � j� �Y"rt�;�r 'g'� ZA °WHEN-YJit BUILD FOR OWNERSHIP,; - YOU RE d FUNDAMENTALS PHILOSOPHY AND APPROACH SINCE THE EZRALOW COMPANY'S INCEPTION, THE FIRM HAS MAINTAINED ONE FOCUS: THE ACQUISITION, DEVELOPMENT, REDEVELOPMENT, FINANCING, OWNERSHIP, LEASING s¢ AND MANAGEMENT OF REAL ESTATE PROPERTIES IN CALIFORNIA AND THE WESTERN UNITED STATES. CREATION AND PRESERVATION OF PROPERTY ASSET VALUES WITHIN ,vc OUR INVESTMENT PORTFOLIO HAS ALWAYS BEEN OUR ULTIMATE GOAL. i Mr VAT F sv n ^" sr • Expertise in diverse geographic markets, a breadth of property type experience, and a �J't $ depth of active relationships with financial institutions, tenants, and real estate professionals ��., f e ,VERY DIFFERENT r }' within those markets allow us to take advantage of market trends and opportunities. g_ 4 * . t • Our philosophy is to take a long term business approach that adapts to changing market S ET•OF CRITERIA;'' conditions and economic and financial factors that affect property marketing, leasing, tt. •; �W ..� . i financing, and investment decisions. WE VE ALWAYS I # Our entrepreneurial spirit and commitment to the highest standard of excellence contribute - •KNOw N• 'ERE IN€ } to creative asset management and our ability to capture opportunities as they arise. IT,FOR THE LONG • I THE ORGANIZATION v`9 ys, THE EZRALOW COMPANY ESTABLISHED ITS REPUTATION AS A DEVELOPER, OWNER �T12 AND MANAGER OF MULTI -FAMILY RESIDENTIAL PROPERTIES IN SOUTHERN CALIFORNIA Y}x SOME 30 YEARS AGO. BUILDING ON THAT FOUNDATION, THE COMPANY ` DIVERSIFIED INTO OTHER GEOGRAPHIC AREAS AND PRODUCT TYPES INCLUDING BUSINESS PARKS, MID -RISE OFFICE BUILDINGS, SHOPPING CENTERS, AFFORDABLE HOUSING, SELF STORAGE FACILITIES AND LUXURY fy ESTATE HOMES. sI Our investment portfolio through the years has reflected our acquisition, development and redevelopment of more than 6 million square feet of commercial and industrial space, over 20,000 apartment units, and 250 acres of luxury estate homes and lots • The longevity of the organization and the professionalism and experience of the key executives and employees assures our continued success even in the toughest of real estate markets. The Ezralow Company currently employs over 200 people, including 70 real V 'n estate and related professionals, and support staff with headquarters in Calabasas and project offices located throughout Southern California. 4 >„1 e • All real estate services, including acquisition I analysis, financing, development, redevelopment, construction, supervision, budgeting, leasing, marketing, and management are provided in-house to insure financial control, state i, of the art information processing and efficiency of operations. 71 ,fir r• + $ k } 'THE PEOPL',EJ e s HERE' {OSSESS A t`a yi A "RARE i •'��„�T CAMARADERIE — a; a- j.,F,fpd. PERFORMANCE THE CONTINUED SUCCESS OF THE EZRALOW COMPANY IN A VARIETY OF REAL ESTATE CYCLES IS SUPPORTED BY OUR PORTFOLIO OF PROJECTS WITH PERFORMANCE LEVELS HIGHER THAN THE MARKET AVERAGES IN BOTH OCCUPANCY AND TENANT RETENTION RATES. THIS FOUNDATION FOR ACHIEVEMENT CAN BE CREDITED TO THE FOLLOWING FACTORS: • The Ezralow Company's reputation and financial strength allows the company to sustain growth through the acquisition and redevelopment of diverse complex projects by seizing opportunities in changing submarkets, staying competitive, and closing deals in a timely manner. • A group of professionals with expertise in the full range of real estate disciplines from planning through construction to marketing supports the development and asset management of an intricate real estate portfolio. This group was responsible for the development of Beverly Park, the largest subdivision of estate homes on the west side of Los Angeles, comprising more than 250 acres having valued in excess of $300 million. t x The flexible organizational structure _ contributes to the company's responsiveness to Y the needs of sellers, financial partners, and tenants. Each senior executive performs a separate function within the company, operating autonomously with decision making authority trumleumngnr and concurrently, as part of a team, to meet the demands of any task. The Ezralow Company HavidM,'leH, CristinaAgra-Hughes, can modify the functional structure to focus all financial and human resources to complete GarwE.Freedman,Marshall S:Fzralow, a project successfully. Bryan R. Ezralow ' a ' Our strength and diversity of business relationships with a well established group of � tY 1 g P p E outside professional resources enhances our in-house expertise. THEY^ARE'; IN THE , vw I COMPANY EXPERTISE ^ -TRU EST,SENBE, THE EZRALOW COMPANY HAS A WIDE ARRAY OF EXPERIENCED, FOCUSED PROFESSIONALS .-;A FAMILY OF WHO ARE EXPERTS WITH RESPECT TO THE PROPERTIES AND PEOPLE WITHIN THEIR SUBMARKETS AND HAVE THE ABILITY TO ANALYZE AND EVALUATE EACH PROPERTY ON ITS r Po OWN MERITS, IN ADDITION TO THE MARKET AND ECONOMIC FACTORS IN A BROADER PROFESSIONALS ' ECONOMIC CONTEXT. OUR BELIEF IN SUPERIOR PERFORMANCE AND A LONG TERM r # - COMMITMENT TO THE ORGANIZATION IS ENHANCED BY OUR SENIOR EXECUTIVES' DIRECT fi ;WHOSE EFFORTS PARTICIPATION IN THE OWNERSHIP OF THE COMPANY'S PORTFOLIO. . f 'tn CO-MPLEMENT t The longevity of the organization and the continuity of the key executives have allowed it the development of the in-house skills necessary to promote the firm's ability to function y EACH OTHER";_ smoothly and efficiently. The Ezralow Company develops new divisions as required to meet the demands of a changing real estate environment. ... r E', f�. kL' 2r-"t• f?�� a F�„a3 f F Marshall S. Ezralow f, kill N{• DIVERSITY AND q GOOD TIMING,, ARE A STRONG. E' I i lY HEDGE AGAINST ,. .hair THE'.CYCLES OF .�k _ '^�•"'' _ OUR BUSINESS" f " 1 � r k 'Y STRATEG"I'FOR TILE FUTURE OUR STRATEGY FOR FUTURE GROWTH IS TO CAPITALIZE ON MARKET, ECONOMIC, AND FINANCIAL OPPORTUNITIES BY REACTING QUICKLY TO THE CONSTANTLY CHANGING REAL ESTATE ENVIRONMENT. OUR FORMULA FOR CONTINUED SUCCESS IS AS FOLLOWS: } • Continue to innovate and expand into new geographic regions and products where market opportunities exist. pip, • Utilize The Ezralow Company's financial strength, 'p longevity and track record, ,.r strategic alliances and affiliations within the real estate community �. for the acquisition or joint venture �.�� of individual assets, investment properties, loans and loan portfolios. The underlying assets for the transactions can be commercial or residential, performing and non -performing, and owned by financial institu- tions, private investment groups, or private individuals. • Capitalize on our access to capital through an extensive network of relationships with investment firms and financial institutions. • Apply our depth of market, financing and product expertise to act quickly and close transactions in a timely manner. Employ our ability to evaluate, restructure, improve performance and skillfully manage assets for long term value enhancement. Igg 4 ">�b* c'" r #l=y. r a COMPANY EXPERTISE t." Marshall S. Ezralow, founder of The Ezralow Company, is its key decision maker and the person who ultimately determines its philosophy, direction, and goals. Under his leadership, the Company.has developed more than 20,000 apartment units in Southern California and over 6,000,000 square feet of industrial, office, retail, and other residential projects, most of which the Company retains for its investment. portfolio. Mr. Ezralow's insight and determination are the driving force behind the Company's continued success in diverse real estate products in a variety of markets. "., Bryan R. Ezralow develops and implements the Company's strategic planning decisions, including determining liquidity requirements, sourcing acquisitions, evaluating equity and financing opportunities, and managing the Company's investment portfolio. Y #� k 'Z M1 -nia 4 4 Gary E. freedman structures, negotiates, and manages the Company's major equity and financing relationships and is a key participant in the formulation and implementation of strategic planning as relates to.such relationships. He is also responsible for the implementation of operating strategies for the company. David M. Leff directs the acquisition and disposition of real estate assets and manages the leasing operations for Brymarc Management, the in-house management affiliate for the Company's residential, commercial and industrial properties. Cristina Agra -Hughes controls the integrated business operations of all functions of the Company, ranging from acquisition and financing to development and disposition, as well as heading the Company's affordable housing affiliate. Lara S. Bridges directs the property management function of Brymarc Management and is the manager of the Company's management information systems, responsible for the Company's operating, accounting, and financial management systems and procedures. Jeannie A. Nolan is the Company's human resources director, responsible for development and administration of personnel -related programs, policies, training, and recruitment procedures. ' � � i �#I ' �� J � '�� .I •, � i ' .: �. �' , ��, t; • . � .�- , . ,, !, ., .E � 1 � r ,, • .�' f �'. � ' , .�, '1 � '�� {. .�A .}:S'.._:�.� t �, �..,1+ � , � ,< ,. 1 �� I '� I �F�x � r �, r i ►� ' .��. r, � � � r 1 �� i .� . �� ti � � ! .'� � r 1 Y � � � � I .• ��, 1 '� � i � � � � s �. � , , , � - � � ,- f , i 1 1 � i � � -� r �� ` , 1999 RNNURL REPORT i s ' d m �� „� !� Cry ,i n ��G f�B • ��a Q� (f SlItIA1111.1IC11 105309 % 11,000 fNYSE_SAI1 10,000 - - 9.000- I 8,000 7.000- 6.000 5.000 i_ �_---_ 4,000 3,000- 2.0001.000 — I 1990 1991 1992 1993 1994 1995 1996 1997 1998 lnderr 1990=100 THE BEST -PERFORMING STOCK ON THE NYSE 1990 TO 1998 SuilAmerica has established Osell as a leader in one of the country's fastest -growing markets rehreaw.rot savrrgs- Today. SunAf-,Cr+ca p,ovrdes 1.8 md;ion Ame,j.—, 15 Iw l: a brbaq rrnge of high-quahly relrrement savings products ano' Services designed to help them SeCure a sound linanciat Ili;ure. Along 't-e way. Sur;Arr ica has excr eJed wilu"ally evilly branc�al SL !urces miks:fy 1)eJw)"mar;s for performance and has consistently p�ovided a return on Shareholders' equity far above industry averages SunAmenca's Commitment to the highest performance slandar0s. — ano investors' recognition of this commitment - is perhaps best exemplllied by its Stock price v:hict:- adluStlrrg for splits, has a3precrn:eu more than 10,000% during the decade. from a low ;n November 1990 of $0.78 to a high as of November 23. 1998 of $81.19 SunArnerrca Is fully coohdent of the retirement savings market's growth potential In the corning cfocac:es. parocu;arfy as the ; uff rrrvact Of th!�, ager+g baby Worm geoeratlon +.S realized Similarly. Su,lA-.lenca is n.l;hiy CCn`jdert o' is ov:n ab1:11y to mamlain a leadership poSClon in the ma,Ket. The company's rrlheren: slrengWs, cow-bined with the many new opaortunities presented by its pending merger with American International Group. Inc.. set the stage for continued strong growth and a prosperous future. COMPANY OVERVIEW SunAmerica is a financial services company specializing in retirement savings and invest- ment products and services. The company has approximately $110 billion of assets on which it earns fee or spread income. The SunAmerica Life companies (SunAmerica Life, Anchor National, CalAmerica, First SunAmerica and SunAmerica National) collectively rank among the largest issuers of fixed and variable annu- ities and guaranteed investment contracts in the nation. These companies also rank in the top 2% of all U.S. life insurance companies based on assets. SunAmerica's broad -based distribution encompasses its six wholly owned broker -dealers: Royal Alliance, SunAmerica Securities, Advantage Capital, FSC Securities, Sentra Securities and S'pelman & Co., collec- tively known as the SunAmerica Financial Network. SunAmerica's distribution also includes an extensive network of independent broker - dealers, national and regional securities firms, insurance agencies and major financial institu- tions. SunAmerica Asset Management Corp. manages more than $3 billion of mutual fund assets and serves as an investment advisor for SunAmerica's variable 2nnuities. Resources Trust Company, which focuses exclusively on self -directed retirement plans, provides trust services to more than 200,000 retirement accounts with combined assets of $13 billion. Imperial Premium Finance is one of the nation's leading insurance premium finance companies. TABLE OF CONTENTS Letter to Stakeholders page 1 American International Group, Inc. Profile page 3 The Retirement Savings Market page 4 Growth page 6 Strategies page 10 Investments page 14 Financials page 17 I HISTORY OF GROWTH 1971 SunAmerica Inc. (formerly Kaufman and Broad. Inc.) diversifies into financial services with its acquisition of Sun Life Insurance Company of America (founded in 1890 and renamed SunAmerica Life Insurance Company in 1995)- 1983 SunAmerica Life Insurance Company begins the shift to retirement -oriented savings products by establishing an annuity marketing division. 1986 The company enters the variable annuity market with the acquisition of Anchor National Life insurance Company and its affiliated broker-deater. 1988 SunAmerica Life Insurance Company and Anchor National initiate an 18-month divestiture of all mortality -based life insurance operations. 1989 The company is established as a stand-alone financial services firm marketing its products under the name of "SunAmerica:' 1990 With the acquisition of $4 billion of assets under management, the company expands to encompass mutual funds, investment counseling, retirement trust services and an additional broker -dealer. 1995 SunAmerica acquires Imperial Premium Finance and establishes SunAmerica National Life Insurance Company, rated "AAA" by Standard & Pocr's. 1996 The company acquires $5 billion of annuity business and adds a broker -dealer- 1997 SunAmerica is added to the S&P 500 Index and acquires $5 billion of annuity business 1998 The company adds three broker -dealers and enters into an agreement to acquire $5 billion of annuity and life business. SunAmerica agrees to an $18.5 billion merger with New York -based American International Group, Inc. FINANCIAL HIGHLIGHTS-.--. AS of and for the years ended SeDlem-mr30 fin mdl:ons, except per-share amounts and percents) 1994 1995 1996 1997 1998 S 8,541 Total sales $ 2,371 $ 3.423 S 3.165 $ 5.329 Annuity sales 989 1.516 1.923 2.798 3.680 S 842 Net Investment income S 294 $ 366 $ 493 5 679 Fee Income 171 199 248 318 459 Pretax income 240 280 392 53/ 707 Nei income' 165 194 274 379 516 - Net Income per diluted snare" 0-80 0-96 1-32 1-81 2.34 Operating earnings per diluted share `'' 0-88 1-08 1 42 1 91 2.47 S 25,031 Average invested assets $ 8.920 $ 9.897 $14.355 $20.859 varradle annuity assets 4.513 5.263 6.380 9.515 11,405 Total assets 14.656 16.844 23.727 35,637 39.200 Assets on which fees or spread Income is earned' $33.1 18 40.025 56.503 91.173 109.917 Equity capital, $ 961 $ 1,266 $ 1.898 $ 3.510 $ 3.918 Market caplai,zationa' 1.690 2.522 4.07 8.575 13,220 Book value per Share' 4.20 593 7.80 13.40 16.02. Return on average equity 16.9% 17 7% 18 8% 21-2 n 19.99E Average diluted shares outstanding' 186 186 199 206 220 'be1a,v T33.5 m-nron (SOLbper Oftled sale[) cum-ulat,ve effect o: ChVtp in occounuri; :or inc=-t :ues l.n 199A 'As restated to reflect a 031SO in calculatiOn O' !a'rmt% per Srare- 'Del-rad at a"! tax Incomt per vwe be'cfe ne, fea..Itc nreUmMt (airs al_ bsses — a C.'.Taw ;x+•rrnarce Tlemwe UA-- Cy f.na:4 a dneiVI4 Includes total investments and Vlerible aanrjy aSSe:s hea in Stparale acceun!S on the C,rt ,lnp S balance u1 t% assa:s nunaw in mu:wl lunds and prrvite accounts. assets ur dtr cus:OCy in retirement "%I accCunls: arwi nor pmwieUrlr aX a4vrsdr7 assess i:r the SunA-nanU I' manclal Nerwork 'Inc:udes preferred sea.r.ues of `raGtor trsts and ire cowpa'ry's 8'6% PENCS' UnAs- •Includes the Co,npwy's 8'4% PERCS' Uri-ls and net unreahlea gains On deb' and twirl sr[rei:its 11-•41145re for save 'rauaef caprulw:ron p November 23. 1998 lotaleo $17.6 pnrpn — — '41 -- i TO OUR STAKEHOLDERS 1998 WAS A WATERSHED YEAR FOR SUNAMERICA as we signed a definitive agreement to merge with American International Group. Inc- (AIG). the leading U S.-based international insurance company. This merger positions our Combined operation as a giobal leader .n the two fastest-grovrrng sectors of financial services retirement savings and international markets- For SunAmenca, It Is a passport to future growth. We established our company with the simple yet prescient vision that America's vast population of baby boomers would soon be laced with the difficult challenge of saving for retirement- We built SunAmenca on the notion that people would need long-term Investment products and. equally important, financial advice to guide them to a secure future We also built this enterprise on the belie[ that the financial services Industry would undergo rapid and irrevocable change As regulafory reforms weakened the walls between financial services sectors, technological innovations began to redefine everything from distribution channels to product features to customer service. We knew our company must be agile. opportunistic. ffexible and unhindered by the status quo. We d'.d riot want to be bound by the traditions and paradigms that have defined many large financial institutions- In short, we Instilled in our company a new culture - and it became our single greatest competitive advantage - The result has been a history of performance of which we are exceedingly proud, and more importantly, which now pcsitions us for continued growth and success In the =oming millennium. Our strong performance in fiscal i 998 represents a continuation of notable achievements throughout the decade- In fact, as we close the year we report record operating earnings. while also achieving record sales and high return on shareholders' equity Operating earnings per share rose 29% in the past year. Total sales increased 60% to a record 58.5 billion, with our variable annuity product safes rising 40% to $3 5 billion. In addition to strong internal growth in 1998. we also announced the ac lursrtrcr of the life and annuity business of MBL Life Assurance Corp., which will gve us $3 Milton of fixed annuity reserves, and $2 billion of universal life policy reserves. This acquisition will also give us a foothold In the 403(b1 qualified retirement savings market_ 1998 also saw several ma!or nii,esto:,es acn,eved- We recorded out first two quarters of billion -dollar vary acre annuity product sales. Our gt:aranteed investment contract (GIC) sales exceeded $4 billion for the year - Market capitalization passed the $17 6 billion mark, and the company nuw earns fee or spread jrcome on near.y $110 billion of assets. _2, OPERATING EARNINGS PER SHARE* $2.47 I St-91 $1.42 1 $1.08 St7-fie 94 95 96 97 98 'caticulated on a dilated baut;_ This Stellar performance comes as a result of our commitment to three core strategies distribution, branding and technology- These strategies, Coupled with superior product performance and our extenswe network of financial professionals, have allowed us to grow quickly, consistently and ahead of expectations. We realized early that in order to succeed over the long-term, we had to be more than lust a produCl manufacturer- We had to have access to, and Control of, broad -based distribution. In 1993 we set a goal to grow our distribution ranks to 10.000 financial professionals by the end of the decade - At the time, we had two broker -dealers with about 3.400 affiliated representatives. I'm pleased to report that this year the number of registered representatives within the SunAmenca Financial Network reached 9.700. giving us the fifth -largest retail securities sales force in the country. We also invested early - and significantly - in technology- We were one of the first rinanciaf services companies to make extensive use of imaging technology and artificial intelligence. This investment has helped us keep a lid on COSTS. boost prCduCtivity, assimilate new blocks of business cost-effectively, and improve our service to policyholoers. And we've been relentless in b.::'•ding a brand name - In 1998 we continued our national network television advertising campaign• which hds he'ped us achieve a dramatic increase in consumer awareness of our company. We made the bold decision this past year to embark on a partnership with A)G. Our reasoning was sample- We believed that the two most important market sectors in financial services going forward would be retirement savings and international markets - Our partnership with AIG is one of complementary Strengths. it's a;so a partnership or growth. The combi- nation of AIG and SunAmenca creates a global financial services powerhouse that will have unparalleled domes- tiC and international distribution. And with its "AAA" rating, it will not only have lower cost of capital• but will also be a beacon for cusiornvrs in the c-.:rrent flight to Quality caused by volatile economic times. SunAmenca will become a stanoalone subsidiary of AIG. and serve as its Ilagsnip retirement savings company in the U.S and abroad SunAmenca will retain its family of retaeme.nt savinrs b,s nesses, as well as its vdfuabte brand name This struGtiire will enable us to maintain a cultuie that ;s decisive. aggressive. Quick and opport.inistic- Our company has come a Jorig way from the time we spun off .ou, hoinebc•ilding business in 1989 and staked our claim as The Retirement Special1St. Since 1900, our operating earrings have grown at a compound annual rate of 32%• and our assets held have grown at a rate of OUR CULTURE I5 OUR GREATEST COMPETITIVE ADVANTAGE. 21%. -- '.- - to nearly 20% in 1% has grown from ! 121 to more than $17.6 performance. _ Stock on the NYSE Man 10.000% from high on November 23 this past decade. I directors for itt to thank w, their dedication and into the new ......-- - the strength of our MERGER DOOR TO =--- EXPANSION —3- 21% Our return on equity has grown from 10% in 1990 to nearly 20% In 1998. and our market capitalization RETURN ON EQUITY has grown from $184 million at the start of the decade to more t`an 517.6 bit Ion today- As a resu"t of this performance. SunArnerica has been tie iastes:-g:owing stock on the NYSE dunnr this decade. growing more than :0,000 o from Its low .n 1990 of 78 crnts to a PR4rtiiABLE high on November 23- 1998_ of $81-19. O f It `as beer a pleasure leading S::nArrerica through this past decade. I would like .o L:ank our board of 21.2% directors for its guidance and vision. I would also like 18.8% 19.9% t0 t!'.a"k our management team and c:.r employees for 17.7% Ifi_9% their dedication a." d hard work, and for the superb results they have provided our shareholders- As we head Into the new mlllenn-um. we see great opportunity In the strength Of our existing businesses, and In the powerful synergies from our union with AIG It Is Indeed a passport to future grow;h- MERGER OPENS 94 95 96 97 98 DOOR TO GLOBAL EXPANSION. ELI BROAD CHIEF EXECUTIVE OFFICER December 1, 1998 4 - THE RETIREMENT SAVINGS MARKET THE CHANGING LANDSCAPE OF RETIREMENT SAVINGS --I- - 5 — »»»»»»»»SPURRED BY AN UNPRECEDENTED CONFLUENCE OF DEMOGRAPHICS AND SOCIETAL TRENDS, RETIREMENT SAVINGS HAS EMERGED AS THE FASTEST -GROWING SECTOR OF THE FINANCIAL SERVICES MARKET.«««««««««««««««««« >CONSIDER THAT: outside of employer -sponsored qualified plans and • The life expectancy of Americans continues to Individual Retirement Accounts available to individ- rise A person born in 190C lived to be about 47 ual investors- The company also offers guaranteed years old However, a man born in 1940 can expect investment contracts. trust services. mutual funds and 10 live to a. least age 75. a woman can expect to brokerage services - live to age 77 or older. Lifespans are expected to SunAmerfca has experienced significant growth continue increasing thanks to medical innovations during the past several years as an increasing number and improved quality of life- of Americans have realized that tax -deferred annuities • Company -funded defined benefit plans are rapidly can play an important role in their retirement savings berg replaced by defined contribution plans that strategy. The company now faces its newest - and require employees to contribute to and manage largest - potential customer base in the baby boom their own retirement savings- generation SunAmerica possesses the strategies. • The U S remains one of the most undersaved workforce, products and services to meet the needs countries in the industrialized world of this extraordinary emerging customer base as its members strive to ensure a secure financial future for >HERE COME THE BABY BOOMERS themselves and their families Added to these issues is the aging of the largest demo- graphic group in the history of our country- the baby -- boom generation_ As the oldeSt of the 76 million individuals born between 1946 and 1964 come within U.S. VARIABLE shouting distance of retiremert. they are making ANNUITY SALES their presence felt as the newest customer base for retirement Savings products and services- (Lr B,Ilroru) Baby boomers' growing focus on their financial future is well-founded- Perhaps more than any previous S87 generation. they will have to rely Significantly on 0 s74 personal savings in order to ensure financial security during retirement. Indeed. many financial professionals (��o believe that individuals will require up to 80% of their up $S' 1 pre -retirement income to Sustain a comparable standard of living during retirement. $29 >SUHAMERICA. $17 THE RETIREMENT SPECIALIST SunAmerica is uniquely positioned to serve this burgeon- s12 ' ing baby boomer market because it is focused solely on 411, retirement savings- Its high -quality lineup at products 90 91 92 93 94 95 96 97 and services includes lixed•rate and variable annuities. the only long-term tax -deterred investment products - 6 -- GROWTH OUR TOTAL SALES HAVE INCREASED 21% ANNUALLY SINCE 1990 -7— >y»»»SUNAMERICA ESTABLISHED ITSELF NEARLY A DECADE AGO AS A FINANCIAL SERVICES FIRM FOCUSING SOLELY ON THE BURGEONING RETIREMENT SAVINGS MARKET.««««««« Since then, the retirement savings market has experi. enced tremendous growth. A strong indicator of America's retirement savings boom is the strong growth of the variable annuity market- SunAmerica itself has also grown rapidly to meet the demands of this expanding market, providing a broad range of retirement savings products and services - >ANNUITIES SunAmerica's annuity sales were a record $3-7 billion in 1998- Variable annuity product sales represented the vast majority of this year's total annuity sales, reaching a record $3.5 billion_ In fact. SurtAmerica's variable annuity product sales have more than quadrupled during the past five years, and its market share has more than doubled, from 1.7% to 4% in the most recent quarter_ The continued strength of SunArnerica's variable annuity product sales reflects the quality of its products, the strength of its distribution network, the effectiveness of its strategies to Increase awareness of the SunAmerica brand, and consumers' increasing willingness to tap the equity market to accumulate long-term lax -deterred savings- Polaroyi. SunAmerica's flagship variable annuity. offers investors 26 variable portfolios managed by nine highly respected money managers- Nine of Polariyi's 15 domestic equity portfolios have one-year returns well above the Morningstar averages for domestic stock funds- Similarly, seven of the 10 Polansrf domestic stock portfolios established at least three years ago have three-year returns that soundly beat the Morningstar average for domestic stock funds. As testament to consumer demand. Polari5n is now the top -selling Individual multi -manager variable annuity in the nation. Polarisrr also features five fixed-rate options, a choice of death benefits and two dollar -cost -averaging options, which enable investors to systematically lrans- fet funds from fixed accounts to equity and bond portfolios during six- or 12-month periods. porarisrr is pined in the SunAmerica variable annuity lineup by Seasons, a first -of -its -kind product that offers four simple "check the box" strategies Depending on their investment goals. investors can choose from among the following investment options- growth, moderate growth, balanced growth or canserva- twe growth- Each option is co -managed by five highly respected portfolio managers. Customers can simply choose a new investment option as their investment needs change over time- In 1999, SunAmerica expects to launch Seasons Select, an enhanced version of Seasons that will include large-, medium- and small -cap portfolios, as well as international and bond portfolios - each of which will be co -managed by three leading investment firms. Mostrecently. SunAmerica launched Polaris Plus, a varrable annuity designed specifically for the qualified 403(b) market. Polaris Plus offers customers a similar array of variable portfolios and dollar -cost -averaging ANNUITY AND GIC RESERVES (In thilianr) l -- $32.8 $29.5 GRflW� ......._-. b - ..._._. $20.2 $13.7 St t.8 q 94 95 96 97 98 Fix@a Arawity . Variably Mown 0 BICS -8— SUNAMERICA"S MUTUAL FUND SALES NEARLY DOUBLED THIS YEAR. ; J accounts provided by Pofarrs'r. as weft as three fixed-rate options - And in 1999, SunAmenca anticipates the intro- duction of a new variable life product The product marks the Company's entry into The variable lite market. and Its first joint product marketing effort with AIG. SUNAMERICA ANNUITY SALES (In Whom) $3.7 G tAkRKEs SHARE $2.8 51,9 $1.5 $1-0 I I f I I v 94 95 96 97 98 Vaik s atirwity Fixed 6nnvity Producu Products SunAmeriCa also continues 10 enhance its products with new features- The company added Its Income Protector feature to Polariv and Polaris Plus in 1998. and expects to add this -living benefit" feature to Seasons in early 1999- Income Prolecwr provides variable annuity policyholders with a guar- anteed minimum levet of Income lot the rest of their rives, regardless of equity market performance-' �Sumi . wiU's vdri♦tbie 4rnu tees d'+0 m.vt6a] li;nds (tie ollaed by PfD% ctLs Only 1be prCSPICIus includes d.ta.kA intorrniiion. .nc1W,nj ctVrs and <es Investors Srimid iaad Ine prosi>Kws Carelully be!o a IrnCstl �� THE SUNAMERICA FINANCIAL NETWORK In recent years. SulAmerica has focused intently on expanding Its network of wholly owned broker -dealers• collectively called The SunAmenca Financ)aT Network - This growth strategy is driven by the company's ever- Increasing need for guaranteed -shelf space- for I(S retirement savings products, as well as consumers' awareness that they need assistance from financial professionals to manage their retirement savings strategy in 1993. the company established an ambitious goal of increasing the number of indepenJeni regis- tered representatives affiliated with the SunAmenca Financial Network Iron a then -modest 3.400 to ! G,00O by the end of the decade to the rnsuing years, ,he company stepped up its reCru.tmer.t of experienced financial professionals and also acquired several well- estabfisnec breKer-dealers, mcfuding Financial Service Cap-. Keogler Morgan. Advantage Capital. Sentra Securities and Spelman 8. Co- These acquisitions brought the total number of financial professionals a'fil- iated with tie SunAmenca Financial Network to 9.700. placing tie company solidly ahead cf schedule to meet its growth goals- Today. the SunAmenca Financial NetviorK represents the hfn-largest retail secunues sales torte in the na:ion- MUTUAL FUNDS SunArnenca's registered wye5,merl a0vtsa. SunAmerca Asset Managemen; Corp., manages more than $3 billion of assets- including a 'arnily of 21 mutual funds available for safe through the SunAmenca Financia! Network, financial institutions and other bicker -dealers acruss the country. The !um also provides -9— private account management services and serves as investment advisor for most of SunAmenca's variable annuities - SunAmenca Asset Management Corp- posted record sales during fiscal 1998. nearly doubling sales over the previous year. The firm's outstanding performance was driven largely by its Style Select Series of mutual funds, which more than doubled in assets, and by solid performance in many of its internally managed funds. Style Select Series offers several different core investment styles and asset classes, each co -managed by three highly respected, top -rated mutual fund managers This year, the number of "style" ponfohos available in the Style Select Sermswas increased to nine, including the Style Select Series Focus portfolio. This portfolio seeks long-term growth by using three leading inde- pendent money managers, each of whom manages one-third of the portfolio by choosing 10 favorite stocks. All of the SunAmenca mutual funds, as well as the Style Select Series, were enhanced by a new asset protection plan, the firs. to be offered in connection with a mutual fund This option ensures that in the event of the investor's death, the beneficiary wilt receive - between insurance proceeds and account value - an amount equal to the original investment, plus a 4% annual growth rate r i SUNAMERICA ISSUED $4 BILLION OF NEW GICS IN 1998P E ' 1998 >GUARANTEEDINVESTMENT CONTRACTS The company complements its retail annuity and mutuai fund businesses with guaranteed investment contracts iGICsi, which are sold to instautronal cusxmers- SunAmtyica has dtsiingurshed itsell through %nnCvatiWs ASSETS ON WHICH SUNAMERICA EARNS FEE OR SPREAD INCOME (In fi:l1w,15i 0 6E $110 w 07 $40 $33 4, 40 4111111110 f 4111111111, 94 95 96 97 98 such as new "AAA" -rated products for investors with very low toleranCe ler credit 'isk. and p'Oducts designed for ,nte!ndt1c1al investors- SunAmenca iss.:ed mere than $4 billion of new GICS in fiscal 1998. making it the largest U.S. issuer of new GICs for the yea, and increasing its GIC reserves by 51 %. to $8 4 billion- SunAmenca is the largest international issuer of GICs and the fifth -largest GIC Grcvide'in the Country based on reserves >TRUST SERVICES AND PREMIUM FINANCE Resources trust is one of the largest trust companies in the U S. focused excl s.vely On sell-drrecled retirement plans. It earns fees by providing custodial services to more than 200.000 IRA, Keogh, 401Ik1 and pension and prola-shanng accounts, ccllectively holding nearly $13 billion of assets - Imperial Prem,u.m Finance is cne of the nation's reading insurance premium fina.xe companies In fiscal 1998. the company financed more than $1-6 billion Of p•olxr'y and casualty msura,ce p'emi.ms for small - and medwm-sued U.S. businesses- — 12 — SUNAMERICA among national brokerages, and will gain a solid foothold in the qualified 4031b1 retirement savings Mar - FINANCIAL NETWORK kel through its acquisition of the individual life and AFFILIATED REPRESENTATIVES mdrvwdual and group annuity, business of MBL Life Assurance Corp - A total of 70.000 financial professionals are now '\ licensed to sell S,:nAmerica annuity products. nISTR,� ColleCtrvety, this diverse group of distributors gives {r � , }, ejL�% OUTl 9.700 SunAmerlca access to customers coast -to -coast. SunAmerica also continues to invest in its VV �,/ marketing organization to enhance the sales potential r 7,50Q in each of its des;nbuLdn Chdnnefs- The Company 6,600 increased its ranks of field marketing representatives and its internal wholesaling force srgndlcantly this 4' year In addition, it successfully implemented programs within its internal wholesaling organization to increase sales of SunAmerlca products. One program focuses on enhancing relatlonshl.7s among registered represen- tatives with whom SunAmenca has ongoing relation. _ _1 ships in order to earn a greater share of their business - 94 95 96 97 98 Internal wholesalers are a'su increasing the total number of professionals who sell SunAmerlca products by identifying qualified registered representatives As a result of tris el!orl. more than 4.400 registered In addition to the SunAmerlca Financial Network, representatives Sold SunAmenca products for the firs; the company markets its products through a broad time daring the year_ The effectiveness of the company"s range of distribution Channels, including other mdeaen- Infernal wrolesa rcg ind.al,ues was r.ccerscored by a dent broker -dealers. national and regional securities recent survey of brokers in multiple distribution channels firms. financial institutions and general insurance who ranked SUnAnlc:ica'S outt}7und telemarketing firs; agencies. In tact, these distributors accc-int!or apprux- in the irxC s;'y. imately two-thirds of SunAmerica's annuay sales - During the 1998 fiscal year, SunAme: rca increased sales in virtually all of these .......... t ........................ -........... . channels- For example• the company saw j w d major expansion Of shelf Space for its THE S U N AM E R1 CA variable annuity prod,:cls among hnancal institutions as it launched lolariyr in rINANCIAL NETWORK several new markets. Expanded shelf RGEST space• combined with continued popularity iIS THE FIFTH- of SunAmerica's products, resulted in a i doubting of variable annuity sales within ' RETAIL SEGUR1TlES this channel during the year The company SALES FARCE is now ranked among the top 10 sellers of variable annud:es in financial institutions. t INTHE U. • The company significantly increased ] sales volume of its proprietary products ieRa •••"'•"' - n —13— >BRAND -NAME AWARENESS SunAmerica for many years achieved stellar sales results and improved its market share without a well -recognized brand name_ However, the com. pany realized that it was imperative to establish strong brand -name awareness as a way to achieve market leadership and distinguish itself from a rapidly increasing number of Competi- tors_ Thus in 1995. it launched its first national television advertising campaign, fol- lowing it up in 1997 with a second multi -year, multimillion -dollar nalional advertising pro- gram that will continue through 1999. The current campaign features a trio Of ads that position SunAmerica as The 6 Retirement Specialist and remind consumers not to -leave your future to chance.- The ads have appeared during major sports events such as Wimbledon, Super Bowl Sunday, the world Series, the NBA Eastern Conference Finals and the U S. Open golf tournamer 1. Another key component of Ine campdig" is a multi -year partnership wish NBC Sports- The pact includes The SunAmerica NBC Sports Desk, a national sprats highlights segment hosted by NBC sportscasters. SunAmerica's national advertising campaign has proven highly effeclive- Since the program's inCep!ion. consumer awareness of the company has increased dramatically. SunAmerica Ul >TECHNOLOGY SunAmerica has continued to improve upon and expand its technology platforms to reduce costs, improve service and increase productivity - critical competitive advantages as the company has increased its cuslcmer base and expanded its businesses THE SUNAMERICA WEB SITE GIVES POLICYHOLDERS SECURED ACCESS TO ACCOUNT INFORMATION VIA THE INTERNET. ........................... ........... .,, J SunArrerica's use cf technology has also been 0! critical importance as it has acquired blocks of annuity business and integrated them into its existing opera- t ens. Including the pendi^g addition of the ndividuaJ life and individual and group annuity businesses of NBL Life Ass.:ra-ice Corp.. 5..^Amenca dunrg the past few years has ac;uired $13 pillion of annuity reserves. represerinngapproximately 540.000 individual investoors- Tre cd.ipany's .echnolog,coi capability enables it to assimilate these businesses with virtually no disrupPon to Jay -today business Even more impressive is :he 'act Ina[ per-un t servicing Cosa Cont•nue ` to decline even as these businesses are added- 1 The company has enhanced customer service by providing its policyholders secured access to a broad range of account information via its Iniernet s.te, www.Sunarnerlca.ccm. The sire also offers a forms library for registered repr"ematives, and several financial planning locls, including interdctive retirement plan- ning calculators and a wide range of real-time finai%,ial data. S,;nAmerica also launched vision 2020. a fully integrated front-end system that enables representa- lives affi'iateC wita Ine SunAmerica F.na-:c al Network to manage a wide range of client information and transactions on-line- 14- INVESTMENTS SUNAMERICA HAS ACHIEVED CONSISTENT INVESTMENT PERFORMANCE DESPITE VOLATILE MARKETS -15— »»»»SUNAMERICA'S INVESTMENT PORTFOLIO IS MANAGED BY AN EXPERIENCED GROUP OF PROFESSIONALS REPRESENTING A BROAD RANGE OF INVESTMENT EXPERTISE. ««««««< This internal team implements the company's strategy of seeking long-term investment return. Every investment is evaluated on a risk -adjusted, total -return basis, which has helped the company consistently achieve investment spreads that are well above the industry average. Today, the majority of the company's total assets Carry little or no credit risk, including $11-4 billion of variable annuity assets in separate accounts, approxi- mately $6.7 billion of U.S. government agency and high- ly rated mortgage backed securdnes and approximately S1.8 billion of cash and short-term investments. The investment portfolio contains primarily fixed- rate investments that produce highly predictable income- Investment -grade bonds represent 64% of the portfolio, while non investment -grade bonds represent less than 7%. The company's bond portfolio includes S5.9 billion of mortgage -backed securities. or 23% of invested assets, the majority of which are highly liquid public issues- Significant portions of the mortgage - backed securities have limited prepayment or extension risk, allowing cash flows to be more predictable and less sensitive to changes in interest rates - Underlying SunAmerica-s investment approach is a stringent credit review process designed to maximize total returns, and disciplined asset -liability matching that helps ensure liquidity and principal protection under a variety of interest rate scenarios- As a result, the company's investment portfolio performs very well under stress tests analyzing its sensitivity to Changing economic and market conditions. Perhaps the best evidence of this strategy's success is SUnAmerica's investment spread perfor- mance- The company's investment spread has held steady at about 300 basis points during the past five years despite pronounced interest rate fluctuations during that lime- SunAmerica's spread performance is substantially higher than that of its peers and, equally STABILITY OF SUNAMERICA'S INVESTMENT SPREADS 8.29% 1-86% ,reaa- 90 91 92 93 94 95 96 97 98 ' DO— 1� W rwu e......g. __4 — _d a, wr F&d r &L. 2.4—r N..i a nJwr Kb is t 7--y Nwee 2.93% i� �!ZfaSAti ,r RES11R=~�_ ��- 5.51 % -16-- DEFAULTED ASSETS* 0 0.2% 0.2% 0.2% I 94 95 96 97 98 'as a Percent or invested assets at amortized cost at SePtampet 30. important. has been achieved while maintaining defdult levels well below industry norms Although it reflects a relatively small portion cf the company's total portfolio, investing "wholesale - is an important - and unique - element of SunArrerica's investment strategy *e company's investment team works directly with various funding intermediaries and direct issuers to originate assets and structure secur-nes that are compatible with its own investment guidelines. This strategy enables the company to reduce credit risk and achieve higher returns than it would if it only purchased investments originated by intermediaries - SunAmerica also invests about 6% o1 its invested assets in partnerships, which have cpnsislentip generated returns in the high teens of above. The company-s partnership portfolio is diveaifted- It is composed o! approximately 660 separate partnerships, inclucing those managed by independent money managers investing in a broad array of equity and taxed -income securities. tax -advantaged affordable housing, and partnerships that invest in mortgage loans and income - producing real estate. CAPITAL STRENGTH Thanks to its disciplined capital raising approach. SunAmerica has achieved a strong capital position- The task -based capital ratios of its life insurance companies far exceed industry averages and the regulatory require - meats of the l.fe insurance arW annuity industries. SunAmerica has an excellent track record of issuing innovative, cost-effective Securities to raise capital, and in recent years has taken advantage of the market for new types of securities. such as tax deductible preferred secu Mies. The company's total capital is now $4-7 bllion- I;s equity capital currently stands at $3.9 billion and it holds approximately $4 billion of inves!ed assets outside its regulated entities - The company also maintains high ratings among the principal rating agencies- The SunAmerica flagship life companies' financial s;reng;h is rated "A+" (Superior) by A1d- Best. "AV' (Excellent) by Standard S Poor's. "AA" (very High) by Duff 3 Phelps. and -A2- (Goc(5) by Moody'$. SunAmerica anticipates ratings upgrades to the highest levels from the principal rasing agencies when its merger with AIG is consummated- lri8' WE REDUCE RISK AND IMPROVE SPREADS BY ORIGINATING ASSETS OURSELVES. fene SunArnerica's effective issuance and use of capital, as well as its strong earnings performance, is reflected in is return on average saarehcldeis- equity. which has been well above the industry average during tt;c past several years and was nearly 20% in 1998. aaaQo�ar�a4� oo�c��ooa I OFEDUFM2 IE&ERM29 HCMIFM�E@ i _ 18 --- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysts Of financial Condition and results of operations of SunAmerica Inc_ (the -Company") for the three years in the period ended September 30, 1998 follows- In connection with the "safe harbor" provisions Of the Private Securities Litigation Reform Act of 1995. the Company cautions readers regarding certain forward -looking statements contained in this report and in any other statements made by, or on behalf of, the Company, whether or not in future filings with the Securities and Exchange Commission (the -SEC-)_ Forward -looking statements are statements not based on historical information and whrch relate to future operations, strategies, financial results. or other developments. Statements using verbs such as "expect` "anticipate," "believe- or words of similar import generally involve forward -looking state- ments. without limiting the foregoing, forward looking statements include statements which represent the Company's beliefs concerning future levels of sales and redemptrons of the Company's products, investment spreads and yields. or the earnings and profitability of the Company's activities EARNINGSPER SHARE* S0.8o W. 4W 98 S2.34 St.81 Y r' 97 98 •Calcuund as a dik"d batis. ••aetare So-10 pat aware wvulan.e ellect of Change in accounung for ICKU" Well. Forward -looking statements are necessarily based on estimates and assumptions that are inherently sub- ject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's Control and many of which are subject to change. These uncertainties and contingen- cies could cause actual results to differ materially from those expressed in any forward -looking statements made by, or on behalf 01, the Company_ Whether or not actual results differ materially from forward -looking statements may depend on numerous foreseeable and unforesee- able developments Some may be national in scope. such as general economic condi(iorrS. changes in tax law and changes in interest rates Some may be related to the insurance industry generally, such as pricing com- petition, regulatory developments and industry consoli- dation- Others may relate to the Company specifically, such as credit, volatiU*y and other risks associated with the Company's investment portfolio- Investors are also directed to consider other risks ant) uncertarrilies dis- cussed in documents filed by the Company with the SEC_ The Company disclaims any obligation to update forward -looking information. RESULTS OF OPERATIONS Net Income tsraled $516.3 million ($2.61 per basic share and S2 34 per diluted share) in 1998. compared with $379.1 mdhon ($2.01 per bask share and 51-81 per di'.uled Share) :n 1997 and $274 4 mll;on ($1.44 per basic share and $1.32 per diluted share) in 1996 OnMarch 31. 1997. the Company acquired certain arnuity contracts from John Alden Life Insurance Company and aU of the outstanding common stock of John Alden Life Insurance Company of New York (col- fectrvefy, the "Jonn Alden Acquisition"). During fiSCai 1996. the Company acquired CaiAmerica Life insurance Company ("CalAmerica") on December 29. 1995, Ford Life Insurance Company ("Ford Life") on February 29. 1996. and certain annuity contracts from The Central National Life Insurance Company N Omaha (the "Central National Annuity Contracts") on April 1. 1996 (collectively, the 1996 Acquisitions- 1-The John Alden Acquisition and the 1996 Acquisitions (collect.vely. the "Acquisitions") were accounted for under the purchase method of accounting, and, there- fore, results of operations include those of the -19- Acquisitions only from their respective dates of acquisi- tion. Consequently, operating results for fiscal years 1998, 1997 and 1996 are not comparable. On a pro forma basis, using the historical operating results of the acquired businesses and assuming the Acquisitions had been consummated on October 1, 1995, the beginning of the earliest period discussed herein, net income would have been $397.4 million ($2.11 per basic share and $1.90 per diluted share) in 1997 and $323.2 mil- lion ($1.73 per basic share and $1.56 per diluted share) in 1996. Pretax Income totaled $707.3 million in 1998, $537.1 million in 1997, and $392.0 million in 1996. The 31.7% improvement in 1998 over 1997 and the 37.0% improvement in 1997 over 1996 primarily resulted from increased net investment income and fee income. These favorable factors were partially offset by increased amor- tization of deferred acquisition costs, higher general and administrative expenses and, only with respect to 1998, higher net realized investment losses. Net Investment Income, which is the spread between the income earned on invested assets and the interest paid on fixed annuities and other interest -bearing liabilities, increased to $841.6 million in 1998 from $679.4 million in 1997 and $492.8 million in 1996. These amounts equal 3.36% on average invested assets (com- puted on a daily basis) of $25.03 billion in 1998, 3.26% on average invested assets of $20.86 billion in 1997 and 3.43% on average invested assets of $14.36 billion in 1996. On a pro forma basis, assum- ing the Acquisitions had been consummated on October 1, 1995, net investment income on related average invested assets would have been 3.14% in 1997 and 2.97% in 1996. Net investment spreads include the effect of income earned on the excess of average invested assets over average interest -bearing liabilities. This excess amounted to $1.88 billion in 1998, $1.15 billion in 1997 and $1.06 billion in 1996. The difference between the Company's yield on average invested assets and the rate paid on average interest -bearing liabilities (the "Spread Difference") was 2.93% in 1998, 2.95% in 1997 and 3.01% in 1996. On a pro forma basis, assuming the Acquisitions had been consummated on October 1, 1995, the Spread Difference would have been 2.91% in 1997 and 2.82% in 1996, Investment income (and the related yields on aver- age invested assets) totaled $2.16 billion (8.63%) in 1998, compared with $1.80 billion (8.61%) in 1997 and $1.25 billion (8.74%) in 1996. Investment income and the related yields reflect the effects of the Acquisitions from their respective dates of acquisition. The invested assets associated with the Acquisitions included high-grade corporate, government and govern- ment/agency bonds and cash and short-term invest- ments, which are generally lower yielding than a significant portion of the invested assets that comprise the remainder of the Company's portfolio. On a pro forma basis, assuming the Acquisitions had been con- summated on October 1, 1995, the yield on related average invested assets would have been 8.53% in 1997 and 8.37% in 1996. Thus, the increased yields in 1998 and 1997, when compared to the pro forma 1996 yield, reflect a partial reallocation of lower -yield- ing invested assets acquired as part of the Acquisitions into generally higher -yielding asset classes in which the Company has historically invested a portion of its port- folio. The increases in investment income also reflect increased income from the Company's investment in partnerships, as well as the effects of increases in average invested assets (in excess of those acquired through the Acquisitions). Partnership income increased to $371.1 million (a yield of 23.42% on related average assets of $1.58 billion) in 1998, compared with $241.5 million (a yield of 21.00% on related average assets of $1.15 billion) in 1997 and $178.6 million (a yield of 19.04% on related average assets of $937.8 million) in 1996. Partnership income includes income recognized by using the cost method of accounting, which amounted to $211.2 million in 1998, $114.7 million in 1997 and $82.1 million in 1996. Such income is based primarily upon cash distributions received from limited partnerships, the operations of which the Company does not influ- ence. Consequently, such income is not predictable and there can be no assurance that the Company will realize comparable levels of such income in the future. The Company has historically sought to enhance investment yield through total return bond swap agree- ments (the "Total Return Agreements"). However, because of recent significant market declines in the non -investment -grade bond sector, the Company recorded losses of $33.7 million on Total Return Agreements in 1998. The Company recorded income of $35.4 million in 1997 and $32.5 million in 1996 on Total Return Agreements. (See "Asset - Liability Matching" for additional discussion of Total Return Agreements.) Total interest and dividend expense equalled $1.32 billion in 1998, $1.12 billion in 1997 and $761.5 -20-- million in 1996. The average rate pa.d on all inteies:- bearrng liabilities was 5-70% in 1998. compared w,tn 5-66% in 1997 and 5-73% in 1996- Interest bearing liabilities averaged $23.15 billion during 1998. com- pared with $19-71 billion during 1997 and $13.29 bil- lion during 1996- On a pro forma basis. assuming the Acquisitions had been consummated or. October ' . 1995. the average rate paid on all interest -bearing liabilCies would have been 5-62% in 1997 and 5.55% in 1996. These increases in overall rates paid primarily reflect year -over -year Increases in the percentage of average interest- bear mg liabilities composed of guaranteed investment conirac's ("GIGS" ), which, on average. bear higher interest rates while generally bearing lower acqui- sition Costs, than the Company's other interest -bearing liabilities - Growth In Average Invested Assets since 1996 prurarHy reflects the impact of the Acquisitions and growth of the Company's GIC reserves The Company acquired $722-5 million of invested asses of CalAmerixa on December 29. 1995. $3-10 biRion of invested assets of Ford We on February 29. 1996. $908.8 mi I-cn of investeo assess associated with tie Central hat.arial Annuity Contracts on April 1. 1996 and 55-00 billion of invested assets associated with 'he John Alden Acquisition on March 31. 1997 The Company intends to centin e to pursue a strategy of enhancing its r.ternal growth with complementary acquisitions. On July 15. 1998. the Company entered into a defir.itive agreernen; to acquire MBL Life Assurance CorpOratron's individual life and individual ana group annuity tlusihess (which has approximately 52 biilto" Of rdrvidual We reserves ar.o $3 billion of tiled annuity reserves) for a purchase price Of approximately $130 million In cash. The acquisition is subject to customary Conditions ano required regufa- tory approvals, and is expected to be completed by the eno of December 1998. Average invested assets also ir.creased as a result of sales of the Company's fixed-rate products. consisting of both fixed annuity premiums (including those for the fixed accounts of variable annuity products) and GIC premi ms. F,xed annuity premiums to'alec $1-80 billion in 1998, compared with $1-49 billion In 1997 and $993.4 million in 1996. Tnese amounts represent 12%. 15% and 20% of the fixed annuity reserve bal- ance at the beginning of the respective periods- The decreases in percentages in 1998 and 1997 reflect the impact Of the Acquisitions. wh!cn mcreaSeo fixed annu- ity reserve balances at the beginning of the respective Periods. Fired annuity premiums include premiums for the tiled accounts of variable annuities totaling $1-59 b nion• $1.1 7 bi Iron and $782.6 million. in 1998. 1997 and 1996. ,esDeCt•vely. Increases in premiums for the fixed accounts of variable annuity products principally reflex: higher variable annuity product sales and the use of the fixed accounts for 001:ar ccsl averaging ,nlo [tie variab,e accounts GIC premiums increased 10 $4 01 billion .n 1998 from $2.06 billion in 1997 and S 1-02 billion in 1996. These amounts represent 72%• 50% and 28% of the GIC reserve balance at the beginning of the respective 0eriods. the increases in GIC prerr.iurrs reflex: an expansion of the GIC client base due• in part. to a broadening of the Company's products and oistribu. tion channels. including its AAA -rated company, S;rnAmertca National Lite Insurance Company, and its AAAv'Aaa-ra:eo c!edit-enha'ixed GIC products. and an expansion of its :rternationa! client base. The size of the Company's GIC reserves increased over the three-year period to $8-38 odlion at September 30. 1998 from $3-51 ball on at September 30. 1995. The GICs issued by the Company generally guaral. tee the payme-.l 01 princiaa, and nteres: at a fixeJ rate for a lixuc corm of three to twe:ve years with an average 01 approximately 7 years. In the Case of GICs sold to pension plans. certain witncrawals may be made at took value ih ih-: even[ of circurnslancc's spex;fied in ;he plan dOcurrew. such as t mp oyee retirement, cea'h• disabi!- rfy, hard;h-8 withdtaiwa) or employee terminat.on. The Company generally imposes surrender penalties In the event of o:her withdrawals prior to maturity GICs pur. chased ice their long-term oorttol,o5 by banks, asset ^ianagem-nt 'irms. certain trusts ar.d state and teal governmental enht es either prohibit witnoranals o' per. mit scheduled took va'we withdrawals subject to the terms of the underlying indenture cc agreement GfCs purchased by asset management firms for their short- term pCrtionos either p•oh.bit withdra'wa!5 or permi' withdrawals w.fh notice r2ngrng fr6.'n 90 to 270 rays. In pricing GICs. the Company analyzes cash flow informa- tion and orices accordingly so that it is compensated for possible withdrawals prior'o maturity Net Realized Investment Losses totaled $41 7 mi'.I.c.1 in 1998. compared with $29.2 million in 1997 and $30.3 million in 1996. Net realized investment loses include impaumen'. writedowns of $109-8 million in 1998. $65-3 million in 1997 a-d $34-9 million in 1996 Thus. net ga.ns from sales and redemptions of invest- ments totaled $68 1 million in 1998, $36-1 million in 1997 and 54-6 million in 1996- The Company Company sold of redeemed invested assets, principally bonds and notes. aggregating $22.90 billion in 1998. $19-13 blhon in 1997 and $11-21 btfion in 1996. respectively. Sales of investments result from the active management of the Company's investment port- to:io- Because redemptions of investments are generally involuntary and safes of investments are made in both rising and falling interest rate environments. net gains from sates and redemptions of investments fluctua!e from pe6od to period, and represent 027%, 0.17%, and 0-03% of average invested assets 'or 1996, 1997 and 1996, respectively. Actrae poafolio management involves the ongoing evaluation of asset sectors, Indi- vidual securities within the investment portfolio and the reallocation of investments tram sectors that are mi- teived t0 be relatively overvalued to ieCtOrs that are per• cetved to tse relatively undervalued. The m ent of the Company's active portfolio managerrent is to maximize total returns on The investment portfolio, taking into actount credit, option. liquidity and Interest -rate rislt_ Nistorical!y. impairment writedowns pnma•ily have been applied to defaulted bonds. However, in 1998, as a result of equity marke; declines in the later par: of the fiscaf year, impairment writedowns were also applied to various cost -method partnerships- trnparrment wn:e• downs represent 0.44%. 0.31 % and 0 2-'% or average invested assets ict 1996. 1997 and 1996. resoe=Lvety- For the live years ended Septemper 30. 1998. impair• ment wmeWwns as a percentage of average invested assets have ranged from 0.24% to 0-63% and have averaged 0 41%- Such writedowns are based upDn es!i- mates o` the r.et realizable value of we app,rcact a assets. ACluai realization wile be dependent upon ,`,,lure events yjriable Annuity Fees are based on the market value at assets In separate accounts supporting vanab'e annuity CCUtracts- Stain tees totaled $204.5 mill:on n 1998. $141-2 million in 1997 and $104.7 million in 1996 These increased lees reflect growth in average variable annuity assets• due to increased market values, the receipt of variable annuity premiums and net exchanges into the separate aCcOunts from the fixed accounts of variable annuity contracts, pzrbally offset by surrenders variable annuity fees represent 1.9%. 1-8% and 1 5% of average variable annuity assets for 1998. 1997 antl 1996. itnKtively- Variable annurly assets avefaged $10 93 bdllon during 1998. $766 billron durira 199? an0 $S-75 btlltan during 1996- Var:ab(e annuity prerni- ums. which exclude premiums allocated to the Fixed accounts of variable annuity products, have aggregated $1.88 billion in 1998, $1.31 billion in 1997 and $929 2 mllion in 1996. These amounts represent 20n. 201% and 18% ct variable annui:y reserves at the beginning of the respective periods - Sales of variable annugy products (which Include premiums allocated to the fixed accounts) ("variable Annuity Product Saes ; amounted to 53 47 hillton, $2 :7 bown and 51 71 bi:l,c', in 1998. :997 and 1996, respectiveey- iW primarily reflect sales of the Comp3nys flagship variable annuity. Polaus- Polatis IS a multi -manager variable annuity that offers rrrvestdrS a choice cf 26 variable funds and 7 gcardnteed !tied -rate funds. Inc eases in 4arii:ble An?u!!y Yrod.,ct Sales are due, in pat. to merl<et share gains fnrough enhanced d151nbpt+Gr, el€orts and growing consumer demand tar flexible retirement savings products that offer a variety Of equsly, fixed In_Ume and gua'anleed fixed aLLilpnl :nves,menl Choices- In -event weeks. subsequent W ;he Gorr.aanys fiscal year end. sates of vir:able annuities have slowed as investors paused !o reevaluate there investment decisions in light at rolafile markets- The Company believes that fluctuating mark@t conditions -ne'ease Vie value 0' financial plain rig services and rrake the I.ex.bmtj card secuitty of vac,abte annuities e.ea more attractive The Company has encountered increased tompetr- lion in the variable alnuily markelplate during recent years and anticipates Ina: Me marke; will Terra n high;y cc-ipe'tttve for the €c••eseedble ft;ture. Atg3. 1,o:1r% time :o ume, Federal rr,i(iatives are proposed which could affect the IaiEition Of variable annuities ancf annuities generally. Net Retained Commissions are ot.marsty defrved €-Gan com.m-ssions on ;he seles of non-propoeta:y investment products by Lite Company's 17roker-dealer subsidtaztes, alter deOuCling the Yv?stanbat Xrtion of such Commis- sions Mot s passed on :c registered rearesenlahves. Net Walne3 cOrrmissions lola;ed 5114.5 million In 1998- g64 4 al.hion in :997 and $49 8 million in 1996. Broke:-dealec sales (mainly sales of general securities, mulaal funds and annuities) totaled $29.31 billion in 1992. $1752 b.1hoo in 1997 and $12-i8 billion in 1990 The ncreases Ir saps and --ref reta.ned cvnfras- sions reflecr a greater number of registered representa- tives, higher average ptodu17110n per representative ant generally favorable market conditions. The greaser num- t)er o regme•ed repfesentatwes •.:as primarily due to acquisilions includ ng tht? April 2. 1998 acc.:isi!ion of Sentra Secu.rities CofpQrat:on and Spe+man & Co. Inc- ("Sentra-Spelman"), Ire October 1. 1991 acquisition of Financial Se -vice Corporation and the January 22. 1997 acquisition o! The FwdnC•.al GfOLO, tic. At "hell respec- tlae dates o` acquisi:.c-.. these acquired CC'npanie5 r -- 22 -- licensed through their subsidiaries approximately 500. 1,500 and 400 independent registered represematives, respectively. Increases in net retained commissions may not be proportionate to increases in sales primarily due to differences in sales mix Surrender Charges on fixed and variable annuities ,otalec $54.4 million (including $37.4 million attrioutable to the Acquisitions) in 1998, $35-2 million (including $24.5 million attributable to the Acquisitions) in 1997 and $22 1 million (including $11 1 mrl!ion arributable to the Acquisitions) in 1996. Surrencer charges gener- ally are assessed on annuity withdrawals at deciin:ng rates during the first seven years of an annuity contract - Withdrawal payments, which include surrenders and lump -sum annuity benefits. totaled $3-12 billion (including $1.85 billion attributable to the Acqui- sitions) in 1998. compared with $2-28 billion (includ- i^g $1-00 billion attributable to the Acquisitions) in 1997 and $1.42 billion (inclaoing $2458 million attributable to the Acqu;sitions) in 1996. Tr:ese pay- ments represent 13 21. (23-7% of average fixed annu. ity reserves associatec with the Acquisitions). 12.0% (15 0% of average fixed annuity reserves associated with the Acquisitions) and 11.1% (9-3% of average fixed annuity reserves associated w th the 1996 Acquisitions), respect.vely, of average f xed and vari- db:e annuity reserves withdrawals include variable annuity withdrawals from the separate accounts :Ctal- ing $964.9 million (8.8% of average variable annuity reserves). $827.3 million 110.8% of average variable annuity reserves) and $637.0 million (11.1%of average variab:e annuity reserves) in 1998, 1997 ago 1996. respectively- Cons.stent with the assumptions useo i" connection w;th the Acquisitions. management ant:cr pates that the level of withdrawal payments will con- tinue to reflect higher relative withdrawal rates in the near future because of higher surrenders on the acquired annuity businesses. Excluding the effects of the Acquisitions, with- drawal payments represented 8.7% in 1998, 10 4% in 1997 and 11.6% in 1996 of related average fixed and variable annuity reserves. These lower surrender rates in the current periods reflect the continued decreases in the percentage of non -acquisition -related annuity con• tracts that are free of surrender charges. Asset Management Fees, which include ir.vestmert advi- sory fees and 12b-1 msiribution tees. are based on the ....... ..... .,f ....-... .......w ... ......... I f.....i. - $29.6 million on average assets managed of $2.89 billion in 1998. $25.8 million on average assets man- aged of $2.34 billion in 1997 and $25.4 million on average assets managed of $2-14 billion in 1996- Asset :management tees are not oropo::ionare to averalie assets managed, pr;ncipal y due to cnanges in product m.x_ Sales Cf mutual funds, excluding sales o• money market accounts, aggregated $853-6 million in 1998. compared with S454-8 million in 1997 and S223-4 million in 1996 Trie significant increases in sales pr;n- cipally resulted from sales of Lhe Company's "Style Se,ec; Series" product (which was introduced in Nove nbe! 1996) and the introducticr .n June 1998 cf the -Dogs" of wall S*.reel. The -Style Selec: Series" is a group of mutual funds which are each managed by three industry recognized fund managers The "Dogs" of Wall Street fund contains 30 large capitalization valge stocks which are selected by s:rtct criteria. Sales of these p•oducts tota'ed $611 1 mill•cn in 1998, com- pared with $267.8 miler•. in 1997. re`lecting the add - lion of five new Style Select funds, which more tnan doubled the number of Style Select funds to nine. and generally favorable market conditions- Redemptions of mutual funds, excluding redemptions of money market acce::nts, amounted to S402 5 million is 1998. $4128 mias n !997 did $379-9 milhon 1:, 1996, w^ich :epresem 17.5%. 22-0% and 2 1.4. •espcc- lively, Of ave:ege nu:ual fund assets. Loan Servicing Fees are earned Ly Imperial Premium Finance, Inc. (--Imperial-'). Imperial provides snort -term installme:it loans for borrowers to fund their property a^e cas_ally insurance p'eniiurns- These loans are securec by ;he ..nearned pferriurr associated w,tn *.he under y-ng insurance po:iues Currently. Imperial selis most of the loans it originates and earns fee income by servicing the sold loans- Such fee income totaled $23-4 million on average loans serviced of S483 0 million in 1998. compared with $24.3 million on average Icans serviced of $490 5 million in 1997 aid $23.8 million cn average loans se•v.ced cf $457.8 rrihion in 1996. Trust Fees are earned by Resources Trust Company for providing administrative and custodial services pri ar- ily for individual retirement accounts, as well as for other qualified retirement plans. Trust fees increased to $18-1 million :n 1998 (on an average of 208.OD•0 ;rust accounts) from $17.9 md;ion in 1997 (on an average cf 204.000 .rust a_counts] and $16.7 rniilicr. in 1996 -23- General And Administrative Expenses totaled $310 3 million in 1998, compared with $265.7 million in !997 and $210-7 million in 1996 General and adminrsira- lrve expenses reflect the impact of the Acquisitions. as welt as the acquisitions of Sentra-Spelman, Financia; Service Corporation and The Financial Group, Inc. As a result. the number of employees has increased to approximately 2.500 at September 30. 1998 from approximately 2.000 at September 30. 1997 and approximately 1,600 at September 30, 1996 As a result. compensation (net of deferrals) has increased to $174.8 miltion in 1998 from $145.3 million in 1997 arc $123 5 million in 1996. General and adminis- trative expenses remain closely Controlled through a company -wide cost containment program and continue to represent less than 1% of average total assets. Amortization Of Deferred Acquisition Costs totaled $241 2 million in 1998, compared with $165-1 million in 1997 and $108-2 million in 1996. The increases in a'nori zation primarily reflect the amOrtiza'ion of the deterred acquisition costs attributable to the ACCUi- srtrons, which aggregated $133-0 million in 1998. $65.2 million in 1997 and S16.8 million in 1996. Amorttzal:on has alSo increased due to additional fixed and variable annuity and mu:udl fund sales and Inc sub- sequent amortizabc..i o' related de!errec co emissions ana other d.rect wiring costs. InColne Tax Expense totaled $191.0 million in 1998. compared -with $158.0 million in 1997 and $1176 million in 1996, representing effective tax rates of 21% in 1998. 29% in 1997 and 30% in 1996. T! esc tax rates reflect the favcrab:e impact of tax Cretli;s associ- ated with tax -advantaged invesiments in afforddOle housing partnerships owned by tie Company. FINANCIAL CONDITION AND LIDUIOITY Shareholders' Equity increased 15.8% to $2-99 billion at September 30, 1998 from S2-58 oillion at September 30. 1997. primarly due to $5'-b 3 m•loon cf net income recorded in 1998, which was pa.rtlally off- set by $100.5 million of dividends paid to shareholders. On August 20. 1998, the Company entered into an agreement to merge with Amencan international Group, Inc- ("AIG")_ The merger will be treated as a pooling cf interests fcr accounting purposes, and will be a tax- free reorganization. Each share of the Compd-y s Com- mon Stock (including Nontransferable Class B) will ae exchanged for 0-855 shares of AIG's common stock. The lransactiOn was approved by both the Company's and AIG's shareholders at special meetings on November 18. 1998- The merger is expected to be com- pleted in late 1998 or early 1999. On September 22. 1998. -.he Company announced that it would redeem all of its Series E Preferred Stock. The redemption was competed on Cctober 30. 1998 and resu:ted in the issuaace of approximately 11.3 million shares of common stock. For the year ending September 30. 1998. the Series E Preferred Stock was included in the computation of diluted earnings per snare as 12-2 million of common stock equivalents - On October 7. 1998. s..Osequeni to the Company's fiscal year end, the Company announced that it will redeem all of its 8-A% Premium Equity Redemp- lion Cumulative Security Units ("PERCS Units") on December 6, 1998 In connection with this redemption. the Company will issue approximately 10-1 million shares of common stock and will receive $431.3 million in cash proceeds. �cr the year ending September 30. 1998. the PERCS -in Is were .icluded in the comcutation of dilutec earn.ngs oer snare as 4-3 million of common stock equ:va:erts Book Value Per Share amounted to $1.4 45 at September 30. 1998. up from $12-40 at September 30. 1997_ Exclud ng net unrealized gains on dex an-- equi'y secu- rities 2vai aisle for sale• book va ue per share amounted to S13 50 at September 30, 1998 and $11-39 at September 30. 1997. On a pro forma oasts. assuming that the PERCS Units w'e,e converted 10 Common Stock. took value per share would have been $16-02 at September 30. 1998, compared witn $13 40 a! September 30. 1997 and. excluding net unrealized gairs on dent and CQU tc sect.riCes avadab'e fo• sale. wou of rage been <_15-]U a' September 30. 1998 and $12.47 at Septen'oer 30. 1997. invested Assets at September 30. 1998 totaled $26-07 billion, compared with 524 4' billion at September 30. 1997- Tre Company manages most of its invested assets r.le!ially. Tre Corr.pZrry's general :nvest.'nent ph IpSCJ':y Is to hold fixec-rate assets `er long-term investment- -'us. a does not have a trading portfolio- However, the Company haS determined that all of its portfolio of bonds, m tes and receemazile preferred stocks (tme "Bond Portfolio') is available to be sold to response to csanF,es in market in,erest rates. changes:n re:alive value of asset sec'crs anc ndiviaua' securities. oranges m pr�:pdyme't risk. ChangOS in t.-e credit qual- ity c..tlook for certain sec,!,,,[ es, the Company's need for Iigt.idity and ether similar factcrs- The Band Portfolio, which consta•.:tes 72% of me Inves:rr.ent gfaae These non-.nvestment-graae winds Company's total Investment porttol:o• had an aggregate accounted for 6 of the Company's ;olai assets and fair value that exceeded its amortized Cost oy $399.2 6 8% of Its Invested assets In addl;Ion ;o Its dlrec; mlliion at September 30. 1998, compared wiln an investment Ir non.!nvestmenl-grade bonds, t.ne excess of $398.8 million at September 30. 1997. CCMPdny has e'llered Irto Total Return Agreemvts with At September 30, 1998. the Bond Pordol0 an aggregate nctlonal pr;nclpal amount of 5,333.0 (excluding S292.0 million of redeemable preferred nlahpn at Sep,err,oer 30, 1998 (see "Asset -Liability stocks) included $17.21 billion of oonas rated by Mat(tl-rg" ). Standard & Pow's Corporation r-S&P"), Moody's Non-mvest,r.en'-grace secur•tie5 genera'ly pr;lvlce Investors Service (-Moody's" ), Deft & Phelps Credi; h,g"er y!el•ds and Involve greater risks than Inves:-:tpnt- Ra;Irg Co_ (-DCR••)• Fitch Investors Service. L P grade sc,^un:Ies because ;heir Issuers typlca ly are Ir.pre ("Fitch") or the Nat,ona! Association of I'-surance rlgh.y leveraged :I::d more vu!nefable to aovelse Commissioners (-INAIC"), and $1.30 billion 0f econr.•n c conditions than Investment -grade Issuers- In bonds ra;ed by the Company pursuant 13 s;atuwry adds:-, n• the'.ra(:ing make; t:)! these sec,lrlttes Is ust:. ratings guidelines established by 1ne NAIL- A: alit/ (core Ilm tec than fo' investmen, -grade se-cUrs;Ies- September 30, 1998• approxtma;cly $16.73 Dalton 01 The Company hao no naterlal concenlratl,ns of non. the Bond Portfolio was investmen: grade. rCluding Inves:r]eni-grace se:un.IeS at September 30 1998- $6.71 billion of US- govern men Uager.cy Sccuntles and i r:e following table s.,ntr^an2es :lie Company's mortgage -backed securities CWBSs"). rated oonas oy rating classifiCa:Ion as of Sectemoe! At September 30, 1998. Ine Bond Por;follo 3C. 1998 (dollars In thousdnCS). Iccruded $1.78 binlon of bonds that were not hun '1:'a' :1 Slr:1R10.:r s1L��::=,�:r ?Co FI[,. f•I L�:: :rle=ri '::>: E 1:c�a:t4 :7: ne:ld f::rs+'n1 'oiler. sl SSPethwhsAxIly AcA.A Ill kli; {rY .,, A15o I.•t! tar .nlra _ ;ri[-,: U1,40r` [V rtht :!'tl!-r' C_ Wt :31E '-W :& .l Via :, A3i .W t, ;L-I :W tc it-: $10.Ctr35C2 S:C.337.14._ S<263A $2 05 01 $-2.3:0.534 $i263+.+.; +3?+x 6_B- to 6eB- iBjat!sBaz?: :638- to 15H-I iaOW. o EBB ! 3 :13 664 3-2+6.27i F C`3-5:5 ce5 315 J.°li 22? J 552.5i2 N 3s. BB* !� BB- i8al to 3a31 IBB4138B ] 16e-I:Bd-1 2:6.9?0 03u3 3 ?3.6i: 71-135 :i3.5E3 E r to 6- .9: 'a 83) la- to B-! :8- IQ B-1 ..257E35 1.154.33, 2E5.%f: i 1.555 !.T+J.J 7i 1 =16.mi i 41 :Cc- tc (C+a :o C; IwC: [CccltoC- !;A?: 3t274 t ?3.3+3 :'.C-32 .CU. c 923115 CIr0 5 1j3i SSA ]:JS 55e 000 kta::ala;Issues Slj.M6!3 S!i.323.+7? 53.3:?.?_e $3+13CA)i $16.1933;1 $:E.S.7E.e13 `S&P ask r,li ra:e dfG [Bia.ts a ra:,l curdy-ei .'[i= 1, ALA rx n jr nlf ta C ! . )+r^AI k17J 15 .t C li l.1 y n,:t l : r::+I•S :Et evil ; It l:M Sl+rd rl n. � Rt u:r j a[tIM a ~.r, rill'. MO- N t j4$ Cc,s.lertl lT.tS-T"' jratr eked; s v:.1 [t9r s4.[a-r. n. I: III j sa:ej(.!% "I r, s j'rcr xa! :Ir., txs': ; C Wrr: rk pod pr7specis C: t%*f a:taxnj airy •yI a:Mtew+ sla�d.,j) 1 x al,xr 1. 2 } 3 W..,. It ! %!*S! !,Q 1 I: r T.rs:i I J :jI!s :at Je t: s'IIaL.t star J11 r+1, ltt Ia' r 1 erF- rycry a srI[L.' IaIN 6aa3 a •Ixr I+t[s JCM r,rrsl WV 1-3k t{t -a:'-S e N xcr Iris c, .-a:r:t:alry,r,ts Ia•jrj':cr am !:Y 1 jxs': -c t];c•. 3A"N:: 3els, Ii a yr. :r)a^>•us:-:IsGla7es lac 0a[srtu'�ts'axnj.rprlx:a:rjulrjxr a:rc-I�u-k 5i9 ralrn ores .jLM:ur. jlacr hsu: rl ca-riy rr ]lu7c,l4 +j,est Y IA! SiP dod%r [. P7 a,d flrc5 ruajs It n:la Yr ryr p4 citx.n 'axis ec! ysrt:rn p:s�ass[ry cSlrtrxr+s 1'f E rtt- t:7 s r Oa+l h `+:!Irr'es I] liic� r:' rj %'),ISlS.:ar j f l I•rI I :a jkt:i:7 7!rortsn k.' Yf:(Iat lti tc,C1 CA Fst cattjri. 6, W StrGs r or rta: attalt :rtsr w ulryxltl :n-I$Mv, • In Ux S.ie:Vslr-L �_`�'cl:exj 1-G,:: ri M alone M. a:rta-ts I +aC: Coss .1 jra:t The "caUjdlesr:lxe$13Cp1x,dasscsItr:+trt:sleet!-xCarWa7; r,...cl:,rpta_att:ICrerrjjcrrrrt! -25- Senior secured loans ("Secured Loans") are included in the Bond Portfolio and aggregated $1-89 billion at September 30. 1998- Secured Loans are senior to subordinated debt and equity, and are secured by assets of the issuer- At Septemoer 30. 1998, Secured Loans consisted of $982.0 million of publicly traded securities and $903.5 million of privately traced securities- These Secured Loans are composed of loans to 310 borrowers spanning 44 industries, with 26% of these assets concentrated is financial institttions and 15% concentrated in unities. No otter industry con- centralion constituted more than 6% of these assets. While the trading market for the Company's privately traded Secured Loans is more limited than for pcbficly traded issues. management believes that participation in these transactions has enabled the Company ;o improve its investment yield. As a result of restrictive financial covenants. these Secured Loans involve greater risk of technical default than do publrCty traded investment - grade securities- However. management believes that the risk of ;css upon default for these Secured Loans is mit• igated by such financial covenants and the collateral val- ues underlying the Secured Loans. The Company's Secured Loans are rated by S&P, Moody's. DCR, Fitch. the NAIC or by the Company. pursuant to comparao:e stalctoy ratings guidel:r.es estabiis`ed Dy the NAIC Mongags Loans aggregated $3 41 billion at September 30. 1998 and consisted of 1,538 com- mercial first mortgage leans with an average :can Dalance of approximately $2.2 Whon, c0l!dtera!iZed by properties located in 47 states. Approximate!y 27% of this portlolio was multifamily residential, 23% was retail. 17%was office, 11% was manufactured housing. 7% was inclus:rial and 15% was olner types. A: September 30. 1998, approximately 19%. ' 2% anc 10% of this portfolio was secured by properties located in California, New York and Texas, respectively, and no more than 7% of this portfolio was secured by properties located in any other single slate. At September 30, 1998. there were 59 mortgage loans with outstanding balances of $10 million or more. which loans collectively aggregated approximately 30% of this portfolio- At September 30, 1998, approximately 31% of the mortgage loan poalolio consisted of leans with balloon payments due before October 1, 2001. During 1998, 1997 and 1996 loans delinquent by more than 90 days, foreclosed loans and restructured loans have not been significant in relation to the Eclat mcrt- gage loan porl!o'io. At Sep:ember 30. 1998, approximately 40% of the mortgage loans were seasoned cans underwritten to the Company's standards ant purchased at or near par Irom other financial institutions- Such loans generally have higher average interest rates than loans that could oe prig naffed today The Da'ance ol the mortgage loan port - .'oho ras peen origUldied by :he Company under strict urcerwriung standards- Commercial mortgage loans on properties such as offices, hotels and shopping centers generally represent a higher level of risk than do me+!gage loans secured Dy mu:blamily residences- This g•ea:er risk is due to several 'a—ors.:ncluding the larger sae of such loans and the more immediate effects of general economic conditions on these commercial property types However, due to the seasoned nat_re of the Company's .mortgage 'can pc:;fo.io, its emphas-s on mu!Idami.y loans and its strict underwriting stancards. the Company believes tl:at i; has prudently managed the risk attributable to its mortgage loan portfolio while maintaining attractive yields Partnership investmen=s totaled $i-65 billion at Seplember 30, 1998. constituting rnvestmen.s in approximately 661 separate partnerships with an aver- age size of approximately $2.5 million This portfolio includes. 6: $867 7 mi I c" of partnerships r-anaged by irt:ependenl rr.or:ey :Lan2ger5 Ina; invest in a Dread Selection of equity and Irxed-income securities, cur- rently including approximately 4.700 separate issuers. {111 S640.7 mdl,on of parinersh-ps [hat make tax-aevan. Caged inves:-nenis is affordable ho•.mir-g pioperl es, ur. re, by involving au7r0ximdlely 540 mul.ifamily pro)e.S5 in 41 states, and Iw) S136 7 mi.lroa of partnerships that invest in mortgage loans and income producing real estate The risks generally associa'ed wqh partnerships i"c!ude t"ose rel,te, to !near t.^Cerlying inYestmerY.s (:.e. equity secur Les, debt secur.l-es and real estate;. plus a level of illiquidity. 'which is miligaled. to some extent, a) for the affordable housing partnershrps, by the marketability of :he tax credits they generate, and b) in the case of many of the other pa•tnk!:ships. L•ytr:e e.:s- tenCe of contractual terivinaLcn provisions. Asset -Liability Matching is utilized by the Company to minimize the risks cf interest rate 11ucluations and dis- rntcrmediation- Tne Company believes *,hat its fixed-rate list i:i:ies Shc::ld be Lacked by a :;crtfolio p•inclpolly composed of fixed-rate investments :hat generate pre- dictable rates of return- The Company does not have a specific large. rate of return. Instead. its rates of return vary over rime depe:"c•ng on the Curren; .ntere%' rate environment, the slope o.' .he yielc curve. :he sp'ead at -26— which fixed -ante investments are priced oven the yield curve, and general economic conditions- Its portfolio strategy is constructed with a view to achieve adequate risk -adjusted returns consistent with its investment objectives of effective asset -liability matching, liquidly a.nd safety. The Company's fixed-rate products ircorpe- rate surrender charges, two•tieted interest rate 51ruc. lures or other restrictions in order to encourage persistency- Approximately 86% of the Company's fared annuity and GIC reserves had surre ides penalties or other restrictions at September 30. 1998. As part of its asset-Iiabdity matching discipline, the Company conducts detailed comp;.le: S-mulationS ;hat model its fixed-rate assets and liabiliues under Com- monly used streSS-test interest rate scenarios. With :he results of these computer simulations. the Company can measure the aO;ent:al gain or loss :" fair vai,e of .ts interest -rate sensitive instruments and seek to protect its economic value and achieve a predictable spread between what it earns on its invested assets and what it pays on its liabilities by designing its .'axed -rate products and conducting its investment operations to closely match the duration of the fixed-rate assets to that of its fixed-ra,e liabilities. The Company's fixed-rate assets include. cash and stictt-terry. in-wrrews; bcr,ds• notes and redeemable preferred stocks. mortgage loans, and investments in limited partnerships that invest primaady !n fixed-rate securities and are accounted for by using Me cost method. At September 30.:998. these assets had an aggregate fair value of $24-36 billion with a duration o: 3.7. The Company's hoed -rate liabilities include- fixed annuities. GSC,s, t•ust deposits; lostg-,e,m notes and ceben;ures; and preferred securincs of sub- sidiary grantor trusts. At September 30, 1998. ,hese liabilities had an aggregate fair vaa:e (delermtned by discounting future cO:,t,aCtual cash t-Cws by related market rates of interest) of $23.10 bil.ion w th a cura- lion of 3-4. The Company's potential exposure cue ro a 10% increase in prevailing interest rates from Their September 30. 1998 levels is a loss of $50-8 mil c, .n fair value of its fixed-rate assets that is not offset by a decrease in the fan value of its fixed-rate liabilities. Because the Company actively manages its assess a,1d lialol.taes and has strategies in pace to min.'n,ze its exposure to loss as interest rate changes occur. i; expects that actual losses would be less ,ban the esti- mated potential loss. Duration is a common option-adlt.s;ed measure Io• the price sensitivity of a fsxgab-malunly pert(otso to changes in interest rates. It measures the approximate percentabe change in t :e market value of a bortivlio it viterest rates change by i00 basis points. iecognuint the 6rianges. in cash flows resulting :rilm embedded options such as policy surrenders• investment prepay merits and bond calls. It also incorporates the assum? lion ;hat the Company will cOinlin•ue to utilize its existinj strategies of priririg is :i.ed annuity and GIC products. allocating its dvddable Cash flow amongst its varioa! investment portfolio sectors and maintaining sufficierr levels of liquidi(y. Because the calculation of durat.c7. invo ves estimator and incorporates assumptions: f potential changes rn portfoho value indicated by tta portlofio's du'a:ion will likely be different from the act.:al changes experienced under given :merest rat scenarios. and the differences may be ma;er,al. As a component of its asset and liability manag-- meet strategy. the Company utilizes interest rate swat: agreements ,"Swap Agreements") to match assets mye. closely ;o liabilities- Swap Agreements are agreemera� to exchange with a Counterparly interest rate payments[ of differing character (for example. variabie-rate paym{ ments exchange; for 'axed -rate payments) based on al uncerlyrng prin;ipal balance (notional principail hedge against rnterest rate changes The Compary' .yp'Cally ut-lizes Swap Agreements ;o creZlC a hedge thoj i!Ve.tivety convertS ftoat,ng rate assets and liabiltttes� into :axed -rate instruments. At September 30, 199&; the Company had 38 outslanding Swap Agreement; with an aggregate notional principal amoun: of $:.8.; bi;hcn. These agreerrems mature in va ous year througs 2010 ano have an average remaining mattir,T� of 43 months Try Company a so Seeks to provide IiC edify "Vr time to time by using reverse repurchase agreememl (`Reverse Repos') and by investing in MBSs I, also' SUKs to e,'ihance its spread mCOme by using Reveist Repcs and Tota. Re:u•:: Agreemennts- Reverse Rem involve a sale of securities and an agreement to reps chase the same Securities at a later date at an agree upon ;;rce and are genera:ly over -collateralized. Tot Ret.,rr Agreements ef'ective,y exchange a lixed rate 7 m;ere5t On the np;ional amecnt for the coupon in ome plus or minus the increase or decrease in the :air var:+ of Saeci:ied non -investment -grade bor:ds NBSS a.'! g-2ner2ily invest me::, -grade securities collateralized tr large pools of mortgage loans. h1BSs generally pay pr.n cipar and interest monthly. The amount of principal and M!eres; payme-,s may fluctui:;e as a res_R of preps` :rents 0; the under.ying meagage loans - ttiere are rv4ks associated wi,h some of the tKIN niques ;he Company uses to provide liquidity enhaw.. its spreac income and :Hatch its assets a-e liab. d,ei # .::4A -27— The primary risks associated with Total Return Agreements are the credit risk do the underlying nan- investment-grade bonds, the risk of potential loss due to bend marf.et Hvctuations and the risk asVXiateC with coumerparty nonperformance. The primary r,sk assoCt- aced with the Company's Reverse Repos ano Swap Agrgernenis i5 counterparty risk_ The Coilp3ny t elreves. howe,jer, that the Coonterpartres to its T6tal Return Agreements. Reverie Repay and Swap Agreernenls are financially re5ponstble and that the caun(erparly risk aSscr;tdted with 1))Lse transactions is mmirnal It is the Company's polity that these agreements are entered into with cos:nterparties who have a debt rating of AiA2 cr better frcrn gotn 5&P and Moody's- The Company conttnually monilots ;Ss credit exposure with respect to these agreements to addition to counrerparty risk, Swap Agreements also have interest rate risk. However, fhe Company's Swap Agreements lypicasly hedge varr- abie-rate assets or )*Drlilres, and mteiest rate fluctua lions that adversely affect the net caSA received Dr pass under the terms of a $wap Agreement would be oltsel by Increased interest income earned on the variaDle-rdte assets or reduced interest expense paid on the variable - rate liabrlrties_ The primary risk associated with M6Ss is Oaf a :hanging inleies: rate e"v,ron7.en:::siZnt L30e prepayment of the underlying otprganon3 at s-peeds slower or taster than anticipated at the time of their pur- chase. As part of its decision to purchase an f++65, the Company assesses the risk of prepayment by analyzing t':e sE•turily's protected pe0crmance aye. an array o' ra:erest-rate scenarios- Once an MBS %S purchased. the: Company monitors its actual prepaymem experience monthly to reassmss the relative a:rractrveness of the security airh'i 0e invent to maximize total return. Invessoo Assets Ivaltratian iy roulinely conducted t)y the Company. Management identifies monthly (nose roves.- rnents that repune adddtonaf monavmg anti carefi:i]y roiewS the carrying values of such ,nrest-nents at least quarterly to Cexrmine whether specific mvesirr.ems should be placed on a nonaccivaf bass anc to deter- mine dectrnes in value that may De other than lempo- ray In making these reviews for bonai, management Dr-mcipahy ccasidefs (he adequacy of any cC4ate•al. co'mpkance witn contractual covenams, :he borrower's recent tmancial Qeriormvice, news repots anc mher externally generated Warmation ixncerning the Credi- W". Vfairs In the case a( publicly traded bands. man• a$errent also considers market 'va)ue quc'waons, d ava,loole- For mortgage Icons, ma0ag-1rnent gerieraiiy considers intormatsos Concerning the mcrtgargW prop- erty and, among other things. factam impacting the cur- rent and e), ecled payment status of the loam and. if avail -We, the current fair value of the underlying cotlaleral t=or investments in partnerships. management rev.ew5 Ine finan�tal swenieols and ether mlormazion provided by the genesal partner5. The careyrag •calves of investments that are deter- mined to have deZ(Ines In value that are other than rem- pnrary are reduced to net tval3ZbiC value and, in tt:e case of bonds, no tuor:cr accruals of interest are r:taJe- The provisions for impairment on mortgage ioans ate Used on iOSIeS e■pecteo by management to be rearmed on transfers of mongage loans to real estate, on the ors- pcsit:on and set'lerrent 4f mCrtga6= '10als and an mort- gage 1pdtts thd: rrranagement ttelieves may not tie ccrlecfible ir. full. Accrual of interest is suspenrJed when principal and interest payments on mortgage ioans are mare than. 90 daps past due Oefauitea Investments, ccmprising 2ss :rvestmenis that are in de'a.:lt a5 to the payment cit principal U interest, totaled $55.0 milrron at September 30. 1996. inciud- tng $19.7 miihon et ponds and notes and $35-3 million M mortgage 'ilars- A' September 30. 1998, defaulted investments consucted C 2% of _Ctal invested assels- A' 5eptemper 30. 1997. defaulted investments lo*.aled 5.18-0 million, including $15-1 misrson of borsds and nobs and $22 9 mirlion of mortgage roans, aid consti- tutes 0 2% of wal inrested asw.s Sources Of Liquidity are readily available to the Carhpa..y in ,he tCrm of ITC Cer•ipany's ectstrrg portfolio dt cash and sn.oit•ieirn imesurents, Rt--erse RCtto capacity DA invested a5se's an3. ;I e� ueC, prcceeds 'ram ,riveireo Gsset sales- At Srptecrber 30, L95r$, appfomma,e(y 51 �3 7d biil.csi 71 he Company's Bond Po ;folio lead an aggregate unrealized gain of y717.0 million, veh,)e appn1xima-ely $3-C)6 t lion of the Bond Portfolio hail an aggregate unrea?ized 'ors o' 3-L 7_8 m,;i.os;. in add.. Lion, trie CcTpanv's trivesIrren( 7joit1%;l 9 currently oio. vid,!S aaproxima-zes'y 5209.4 mil),on cl n:on,hry cash Pow from scheccled principal and interest payments. fort ter, $3 23 U ton renjajn5 araiiable to the Company to sjsse sec..ritses usidel a she]' tegislraison s.aterrew `iI-1 r- July. ±997- tlistcricady. cj-;h flows from cpera- t,Cris ano ira,•st the sale of .he Ccxv.oany's annuity and G(C products have oecn more than Su"ickent in arrtouril to saiis'y the Lanpany's liquidity needs. Management r5 aware t^a' preva.Lrg rna,Ae,. I-W'- est -a-us may sht(t sign r.cantiy and has strategies in pla--e to managr- sw.he: an inC:@25e or decrease in I)mvailing rates. !n a rismg interest rate environment, She Corttpany's average cost of funds would increase over time as it prices its new and (enew(n$ annutties ano GICs IV maintain a genesally eoMpetitsie market rate - Management would seek to plate new tunds ,n invest' menu that were matcned in duration to. and Cigher yielding than, the Iiabiidies assumed- The Company beiieves that liquid,!y to fund withdrawals would tit' avadabte through incoming cash flow, the safe of s',r6rt- (e5m Or floating-rate ,nstrurntnts or Reverse Repos on Me Company's substantial M.85 segment of ti•.e Bona Poritolro, thereby availing the sale of tiuea-rate assess in an unfavwable bond rr.arket- In a deciiming interest ra;e environment, the Company's cost of funds would decrease over lime. reflecting Bawer interest Crediting raves on its lined annwlies and GICS. Shouid increased housoale tp required for withdrawals, Me Company believes that a significant portion of its investments could be sold wrlhoul adverse conseavences in hgfst of tie general sireng;:rening ,rat would be expeC:CJ rn Ire bc%d ma'ke!- 0n a parent company sta- d-atone bans, SunAmwica Inc 'the'Paient'1, at September 30. 1998. pad invested assets with a fair value at 52 53 tnIlion and outstanvmg senior indet;tednes5 c,! $1.22 yrttrsn. cc:rrprrsrng all of the Company's ou'staodmg sego: indebtedness. ddduronaoy, as of September _0, 199a, the Parent had three GiC5 purchased Cy local govern' merit entities, wm[!i aggregated $213- 7 mAlmn. During November 199& ape October 1995, iespr,-r- tmNy, the Pa'en' pur^.d5ed the co:nrr,;., securr;res S, nAmerica Capital Trust lit ar.0 Sur.Art enta Capital Trust it (Collectively, the `Grantor Trusts") and is5�;ed an aggregate of $511.9 m((hon of jinn .3( st nardina �., cebe)tlites {the "Dctienw.,K'1 to the Grantor Trusts in Cc..rection wily the a::b.ic 15s.ance of (^e xe'erreY securities of the Gia:ltor ';rusts (see Nuttt lu O( NCI-6 to Censolsdated Financial Slaterriem5l. The Parent's annual debt servxe (principal ana interest paymen(sl with reSpec! (a its Senior (mleb'CC ne5s, GiC obl,gat,ons and Detenl'ures t+,;als $292.0 miflwn for hscat 1999, $563.5 million fc• fiscal 200O3 $1313Cl million for fiscal2001. $2974 mohrrt for Ns - cal 2DOZ. $ t 12-3 million for fiscal 2C*3 and $4.1 a bil- lion. in the aggregate, thereafter. Q.1 IDecembee 6. 1998, Me Company is contratt..aly sche, u.eo to rece ve $431-3 mullion u➢c, Lelwary of 10.1 rrwlon sha-es rl the Company's Common Stock in acccrdante w'rtn the terms of the Company's PCRCS Units - The Parent received orwdends from its regutatcR life insurance Subsidiaries tD.ahng $143.0 million •n September 1998. $1IS ) rnilho7 .n Apr:l 1997 and $94 3 million in March 1996 The Parent also received dividends of $12 9 million In f,sca( 1998. S 17 5 million In Iistat 1997 and $16 0 million in hscai 1996 from its 011ier direC,iq owned Subsrd:aries- The ability 2t the Company's hie insurance subsicraries to pay divicends is limited by Salute- for the remainder of taiendar year 1998. no amaunts are avarfgbte for dividends to the Parent from sty regOated cite insurance subsidraries- Ttie Company has so:a- ihrc,.gh Inreo separate ca ns�rance transacrc^s I!) t^t general agL-r]cy c•vis,on cf SunAmerr_a Life Insurance Company to Saves L(!e IrrSurance Curr;par%v tm 1989) which subsequently lr3ns!erred the business to Winlerthu•r Life Re Insurance Company; (ul the credit fife tusiness of tocc L-fe to Vista Oct Insurance Cc'hpany tin 1996), and t.r•i :ire frioll2pMy-based business of CalA.merica Life Insurance Corrrpany to protective Lsfe insurance Company (in f996)- With 1'sWett to these cosnsuranLe transactions. SunArnenca t'r uties could become liaD)L• fry' in -force a ra !s ceced :;t $891 > M01-oa, 1962 2 t:pion and $t 4 mihoc respectively, at Sep'-ernber 30, 1998. if the coinsure!s were to become unable 19 meet Inn`. ooirgatrons as•,uracd under 'he respective coinsurance agreements. Nowevet, the Compa-y considers these tD":ingenci�-s to be ,e7iole beca,;5e the e4.ns,re•s a'e 5(rGng Creort-wl(Oy irs_iM ons arid. in !re CaV of the 1989 transi;oun. assets sub5,lanti0Y equal to Itie M(- icyholeter reserves assumed by ;he coinsurer are held i7 trust ;o ad'.urC the crligat,cr,s of the coms_re:_ At Swemaer 3.3. 1998. rela:ec po•r.yhc(der rtSer'res cimto by the coinsl-•refs were $59-3 rn,l-ion. $10.9 million and $1^.1-3 mrBion• revectrvelX- The Company has transferred to third -party rrcesiors certain of d5 interests in vanCus partaerships that malc ta=-a�vanta,ed affudat:le ,lousing-nvest- Men's. AS bin' cf tt,eSC .!anWCj.C"5. :he Paten: has :!greed to advx.re ironies in S1a7?rt the opeia"Ons of the underlywl lsoussag proj^Lts. rf required. and has Euj'an.eet 't at the (ra(isftrrr•d par,nershsps will pro- -eide. M, Of the ;:ansler Ca;c a-d under t::cn cu'ieni tali laws. a spec fsd level of asixia,ec lax cr-,,hts aiJ sieductwis w the 1:1-ir7-early irrves',ocs Gasec or an evatualmn of the untiersy,ng haus,ng prceCs, manage' men( does not aaticipate ai)v maternal Cash parrnen's wr-h respect 'o thL guava-leesir' the ord,:'dry rouse J! :r_s,r.ess- Ili= Company has agreed to rnake Capgdi Conv:bU(,a:rs, ii rfowred_ aggregating apG(oKtmately Site-2 million. to M tin ted paitnrrsh)ps over the ntx! 5 years in e,r.tiange for owner5h p interests in such part.-er$MPS r -29— YEAR 2000 The Company relies significantly on computer systems and applications in its daily operations- Many of these systems are not presently year 2000 compliant. whicn means that because they have historically used only two digits to identify the year in a date, they will fail to distinguish dates in the "2000s- from dates in the "1900s" The Company's business, financial condi- tion and results of operations could be materially and adversely affected by the failure of the Company's sys- tems and applications (and those operated by ;hard parties interfacing with the Company's systems and applications) to properly operate or manage these dates The Company has a coordinated plan to repair or replace these noncompliant systems and to obtain sim- ilar assurances from third parties interfacing with the Company's systems and applications- In fisca! 1997. the Company recorded a $15.0 mifhcn provision for es,imated programming costs to make necessary repairs of certain specific noncompliant systems- Management is making expenditures which i! expects to ultimately total $15.0 min on to replace Certain other specific non- corr.p!ian; systems. which expend.tures will be cxp,lai. ,zed as software costs any amcr!i;ed over future periods. Both phases of the project are currently pro- ceeding in accordance with The plan and management expects them to be substantially completed by .he end of cwenaar 1998. TesG'g cf both the reod-ed and replacement systems will be conducted during calendar 1999_ In addr•-ion. the Company has distributed a year 2000 questionnaire to certain of its significant suppli- ers, eistribu'ors. financial institutions, lessors and oth- ers with which it does b::srness to evaluate their year 2000 compliance plans and state of read,ness anc to determine the extent !o which the Company's systems antl applications may be aftec!ed by the failure of o,h- ers to remediale their own yeer 2000 issues To date. t•.owever, t^e Company has received only prerm.nary feedback Ircm st.C` part es and ':as net independenVy cc-ifirmec any in.`ormation received from other panies with respect ;o the year 2000 issues- Therefore, there can be no assurance tnat sucn other parties will com- plete their year 2000 conversions in a timely fashion or will no. suffer a year 2CC0 os less Ois:upnon tnat may adversely a'feet 'he Cornpaoy's finanaa, condition and re5.rlts of operations. (at tlgmands. axpt Per-share amcu,Asl _.30 _. FIVE-YEAR SUMMARY Years cn_e4 Stpi"bcl .0. l"I 1997 IS16 1995 1994 Sales' $ 8.540.682 S 5.329.227 S 3.165.210 S 3.422 934 S 2.370.646 Results of aperatfons Net investment Income $ 941.646 S 679.377 S 192.M $ 367.555 S 294?54 Net realized investment losses (41.12t1 0.203) (30.3141 (33.012) (21.124 Fee income 456.827 317.70 248 411 191.604 111.095 General and administrative expenses (310.273) (265.732) (2i0.6501 (165,434) (135.161 A.,wima.ton eI deferred acowsr;,an costs (261.161) 1165,089) (108.)761 !86.10f1 (59.253 Pretax Income 701.312 537 CA 392.027 219.6'"k 240.031 income tax apense 091.000) 08.000; f 131,Eiow 185.4x-} (74.7DJ Income belois cumlilalire ettict of Change in _ accouatulg for income taxes 51012 379.050 2)4.427 154.206 165.301 Cunl,lative effect of c:lange in etcouiting w., income taxes — — — -- t33.500 met income S 518.312 S 379.050 S 234.427 S 194.2&6 $ 131SO! 619q earnings per share- Woma betas cum,4148 affect at change in accounting for income taxes S 761 S ?-0! S 144 $ 104 $ a ; umc',alive ellect of charge in araarlini !Cr Ir{one lazes — — — — 11et tncome S 2 61 S 2 01 S i-44 $ 1 04 1 C :c Diluted tat ings per share: Income before cumulauve effect of change to accounting for income uaes $ 2-34 $ 1 31 1 132 S C. S6 S 0-30 cvm0atwe effect a! change ;n actdi;n!n:g to: mcome taxes — — — Net Income S 2.34 — S 191 S 132 S — 0 % S 0 t:2 Cash dividends per share paid 111 commw shmsholders_ N1rtransle(able Class B Stook $ 04050 S C 240 S 0-:80 S 0 i204 S 0 09001 Cameron Stock S 04509 S 6.2c65 $ 0 2NJ0 S 0.1333 S 0-D299 'Pre .-urs and mural fun; sales, exclu.r.f sales or :raer market SaDur:.s ... r/t,•.-:.:.M:'.Y�Y�e/JM1�1.l"T��'S.��r=K�'�:.Y1�1�-�� -_.. ..� ., -- -_ -31- FIVE-YEAR SUMMARY (continued) f'a thc.sancsl 19" 1591 I°56 At Sep'ember 3e. 1 x: 193t Financial position Investm-its $26.065 407 $24.408.118 $16.199.784 S!0.BN.959 S 9.280.390 Variable annu.ty asses meld in separate accounts 11.405 434 9.514 675 6.380,458 5.163.DD6 4,513.093 Deferred acpuisitO costs 995.503 1.118.562 M.300 526.415 581.874 Other assets 733.053 595.45! 364.219 245.751 280.868 total assets $39,200.407 $35.635.1186 _ $23.126.821 SL5.644.167 S:4.556.225 Reserves for fixed annw'y contraas $12.970.549 $14.445.:26 S 9.654.674 S :.662.250 S 4519.623 Reserves tar guaranteed investment contram 8.380,11" 5.553.19? 4.i69.028 3.607.192 2.783.522 Variable annr rty habrlities related to separate accw:nts 11.405.434 9.5tkV5 6.380458 5.263.005 4.513.093 Trust deposits 439.918 427.433 43G.048 426.595 442.320 Other payabtes and accrued liabilities 905.202 1.097.418 489.672 747.733 860.763 Long-term routes and debemures 1.216.413 1,136.072 573.335 524.835 472.835 Oshersemms,ndtbtedness - - - - 21.662 Deferred income taus 394.910 333.764 125.417 1:6 S47 74.319 Preferred securities ci arantu trusts 495.000 495 K.0 237 531 52.631 - 5tareh.lders' equity 2.99I.057 1 2.584.106 1.660.558 3.213.078 961.088 T4t3uia4rnties and sAuedntdui equity S39.290.401 I SWQ6.8% $23 726.821 $16.W .,67 513 556.225 -32— CONSOLIDATED INCOME STATEMENT p, mauunds. Wee: Dv.Sea!e 4Tcu'sl Mewl er✓_rd se,:hrhn P. t996 !�91 1555 Investment income T S 2.150.463 i I.195.2?b S11.254.2?8 InZefest expense on: Fixed annuity contracts 021.450} (644e26) 010.269 Guaranteedinvestnenttontrac!s (426.496} (3;4.144) !257.07J Trust depouls (9,4001 5.12<1 (9968 Stmoriedebtedaess (120153? f108.219; (A9.033 Total inWest expense y (1.277.639) (1.014 575) {141291 Dwioends paid on preitued seeuuues of praetor trusts (41,118) 141,alc (20,235 Not investment income z z d4I.646 :19-311 :92i:b Net realized Investment losses (41,121) i29 203) [33.214 fee irxpmr — -- Vai,aVe ann:nri fees 264,414 140N I64.661 net 103'red c mm.ssitns 114.461 64.911 49.224 5uuender chalits 54.361 35.2.1 22 C35 Asset manageneni Tres 29.592 25J64 15 C3 MY) se"mg (ens 23.398 24.254 23.846 Dust tees I&M 11.912 1p_6S4 Csr•er fees 14,461 8.4D+ —291 Total fee income ~` 456•82h 317.103 249.411 General and administrative expenses (310.213) (265.13E%. (2 i 0.65G Amortization of deterred ac4mition casts — -- 1241.1611 055.069) 1103.126 Pretax income 701.312 531.050 392.027 mcome!axexp ,se 091.000) (1)8.0'rt (111.603 Kit income S 516.312 i 319.053 $ V4.421 Net income per share: Basic S 7.61 S 2.01 S 1.44 Di,L.lt4 S 2 34 S 1 2i S 1.77 Stt acccmaaw-i arAts -33-- CONSOLIDATED BALANCE SHEET t5a'T�uunasY 1938 Sesre^ +r 30. 6s? Assets Inyestmerts- Cash and sho -term urvestments $ 1,796.132 S 59334S Bonds, r-o.es and redeemable p!elerred SlVkS a'+21.3:.c 1tr sale, al t3 r v31r.0 (am:r;rred cast 1998. $18.401.655. 1997. S18.124.837) 19.800.847 18.523.6t,5 Morgagc loans 3.412 u9 3139.11M Commas stocks avarlaple for sale, at tau vague (case- ! 938. S3.043; 1991. 532.821) 12,808 96,541 E«ttj-r„e'.bodpartnessbips TT9,098 561.336 Cost-metnrd parnersnips 865.953 725.457 Real estate 53.605 8L.569 Other invested assets 274.515 296.967 _ Total rme5:rr.eMS 26,065,07 24.439 118 yanable annuity assets held m sryarate accounts 11,405!34 Y.514.675 A:crued rrtcestmeat intone 297.313 296.637 Deteired acquisition costs 996.503 1.118.582 Daher assets 435.750 2WV4 Total assets $39.200.407 535636,886 Liabilities and shareholders' equity Reserves. payab'es and accrueC haai:im. P.eser:es for l:xe] annu ly contram Reserves tpr guararteed mves.mex, tartratls Trust deposits Payable t3 tivlws t-3t D%1,hases 7l sKvA%vs Ircc.tie iz.es curen91 paya;;e Other liabilities Total reserves. paya5les and accrued liabilities Yanatle arwi'y liat:ldies rt!a1e7 to separate accadrts Lang -term n91es and debentures Dele:red mcne taxes Umparycal-ea'ed mardalvily receemable pfelerred se",ries 0 su'bsAvy gr3,tcr Lusts Am sale assets are linier Scbcrd,ra'ed ceber,tures ef'he Company Share4olce:s' equip. Pre'er:ed Stock Nontransfera5le Class B Stock Cur.rnan Stock Additional pa;d-m UP1131 Retained earnings Net unrcaLred Fairs or, debt and equity seunt:es ava,Wc for sale Total sharebo:tiers e;uity Total IubiGties and shareholders' equity Sm acm-C.-„nt roses $12.970.549 $i4.445.12l 8.380.844 5.553 792 439.918 427.433 91.463 26oA;t 2.684 2.C•h B11.055 S28.9;C 2!.523 269 _ 22.696.513 405.434 ; 514.6'S 215.483 !.i36.017 394110 383,16 495.000 1 495.000 248.000 248MG 16.273 16.273 179.526 179.015 755.776 73De01 1.596.220 1,18O 446 596.212 2 .510 ?.992.067 2.58:.:06 539.200.401 1 $35.636.E26 -34 -- CONSOLIDATED STATEMENT OF CASH FLOWS !ears rCW SeYrm6r 3d. ' tin thman;9) im issi 19% Cash dons ltom operating activities- Tier incrme $ 516.312 S 379;0:0 S 274.427 Adiustmen's to reconcile !let income to rye; cash provi0e9 9y cpt. jimi aclndits K htetest credited to- r. fued annu:ry ciniracts 711,49D 544.425 4 e0.259 ' Guaranteed mvesl rent ccriracts 426.496 314-144 252.027 Trl;t deposits 9.400 9-726 9.968 1 Net reakicd %nves;rtnl hues 41.721 29.203 30.314 Acctelrpr of nel discourls cn inveslmen[s Willi (38.6841 (78.610) s _ Prls• mn 1x delurr4 ,ncorre lazes 22.47) 128.001 (3.457) Cnange ra Accr.,ed Inveslnerl nr.'rre (sell :59.214i (10.10) Dete:ud ac�ws-twn costs (48.1871 :79.5iAj (50.4s5) t Other assess (47.9941 02 8461 1:9,958) , )r me tms curreaap paya5lr 13,567) i34.424) :9.052 01her habil°,t.ts 115.653) 151-598 33.275 t 01iler, net y� y � _ 1.241 _ (1,652;_ 1:]21 F Net cash provided by operabrlg activities 1.561.150 0;66 761, 939.186 Cash Rows from investing activities- i- , Pcch.ase ol- t Bands. rotes and redeemable l:eiz,ree s:acks (21.020.9361 M1 06.3:34 ;! 1.476.8271 Mongage'oars r,).UU59) 1990.4G8' 1320•l42) l ' Pa7aersh.ps (1312.571) ;:,052,133! (1i2,749) Otter in-,ntmerts, excliciig swt-term xvesimer:s 139e.387) 1,259 538) (112.1111 fie: asseisoi ecuuueo basinesse; (44.194) 113.239 62.i90 Sales of Mends. vales )nJ :edtemaile pierered stxs 16.97e.965 13.105•4e) mongaitHaas - 333.1s3 -- ! Parrushs 786.919 67S.1:9 318.303 Clher .rvestdenls, ezcicd.rg slcrt-lemi iacestmen:s 73.676 92.626 63.556 Re4enpt+a7s an, malur(es Ct r ftnds. wits and rrpeem&e p,-itireil s;xks 3.704.5D3 4,425.146 2.M.448 { Mvigage loans )7+406 428.536 19:.564 Par.nships 173.119 1S AOi 0!nd rnveslrrzats. ac'.cd:ng saCr.-:e:r um�estu Cis O!hei -- --- - ---- 373.t7e 180.?66 - --183.019 70.519 Net cash used by investing activities 0.035.379) (2 C8:,4,31 11.383.IY1 Ste &ma- arynQ nC;ts CONSOLIDATED STATEMENT OF CASH FLOWS (continued) (in Ift Sirids) Years rn:ed SCCre-=er 30 1931 1997 1956 Cash !loin tram twocins activities: Payments of cash dividends to shareholders S (100.538) Psemwm rtctiflsen. hsed annuity contacts i,797.798 Guararteed investment contracts 4.007.478 Net nchanges from'.he fixed accounts of variable anunty co:e(acts 11.365.108) )iece.pts of trust depcsils 817,698 Withdrawal palnents on. Ftr_^d annuity contracts 12.158.737) Guaranteed imstment contracts {1,607.875) 11usl deposes 1874.615) Claims and annaity payments on fixed aniury onr:acls (474.8:1) Net proceeds from issuances of long-term nixes and Wen!utes 98.544 Net proceeds from issuances of preferred securities of subsidiary grantor trdsts — 7 W. ent fcr redemption of preferred securites of a suhsidiary grarttr ;rusl Net ;ioc°EdS from rSSL3,nCt of Pstlerrtt Stock — Payments fcr redemptions of Preferred Stxk Net proceeds from issuance of Common Stock — C:her, ne: 78.11E Net cash provided by flrrancing activities 278.012 Nel increase (decrease) in cash and short-term iorestmenis 802.783 Cash and shorl-term investments at beguuring of period 993.349 Cash and short-term investments at and a1 period S 1.79b.132 $ 167.8:9i $ :61.721: 1490.556 993.316 2.076.941 1.019.21; (660-332) [260.635i 787.599 45:23: 0454,7181 (786.724) f1.010,1271 i70E,143) M5.937; MUM {357.180 1232.351i 559.332 47.478 299.586 179.476 (52.6311 - - 24C.547 113E 5491 — 517,268 (34.213) i310.5631 1.3015 1'..327 463.9e6 (325.987) 529.363 355.350 S 993:s49 S :29.363 Suppiementar cash flow information Initresl part on indoletress S 155,511 S 130.451 S 66.033 Income :axes paid. re, of refunds received S 172441 S 114.423 $ 102-005 $M accom5arryn j nodes r — 35-- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: NATURE OF OPERATIONS SunAmerica Inc- 0he "Company") conducts its business through five segments- annuity operations, asset management. retirement trust services. baker-Cea,er operations and premium financing. Annuity operations, which include the sale and aoininistration of fixed and variable annuities and guaranteed investment contracts, are conducted through ;he Company's five We ins.:rance subsidiaries- SunAmerica Life Insu.ance Company. Anchor National Life InSurance Company; CalAmerica Life Insurance Company (" CalAmerica"1: First SunAmerica Life Insurance Company: and SunAmerica National Life Insurance Company. Asset management. which includes the sale and management of mut,ai funds, is conducted by SunAmerica Asset Ma:iagement Corp. Retirement trust services are provided oy Resources Trust Company and include custodial and administrative services for sett-Cirecled retirerrent plans. Broker -dealer operations include the sale of Secu- n, ers and financial services products, and are con ducted by the Company's six broker -dealer subsitli- arres: Royal Alliance ASSCCra:eS. lnc S.,^Af-CfiCa Securities. Inc.. Advantage Capital Corporation. FSC SeCuriues Corporation: Sertra Sec::nlies Corperation. and Spelman & Co.. Inc- Premium financiag is provided by Imperial Premium F.na-ce. Inc- and .nv0:ves ,ne origination• sale and servicing of short-term premium finance loans - The operations of the Ccmpary are influenced by many factors, mclud:rg genera) eccnomi: conditi0 ts. monetary and fiscal policies of the !ederal government, and policies of state and Othe• regu'alory aulhori;ie5- The level of sales of the Company's financial products is influenced by many factors. icclujing ge^eral ^ 2rke; rates Of interest, strength, weakness and volattioy a' egi.rty markets, and terms and candivans of Ccmpebng financial products. The Company is exposed fo the typ- ical risks normal',y associated wi!n a portfolio Of t-xed- income securities, namely inleresl rate, option. Iiquidily anq credit r.sk The Company Can;•o!s :1s exposure to these risks by, among ocher things. closely monitoring and matching the duration 01 is assets and Iiaoi'.itres. monitoring and limiting prepayment and extension risk .n its por•,fo!io, rradita'r,rng a loge percentage of :is portfolio in highly liquid securities, and engaging in a discip'.ined process or -,:cderwriting, reviewing and mor- itoring credit risk. The Company aiso is exposed :o riar- kel risk• as market vola;i:ity may result in redLced fee income in the case of assets managed in m,;;ual tunas and herd in separate ecCc_nis. -- = i SukY?5C%i`�r"•: �:vr ��-�%i�w:, ... -- .- a o r.. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis at Presentation. The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles and ir,civae t`.e accounts of the Company and all of its wholly owned subsidiaries. Alt significant inter- company accounts aid transactions are e'urmafeC in consohcJ2!ion The preparation of financial statemects in confor- mity with generally accepted accounting principles requires ;he :se o1 e5t.-wes and a55umd,ions that affect the amounts repOrteo in the linanCiM statements and the aCComoanying notes ACtuai reSuCS could Giffer from those estimates - On August 29. 1997. the Company oa•d a M.-E-a-fo:- two s:oc'K split: on August 30, 1996. the Company paid a two-for-cne stock spld; and on November 10, 1997, the Company paid a three-for.two stock split (collec- tive:v :he "STOCK Spits")- The Stock Splits were effec;eq in the form of stock dividends on the Con;-.any's Co."tmor* Stock and Nawrartsferacle Class B Stock The par value of the shares paid in conneclion w'th ;ne Stock Splits was charged to Additional Paid -In Capital in the bah;nce s`eet Per -Share amounts. aver• age shares ou!slandr--g. stock option plan data and related paces have been restated, for ail periods pre. sen!ed to refiecl fhe Stock Spf:15- Investments- Cash and short-term inves!menfs pri. rlari;y include cash. Commercial paper, money market irives:ren!s. repurc`.ase agreements and short-term ban'K participations_ All such investments are carriea at Cost p'us acc:ied interest, which approximates fair value. have maturities of three months or less and are considered cash equivalents Ior purposes of reporting rash Nowy- Bonds. nu;es and redeemable preferred stocks available for sale and common stocks are carved at aggregate fair value and changes in unrealized gains or tosses, net of tax, are cred-ted or cnarged directly to shareholders' equity- Bonds. notes and teoeemable pre. 'erred STOCKS are :educed to estin a',eo net reairtable value when nece5say fcr declines in value considered Ia be o;ner than temporary. Estimates of net reaiizabie vale are sub;ective and actual realization will be dependent upon Vu a events. Mon,gage loans are carved at amortized unpa1J oaiances, net of provisions for estimated losses Rea' estate is carried at the lower of cost Or [air value. •-37— Partnerships are accounted for by using the equily method it the Company exercises significant influence over their operating affairs; otmerwise. the cost method is used For partnerships that invest in tax -advantaged affordable housing unrts, interest is capitalized during construction. The Company invests in soar partne=Ships principally with the intent to syndicate them to th;rd. party investors once construction of the underlying pro- jects is completed- Investments in such partrerships are accounted for by using the equity method and sales of such partnerships are accounted for as sales of real estate- Because the Company provides certain operamng and yield guarantees to the buyers, the gain realized upon sale is delerstd, after recognition of syndication compensation• and amortized over a I5-year pertcd- Synd.Calion compensation, imputed interest and amcr- trzation of deferred gains are included in Investment Income in the income statement. The carrying value of partnerships that are determined by the general partner to have Ceclines in value that are otner than temporary are reduced to net realizable value - Realized gains and losses on the sale of invest- mems are recognized in cperations at Oe care of sale and are determined usrng the specific cost idennhca- tron methW_ Premiums and discounts cn investments are arnort.zed to :nves.'rtent income using'he interest method over the con'.raclual Ives of the investments - Prior to September 24. 1998. the Company entered into certain co..nbi,^ed structured -ore Ira-s- acteons which have been accounted for as separate notes and in accordance with the provisions of Consensus No. 96.12 of the Emerging Iss..es Task Force. At is November 1998 meeting, the task 'crce issued Consensus No- 98.15 which concludes that combined structured rote transavions entered -rto after September 24. 1998 shosld be acccu:ded for as a unit- If the Company had accounted for these notes as a unit, net income for 1998 would have been increased by $72.103.000 (or $0.33 per diluted share) to $588.415.000 (or $2.67 per diluted share) - Interest Rate Swap Agreements. The net differential to be paid or received on interest rate swap agreements ("Swap Agreements") entered into to reduce the impact o: er:anges it, mteres; rates is recognized over ;he Ir:es of the agreements• and such diflerenliaf is classified as Investment Income or Interest Expense in trte income statement. Inifia'ly. Swap Agreements are des.gr.a'ed as hedges and. theretore, are not marked to marktt- However. when a hedged asset/liability is sold or repaid before the r0a:ed Swap Agreement maWres, the Swap Agreement is marked to market and any gaindloss is classified with any gain/Joss realized on the 4rsposrtron of the hedged asseOtabdtty- Subsequently. the Swap Ageeemen' -s .marked io market and the resulting change in fd:r value is incfuded in Investment Income in the income statement- When a Swap Agreement that is destgnated as a nedge is teirmnale3 before n5 contrac- tual rnaturity, any resulting gain/loss is creddedfcharged to the carrying value of the assettlrabitily that it hedged and ;s treated as orerrtrtrmldiscount for the remaining We Ct lne assetlliabtlily. Total Return Corporate Bond Swap Agreements. Total return corporate bend Swap agreerreWs ("Total Return Agreements") have been entered into for investment purposes, and, accordingly, are marked 10 market with the relateu ga rv-css Class tied as Investment Income in the income statement DeferredAcquisition Costs. Porky acgws.t,cn costs are deferred and amortized. with interest. in relation to the incidence of estimated gross profits to be realized over the esl.matep lives o' the annuity co't.rays- Est�rrra:ed gross profits are composec of net interest income, net reah7ed investment gains and losses. variable annuity fees. sane -der urges and direct adm.nis:rauve ex;�e ,ses. Costs incurre9 'o sell mutual funds are also deferred and amortized over the estimated lives of the funds cbtamed- Oefer:�c acq:;isi'ion costs ccns,sl of Cor^mibbions and ot-er costs that vary with, and are ar.menly related :a. the production or acquisition of new business - As deft and rgw'y sec_nt,es avdi.&Ae for salc are Carriec at aggregate fair -clue, an adjustment rs made to deferred acquisition costs equal to the change in amor- Iization :hat would have teen re_orce0 if s.._-n securities hart been sold at their stated aggregate fair value and the proceeds reinvested at current vreMs_ The change in Mis ad:_s' .ient• net of tax. is mc!udec with the cha^ge in r--el nreahzeo gainsllosses on debt and equity securities available for sale that is credited or chaTged d.:eCtty to s ar2holoe,s' equity. Ceterred Acqu,- s,ton Costs have been decreased by $145.200.000 at September 30. IS98 and $139.600,000 at September 30. 1997 'or Ois ad)us'inen;. Variable Annuity Assets and liabilities_ The assets and I.abilifies res..lting from :.`.e receiol C[ vanat)1e annuity prom. its a•e scg•egaley in sepa-zte accounts The Company receives administrative fees for managing the funds and ether fees for assumirg mortality and cer. tai- enense risks- S„ch :ees are nclu•ded •n Vanab e Annuity Fees in the incor.e statement -38— Goodwill. Goodwill, amounting to $91,886,000 at September 30, 1998, is amortized by using the straight-line method over periods ranging from 25 to 40 years and is included in Other Assets in the balance sheet. Goodwill is evaluated for impairment when events or changes in economic conditions indicate that the carrying amount may not be recoverable. Contractholder Reserves. Contractholder reserves for fixed annuity contracts and guaranteed investment con- tracts are accounted for as investment -type contracts in accordance with Statement of Financial Account- ing Standards No. 97, "Accounting and Reporting by Insurance Enterprises for Certain Long -Duration Con- tracts and for Realized Gains and Losses from the Sale of Investments," and are recorded at accumulated value (premiums received, plus accrued interest, less with- drawals and assessed fees). Fee Income. Variable annuity fees, asset management fees, trust fees and surrender charges are recorded in income as earned. Net retained commissions are recog- nized as income on a trade date basis. Loan servicing fees are recognized as income ratably over the life of the serviced loans and include the difference between the loan yield and the rate earned by the purchasers of the loans. Recently Issued Accounting Standards. In June 1997, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130") and Statement of Financial Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 130 establishes standards for reporting com- prehensive income and its components in a full set of general purpose financial statements. SFAS 130 is effective for the Company as of October 1, 1998 and is not included in these financial statements. SFAS 131 establishes standards for the disclosure of information about the Company's operating seg- ments. SFAS 131 is effective for the year ending September 30, 1999 and is not included in these finan- cial statements. Implementation of SFAS 130 and SFAS 131 will not have an impact on the Company's results of opera- tions, financial condition or liquidity. In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 addresses the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. SFAS 133 is effective for the Company as of October 1, 1999 and is not included in these financial statements. The Company has not completed its analy- sis of the effect of SFAS 133, but management believes that it will not have a material impact on the Company's results of operations, financial condition or liquidity. NOfE 3: PENDING MERGER WITH AMERICAN INTERNATIONAL GROUP, INC. On August 20, 1998, the Company announced that it has entered into a definitive agreement to merge with and into American International Group, Inc. ("AIG"). Under the terms of the agreement, each share of the Company's Common Stock (including Nontransferable Class B) will be exchanged for 0.855 shares of AIG's common stock. The transaction will be treated as a pool- ing of interests for accounting purposes and will be a tax-free reorganization. The transaction was approved by both the Company's and AIG's shareholders on November 18, 1998, and, subject to various regulatory approvals, will be completed in late 1998 or early 1999. -• 39 — NOTE 4: EARNINGS PER SHARE The calculations o1 basic and di:uted earnings pet sha.,e are as follows Yuri tr-r7 Stytr2w )0- ;b lhll M-& edr:il W, 0a" jowls) IM I": !isa Bask Ba ain(s pa Srurr Net lrK=t $516.312 $379.050 S274l27 Less palwrO St9ct drnCents 9Y.% Prererred Stock Ser*$ 8 — 15.751) is.120 Adlusratae Rate Camula:Ivt Pitlerit< Sock, Str.a C — (M 13.021 Series 0 Alandvory Ccmttsion Premiun D."d d Nt:t-,red SIX. — — la.i:31 Sei eS E Mjn_a:;ry Ce-veision Premium Clvi;end Preltrrtd Stcc''- (12.400) (12=0) 110215) Total ;relecrejstock drv.gends {1 ADO) (15:M (7)-C63) :-care avallab.e [= ==n sharMolCer3 S503.912 S:o0.351 92e7.15; AMIlle co9mo.n Shares issuee andoulvir—rip 195405 !82640 175.'.le tem ttrnGon shirts Issued and oult[are-As taut no! Mled 10 parbclpanis unCa varro:s e,.jpk- t VXk plans 12.382) (3.255) (3.527) Awrageshares 0--MacdmE 113.073 1;9.31! 71.591 641511 u:•InYs Der sure S 2.61 $ 2 C•t S 1 :a OJula7 urnugs per Uwe - fWt rctnt $516,312 S's19C53 .els;ieltne- S:OCk dw dens 97.% PICIGrd Sl(ck Se:.tS 8 — ,5.754j 4.1?<: A-`,'.jslablt Rate Cumu an ie Nelerrld Staee. Serra C — 11e) (3 40D Spat :attV:td stack tmx:-01 — i5JZ21 11I.S32) income a''va.laWe'o c.7nr_on _-- sha:tk*as $515.312 S373.263 5251.E95 Arvile caril7n sham Issued ane ov:si3Ming 195,405 192.6a0 115.11's Plus IrKamer,:al shwa tr:m ptttnh;l COclmcn Stock. A+bage nu -ter ct shirrs ans - Q I:aa au[Slandlnj eeplC)rt SNO;le-S 5.511 e.!: AveraEf MIN, err s-alel Iss-atle coon CaWmsKA at Sales 0 ManJeciry Ccnvtfsiej PlemI.i D.nndend Pre:eved 51xk — — 3 e76 A:tlaBt n.,nEa at Spares ISs',aCie e on cczwv5gn of Suits E Mahe:ay Coat ers10n PrtroQm Dividend Preferred Stock 12.216 14.301 15.2 i 1 A:Yralfe cumber 01 Shares asuab;- LXaI ca-vers.m a: Prem.win Squlh ktder� n Cuoclitrvt Secular Units 4.311 5.173 - A'+tg6ts'aresC Varwme 220.40e 2C5.726 :S3-:S3 Diluted earn -ps M: srare S 2 34 S 13i. S 1 :2 NOTE 5: ACQUISITIONS On rdarch 3l.:997 the Company ca,llple:ed Ire acq..I' sition of (i) a b.cCk CI ar.rui:y CC.-.traC'.5 `row jen Alden LI;e insurance Company, a subsidiary of :ohn Aloen i IndnCldl Corporation. and (14 all Cf line outstanding common stock of Joh.'i Alden Life Insurance Company of New York, for a total cash purchase price of approxi. mately 5238.282.000 (collectively. the --John Alden Acqulsl:Ion" )- As part of this transaction, the Company acquired assets haying an aggregate fair value of $5.056.098.000• composed primarily of invested assess ;otaling $5.0i7.822.000. Liabilit,es assumed 1n this :ransact.cn tolaled $5,218,828,D00, ncludi^j $5. _6, 338.0X el fixed annuity reserves. An ainrk nt equa; to :he s..m of tr:e purchase price and the fair value of :he net llaaddies ass:;.ned. amounting to $291.786.000 at SepLenber 30. 1998. is Included In Deferred Acquisition Costs in the balance sheet- On October 31. 1997. lchn Alden Life Insurance Company of New York was merged with and into the Company's other New Yock-chartered rife insurance subsidiary. Firs: SunAmerica Lite Insurance Companv- On April 1, 1996. the Company completed the acc..lsl;lon o: a $958.672.000 dicta of annuity cCr.- tracts (L.r'.e 'Central Na:Ional Annuity Coma-s-) from ne --en-al Nat.gnal Life Insurer-ce Company of Omaha. a sutls:dlary o: Renel clal Cerp_ for a ;,aChase price of $20.606.000 As par, of tr.Is acq-...sinon, tie Comovny acq:Ireo assets having an aggregate lair val .e or $939.006.000. composed primarily of Invested asses to'.aling $929.561,000 An amount equal to the CaceSS of the sum of ;he purchase price and fair value of the annuity reserves asst.'med over the fair value of the assets acquired. amounting to $19.715.000 September 30. 199a, is Included !n Deferred A=qulsltiOn Costs In the balance sheet. On February 29. 1996. the Company completed Ine dCgWsinan cl all or :he outstanding s:cck of Ford Life InsLrance Company i"ForC Life") for a cash purchase price of $172,500.00D. T;ne Company acquired assets having an aiirega:e fair value of $3•146.072,000, composed primarily of invested asse's totaling $3,097,151,000_ Liabilities assumed In this acquisition to-aled $3.090.123.000. including $3.050.575.000 of fixed annuity reserves. An amount egLd1 to the excess c1 the purchase pflce over the fair value of [he net assets acquired. arrioun:ing to :57,121.0,00 at September 30. 1998. Is Included in Deferred A:qu•s t;on Costs Ir, the calcnce 5heel On Dece-it-e! 3'.. 1996. Frd LI'e was r•-ergec with and 1r':e S.. A.,ne'.ca Life I-surao ce Company. —e0— On December 29. 1995. the Company completed the acquisition of all of the outstanding Stock of CalAmerica for a cash purchase price of 512O.00O,OOO. The Company acquired assets having an aggregate fair value of $739,852,000. composed primarily of Invested assets totaling S722,461,000 Liabilities assumed in this acquisition to!aled $662.316.00O. including $645,379.000 of fixed annuity reserves- An amount equal to the excess of the purchase price over the fair value of the net assets acquired, amounting to $28.897.000 at September 30. 1998. Is included in Deferred Acquisition Costs In the balance sheet - These acquisitions have been accounted foe by using the purchase method of accounting. Accordingly, the income statement includes the operating results of the John Alden Acquisition for only the period from April 1, 1997 through September 30. 1998. the oper- ating results of the Central National Annuity ConVaCts for only the period from April i, 19% througr. September 30. 1998; Ford Llfe's operating results lot only the period from March 1. 1995 through September 30, 1998; and CalAmerica's operatlnt results for only the period from January 1. 1996 through September 30. 1998 On a pro forma (unaudited) basis, assuming the John Alden Acquisition occurred on October 1, 1.996. revenues (lrve5trrlert Income. r.e: realized Investment losses and fee Income) would have been $2,269.135,000 and net Income wosrfd have Deen $397.402.000 ($1-90 per diluted share) for the year ended September 30. 1997 At September 30, 1998. me deferred acqursrtlurl costs arising from these transactions aggregated $397.519.000. and are being amortlzec. wan interest - in relation to the incidence of estimated gross profits to be realized over the estimated lives of the assumed annuity, Contracts_ future annual amortf.atron r, projected to be as follows- 1999, $92,504,000. 2000, $69.717.000; 2001, 552.786.000. 2002, $39.481.000; 2003. $30.641,000; and thereafter, in the aggregate, $ 2 Z 2,39O.000. The deferreJ acqu.sfrfon costs are Substantially less than computallcrs of the present values of estimated future profits discounted at the related weighted average crediting rates. On July 15, 1998. the Company entered Into a definitive agreemenl to acquire MBL Lde Assurance Corporation's individual life and individual and group annuity business (which had approximately $3 b:lhon of fixed annuity reserves and $2 billion rr reserves for uru- ve(5al life policies) for approximately $130 million in cash. The acquisition Is subject to customary conditions and required regulatory approvals, and Is expected to oe completed by the end of December 1998 NOTE 6:INVESTMENTS Tne amortized cost and estimated fair value of bonds, notes and redeemanle preferred stocks available for sale by major category follow: Aro1L!! ;$! rJ!r- ml.VvtaWd (p{ ta. WA It September 30. 1994 SKC' !its 0 the Ur-'e3 Sli:es CSWrmect S 791.W S 121.109 P?,4Jr2e-b1WJ wccr.a:s 5.752.001 5.911.623 securities of XtIK u:ILcla 1.125.568 1,136,022 Corwale bongs And rates 9,056.639 1.201.342 Alit -ticket sx:ores 1.761.140 1.r90.03r Rea tnAb a ore'e::ed stacks 213.345 292.034 Other test secu::.ts 613.749 531,970 %tat a■ahble lot sele 111.e01.656 511,100,641 III Septemser 10. 1991: Secuales DI Ire Unded Sti:t$ ccmnff,-4 S 1-! I l.Lt6e S 1.12E.e56 VChjale be:lltd securities 52016i0 6.344.035 Se:r:Its:'DuYtiuledres 532.577 542.;25 cxms:r -Ws end notes U14143.832 81E8.91I asset-baur. securities !.556.605 1.5E6.242 RedttmaN!Creltrrelslxks 152419 162.355 31'n dehl secuntres ass i37 472.450 %iil rivallib't [Dr Salt $18.12c.937 W.523 E`5 i he amcrtued C751 and estimated fair value o1 3on�s. :toles and redee.Tao!e 7referred stocks avalaole for sale by corttraclsal mawrrty, as of Sept"oer 30. 2998. follow: An Mt ml Es:.v'ea I.1'YJLril: CM n. �.•n C•.e In one s'AI or:ns S 263.6r5 S 779.357 0t Aber C-t Yea, thmulh ;;n 7eAn 3.9DJ.566 4.094.035 D.e aftv'r,e tears llrD;jh'en years 6.026.726 1.053.320 ore alter !;n *3:s 2.435.686 2.462.512 fl:rtgage ba;k+ Sn.zWKS _ Y 5.152.001 5.911 623 104Al aralab:e for w e S11!01.6% $14.100.847 Actual maturaws of bonds. notes and redeemably preferred stocks will dltfer from those shown above due to preaayrrenlS and redemptions. ate. -- 41- Gross unrealized g3ins and losses on aonos, -Ves Toe sources and related al-oun;s of in%irstmeot and redeemable preferred stocks available !or sale by trcomc we as lol:ov.s Mahe tateorry follow- C ass Cm t.>-r+�rtd sxr.5xd :Li Ir0.La•+asl ar-r1 -min - Al swore at 30. 1in: Stce:,,tts tl tt,e bm iC Stets Stwnmenl S 31.176 S 11SU Woltale-tadmi sttt,rlltts 177.753 (18.133) SKunlies of pudic [:..Idles 40.185 (79.720 Cc.'paale bards am io ei e00.157 (248.454) aastl-Sa 6ed ww.11ts 34.94I St3.3631 Rtdeemi0e preferred s:xks 1.532 16.803) Cittrdebt wuriles 20-345 _H24) fo[alavalla_4e!c'sYe 57]7,WC S(31449) Al Saptamtlar 30. 1997: SeC's:.;.es ar ltk (l7rrK 5'a1;5 �yyvnSSpSS S SS M S ,3e9S AUrtp�rEacr" setum es 1 °E.?de '23.5621 Securntes m WCIx _alit s !0,38! Co.;xaale Dads and rates 235.09 3_-S19; asset-:atke<l wv:S,:s 23 i6l. t52<} Redkracle p'elerrpd Szxks ic.%4 :5e; 31`ttdeatse(urihts 6.118 i293: ,crai dvalu 7l: %, sa'e UM.!A, $ :i0,25: Al Sete ttber 30, 1995, grass unrealized galn., o^ equ.ty sec..rdle5 available 'Cr sale aggrep,e-i $49.631,00-0 and gross unrealized losses aggregated $1.E66.000- Al SepternD?r 30. '997. gross .,lreal,zezl ge,ns on e,�urty secur.t:es a.ai%b:e'cr sale a�!Cgatec S64,E35,0i)0 and gross unrealized tosses agjrebexd $915.000. Gross realized invesurnent gains and losses on. sales of lnves,ments are as follows: :Li ltssas[sr 1lli ISi� lire -- Bonds, notes and redealnatlo prelarred Stocks- Acat'ant 1t• u,t F.ral•etd;al-s S 3o6,251 $ 155613 s 9! 133 Rtali•td Asses (259.2491 !:.1.5:3) !S3.,0 [areas= B.t3' t p -.s Is)$ll 22.7i5 a 45 Rtalzea ,asses 6141 UEC1 Olkar ,nrastmasts� Reel 7td ia': s 8.858 2 FF6 13 )Js Reall:w; ssts tsa1: 12.2i21 112; 1m;,alr0wt rrril"awas [109,7871 i55.31.! tip 534! h1a re: rtalutd mrts,me-t o55CS $ (41.721) S :25.2031 S:_C'-3!1; .c:tk..ar:si Mil :i57 '.fie $,i:at'nrmet:lne:,s S 90.99a S dJ.32! S Ec.376 Wis. rF :t an? wetwam �,t,,vvd s;9rls 1.413.205 E.59 E31 i0i:2 M:n�aQz kr-S :17.629 222 4t73 :=S 476 iGudY-�llrod ;34-Y+Sk s 559.Ba6 1:c.365 is s57 W:r.rri'.:_j pa'rl!•S.-fs 711.23 1KE57 32.t15 Cltitr.:curd asx!s - _ t2.6391 _ 73.: J? - s?i'V 'ca, rsas!�tnl ^c me 51.160.a63 s!..95 £15 S!.251289 ExNe.5e5 1.:Curre. 14 marage the ,nve5trnerl Dort- lc•l'o amcurted to $30.653.000 for Inc year enled Septernoer 30. 199S. $25.801.00 lo., the year eozea Seater:txr 30, 1597 ano $21.475.000 for Inc year e-cec Sep:e.mber 30.:996 and are included t^ Gereial a^d Acmu,s'•ative Exre• ses to t.`•e t^.come ste'ement- InveS:ment5 -n Cnconsolijatad pert"ersnips acccsc'ed Ior oy using',he eq,;.ty mC-,hCC of accoun[ing ,eta.ec $779.098.000 at Septemter 30. 1998. A: tr:a: oe:e. ,ctal conio.nej a5se:5 of :here cafl•Crshlps %ere $3.033.520.000 (cc,slshng entirely of inve5,men,S1 ar,u twat cc'io.-ed l.abl'rles w_ a 52,d55.3b8,C'•�' (1:-c,ucl.g 55.339.517.�tT� of nonrecourse roes payebte :L banks,- Fc: ,`e rear t:ten veeo. t-:al ccmblrle:l revenues ano ex;;en.es of s-Cn pa'tne•srnas wt•e $446.4:2.0CC and S214.010.000, respectively, resu't ng n 5232.402.-&) cl total Cc'nblcea pretax ncome. . ^�1:51tTte'IS i' unconSolidare7 partners.".ips a;=ounteo .'cr by �,s -g'he equl:y method cf accounting to,aled $5`-.33�.C, i;, Sep!emoer 20, 1997 Al t`,a' .a,e. 13 31 ,psrb•,nCd a55els 9` t!'.ese p=r r)e•5,).bs were a2.220.C50.Cr'-j hact_ctng V.21 *.4G;.��.'', a•' rn.eSG'en;5; an-3 total z:ombineC liah hoes we•e S l ,b93.596,'al.l, deli lu-slrlg S 1,543.148.000 of nOnre- cu,rse ^ctes oay4ble :e bank5l. For [he year 'he-. ecoed. r0!al Comb,:,e� •evenues ano expert SrS 0' Such parrer. Ships well' b29r,4rh.rrl) and S 1 eE,104.000, resaec- tive,y, rc5i't rig In $144.3i?2.000 of :Ctdl combined pretax t:,c:rre M. S^p!emtler 30. %;SS- r,,j tnve5.,,%:nl t:xcccdcd 10% o' re Cc:np,rlp's conscl dared scarlho'de's' eq ,ly- A.t Sea:e,-T11}e• 30. :938, mcr:gage loans were CGIId1 e!dl�tc� vy procerll�5 'CCated -- 46 S[E:eS, v+i:h 'oars IC:31 -g a1;Cr9x1frlate!v 19%. 12 _1� a,13 :Ciro of t--e aawgale tarry ng :c1,.e Cf t; a pa:t`3110 5CC:-red b p!Caerl-es 1C{a:ej in C.;WC:n a. New -i�lk 3-0 iexa5, S25ae�'rvcly. _12— At September 30. 1998. 5onds: roes and redeemable preferred stocks included $1,18:.814.000 of bonds and notes not raved investment grade. The Company had no materral concentrations a con -investment -grade asses at Septerber 3C. 1998. At September 30. 1998. the carryins value o: investments in default as to the payment of principal or interest was $55.009,000. consisting of $19.672.000 of non -investment -grade bonds and $35.337.000 o: mortgage loans - As a component of as asset and liabi.i:v ^lanage- ment strategy, the Company utilizes Swap Agreements to match assets more Closely to hab.,laies- Swap Agreements are agreements :o exchange with a counter - party interest rate payments of dif'enmg character (for example, variable -rate payments exchanged for fixed-rate payments) based on an cncerlying principal balance (notional principal) to hedge against interest rate changes. The Compd::y typica;ly Wili7es Swat] Ag•eernents to create a t..ecge that effect.ve.y c�:ive•is floating-rate assets and lidbi ivies into axeu-rate ins:rr.- ments_ At September 30, 1998, the Company had 3B outstanding Swap Agreements with an aggregate notional princ+pa) arnoc::t C-1 $2.870.427,000. 7rese agreements matl.re in var,o,.s years throug- 2010 and have an average remaining maturity of -13 montas- W d, respect to swaps that hedge assets, net interest received (paid) amounted to ($6,706.000). (S1.1091.000) and $5.2:4.000 for the years ended September 30. 1998. 1997 ano 1996. respectively, and is inc.ucec n Investment income in the income 5,aten-em With respect ;o swaps that hedge liabilities, net interest paid amounted to $5.430.000. $3.706.000 and $168.000 to- the years ended Sepiemcer 30, 1998. :997 and 19945. respectively. and is iricl„ced in Intc,esr Expense on Gudfanteed Investment Contracts in I^e income statement_ For investment purposes. the Company also has entered into va•ious Tota' Return Agreements wish an aggregate notional pnncipai amount o' $5321.000.-M3 (the "Notional Amount") at September 30. 1998 The Total Return Agreements elfective)y exchange a fixed tale of [r.tzrest (the "Payment AmCL:nt") on ;he `)o:ional Amc,rt fcr ;he ce..pon rnccrne plus or :-r nus the increase or decrease in the fair value [the "fo:al Return') of specified non -investmen;-grade bonds (the "Bonds-). The Total Return Agreements mature in March 1999. however, tie Corr.pany intends to enter into o:ner similar agreements. The Company .s rxpcsed to potential loss. due to credit risk on the underlying non -investment -grade bonds and bond market fluctua- tens, equal to ;he Payrr.v; Amount p.us any reduction in the aggregate far, value of ;he Bonds be -ow the Notional Amount The Company is also exposed 10 oo:ential credit loss in the event of nonperformance oy the invesimeri-grade -rated coumerparty with reboe::'o any ncrez:se in ine aggregate 'narxe: value of the Bonds above the Notional Amount. However• nonperformance is not amicipalo and. therefore, no collateral is held or pledged Net amounts receiveo (paid) are included in Inves:-ten' ln,:c:ne in the .ncome statememand to'aled (S33.716.000). $35.368,000. and $32. -3,D.il"30 -cr the years ended September 30. 1998. 1997 and 1996. respectively NOTE 1_ FAIR VALUE OF FINANCIAL INSTRUMENTS The following eviniated fan value disclosures are lim- ited to reasonable estimates o' the fair value of only t`.e Company's :mancial insirurr..en,.s. The disclosures do not add-ess t,..e va ue of the Cor^pang'•, reccgvzet; tnd unrecognized nonh .ancia: assets (including its pdrnerships accounted lot by using the equey method, real estate investments and other i :vested assets) and haoili;ies or Ire value of ent:c,oated fut„re business- .re Compa-ry does no; plan to sell :riost of its asse.S or settle most of its haoilities at these estrmalr:l far., values - The fair value of a financial instrument is ;he a.noun: at wh!Ch :he insir„merd COLId tie exchanged in a c..r•ent Iransaction between m.I.ng parties, other r,an .m a 'd:ced or liqu-dafion save- Selling expenses anc potential 'axes are not included- The estimated fair value amounts were determined using available market .niormation. current pr cing inrarna:ion a-c -,oucus val- 4aiioi methodologies- if e,.o.ec market prices were -r readily available lot a fina4L.al :nslr,,merlt,-lanage- ment determined an estimated •'air value Acco:dingly the es: mates may not be inditarive of the amounts the `inancial instru-ients could re exchanged for in a cut. rent of *.uture market transaciian. The following methods and assumptions were used .o evimxe the fair value of each Class 0f linancial instruments fcr wnich it is practicable to estimate 'fiat value Cash and Shon-Term Investments: Carrying value is con- sidered to be a reasonable esfima,e of fair value Bonds, Notes and Redeemable Preferred Stocks: Fair value is based principally cn independent pricing set - vices, broker quotes and other independent information. M y. -43— Fair values include the market value. de:ermined from Long -Term Notes and Debentures- Farr value :s estr independent broker quotes. of Swap Agreements that mated bases on the cf-jved mane; prices for the spine hedge certain bonds and notesor similar ;ssues. Mongage Loans: Farr values are primarily determined Preferred Securities of Subsidiary Grantor Trusts: Fair by discounting future cash flows to the presenj at cur- value is based upon maependenl pricing services - rent market rates, using expected prepayment rates. The Cstlmdted fair values Of 1he Company's finan cial Instruments at Sep:ember 30. 1998 and 1997. Common Stocks: Fair value Is based principally on compared wl:h :hell respective carrying values, ate independent pricing services, broker quotes a::d other ds t•O:IDws independent Infcrrnatlon. Last -Method Partnerships: Fair value of l-rn.ted parner- sh;ps accounted for by using the cost method is based upon the fair value of the net assets of t.ne partnerships as determined by the general partners. Variable Annuity Assets Meld in Separate Accounts: Variable annudy assets are tarried at the market value of the underlying securities. Reserves for Fixed Annuity Contracts: Defeced annu.ty contracts and single premium life contracts are assigned a fair value equal to current ner Surrender value, which Inctudes the estimated fair value of hedg- ing Swap Agreements, determined from independent broker quotes Annultrzed conlracts are valued based on the present value of future cash flows at Curren: pricing rases. Reserves for Guaranteed Investment Contracts Fare vast e ,5 nased on Ine presen; value of future cash how5 a: cur. rent prtGng rates, and is net of the Cstlntatrd fat' va Le of heagirg Swap Agreements, determined Ircm ;nde- pendenl broke; quotes. Trust Deposits, Trust deposits ate carried at the lair value of deposits payable upon demand - Payable to Brokers for Purchases of Securities: SVCf1 ob.igatlons represent cel transactions of a shorl-term nal..re for w! ich the carrying va;L;e r5 conslde'eo a ea- scnab'e est.:.iate of fair value VariableAnnuity liabilities Related to Separate Accounts: Fair values of contracts in the accumulat,un phase are based on net surrender values. Fair values of contracts in the payout phase are based on the present value of future cash Mows at assumed investment is:es. ;li Irq�l4fell .a t.t :ii• isle Itssels- Cassandslfdr:len+IRsl-tails s 1.196.132 S 1.19i.g2 Etin%. We% alq redetCa:k prefeoed sxu ta.190.eu 11.1J0.a4T #wtace bans 3At2 us 3.511.3u Cer-man stacks 12.e09 e2.303 Coll• rcchad d:ane s lcs 165.153 1.213.66a +an;l) a anne :y asse:s'N] a seCa-a:e a:ca.nls 11.405.434 11.4G5.434 Lia_Ililies pas :'ts to t,.e;. a:.au.1r cD::sa's tT 9t0.S44 l2 �1i.612 ResPrits fts 1.arar.'er] mitt=,e?r.7 fpfit; a:1s 1.360.144 1.61 i.0l9 Ims: dopes. 439.919 419.118 Paraek 10 D.-eal;S la pm,eases cf secuut<s 91.463 91.463 Vara=lt an-gitr 1It?lllles :e„-e'- to Sep34te a[L7 nIS 17.405.04 10.151.125 Lcr1-r!•r. -;:es !-d MC wi,i 1.216.463 1.310.566 r_11s 495.000 501256 ;�, �rassxs! _ 19f7: Aunts: Cash and slserl-'efm urrestrrs-:s bones. netts and re4atnable pretared s:xks Idcniage wens Yenm;n storks Ccs'.metrsd ear. enh.ps yarU:le anrr:dy asse's,'d] in wpa:art hco.nts -4;— c+r,t hu Suoseq.rent 10 ,hese cffe•ings, $3.225.=).0,00 .eiie "A rerrains avaddb,e to the Company to iSS-C se;.urities ;seer the Ju y 1997 shell regislrakcr state-lent S 993.34? S 593313 Shu•1-terrn Lmrow•i"gs. which-rClude snort-lerrr .8.52.655 3,135.3]5 SE.Sa'. 7i` �57 9.5:a.51_ Usti es: Rtservts Id fue9 an•city'caracts I1.=45126 Reserves tar 3uafin: e. irr4-tn.4n1 t2RI''ts 5 5_3.2S2 T::st deposrls :21A33 Parable to 5rakea for purchases Y. SK.nt es 265.477 ya:-We annudy haSrldrcs malt] t0 separate WounL5 9.SW.67i long-term rites and debt: ;ures I :35.072 Pie'evad sr--u::ms or subs diary Dank rules, 'Everse repurchase agreements and Lor ]B.v' eis rows-gs ..-der a commercial paper prcgram. averaged 315?.C73 $514,055,OCO at a weighted average interest rate cf 56.�11 5.0% clu. ng 1998 al�d $611.719,000 a; a weighted Roc average rate of 6% b during ;997 The h;gP.- 9.5;:.615 est level of short-term borrow',cgs a' any month -end was $1.167,676.000 a; 5 % during 1998 and $1,019,754,UC� at 54: a dur ng :997 There were :35C�.12: no sho:lle•m borrow•ngs outstanding at either September 3C, 1998 or Sep:embe• 30. 1997_ SS:5.3:5 Principal payments on long-term borrcwclgs 12i,e31 2c61r7 art cue as `ollows: 1999. $17.775.000; 2000. $570.25G,000. 2001. $24.000.000; 20C2. 924C.24' $2:.000,000; 2003. $18.900.000; and ihe-eafter, 1:72_S2 56'-Dr.635.000- pro•afINVS 05C{, 5C%.:i_ NOTE 8:INDEBTEDNESS Indebtedness consists of the fo;low.ng long-term. res and Oebenlure5 tinterest rates are as of Sexernber 30i: ;rr. 11'"saxti -- Isaa M, 5 C% deWtwes due July3l 2097 _ (RI 01 .:.mc'is.:is(7um d $43 011 e1 Se;:ember 20. 333 an•: 343.513 at Sevier,_ r 33. 19S7) S Ut,923 S Wdmm-ta: n rNes :ae 1%9 thro-jh 2026 M-% t21'r:%; 228.310 2<e.335 84: ee;tnt-res due Ap'.l 22. 2C23 100.0m IOe.}]G 9.95% eeter',r_s due ie.ru:'y 1. 20t2 25.791 IC{•}-r, 9-95% ceopr.%res due A. just 1.2.3f.$ 73.209 — 6 2% noes due 3csoter 11. 19S5 431.250 4;:.2v. 5% netts du: lan.ary i5. 13:R 125.030 12c,}x 6 75% eeCar.rrs due oc:Dter I. 2-w 100.100 — TO'al in;ene.-ess $1.716 481 5:.135.C7i In July 1997. ,he Company tiled a s-e f regiStra- t,o:t statement tinder whirr. it may i5S4e up to $3,51DO.000.000 of securities in the form of debt; preferreo stock; common stock; warrants 'o p4rchase debt, preferred s'ocx cr common stock: stock pur- chase Contracts or stcck purc-ase units; or p:efe:red sec rities of tie Ccrnpany's sucsidiary granlor'rus!s. On July 28, 1997. the Company issued $175.000,000 of its 5-6 % detrent,.res. due July 31. 2097. a-.0 •eieived discounted prcceeds of a;rprox1mately S.3C.CCO,CDCO, and on October 7, 1997. the Ccr%:any issue,4 $1CO.000.000 of 6-75% notes cue Oc:coer 1. 2007- NOTE 9: CONTINGENT LIABILITIES The Company is ."vo fed in var o..s kinds cf I.tigat!:.' carnr^on to is t:,s nesses- rtrtse cases we in various stages cf develop-teni and, basec on reports cf counsel, mendgemer.t believes al provis c-s made for pctential losses a•e aceq..a:e and any fu.'rher hab Jibes and costs wrl ncl have a rtateria' adverse impact upon Inc Com; any s it- ancial posi,ion or results cf operations_ n 19S9 a•'.c 1996. the Company sold. 'hrc_gh three separate 100% coins.,ra,ce franuctions. the generdl agency division of S:,n?rrenca L fe Insurance Cernpanp, 're credit Ide business of Fcrd Life Ono the rrortdl ty-bdsed :._sines5 of CalAmerica- 4Silh respect -c these co:-s-,rance ;ranscct ens. SunA-lenca Lire Irsurance Company and CalArrr-rica GauIJ beccme I:able `er in-fc'ce amuu•is cedeo o' $1,856.928,000 and $1 897.974.000. eespect.vely, at Seo,emter 30. 1998. .1 ,he ceinswrerS were 'o become c.:ab.e to rnee, :he obligat w:s essumed under tee rrspecl,'ve cCinsur- an-,e agreerr.ents- At SepterrDer 30. 1998, •e:ated po ir-Oclde• reserves ca•rled oy :he coinsurers w'e•t $IU,:23,Ci U and $157,27d,000, •esp-ect.ve.y- As part cf thf 1989 SLnAmerica Life insurance Company co,n- s-ranee Ird•-,action, assets substantially eq.al to'he Fol cyholcer reserves assumec by the coinsurer a,e ceid i- trust to secure the _-:0Z bons of ,r.e coinSurer- The Company has transferred to lh;rd-arty nveslors cer'avi cf its weresis in var.c,.s partnerships that ma'-�e 'dx-aJvdntageJ dlfcrddble: huusi:16 itvnst- ments As part of Mew transactions, 1''e Ccmpanv has agreec'o advaue mc-ies 'o supper: the caerat or's of flit; un&!lying rousing projects, if required, and has -45— guaranteed that the transferred partnerships will pro- vide, as of the transfer date and under then current tax laws, a specified level of associated tax credits and deductions to the third -party investors. Based on an evaluation of the underlying housing projects, manage- ment does not anticipate any material cash payments with respect to the guarantees. In the ordinary course of business, the Company has agreed contingently to make capital contributions, aggregating approximately $670,192,000, to 121 lim- ited partnerships over the next 5 years (4.5 years on a weighted average basis) in exchange for ownership interests in such partnerships. NOTE 10: COMPANY -OBLIGATED PREFERRED SECURITIES OF GRANTOR TRUSTS Preferred securities of subsidiary grantor trusts com- prise $185,000,000 liquidation amount of 8.35% Trust Originated Preferred Securities issued by SunAmerica Capital Trust II in October 1995 and $310,000,000 liquidation amount of 8.30% Trust Originated Preferred Securities issued by SunAmerica Capital Trust III in November 1996. In connection with the issuance of the 8.35% Trust Originated Preferred Securities and the related purchase by the Company of the grantor trust's common securities, the Company issued to the grantor trust $191,224,250 principal amount of 8.35% junior subordinated deben- tures, due 2044, which are redeemable at the option of the Company on or after September 30, 2000 at a redemption price of $25 per debenture plus accrued and unpaid interest. In connection with the issuance of the 8.30% Trust Originated Preferred Securities and the related purchase by the Company of the grantor trust's common securities, the Company issued to the grantor trust $320,670,000 principal amount of 8.30% junior subordinated deben- tures, due 2045, which are redeemable at the option of the Company on or after November 13, 2001 at a redemption price of $25 per debenture plus accrued and unpaid interest. The interest and other payment dates on the deben- tures correspond to the distribution and other payment dates on the preferred and common securities. The pre- ferred and common securities will be redeemed on a pro rata basis, to the same extent as the debentures are repaid. Under certain circumstances involving a change in law or legal interpretation, the debentures may be dis- tributed to holders of the preferred and common securi- ties in liquidation of the grantor trust(s). The Company's obligations under the debentures and related agree- ments, taken together, provide a full and unconditional guarantee of payments due on the preferred securities. The grantor trusts are wholly owned subsidiaries of the Company. The debentures issued to the grantor trusts and the common securities purchased by the Company from the grantor trusts are eliminated in the balance sheet. NOTE 11: SHAREHOLDERS' EQUITY The Company is authorized to issue 20,000,000 shares of preferred stock ("Preferred Stock"). All preferred shares of the Company rank on a parity with each other and rank senior to Common Stock and Nontransferable Class B Stock of the Company as to payment of divi- dends and distribution of assets upon dissolution, liqui- dation or winding up of the Company. On November 1, 1995, the Company issued 4,000,000 $3.10 Depositary Shares (the "Series E Depositary Shares"), each representing one -fiftieth of a share of Series E Mandatory Conversion Premium Dividend Preferred Stock, with a liquidation preference of $62 per share. On September 22, 1998, the Company announced that it would redeem all of its Series E Depositary Shares. The redemption was com- pleted on October 30, 1998 and resulted in the issuance of 11,250,709 shares of the Company's Common Stock and cash payment of all accrued and unpaid dividends through the redemption date. On March 10, 1993, the Company issued 5,002,500 $2.78 Depositary Shares (the "Series D Depositary Shares"), each representing one -fiftieth of a share of Series D Mandatory Conversion Premium Dividend Preferred Stock, with a liquidation preference of $37 per share. On January 2, 1996, the Company redeemed all of the Series D Depositary Shares for a call price equal to $49.95 per share plus accrued and unpaid dividends to the redemption date. The call price was paid with 5,112,529 shares of the Company's Common Stock. At September 30, 1996, the Company had out- standing 486,800 shares of Adjustable Rate Cum- ulative Preferred Stock, Series C (the "Series C Preferred Shares"), with a liquidation preference of $100 per share. On October 4, 1996, the Company redeemed all of the Series C Preferred Shares for a cash payment equal to the total liquidation amount of $48,680,000 plus accrued and unpaid dividends to the redemption date. In 1992, the Company issued 5,620,000 shares of 9'14% Preferred Stock, Series B (the "Series B Preferred Shares"), with a liquidation preference of $25 per share. On June 13, 1995, the Company exchanged 2,105,235 Series B Preferred Shares with a liquidation preference of $52.630.875 for $52,630.87t, Changes In shareholcers' equity a'e as `cll,rs- liquidation amount of 9.959_ Trust Originated Preferred Securities of SunAmerica Capital Trust I. On -'xasar;;.K:e;:n:svn Yrin5rJtJSV m._3 __ June 16. 1997, the Company redeemed a:l of tre remaining Series B Preferred Shares for a casn pay.'rlen[ Prarierred Stock BeE,-nini ha'ance S7+l.fAO S 4.5:9 S equal to the total liqu:datlon amount of approx;mately L..u;--; 0' <•?3G.:-3 S87,869,000 plus accrued and unpaid divicerids :o Se is E Ntle led Sh, es the redemption date- ?ederc:rcn cl 5 GC2.:}3 The Company is authorized to Issue 350.00C.CGO Se:esC E%S:a7SWa — 03503.1 shares of is $L-04 par va'ue Common Stock anc Is FeCemp:rn ;I 3.5.4165 $erks �' e-e'ed 3'arts authorized to repurchase 15.000.000 snares of such RmeMD'..sn::06A stock. At September 30. 1998. 179,526,00C shares SmesCP-or:edS-ares were outstanding and at Septemoer 30. 1997. Enc n£ Ce an•e $244.000 S246.C?3 S 179.076.000 shares were outsta-ding. On November 6. 1996. ;he Company issuec Xontrinslerahk Cl:ss B Stock 11.500.000 84% Premium EqLIty ReComptiur• B;,-mnjbalance $ 1SJ73 $ 10 Eta $ 13.;-c Cumulative Security Units (the -Units") w.th a s[a;eo C_m2rsr_nel d E15Y-0 shales amount of $37-50 per Unit- Each Unit consists of a to :"Me. S:xs — — i43Ei1 Stock purchase contract (the '-Contract-) and a Unite(1 S:"` spas — Se?j i.lis Slates Treasury Note (the "Treasury Note") having a Endlajpalance $ 16.273 S !EM $ :C.316 principal amount equal to the sta.ea amount and rra'u•- Ing on October 3:, 1999- The holders of the Units will C9r1ign$lock receive interest on the Treasury Noes payable by the Uj'nn. j=ala-;t SI19.07o i13fi.6]: 1 4:.175 Unit:�6 United States Government a[ a rase of 7 p?• annu n Iss.ance Cl 10.654 s of common S r► ar:c Contract fees payab:e by the Compa^.Y at a rate of ,. S=ay; on star, ' I- per annum Mxh, the "Unit P oyrten:5 1 Dased .--)on Is$-an_ecl5:!2.5:° i ares the stared amount- Tne Contract ob Dates're Compar.y to -0,-,r I-rSenes D to delver on October 31, 1999 1.3 th•3 rc:der cf ea." x::s':ag5h='s — — �.:_] Un-i one arc One -Lai.` shares Of CJm npn Stack OI ; C:n:nsw' Cl Ronhaalerab ehe ; ass B Six', 10 Corr.pany, wbrect to a:llt;stn:rnt ncrr eer'a1n del.ned ;;;t.}v,sta:es c r_-un'.s,a".es. and CbliUateS Ine holder of t,,e J"d x. S'ai :D:.;ns art c"a pay to tre Cc:npdny S3750 ptr Vut. _ '.redyury 9mp�itbC' d;l;as +50 ]]: Notes w1'I be held by a collateral age: [ l0 secure pay- S,0,_` =: __.__ .. _ _ :9.637 S ?e; ment ;c toe Company as required unde•'re Contract, fn_ sloe,:•. 5173.526 SI1SCii S!33E.a but may be redeered r)+ the holders of the ! InAs uncle' ce.taln def,nec c:•cums[ances- On Omber I. 1998. Subseq.,en' to the Company's 'Kcal year end. ;he Compa .y announcec that It wi I reuetm all ,f Its Un:is on Cecerr,oer 6. 1998. in connect c- wrn Ih:s-edem)- tion. the Curnpary w,l! Iss_e 10. 108.229 shares Cl L:-e Company's CCmrr�)n S:cck and will mane a cash pay- ment for all accrceC and unpalc Contract fees. The Company Is aut'rorized ;0 Ssuc, 25.000.CCC- snares of :Is $1.00 par valLe Ncntra-sferable Class B Stock. Holcers of this stock nave rights :aenllca to !hose of the Company's com:aon stockholiers ux_cpt that trey have ten votes per share and are entitled tc- Only 90-" of any cash dividend p3.o cr t' a CDmr^on Stock_ This sloCk Is ccnvert:cle at any time Inro o' Common Stock- At Septemt er 3"-, 1998 arid 1997. 16.273.000 shares were c-tstandr-e- 9 tl -47- ;„U,,,,res-e:ao,m.u„t reure xskslr Sep'emL',:r 30. :998. ruStrl�,'ed net assets or trese aaC$we arms; 1191 :e9' -9% ConSolloa'cd life wsurance s,-osidlar.es lola;cd a:1Jroxi- Addrwnalpad-IncapltaL fr.a.ely $1.934.653.00'O. none of wh C^. Is availaLle fo' BCti sing ba,arsce $ 750.401 S :Cd 253 i:852:1 the payme-t cf -111 ca ercar year 1999- Issual:eC4CO!tm0'S'$ck M - the comb:^ed slal_'ory equl:y of the Company's Cost of osume o: Series E fI'%2 I'e InS.;ra^Ce SubSlJlarles tet3lCd $1,4 15-095,000 ?fevrmSha;es bms0 redtmp'onval-eol at Septeo:)er 30. 1996. $1.430.935.000 at SenCs3PrercrtdSha:es Dec errter 31. 1997. and $1.187.013.00G ar "i wl sall8 of shares December 31, 1995. _^e ca-hIbined statutory net' -cane otG:m-mvk l tmed. cl these s,.C•s:dlarlcs totaled 5294.413,000 for the nine :el pF I:dnsaarGS C031s - .:? � :2 mr-:hs e-aed Scple:r-W 30. 1998. $2�7.049.0ir) icy ost -f Issuar;e W 7100.C.}i - shars of Lusl d• 21na,ed the Yea- ended "G(rr.be• 3:. 1997. act $210.79:.5&0 F-e'a' e9Sxcntresot ter'-e year e,Jed C•ecer-Uer 31. 1996 S•nAolerv-a Cap aI trust II GS'. o� MATICt 012.4 X CC3 1401E 12_ STOCK COMPENSATION PLANS shz-ts 5:'r"sl C+Ig:-a4: Al Sep-.e.mbef 30. 1998. them Co!'rpany hdd live s1Uck- PICltfled St:u' :I:s •:f S,-,1rt.trt:d .^.a-d; latlll - ll'3=17i lased comp ensal.C- plans. w^:ch are cescr lbed below C+sip ssu::ems 11.SC�:?JG Tne Comps-y app'Ies APE OpI^IGn No. 25• ".4ccoun[Ing Prrm .r E,,-1Re:trpuc- ter SIOCk 'ssuec :c Employees- end relatec Irte,preta- CYr-IalrreSGu•'Thnils - :a:,5':I°I - Mons I^ )Zzounling'Jr s:zh p'ans, a.C. accordingly, 3:ock :p: errs and o'her nC• :Dnpen5al C^ CCS' has tree' retognlZed fcr StOCa Er}:_p-ebtal.tpan$ S-H 5.375 !I !]bpi c::t o-s gra- icJ pursuant to ;hesc pia s If corr,pensa- S x. S;.Its -- ti65.::?i •- - ' ic- cost for Su=h stxk --ptlons -a- beer recogn.eed. tn. •1 :ale-:: S 755.776 S ?r]=[I S3'?55 cased C.-h :"e !ar •idlu2 al 'he a•a• : cites and Computed n a macner ccrs.Stf.y' wl;h a neth7J descnDC7 by Retained earnings: S:alerren' of F ul-;nclal Accounting Standards No. 123. Be21nn.-j -al:-:e $1.130.446 S 9�5.::5 f�:E.S.h Me: rcre $k6.312 ?iS:?SC ;.a;! 'Accc-n,.i.i 'cr S:Ocl' Based Comce-sahcr," : SFAS i.-Me'ds:n. 123" 1 ;h--n tine Cor-pa-y.s net Ince-tie would ;-have Nelerra_S:p:k (12.4001 fa.4c8i 'Q, -3) =-:;,H ` 3 �_ 00,00 :$2 46 per bast, sage and $2.21 p- W-ranslefab'e dI uteJ Sha••_), $3-"-.b25,000'$1_94 oer basic sha"e Cass 6 S;o:k i6.5391 135C5i Fa 818i al,(;$1.75 per ,;IJCed s^are; and :269.8J8.✓��' -'•c-t•n-ns:a-k -- fa1.5a91 t 5:C5; r?31F'; " - is l 32 p?' t+s51C sh3'E and 5 i 30 per di ctcd snare; 'or Ent; g ^al:rct 11,596.220 1319u :s $L5?2!5 the )ea's w :eJ 5eole:ncer 30. 1998. E997 and 1996• recoeIvely the whets.-:ed a.✓aie per share tan 'value Met Ynrealuttl gaim/losses u4--d h Co-pu'.e .' rr�e::S-;Ion CCsi ')r t ;e yc'df ended on debt and ebWty secur6es Sup;emte: 3C. 19yb was $19-76 ant; Iell E:, welsh;ec available lot salt Big.:mngwarrr S 209.910 S :A.95_: S 454; average a55.:mpl,:rs mcludlil, a J.-.de'c ylcic or Cha-te in oe7:-tea rd 0.7%. a vo atlhty -j' 40-6%. a risk -free Interest rate of ;alnV roses as debt - 9`, ano an o�t:z- IIf_• )t 8-0) yea. s 1 he we.g-heed aYer- $e--c•:use+adabetorsale 373 41:.4 J= ==.ern are per Shari- fair va:..' used .c _olmpu;r cor.pensatic:! --"ange in ne:-nfea:n•]L CCS[ 'or I:;c year ended SeJ1s-:': UCf 30. 1997 was gain c-Murry stunt is a.:.akle;C'sa:e (15.155) 2:.2:» ;!.-I. �11 42 and r-'1?ets vegried average ass.:mphuns Crdnge C. mjusI .enl to I-C uding d t;I'vlJend v eld of 0-V0. d YOIa:I.Cy 01 de;t:rt•J ac;••sdbi costs 15.6a0Y ll5?s'3CI 3.f�:•= 39-3-a. a rlik-1•r-- ullera It rave cf 6.2'": and a-, opt c- NxellhlsclrtlChaa;es 7.344 (172.15,- E.5)5 We cl 7.0 veers. 7-ne welghtec average ptr r-are 'al, ;-ding ba ante S 196.272 $ r:'5.910 S:E,3531 Vdlue usec 'o coma _te c�-mpensst c, cost fcr :he year ender, Sep'emter 30, .996 wji S'-_s2 a-d reflects Div-de7Ls that :he Company may receive 'ron- Its we g-:er, a.,7:ag"! zssur--;);Ions Includl-g a d v:dcnc 1 to msu•anCe s_bs diaries in any yea: w thou[ onor Yle c a' l-3°c a voL'Ih;. of 40 ?a=. a risk -free apprCva; of tee Arizona. Califcrn,z c: New Ycrk rate of 6 0 % a-c an ontse's Lre cf 6.6 yeas i-' )urar:Ce i.ommissloner5 are Ilrn ted by s1a:Ul6. At tl� _ -48— The Company's five stock p!ars are (PC 1997 net inccme for 1998 would have been $415.539,000 Employee Incentive Stock Plan (the -1997 Plan"I. ($2.09 per bask share and $1-89 per diluted Shale). the 1995 Performance Stock Plan (the -1995 Plan"), Under its CEO Plan, the Company may grant shares the 1988 Employee Stock Plan (the -1988 Plan"), of its Common Stock to the Company's Chief Executive the Long -Term Performance- Based Incentive Plan tthe Officer (`CEO") in the form of stoc'K options Prior to "CEO Plan") and the Non -Employee Direclo:s' STOCk amendment of Lne CEO Plan, which was approved by Option Plan_ Tne 1988 Plan has been rep!aced by tie vareholders in fiscal 1997, awa,ds under Iris p'a:. 1997 Plan. Under these stock plans, the Company may were also made in the form of restricted stock or grant an aggregate of 42.632.550 shares to its employ deferred Shares The actual number of options granted ees in the form of either stork options, restricted stock is predicated upon defined performance of the or stock units. At September 30. 1998. 10.298.429 Company's Common Stock relative to defined per'cr- shares remain ava•%lable for future grant- Options trance of the S8= 500 Index Res!ncted shares a•e ne d granted under the plans have an exercise price equal to in escrow until the earlier of the CEO's death• disabiLty the market price at the dale of grant. have a maximum or retirement or Change in Control of the Company. term of 10 years and generally become exercisable rat- Deterred shares are held in escrow until 18 months alter ably over a five-year period- :he ea!her of U-.e C1.0's death, disability or reliremeal Under Ire terms of the StocK Option agree-nentS. or change n central of the Company. SOCK ootl--15 the pending merger with AIG (See Note 3) constitutes a granted uncle: this plan have an exercise price equal to change in control of the Company and. when Consum- the market price at the date of grant. have a maximum mated, will cause all unvested stock options to become term of 10 years and are immediately exercisable - immediately exercisable. If Me pending merger had A summary of the $talus of the Company's stock been completer, in 1998. an additiona: $70.806,000 orl.cn plans as cf September 30, 1998. 1997 and of compensation cost wouto have been recognized for 1996 and Changes during tie years then ended follows: purposes of the SFAS 123 pro forma disclosures, and Ira T 1437 1956 rrct•-ta vrtYr'd rm+r,tc 4.rtte 4raatr rw:ap Sr ter nest Lm tA:.0 Sores a ..:nt (OCCI% Y,ct =111 pier, WON! P.Ke Opuons c4;vaMin8 at beginning of sear 14.995 S14 21 1? :i] S 923 10.320 S 682 OGlws tracred 2 872 45.99 3.434 3.335 2.593 it! 31 Opt.tns turc.sed 4442) 829 1; 6 , 4 63 1306) : 00 Op: ons Weiled !6901 21 10 ;AJi 1632 ;:55) e to Cytons cuwane no at enc ct year 16.235 19-91 14 5; 14 21 !2?5? ? 13 Optic .s curs -sack a: e-d a! Itar 11.709 $15 07 9.110 S 965 9.022 s F 59 11 -49— The following table summarizes Information about NOTE 13: INCOME TAXES stock options outstanding at September 30. 1998- Tr.e components of t-he provisions Icr I:,come taxes on pretax Income consist of the following: 14:em oYsuaa+{ ;q'oas rlasc urt ebe.YN IL I+xwads) NMI Slate Istal a.vap +requN +rplraE ll91 rrnrr.4 trap awaat laelett sans WDW. al GNOW snern eamw Culren:7waatle $155,641 512.612 $151.523 aa¢a4 Prxas 100DS1 Ue ersv t=t) We Dert+re2 20.746 1.731 22.417 5 0 6610 $ 235 2.193 1.914u3 S 2.00 I,163 S 2.0D %4al into t tls erpf"t S176.517 114.413 S191•wwo S 4-50 to S 7.15 1.943 4-7 5.14 1 143 5.74 S8Ilia $11.31 4.160 S.2 10.01 3.402 9.11 S14.91toS2046 2.2U 7.4 II-08 1,434 t6n $25.33toW33 2.134 8-1 2629 1,124 2541 Currelure_ nl7waaok 716 S 29.993 S 2b.281 S 1. $39.35 to $60-41 3./49 1-2 4421 1.943 31-55 9esenM 12: 347 554 17{.00! Tout 16.235 6-5 1911 1009 15-07 Total s;ynetaserttnse S155E29 S 2.372 $I58007 1996- At September 30, 1998. 2,169.284 shares of CwfenlgwaaCle S110531 S10.;2i t1211-.657 unvested restricted stock are outstanding, and deterred eelefim (99:) 12?6ii 04511 shares and stock units representing 2,121,375 shares total lzornetai"ru $103540 S 8.067 $117.6m of stock are outstanding- The Company granted restricted stock and stock units aggregating 370.116 lucome taxes computed at the United States fed - shares in the year ended September 30. 1997 and dial Income tax rate of 35% and Income !axes provided 527,634 shares in the year ended September 30. 1996. differ as f011owi No restricted Stock or stock unitS were granted In the year ended September 30, 1998- The weighted average revs rtwsef!ecft Y. per snare fair value of such stock at the date of grant was $23-08 In 1997 and $15.83 In 1996- Res'r!ct ors Aga nl Co'1Pu!ed at genefat>y lapse e,tt•.er en a:: acceie,a.ed basis. upon st::. , Wit S241 S6D S:F7.G 8 S:31 _C9 achievement of defined perfcrmance goals. pon a Irlc eases fce_reases change in con'rot of Company, or over a defined ter.gth resu:.n[ "an t ICidatk *,Sing Of servtCe. COmpenWion cost charged to operations for :isCie, s 04.1DS1 [7443^I t1:,7s1; all outstanding restricted stock, deferred shales and Save Irl(oe•Ie tales, net Stock units amounted to $10,988,000 for the year C1 Well tap Wet.: 9.361 1.542 5.238 ended September 30, 1998, $23.940.000 for the year Dwdeeds-remwol ended September 30. 1997 and $21.124.000 for the Enfelca 119-2971 t15,55.3 182721 aver ru t7.63m 5-SS'3 5.172 year ended September 30, 1996. S1 Total m:r..t:aztsytn5e 5191.t100 54Yt SS:r.50D The pending merger with AIG (See Note 31 consh- Ues a change in control of the Company under She terms of tee various stack compensation plans and, wren conssmmated, all unvested restricted 5txk a^O 630.000 stock units well vest As a result, unamortlzed compensation cost. aggregating $26.306.000 a; September 30, 1998, will be charged to operations upon completion of the merger -50- Deferred income taxes reflect the net tax elfects of flaimmum, temporary differences between the carrying amounts of acr7toa'ueRte ctu rs, SWWd Iml 1x2' assets and liabilities for financial reporting purposes 1951: He:'nre6Ystn: scone $143.665 S152.00s SI8S•16C $197.94, and the amounts used for income tax eeportlrg pur• poses- The significant components of the Iraoildy of dtt 1W.1t3 +messr_t lalns:bsses: :5.30) (9c47) f.2.1361 :.679 Deferred income Taxes are as follows: 0.%; 13.510 81.796 S2.33C- General air Sr,:tcprr l0. adrr.�titta'..! Isla 1991 upe ses (59.25e) 162935) (10.413) (74.030) 041orrN Us WOrlrf Amon.wan of deferred Lme5lneets S 105.196 S !25.652 arourwicn costs (30.410) (30.003) M.0BC•) (51.55s) be)eeed acgwsmorr psis 381.734 341.131 ,;ttu,nrZOre 1!4.1Ea 114.034 132.S21 15.327 51a't income taus 4.568 3 428 km ne :asa tn5t l34 eC71 ?3i 1CC) d,Sk; 147EC3 o:ner lurhlies 143.451 125.92, Net urrealired lain on cams: cetl 1W zcr.e S 8C.368 3 86.E34 $ 94.321 V i 7.521 any eCwty immies 105,N6 113.028 Per basic share S 0.13 S 046 S 0 51 S 050 1001 dtterred 18- haeMt es 741.831 704.367 Per diluted share S 039 S 042 S 0 a5 1 0 SA OelvTod In assets= Conttacttq)dtt ctstrm t21t1111 (293.94S7 NOTE 15: BUSINESS SEGMENTS Other assets (54.206) 125.693) Summarized Bala for t':e Company's b:a,r.ess segments Tgaldererredtuasses (352.9271 i325dC3] 101'CwS- Weird inc"a tuts $ 394.910 S 383.754 k:aI Ot mWim NOTE 34: QUARTERLY FINANCIAL DATA aW (UNAUDITED) tact aow-'al O r+rt+, r7al 03 L1acLaty] nr.rrcel n7mv r't>tl IssNs Quarterly financial data for the years ended 1998: September 30. 1998 a .a 1997 follow Ann,:,:cevl,_-s $2.340.933 5236.294 W2.112 $31.35$.034 { ■ :er�cdl B-otir'ts-er b:t9t err.341 a9[.rrsl Fi-1t Secsrrd I.." Fptr11` 4eratrc•s I19.165 1.276 34.141 195.122 Rtl,emt" :ruse )191 stnces $0.774 1.116 6.133 419.121 Hit irntalrEtrll incaoe $191,153 S20S.110 S21e.113 5224,118 Asset rranagemnl 41.040 14,710 1.171 101476 del d avtstotnSossts) Pfemum i.runcn•t 24.957 1.050 5.755 45.954 lain$ 3.111 7.251 5.77I 0I.9e5) -- lee inccme 100,922 101.571 123.566 125.466 Teal S7.577.569 $261.I00 S707.312 S39.M.407 CtnenlanC admrstu:,rt 199): tape:ses t17.36I1 (17.391) 481.219) (74.2141 A_n-a,lYCprratgs S).S35=12 S!5V 4 U93349 S343K5.-Is: A.knualon dt dt!e;.,td &5k,eeals, ac9u1s::rxiMS (554") (55.620) (63.386) (66.695) walw.s 67.052 2.401 22.522 101049 Prt:u ircomt 169.139 113.313 191.911 155.662 Rpce.mr; t,ust 1-CUCA art taot= fs5,T441 (s1.540) l54.4041 (41,1401 stmm 49.279 1A97 13,0G1 487596 Nei income Sln.631 $133,493 $144.918 3113.861 Asset me.tafe-ient 35.651 15.357 2.198 81.53 Prerr ..n'ina.:_,tg 2E.912 !.C33 E.?e0 57 2E3 Pe: basic share $ 0.63 S 0-61 $ 0-73 S OSt .,s Vtts:1?6 Wi.)b t:1111 53iS:i4io Pet diluted shoe $ 0.56 S 060 $ 0 b6 S 0-51 1196 Ann:;fdpt•a:i:n s1.3:5.553 S 91.3% $350.153 $21.032.076 BmWdealer rerr.,,rrs 51.906 L229 I ).253 7s.1s0 Rt'ner•W lr_-s! se:+ -:es 45.216 I :Es 13.570 :El F4 Asset rm: ftn:c: 33.347 16.235 2.4e6 74 ::3 Prr.um ras rl 16663 3K Oy3 542?1 'cart 31412.1E5 S1?9A51 $39?.027 S23.726.871 -51— MANAGEMENT'S REPORT The management of SunAnnerica inc and its subsidiaries has the ;e%Wsib.l,Vy !a preparing the accompanyrrg conson- doted financial statements and for their in;egr•:y and oblectw- Ily The statements were prepared in acc-�rGance wall generally accepted accounting Principles applied an a consrsten: bass and ace not misstated bur 10 material fraud or error. The consolidated financial statements include amounts that are based on management's test estimates and judgments - Management is also responsible tot the ogler +n.`ormalion in the annual report The Company's consolidated financial Statements have been audited Dy PnceyyaterhouseCOOpers LLP independent ceruhed public acCountanls Management has mare avail- able to Prrcewdte[houseCoopecs LLP all she Company's hnancwr retards and related data. as well as tie ruin zes of ShareholOer6' and ddrecters' mer:ings Fwtherm. e. mar. agernent believes that all representa:Ions ma;.e :o PncewaterhouseCoopers LLP duthng lit% audit were valid and appropriate Managemt'o: has established and maintains a system of in!ernal control that Ptondes reasonable assurance as to the integrity and reliability 01 the wrsohda;ed !hnaa.zhal statements, the INo:ecllon of assets '!Om unauthor zed Jse or uisaostuon. and the prevention and detecnon cf rrac:ulert linanual reporting- The Company maintains a strong internal auditing program that independently assesses the e!fec6tvcness of the internal controls and recommends poss-Jle I;nprove. rrenls thereto In addlllcn. as part of .ts aielt of !hc Comyar:y's consolidated hranctal statements. Pncewalerhoase-ccV..s. LLP Complete- a study and evaluxion of sele::ed Internal accounting controls to establish a basis for reliance thereon In determining ;he nature, timing. and extent of audit tells to be applied Management beheyes that the Company's sys:o-.n of mteerial cortrAl Is adequate io accomplis% :he o.._Rt-vts d•scussed hereinManage:ner-t also recognizes its !esponslDllity:or'Ostenng a strong ethical climate so trial the Company's affairs atC conddt;ed according w the highest standards of condOCl This responsibility Is reffected in the Campany's code of c_rporate conduct. which :s pef1*Mca:iy o4tributed to al: emplcy_xs *'te cote c! co;,cucl addresses. amorg Other rings.:he necessity or ersur•rg 0;,en c;m:irOnita;ton within the [pmpany; pc.ennal tOnfliCts Of interest• compliance wi:h all raves. Including those relating to fieancfal atsctosure. anct the confidentiality o: proprietary information. The Company ma.nlams a systematic p.'Ogra'n to assess CO;1pl Ia•.xe w.lh tnese Ni ides '9A 0fb� - SCOTT L. ROBINSON Senior Vice President and Controller November 9. 1998 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of D.recrors dnd Sna:e.'gldefs dr SOnAme;tea Inc. In dtr op:nion. the accor:panymg Consolida:ed oala9ce Sheel and [he related consoli0aled income statement and stalemen: 0: cash (loves present fairly. In all nixerlal respects. the fmanc:al pos.[Ion o! Su.nArcencca Inc an? Its subsld-apes a[ 5eptem4r! 30. 1998 ar7 ? 997. and :he results o' the r oper. attons and !heir cash 1'g,-s for each Of the Mlee years in the period ended September 30. 1998. In conlo:may with genet. ally accepted accounting Frmcipres. These hnanclal stare. nten!s are the resperlstbtti:y of the Company's management. our fespons-blllty Is !o e3sress an cp,ntort un these financial sWernews based on Our aud':s- We c9nd.r_terl 0jr audits or these sta:e'ner.ts accordance with eencrally accepted aj=ding standards which recwue that we plan and per`orrn tie Audi: to Obtain teasonable assuranKe about -'nether the hnan. [cal sla:emenls are free rl material misstatement An audit Inck;des examining. on a :est basis. evidence supporting the amo,:n;s any dIsCIOs. r.-s iq the 'mar{cal s;dte ers. assess-ing the cr:cu g ;t.nc•p.cs used ara stgq•'Ica.h; estimates nk e by managemCr:. anc eva't.a, ng the Overall ftnartcof stalemea: i reSerlat.on. We believe lna: our audits prov:ce a reasonable bans Itr the Opinion expresses above PRICEWATERHOUSECOOPERS LLP Los Angeles, California November 9. 1998 .. � ..- - �:-..:. � -•Caw. �a�T ,, DIRECTORS Ell /rnd, 65. Chairman, President sad Chrel &ocul,re Officer SunAmerim Inc- Co-founded the company ,n 1957 WUlism ► Aldi ger, 51, Chairman and Chef fra[uhve Officer. Household fnt&-lV nal, Inc- ApPoitiled a Oi,Kfor cf file company in 1996- llaraa Haslie-Witllam, 54. Partner, the law firm of Go"ll d Aforrng Appointed a d+recrar of the company ,n 1994- Pearp C. Naaahy, 49. Vice Chamnam, L1 S. Bancorp and President, Rerail Banking Grvup. Aopanfed a director of the Company m 1998. 0and 0. Maiwell, 68. Remed Chairman and Chief C.ec_r,ie Officer, federal Ndlgnal Mortgagor AsapciNroir Aypo,n.ed a d,ractor of the comPany in 1985 Marry funds, 57. Pfes:deA. and Ch:e! Ejecul:vc O!Aca. the J Pa;,: Get•.y rrr,•st. ApMntC` a damlor of Me Corrtpany ,rr 1994- Laura Ponacl4 65. MdtWl.j D;rec:a. tafard frerCS d Cc. UC and .Afaaaging D,rtcror ct Centre Partners Nanagemen! :LC. Appointed a omecwt of ; 4e u—piny in 198.1 Carl E Voic urdr, 67. Reuel Cha,fmj:a a.:d Cniel Otr,cer, Wef!s l ar.-p d Comimny and as y,rc,pa! sul.,vau y. 14e!li rargd Bark Appq;,r.!ed a deec!or of the Comp,::y +n 1995 Samard C- Sigara9, 68, Charman, President and Chef E,ecel,re Oft+cer, 5,jobf: d AssoC+a.et. Inc. forcer Vice Chairman and Chief Operating Ofhcar of the coimPany 11979-871. Appointed a craOC:o of :he company in 1979 Haim M. Winiam, 70, Of Ccunset Skodce,,, Asps. Siafe. Mcighe, d Rom- Pres,rlem fineirtus. the! Pa;:! Gerry rhos! ro,nm, Chd,iirian. un,:ed S:a:es Sttunt:es end E.change Cc.^:,m:srdn 11977-811- ArX:nled a director of the coT!pan; m J997 Jay S- WintraG, 41. Vice Chairman and G^:ef Upera::rg Ofhc f. Sw!,A.^.Yi,Ca Inc App—,Wed a d,racior of the C6:rPany M 1997 -ram ti i �I ..1 `• f JN -53— OFFICERS En ImAH. 65. Chairman• President And Chief Frecwiw Dtf ref Sam H. Rithtana, 36• Senoe Vice Presraent £.recutre Vice Cafbunded the company in 1957 Preidant, SunArrcrica F,nancW Responsible for annuiy Serr+:e Jay S. W1a3ob. 41, Vice Chairman and Chief Operarirrg Officer- bpeiaridres and human resources. Joined the company in 1990. President SunAmer;ca 1nmWmenfs- Joined the company m 1987 Sun L RoWnwn, 52, Sens vr_e Presdent and Confrotlr lawn A. tuar4i, Q7. Fietut,.e Vr[e President. President. E.ecuom Vr=e Pre5+de!] . SunA.^`e ics F,r.anc,al. Responsible for SunA.mer,ca National Let@ m4wonce C•Ampeny Has ereruti-w lmanc,at tepon;np, ec;;:4r,al, tar and and,t functions- J&r,*d the respo—b1hy for the company's finance, Veawy, product devel. company in 1978- opmo,rlf and ,mentor War-" functions. and ,n Ovaranreed lawn w_ Rosa.• 36. Se-iia, Vice Pret'dent. Has etecur,ve mroun enr convocl and mutual fund businesses- Joined the respons:Way for intorm.Khoa reclinoicV. e!ec!ror.,c commarce company ,n 1986 and kowurces 7f;:sr Company Joined the company in 1992. Marc H. 6avula, 43. Senior vice President. C.cc.bi a Vice R_ q 31. V.Ce Pro,s,den7 and Titasurer Joined 1ne Pnesidenf• Sun lmer ca Carporare Finance Has fespwm billy amparry ; - com 19998' for investment partnerships and corporate de.etppmenr• area aaecurne responsibility for tega1 and reralarory affairs- Joined Koval t;arnanam. 42. Vice President. lnves!cv Relat,bnS the company ,n 1996. Responsible for snare+uldn And analyst re.Llrons Joined lane Wartag Vow, 46. Senior vice Piesvent. Pres,derr, me company m t 995. SunAma,ca Retirement Markets, Inc. As chief ma,ke!,..V ofl:ce,• Niekap l- Forfar, 44. Vice Pres:dent- President, SunAmenca has respons,b,Lty fa the company's reriremenf Hv,.V3 rnarklGr$, Affordable Hars,np Pa?nefs Jo,nea the company ,n 1988- ad6eR,s,np and sates functions, as well as eaecur,ve responsibility for irs annuity service cjxwvf wn Joned the company m 1974_ y Scan 6ima. 45. vice Presidad 5en,or V,Ce PteS4eril and Con!AWW.. - SeLn L Kurth. 41. Senior Vice Presideal. (;enrol Counsel and SunAmer,,a Life C4)mwies Jornea the company in 1985- Seaefsey Responmble for le:al and regulatory aftNn. Joied the Carlo L Holdfidje. Jr- 41. Vice Plesiderit Erecuhve V.ce company in 1985- Pr46idenr. SunAmer,ca Fa,anoa+- Responsible for Frtb; mandrt Cary W- KraC 51, Senior vice Pres,denr. Chairman endCh,N technetbgy Joined the com-pant ,n 1933 Frecut," Officer of the SunAmeoca Financial Netko k- Joinery Donald E- Sostow. 39, vice President, CorPXafe Com mumcaiiGis rho,company m 1940 Respi:•'s,bfe for p;Wc and inedia relations- Joined the company in 1997 IWI -sa- OTHER SENIOR MANAGEMENT Vincent 1- Asam. 41. Presdent, SunAfnenca S&urifres. Peter NCNirla■ all, 4:, F.rrcvbv ilice Pn75iden! and Chef lamed rho Company in 1987 fnvesrmert Cfficrr. SuriA.menca k-mments. Jared the Wpbe. Aum ue, 41, Prmderr. Resources Trust Company ca•ripany m 1989- Joined Me company in I990. J. Steaen Xeanla. 6C. &0CWW vice Pres�oert, Sunhmerrc i My Cdlieti 51. Presrdent, Royal Alliance Associates. Ass& Aranagemeti! Cxp- Joined the Company in 1996. Joined the company :n 1990 Alan 1- MuasWIM 49. SCmor Vice Pms:denf. SunAaw ca Aobert 1- Lyeoa, 64. Pr rodent. rm pdia! Premium Frrarsce linrsfinenfs- Jo:ned the cv m dnr .� 1987 Joined the company m 1994 Roben i- Sydow. 43. SC^:ur Vice Pies+ter:. SunAmerica POW A. MaldaelL 44, President, $unAmer+Cd Asae! Ma,,najCnY r7 trvestrncnts Domed .1^e ci impany in 1989 Corp_ JOA'red the company in 19W. f- IamK Warier. 56. Pres' enf. Firanc:dt Sen:Ce Ccfwd!:m Kahn t_ Hart, 44. Executive Vice Presicerf ar.1 tsatidnar Saies 1w"ed the comp any i+ 1991 Manager. SunAmerica Refiremen: Martens. Inc Jarred Me Pachald P_ *Wunw. 69. Pies den.. Sentta Secu:if:es Copva!ior company m 1995 ant Speina*.a A Co. '-,c. Jar rd ,he c v-paiiv m / 998- laps A. +leek 47, President. SumAi:,er:ca Cerpoate F,.,Qnce Lai 2semae, 51. Pfes:^ent- Advdn!d6= Capital. )o ed the Execulive Vice President, SunAmericd !rc estme::Is company in 1996 Joined the company in 1990 1 r r� V; t Robe,l 1. Crccn Peter A. flaiteCk I% .i iti 1. Strata Heamrr Nan 1. Ohm%ccbtatt Lea Ie4esa � 3 SUNAMERICA SHAREHOLDER INFORMATION EQUITY SECURITIES PROFILE SunAmerica's common stock is listed on the New York Stock Exchange and Pacific Stock Exchange under the ticker symbol -SAI- and is also traded on the Boston, Midwest and Philadelphia Exchanges. Options are trad. ed On the Philadelphia Exchange- There is no market for SunAmerica's Nontransferable Class B Stock. As of the date of this report, StinAmerica has entered into an agreement to merge with American International Group, Inc. (AIG)- Upon completion of the merger, SurtArnerica will merge with and into AIG. with AIG being the surviving corporation and SunAmerrca ceasing to be a separate, publicly held company. Holders of SunAmerica common Block will receive 0.855 of a share of AIG common stock in exchange for each share of SunAmerica common stock_ AIG is traded under the Symbol `AIG" on the New York Stock Exchange - Copies of the joint proxy staternent3prospectus descrio.ng the transaction were mailed to shareholders on or about October 13. 1998- A speciat meeting of shareholders was herd to approve the merger on November I B. 1998. Upon consummation of the merger, shareholders will be mailed written instructions for exchanging their SunAmerica share certnccates for AIG share certihcaxs as deta0ed in the proxylprospectus Shareholders may obtain copies of the proxylprospectus by contacur•R SunAmerica'S investor relations department. RELATED EQUITY SECURITIES LISTED ON THE NEW YORK STOCK EXCHANGE bM E SunAmerica Inc $3.10 Depository Shares, Each Representing One -Fiftieth or a Share or Se: yes E Mandatory Conversion Premium Div-dend Preferred Stock" SIP SunAmerrca Inc. 8'h% Premium Equity Redemption Cumulative Security Units (( ERCS• Unitsy" SA1pV SunAmerica Capital Trust II - 8.35% Trust Orrg,na:ed Preferred Securities (TOPrS') SAIpw SunAmerica Capital Trust Ill - 8-30% Trust Originated Preferred Securities (TOPrS') .' Rcau.ra r OC-abr 3C•_ :9% v R.X~ v ).cam 6. !999 COMMON STOCK PRICES AND DIVIDEND DATA, ficar hu Kta I.D. D.,&.,f%PW Im FoirrtitOua,ler ST�S SSiY. SO.IS thrd 0"I'm s5s S-69s S5 10 Sewed Owner S50'r. 137 $0.10 First Garter US% 1,32 50.10 t91 fourthOuarter $40% S3n$306, ThedOuarta $3411. $2e°!. $0057 Svix4v0:aner 134 $24% 50067 First O;$rtef W/. $23% sow 'SIRa Iran RWW Ir me 11r. M UK% Ilia" INQUIRIES REGARDING YOUR STOCK HOLDINGS Re;istered Shareholder (Shares held in youv namel Questions about your account statement. dividend payments or related inquiries should be directed to SunAmerica's transfer agent - The Bank of New York Shareholder Relations Department 1 IE P-0_ Box 11258 Church Street Station New York, NY 10286 (800) 520-4458 In all correspondence or phone inquiries. please men. tion SunAmerica Inc , your name as it is printed on ycvr stock certificate, your account number (Social Security number), your address and telephone number BeneficialShareholders (Shares held by your broker in The name of the Drokerage Company) Questions on all administrative marter5 should be direct ud to your broker INQUIRIES ABOUT THE COMPANY If you have questions awul SunAmerica or is you would t.'-te to receive addil,onal mves'.cr materials published by the company, in:luding a Form 10-K and quarte0y reports. please contact! Karel Carnonan Vice President, Investor Relations SunAr-enCa Inc. l SunAmerr_a Center Los Angeles, CA 90067-6022 (310) 772.6535 i nvestorOsijnamer i ca.com CREDIT RATINGS S&P Mocay's Unit d P•e'ps A B•sf SunAmerica `rational Life Insurance Co. AAA— SunAmerrCa Life Insurance Co. AA- A2 AA A+ Anchor National Life Insurance Co- AA- A2 AA A. CalAmerrca Life insurance Co- AA- — — A First SunAmerrca Lite insurance Co- AA- A2 - - A- SunAmerica Inc. Senior Debt A Saa i A — SunAmerica, Inc_ Short -Term Debt A-1 P-2 D-1 - SanAmerica Inc. Preferred Stock A- Baa2 A- — I D NCO LIMIDIEU DB9 ummu A ALL UL Ak. . j sea fts HE aM 2696SUAL (MODOU ,Adau Ame 'can lniernational Group, ncI jS base in ernatio al nsurance r a r •a io nd t o larges a er o comrnere al and 1 s Al co er ge I t e nited S ates. ! • e e cornpanie w ite grope casual ar ne life an a vial lines ins ce n ;Al o i a ely 30 coon nes and lu s ,ctao s, d are a ga ed 117 a a ge o nano al ery ces a d nve t en a age en businesses. I ! l Financial Highlights (in millions, except per share data and ratios) 1998 1997 % Change General insurance operating income` $ 2,723 $ 2,344 16.2 Life insurance operating income* 1,815 1,550 17.1 Financial services operating income 913 701 30.2 Income before taxes and minority interest 5,529 4,731 16.9 Net income 3,766 3,332 13.0 Net income per common share** 3.57 3.15 13.3 Book value per common share 25.85 22.87 13.0 Cash dividends per common share .21 .19 10.5 Revenues $ 33,296 $ 30,602 8.8 Assets 194,398 163,971 18.6 Capital funds (shareholders' equity) 27,131 24,001 13.0 Combined loss and expense ratio 96.36 96.20 Excluding realized capital gains (losses) Based on diluted shares (Millions of dollars) 1998 13,766 1997 3,332 1996 2,897 1995 2,510 1994 2,176 (Millions of dollars) 1998133,296 1997 xs, W, a 30,602 1996 a "y"2e _ : %fir. " .� �•:u,,� 27,943 199525,614 1994 22,122 (Millions of dollars) 1998 194,398 1997 163,971 1996 148,431 1995 134,136 1994 114,346 Capital Funds (Shareholders' Equity) (Millions of dollars) 1998 27,131 1997 24,001 1996 22,044 1995 19,827 1994 16,422 Letter to Shareholders AIGhad record earnings in MS. a Ycar charactcrircd by finan( ial and uonomic curmni: in Asia, volatility in world financial markers, wid an tbbing of investor corifidrricr, particu- larly in emerging markets. As the• year progressed, howex:t-r, thtrc werc.i nurnlx•r of pxrsIIIVC signs that global problems were finally N:ins; addressed in a more cans(ructive manner, and the ourlook is somexhat brighter than it was a vrar ago - AIG's net income rose l -0 percerit to $ i " billion, or S').5 per share. Other financial highlights of 1998 included: • Income- lx•fore• Taxes and minority interest gaited 16 9 htrccnt to S5 53 billion; 11 Revenues increased 8.8 pxrccni to S33.3 billion, • Assrts rose 18-6 percent To S 19 i bilhori. • At year-cnd, AIG's slarehulde•rs' ccluitt• Totaled S?- 1 billion, and • AIG's return on came' was 15-0 percunr At Deccmlx•r i1, 1998, Ak;'5 stet kc marker capralizarion I-na,scd Elie 5100 hiiluxt mark;, reaching; $101.4 billon, or $1 19.6 billion, reflec tiny; tht accpuisitiun O'SunAmerica Int. on January- 1, 1999- This ranked Alf; 15rh in market cap1ta1J7;Moii among; all I i.S. public corporatioriS, .End 26rl among .ill global comixi ic:s. In mud -March 1999, as this animal report event to press, A16 s marker capitalization had risen to approximately St �9 billion \k"orldV,ic?r general iosLlraucc operation~ grrn•raicd S2 0 billion of new cash flow in 1998. including; interest and rcinvesrrd dividends, and ottr lift trisur,Inct cash fins• mtaled a-0 blllLOn. AIG holds Triplc-A ru tr>,t;s from the principr.Ll nitrng ser.viccs, \1cxydy's and Standard & Nair s_ Review of 1998 Operating; in global markets roiled by unprecederucd vularility, cspcuall} in Asti, was the order of the day' to 1998. The widely public izc•d financial dislocations that uccurred unsrtcled invc_%iors, as man}' institutions and hr:clg;L' funds rvp ortcd sIXnificanr losses Dirt• in the year, Russia dcfaulrtd on its debt. which Ird m a sharp devaluation of the Russian curreruy- In addition, shortly after year-c•rid. Brazil devalued its currency and interest rates row, propelling the country into recession. It became apparClIt that pcilitical forces ut Br,v.il were resisting The fiscal plans that Prc-sidcnt Cardoso rccurnmendcd, plans which in The lung run WULtld benefit The economy-. W(: are cautiously oprimisric that he will Ix- suuvssf it in achieving; economic Stability for Brazil - On the Ixisitivc• side, the• G countries respxindrd to the global financial nncerrainty by reducing{ intere-sr rites, and ncc INIF ilrcred its approach to affeccod countries by mod(-rtrin8 the scvt•rc policies and me;Lsures it had c.inccr advocated Trade surpluses incrulsed in 1998 in .t nurtilx•r tit ccrunrnes. Tarp—ly- as a result cif sharply reduced irnp orrs, while in Soucheasr Asti. proL;rrss is tieing; made ro«.ird c•nactui}; Ic•g:isIMLuin on bankruptcy and foreclosure prcxeLlurc•s Maurice R. Greenberg Chairman and Chief Executive Officer . The United States property -casualty market continues to be very competitive. There are now signs, however, that certain classes of business may have reached a level where prices are stabilizing, and, as reported in our year-end 1998 earnings press release, in a number of specialty classes we are obtaining rate increases. During the year, AIG non -renewed $450 million of domestic business that failed to meet our underwriting and pricing standards. We also made a number of changes in our Domestic Brokerage Group to enable it to confront the challenges of the domestic marketplace more effectively. As a result, we have a more responsive organization and one that is better able to operate in the intensely competitive world we face today. Consolidation in the insurance industry continued in 1998 with a number of mergers, acquisitions and international alliances. In some cases, consolidations resulted from weakness rather than strength, with little strategic rationale. AIG has primarily focused on internal growth as a basic strategy, although we have made both opportunistic and strategic acquisitions on occasion. That was the case with our acquisition of SunAmerica Inc. in a pooling -of - interests transaction for AIG stock valued at approximately $18 billion. SunAmerica, an outstanding performer and a leader in asset accumulation products for both the retirement and pre -retirement markets, officially became a wholly owned subsidiary of AIG on January 1, 1999. (Seepage 11 for an overview of SunAmerica. ) Retirement savings is a worldwide issue, as state -run pension plans are inadequately funded in many countries, and the baby boom generation is becoming concerned about retirement income. The privatization of government -run pension plans taking place in many countries is an indication that state -run plans are seeking to change their historic - structure, thus forcing individuals to provide increasingly for their own retirement. Letter to Shareholders (•C0NTIN U E D ) SunAmerica's strength is in the U.S. market for retire- ment savings products. We believe a major opportunity exists to introduce its products and marketing skills into overseas markets where AIG has extensive and longstand- ing operations. By capitalizing on our global network, we plan to introduce SunAmerica products into.a number of such markets in the near future. Steps are already underway to implement.this strategy. There are also opportunities domestically to utilize SunAmerica's nearly.10,000 inde- pendent financial advisers and their nationwide distribution system to market AIG's domestic life insurance products. In addition, the mutual fund business of SunAmerica com- plements AIG's find business and will strengthen our product offerings and distribution in this area. We were also attracted to SunAmerica because of the company's strong entrepreneurial culture, creativity, dynamic lead- ership, strict expense control and sharp bottom line focus, characteristics that will blend well with the AIG culture. Return on Equity MI 91� 25.0 -5.0 88 89 90 91 92 93 94 95 96 97 98` e AIG _ Industry mmm, S&P 500 Industry and S&P 500 Estimated Industry and S&P 500 Source: Conning & Company During 1998, AIG made three other important investments, acquiring over 50 percent ownership of both Transatlantic Holdings, Inc. and 20th Century Industries, and purchas- ing all of the outstanding shares of SELIC Holdings, Ltd., parent company of Starr Excess Liability Insurance Company, Ltd. All three companies are now consolidated subsidiaries of AIG, whereas they had formerly been minority -owned investments. Another significant move in 1998 was our long term investment agreement with The Blackstone Group Holdings, LY, whereby AIG acquired a limited partnership interest in Blackstone. AIG has had a long and very successful relationship investing with Blackstone, and we intend to continue to do so in the future. Another priority for us during 1998 was our continued emphasis on developing and cap- italizing on technology to enhance AIG's distribution networks and levels of service to brokers, agents and customers. Electronic commerce, and in particular the use of the Internet to attract new customers and improve service to existing customers, is an important focus for AIG worldwide: Business Segment Results In AIG's general insurance business, worldwide net premiums written increased 8.8 per- cent in 1998 to $14.59 billion, including the consolidated half -year results of Transatlantic Holdings, Inc. and 20th Century Industries. Income before income taxes, realized capital gains and minority interest for general insurance gained 16.2 percent to $2.72 billion. AIG posted a record adjusted underwriting profit of $530.8 million for the year, and a combined ratio of 96.36, compared to an estimated 103.7 for the property -casualty industry. AIG's general insurance operations have one of the lowest expense ratios in the industry, which provides us with a distinct competitive advantage. AIG added 8551.6 million to our general insurance net loss and loss adjustment reserves in 1.998, and at December 31, these reserves stood at $24.6 billion. left to right Evan G. Greenberg President and Chief Operating Officer Thomas R. Tizzio Senior Vice Chairman, General Insurance Industry catastrophe losses increased in 1998, as Hurricane Georges caused insured losses of approximately $3.0 billion in the Caribbean and the Southeastern United States. This was the largest single catastrophe to impact the insurance industry in several years. Overall, industry catastrophe losses totaled an estimated $10.1 billion in 1998, compared to a relatively modest $2.6 billion in 1997. For AIG, net catastrophe losses amounted to $110 million, compared to only $16 million the prior year. During 1998, AIG's Domestic Brokerage Group maintained its focus on underwriting discipline and strict expense control. Our mergers and acquisitions insurance unit has become a leader in assisting clients with strategic alternatives to eliminate, manage or reduce the impact of liabilities in M&A transactions, including solutions to environmental issues, litigation, accrued liabilities and retirement benefit obligations. Meanwhile, AIG Risk Finance has carved out a profitable role in structuring advanced risk management solutions and managing strategic risks. The Domestic Brokerage Group companies also developed tailored management liability programs for both Nasdaq and New York Stock Exchange listed companies, underscoring AIG's leadership and innovation in both products and distribution. Our Domestic Personal Lines business had a very successful year, with net premiums written rising 75.2 percent to $1.42 billion, including the consolidated operations of 20th Century Industries. The AIG Auto Insurance Program is achieving strong results nation- wide based on targeted underwriting, excellent customer service, state-of-the-art technology and high visibility marketing and advertising support. The Specialty Auto Division had a 25.4 percent gain in net premiums written, offering products for the non-standard auto mar- ket in 27 states. 20th Century Industries had satisfactory operating results, despite an increasingly competitive auto insurance market on the West Coast and an additional $40 million provision for potential claim payments relating to the Northridge earthquake. On a global basis, AIG now has approximately $3 billion in personal auto net premiums written. Letter to Shareholders (CON I i N t1 i D) United Guaranty Corporation (UGC), AIG's subsidiary for mortgage guaranty insurance, also had a strong Increase in net premiums written and a 24.5 percent gain in oper- ating income to S221.9 million. In its first major investment outside the United Stares, UGC and its joint venture partners have formed a new mortgage insurance company in Israel. AIG's overseas property -casualty insurance operations reported outstanding underwriting results, an increase in local currency net premiums written of 1 %-5 percent, including the nuw consolidated foreign operations of Transatlantic Holdings, Inc., and a 10 8 percent gain in operating income to $960.1 million. American Inrernational Underwriters (AIU) continued Its emphasis on opportunities crvaretd by technological advances. Increased privatization and infrastructure drvelopmcm user 4r EMS to pobcrrold rs) 125 55 &P 89 90 92 97 93 94 95 96 97 98, ri AIG raft Industry" In Japan, AIU's largest country market, our business Indistry t%rurtc Stock Conva_ pS continues to flourish despite the .weak Japanese economy- IrdustrySwee Conan&&Conitlany The ""fight to quality" has benefited AIG's Japanese opera- Acarb+reore',oaless than 100reflects anunaerwmnapo;n. tions, .which have rheir own `I-riplc-A fin.lncial strength rarings from Standard h p(x)r's- Our clircer auto business il-iroul:h the Japan hranch of American Home Assurance Company had a very sue ccssful first full year of olx-rations In Southeast Asia and China, AIU died well, reflecting our Iong-establashrtd marker lxisl- tions and outstanding agency force- The concern over financial stability rluou,L�hour the rcgron has provided AIL with uplx)rtunitics ro attract new eornnicrcial and consumer clients. Op raring results in the United K111Pdom and Continental Furolx:V,•rre von. };oxxd In the Central 1=urope and Commonwealth of Indc•penle"nt States D2%,25)tm, tvhrrr AIG; has the most extensive network of any international Insurer, .we expanded .rich new general insur- ance operations in Lithuania, Kazakhstan and Slovakia. Olx"rations In the ii addle East and Africa also had good growth In 1998, and orir direct markrring joanr vuriLurc company In Israel, AIG Golden Ltd , is off to an encouraging start. In Latin America, results improved over the prior year, and our srratcgic flans should produce siron};cr performanct in the future Our Laren American Insurance network cxpandexi in 1998, with the acquisition of a majority interest in a life and non -life insurer in El Salvador Transatlantic Holdings, Inc., in w°hich we have long; held a minority ownership interest. became a consolidated subsidiary in 1998 when AIG accµaire d over 50 lxrcent of the company. Transarlantic is the largest broker -market reinsurance organization in the United States and a recognized leader Ili the specialn. ca.SUA1ty ficdcl- Its cxte:islve overseas opxrarions account for a growing share of Transatlantic"s business_ Transatlantic had .I so)lId Year, with all Increau in net premiums written and posed contributions from lx)th its domestic and oversrts reinsurance operations. left to right Frank G. Wisner Vice Chairman, External Affairs Howard I. Smith Executive Vice President, Chief Financial Officer and Comptroller Edward E. Matthews Vice Chairman, Investments and Financial Services Robert M. Sandler Executive Vice President, Senior Casualty Actuary and Senior Claims Officer Edmund S.W. Tse Vice Chairman, Life Insurance AIG's Life Division reported 1998 premium income rose 16.4 percent in local currency. Operating income before realized capital gains increased 17.1 percent to $1..81 billion. Our life premiums continued to be impacted adversely by foreign exchange fluctuations for most of the year. However, if the turnaround in financial and currency markets that took place late in 1.998 continues, the impact on future life premium growth in U.S. dollars would be moderated. Our Asian life business did extremely well in 1998 in a very difficult environment. American International Assurance Company, Ltd. (AIA), which is the largest life insurer in Southeast Asia, turned in a very creditable performance, beneficing from its many years in the region and its network of thousands of agents. Nan Shan Life Insurance Company, Ltd., one of the largest life companies in Taiwan and a strong, consistent performer, also had a very good year. ALICO Japan, as with our operations throughout Asia, benefited from its Triple -A ratings, and had double-digit premium growth despite a stagnant Japanese life insurance industry. In an expansion of AIG's network in Central Europe, American Life Insurance Company (ALICO) and our joint venture partner acquired a majority interest in the Bulgarian Post Bank, A.D. ALICO, one of the largest international life insurance companies in the world, with $202.8 billion of life insurance in -force, has the most extensive international life net- work in Central and Eastern Europe, with operations in Poland, Hungary, Czech Republic, Slovakia and Romania. The AIG Life Companies (U.S.) achieved a 20 percent gain in operating income to $150 million. The addition of SunAmerica to the AIG family will provide important new growth opportunities for our existing U.S. life business, and plans are well underway to mobilize the SunAmerica distribution network to market AIG's U.S. life products. Letter to Shareholders f C 0 N r i N u t D 1 The Financial Services Group had a 30.2 percenr increase in opemting inccamc to a record $913.1 million_ International I -ease Finance Corporation (ILFC) had an outstanding year. Its aircraft leasing business was particularly strong in Europe, and aircraft sales were also very satisfactory- ILFC's widely diversified global client base is an important asset. ensur- ing the company is not overly reliant on income from any single region of the world- ILFC is the premier company in its industry, its outstanding relationships with airlines and aircraft manufacturers, excellent order positions, skilled management, and financial strength combine to ensure continued success. AIG Financial Products Corp_ (AIGI-P) also prtxluced record operating results- AIC,FP's focus is on structured financial transactions tailored to specific client needs. It is a recognized leader in its field, and increasingly teams with other AIG units, including AIG Risk Finance, to structure creative risk management sohations for its multinational client base_ AIG Trading Group Inc- (A1GTG) faced a difficult operating cnvironmcnr in the latter part of 1998, but was ;able to post reasonable results despite declines rn trading markets for both its currency. and metals businesses. AIG'IG is a leading participant in the field of hedged trading; and market making in foreign exchange, interest rates and base and precious metals, with it growing global network of offices and relationships- AIGTG also works closely with AIG Risk Finance and onccr AIC; companies in structuring transactions to meet its clients' financial and risk manaj;crnenr requirements. Al(- Global Inyesirricnt Group, Inc 's itivestincnt management businc,,s continued (o expand, in moth its diird-party markttahle wcurities business and its ciircut investment funds. We intend to integrate our third -parry marketable WCUrItics business With that of SunAmcrica in 1999, while continuing ro expand our direct lnvesrment fund husiness- AIG's global network, in-depth knowlc-dge of emerging markets and strong ;asset manage- ment skills, combined .vith years of experience operating in Asia. Latin America. Europe and the Unitcd Stairs, provide an excellent platform for further growth in the asset man- agemem business_ During the rear, several nhw direct investment funds were launclicd- AIG now has nearly S 14 billion of direct Investment funds and third -parry assets under management worldwide_ AIG Consumer Finance Group, Inc. introciucecl its first AIG credit carol in the Philippines in 19c)H_ The Group also expanded its consumer finance operations into Poland, acquiring Bank Podl:a_ski S-A_, a Polish bank with all the requisite licenses for constinier finance, and taking a majority interest in an originator of installment sales financing; to consumers through Polish retailers It also entered the Argentine consumer Finance market .vith the purchase of a majority interest in Compania Financtrra Argentina, A. The consumer finance, business represents an oplxirrunrty for AIG ro market additional financial products arid services through our existing nerwork- a Investment Resutts and Financial Market Developments AIG's global investment portfolios did well an 1999. General insurance net investmenr income, including Partial year results of Tranaatlanric Holdings, Inc. and 20th Century Industries, gained 18_3 percent to $2.19 billion, while life insurance net inestmenr income rose 11.6 percent to S3.2� billion. At year-end, AIG's insurance investment portfolios toraled $87.6 billion, of which $38.9 billion was derived from general insurance and $48.7 billion from life insurance_ The U.S. economy turned an a strong performance in 199S. as gross dome.sric prcxlncr brew at a 3.9 percent annual race with negligible inflarion, cal-iping the brsr rhree-ycar period since the mid-19g0's. In this envlronmenr, 11;S financial markets did well and the Federal Reserve held interest rains steady for the firsr half of 1998 In the third quartcr, the Federal Reserve announced a succession of three rate cuts which were deemed a preemptive strike against fears of a widening global economic slowdown, combined with concern of a possible credit crunch_ The intrrest rate cuts resulted in restored market confidence and enhanced liquidity, paving the way for rate reductions around the world. The US Ixr'nd marker also benefiu•d with one of the low(-st i0-year lxr'nd rags In years, closing 1998 at 5.09 percent. For the year, the Standard & Poor's 500 Stock Indcx posted a total return of 28.6 percent. In spite of slow growth in corlxirare earnings and overall economic icuvlty, Curopeari equity indices rose.:alrhough exp crtencing a u)rrectoon III tltc third quarter. European bond markers posted p osirrcc returns in local currcncr as inflation pressures remained low In Japan, the long-a.valted economic turnaround has still not marerralUed .cc the Japanese government has adopted only a pleccmeal approach to irnplcrraenrtng the p ohrics necessuy to restore confidence in the economy and solve the scrious problems still affltcruig Japanese hanks and orher financial imorutions The Nikkei index clnw J the year down 9 28 px•rccnt, a new nine-year losv_ Japans px)llcy wrrh reslx:cr to Its uarrcncv chimed several rirncs doom the year early In 1998, a ne%v bank ht1l01.11. plan and caslcr monct:,.ny I-K)I y It•d to a xyeakcr yen, while later in the year the yen stren rhened by approxrmarely 20 p erct-nt, anti more recently, h.0 tended to weaken_ Consumers in Japan remain rchtuant to spx•nd, and the US trade deficit with Japan rose sharply in 1998- 9 Letter to Shareholders (CON f LNULDI Stock Split, Dividend Increase and Stock Performance 1-he Beard of Directors declared a three-fir-rwo %p)ar of AIG's common stock in the form of a 50 percent common stock dividend, which was paid on July 31, 1998 to share- holders of record on June 26. 1998. The Bcrtrd also increased the regular quarterly dividend to 5.6 cents per share, effcrtive with the Sepremher dividend, an Increase• of 12.0 pe•rcent- AIG's common stock gained 33.3 ix rcenr during 1998, compared to a decrease of 3-2 percent for a group of peer companies, and an increase of 26.7 lxrc(•tit for the Standard & Poor's 500 Sttxk Index_ Over rote pasr five ye.rrs• .wit dividends reinvesiccl, AIG stock has apprrciawd 278 percent, compared to 126 percent for the leer group and 194 percrnt for the S&P. Board of Directors Changes Cumulative Total Shareholder Return' WRY LkW aoo — 350 �- 300 — 250 — 200 ,so — —�— 1�. 1� 93 94 96 91 98 AIG r S&P 500 1= _= AIG Peer Group 'Duce S:a'da,0 d I'M's CaTnustat Soirees, irc Va'.ue M S. V rr.tsle9 on L*CerW,)er 31. 1%3. ir.CluAr,g einwszed Crrdrrbs We wt>uld like to ante with sleci:tl rhanks the cOntri- burions made over the p:t-sr several years by AIG Director Lloyd ,Nt Benrscrl, who retired from our Board in 1995. Senator Bentsen was an Imp orrant race rn our drhhrrtrions and WC will miss IfiS eourrsCI 311d support in the enure•. In early 1999, Eli Broad, Chairman and Chret Exccuttvr Officer of SunAme•rica Inc., and Jai• S Winrrob, SuriAmc•rwi `11Ct- OZalnnan and Clticf Operating Officer. were clectcd to the AIG Board- In addition. Ellen V Futter, President of the Arnerlcsn Nfuscum of Natural Hiscory, horned the Board In Nfarch- We are 111cascd to wcicorne rhesc new Directors to our Board Conclusion 199,14 will go doxn in the history books as a very ehailenklng year, but une In which AIG performed well. We face,-] both a global economic crisis and a sofr property -casualty insurance market In ter United States —twin challenges for our managers, which they Ctmfrowed extremely well. AM has never Ixwen stronFcr or hotter p ostuoned to capitalize on the manv opportunities we see ahead_ On behalf of the Board of Directors and man- agemrnt, we thank our employees, agents and brokers around the world for Lhcir comrlhutlons dais past year- / /,;� le,. "- At R- C.rrrnher;ti C•hatrnurn and (:hlef f_xetut he 4jjr«� ,,,; - -, , k j"1anCt. Gt-cuib-ow Presidoil and Chief Olwamig Officer 10 SunAmerica THE RETIREMENT SPECIALIST SunAmerica Inc., which became the newest member of the AIG family of companies on January 1, 1999, is a leader in one of the country's fastest -growing markets: retirement savings. In 1998, SunAmerica earned fees or investment income on approximately $110 billion of assets and provided 1.8 million Americans with a broad range of high -quality retirement savings products and investment services. In its 1998 fiscal year, SunAmerica's total sales increased 60 percent to a record $8.5 billion. Products and Services SunAmerica offers a wide variety of products and services including: • fixed and variable annuities • mutual funds • investment counseling • trust services • guaranteed investment contracts The SunAmerica family of companies includes: SunAmerica Life Companies —The SunAmerica Life Companies (SunAmerica Life, Anchor National, CalAmerica, First SunAmerica and SunAmerica National) collectively rank among the largest issuers of fixed and variable annuities and guaranteed investment contracts in the United States and rank in the top 2 percent of all U.S. life insurers, based on assets. SunAmerica Asset Management Corp.—SAAMCO manages a family of 21 retail mutual funds, with more than $3 billion of assets. Resources Trust Company —RTC, which focuses exclusively on self -directed retirement plans, provides trust services to more than 200,000 retirement accounts, with combined assets of $ 13 billion. The SunAmerica Financial Network—SunAmerica's six wholly owned broker -dealers (Royal Alliance, SunAmerica Securities, Advantage Capital, FSC Securities, Sentra Securities, and Spelman & Co.) comprise the nation's largest network of independent registered representatives, with more than 9,700 representatives under contract. Total Sales* (Billions of dollars) 94 95 96 97 98 For years ended September 30. Total Assets* 42 94 95 96 97 98 ' As of September 30. right to left Eli Broad Chairman and Chief Executive Officer Jay S. Wintrob Vice Chairman and Chief Operating Officer 11 Eleven Year Summary of Consolidated operations (IN milfraV) Years Ended December 31, 19`)8 1997 1996 1995 General insurance operations Gross premiums written SM694 S 1 S,742 $18319 S 17,895 Net premiums written 14,586 13,4108 12,692 11,893 Net premiums earned 14,098 12,121 11,855 11,406 Adjusted underwriting profit (loss) 531 490 450 417 Net investment income 2,192 1,854 1,691 1,5447 Realized capital gains 205 128 65 68 General insurance operating income 2,928 2.472 2,206 2,032 Life insurance operations y Premium mcomt: 10,24 9,926 8,975 4,0319 Net investment income 3,232 2,896 2,676 2,265 Realized capital stains (losses) (35) 21 35 33 Life insurance operating; income 1,780 1.5 7 l 1.324 l ,0y l Financial services operating; incorne^4~ 911 701 524 118 Equity in income of minority_ --owned — insurance o[xrations 57 ] 1.1 99 82 Other realized capual BUMS (lUssi's) (5) (30) (12) (29) Outer [nunne (deduct tom) —net (144) (97) (55) (92) Income bela7re inCorne tars, cumulative effect Of accounting; changes and minority interest 5.529 a,731 4,056 3.502 Income taxes � � — —— — 1,594 -- 1,367 I ,1 1 G . � -� ~ 956 fncortic heftlrt: cuntula[ivc effect — — --- — — --- — — of accoclnting; changes and minority interest �,935 �._��, i 2,9210 �,5 i6 Cl)mulative effect of accounting changes 1W — — — — Minority interest (169) (;_') (i;) (36) Net income S 3,766 S i332 S 2.897 S 2,510 r•t'Flic daea 1,rcaen(er! for 1988 has. Ilern rtstared J• a reurt[ oi rflr aclud,t,un of Fularee A Aununnng 5[andarc1s B(Ltrd Sw[crnenr No 97-Aetunnnng .ulel Rcjx,r[in : I,+' Insurance• E:nrt rpnx> err (-ertaia I-nny-1)uraiwn C orarat (% and t„r Rt•: ivcr3 ( raim and 1 jaua Irum rh; -Sale r,( Imc.tnlcnr%" SI-.ASIS 97'. fh) Rcpreserus a net htntfit for the cuminat. •'r c[Tcit of adul,uon of act nun[inu beenuarnu mrnrr rclarrd to I~ rst_rc:ircnlent henrirrr WASB 1(16) an;1 ,nr only (a•t-• (FASti 101)) by mrrroritp-Pwim) imur im- cgxrariwis to 11)) ;rr;d h%- AI(" ,n 1992 Earnings per t t r OA&ons of Qodars) 4.200 4.20 — -- — — 3.600 ... _ 360 2.400 — — 2.40 1.800 — ti — — —1 80 — — — — 88 89 W 9k 92 93 94 95 96 97 98 88 89 90 91 92 93 94 95 96 97 98 12 American Irurrnatronal Groul), Icte and Subsidranet l g,)4 1993 1 ` !)2 1991 1,)')() 1989 Annual ComlMiund Growch Rate 1988r•: 198-199S $16,392 $14,901 $13,616 S13.336 $11.927 $11,616 $11,373 6.2i"o 10,866 10,026 9,139 9,146 9,267 8,940 8,-Ii71 5.6 10,287 9.567 9,209 9.105 9,149 8,529 8,154 5-6 201 69 (145) 37 107 86 120 - 1,436 1.A2 1,255 1,168 1,Q64 961 938 1(}.l 51 61 67 89 120 85 22 - - 1,688 1,472 _ 1,177 _ �1,294 1.291 y 1_132 980 11-6 6,724 5,746 4,853 4.059 i, {78 2,995 2,6?0 14 6 1,748 1,500 1,314 1,140 977 806 612 18.1 87 55 -13 23 (6) 42 30 -�- 952 782 667 562 _ 463 454 _ is7 165 405 -_ 390 - 3116 222 132 150 88 264 56 39 28 29 24 21 20 - (68) (47} (59) (61) (f , (44) (23) - 2,982 2.628 2,14i8 - 2,032 - 1,819 1,709 1,461 14.2 776 - - 683 512 4 o 369 335 -'- 2.206 1.945 I .(i 36 1.502 1,450 1, 37 I I -)12 12-5 - 21 32 - - - - (30) (27) 01) (9) (9) (4) (3) - $ 2,176 S 1,939 S 1,657 S 1.55i S IA42 S L)67 $ 1,2()9 12.07, General Insurance Net Premiums Written 88 89 90 91 92 93 94 95 96 9/ 98' AIG Industry Udus7y f s;rnared trrduslry Source Corrmb S Comoarry 'Net Investment Income MAWS of do",S) a,800 �3� - - 2,400 88 89 90 91 92 93 94 95 % 97 98 General insurance >_ Lite Insurance 13 Eleven Year Summary of Selected Financial Information (rn millaonr. ex(epr pr short amowm and y,rrros) Years EndediM of Decen ivr 31, 1998 1997 1996 1995 Balance Sheet Kara= Total invested assets (a) S 144M I S 122,452 S 108,618 $ 96,338 Total assets (h' 194,398 163,971 148,431 134,136 Total reservesV) 55,187 46.341 45,060 41,130 Total bc-neral rrtsuranrc reserves 24,619 21,1 ; 1 2O,-'1O7 19,693 Total long-term debt (,l) 21,504 17,814 17.506 14,453 Total liabilities 166,867 139,570 125,987 113,909 Total cahrral funds (shareholders' equity) 27,131 24,001 22,044 19,827 Income SwEemem Data: Revenues (e) S 33,296 S 30,602 S 271,943 S 25.01.1 Loss Ratio 75-59 75.33 75-89 75.9i Expense Ratio 20.77 20.57 20.58 20.65 Combined rauo - - - _ 96.36 90 20 96.47; - )G 5S Return onc•yuiry'') - - - �.€5-037f:T _^ 15.0'i`3� -- -1154`-r- --I4`'7,... Per Common Share Dara Net income {,•) (h) Bast( S 3-59 S 16 S 2.7 S '-;5 Diluted 3-57 3-15 :.72 2.35 Cash dividend +I,1 .21 .l) 17 - I! Berk valuett'1 25-85 22 87 20-g7 1s.55 blark -( prict. (h) 96-6 50 /1ti 1 1 -i I 1 I Pro forma marker Itrtu '' 334.97 251 -;3 10679 ]-1- 52 Nlarke( eapir-aliration at Drcc•niber i I, - - --S 101,430 S 76,073 5 50) 817 S 4 i.862 Average shares outsrnultng t:;%-- Basic 1,050 1,05 ; € ,060 1 ,o06 Diluted 1,075 1,057 1,064 1,070 • IntlOiling Ilight ucI m pinent under operating leases, Its ta:e. nee nfaccurnulated tic prcciarion, and nrec•stment intornr cIiw and actrucd - �hi Assets tcith rc5l'cct io Ik(cink,er i I , 199.) and u,hsryuc•ni .rats confonn ro the rrc;t:irrmrni5 of l ASIi 113 Including net general instirancc resumes rur to+ties and Ins% eNlxnsrs. life itirttrc lxilit r Ix ncArs and {xil,tt- ,end t,ont:at: t la1:ns i' including cnmme-rural paper and e\clrrtl11I;2 th:cr lxuuun ni long-term drht ntauino�z ire less than uric rc: r r Rrpn-scnrs the• sum ofj:c-neral ntsurancc iwr prcnimrm rarnrd. Ltv premium ,nctune. nee ,mesunenr ,n( unit. Cirtanrt.,i .rn:ec% tomiri-cmi% : r,,ns.,c u:,> ..nd other fees, equae ,n income of minority -owned insurance nix r.tuons and realized capital gjais (lussrs) In I (,r)7, agents opurauons teem PT(�(-Mrd as a cnmin,- ne nr of grnrral ,nsuran, t-.tntl fc,r Ncar% prior :o 11)9 ❑grnct' r: wilts hate Ixec: rcclass,iied to <nnfonn ro rh:s p,csentm n:n Return on equity is ner income, t -fore rralizrd capital }rains (Icxu s). exprussctl as a lxrcrntage of avt:rahr shareholders' equity, t•xclusrt•c ❑f unrc-al[rcd apprc(,arion (duprri [anon) of in%csrmriirs, rirr of rues Total Assets and Invested Assets Ordel Facto) 2 h - - -- 110 - - a8 89 90 91 92 93 94 95 96 97 98' a AIG Industry 14 ' Indus ry Es:marM [ntlust-i S_,(e C-'-N,R R COtn;u-y IN 30 ' B Ai I 88 89 90 91 92 93 94 95 9L 97 98 Total Invested Arncrican lnternauonal (.,r(xtp, Inc Auld SuI,S[dl:trlcs Annual (;ornlx,und Groscrh K.trc 1994 199i 1992 1991 1rY)O 1989 198`1 1958-1995 $ 78,975 S (18J)33 SG3.+zo S53,US2 5:,2.915 S32.138 S2G.�9► 14i,346 101,015 92,722 69.3,49 58,202 4(M)3 7 37.317, 36,075 32,308 28.605 25,894 22,752 19,402 16,325 18,419 17,557 16,757 15,840 144,699 12,958 11,086 12,614 10,956 9,518 7,591 6,780 4,061 2,823 97,72•1 85,591 79,8410 57.9216 48,297 37.632 30.354 16,422 15,22 i 12,78) 11,463 9,904 8,405 6,963 S 22,122 S 19,831 S 1 S,1 G 3 S 16,671, 3 S 15, 196 $ l 3,94i) S12,656 77 82 79 19 81 48 75 93 7S 17 79-50 79 13 20-44 20 30 20.314 21.04 21.06 20 1 i 19.81 98-)() 99 i9 101.s1 99 97 99.-1 i .. _ 99 t,3 95 9•E 13 88% 13 S8%,- 1 > > ram,, 141)2 , 15 39 'X, 1', -4 370 IS 874:, �- IS 17-9 130 83 22.-5 186 10-2 b S 2.01 S 1 51 S 1.54 S 1.r,4 S 1 37 S 1 31 S 1.16 12 O;f, 2 03 1 SU 1 51 1 43 1, 3h 1 .31 116 11.9 -09 .08 07 06 13 > 15 41 14-20 11 -9 10 5 9- 6 59 1 ► G 29.{)3 _>(,.ilU 91 19.•i3 15 19 lti '�5 Io 71 24-6 10066 go. 13 79 =i 3 G- 36 52 61 5C�.7u �- 11 24.6 $ 30,952 5 27,572 S 4,549 520,8S2 51<.i(1s S16,941 S11,074 2a 5;s. i ,U69 1.071 1,O 12 1,075 1,O E8 1.035 1.034 1,072 1.075 1,075 1,07S 1,051 1,039 1,037 'r'Scc \orc Ilu) of Nmn ro Firi racial Sratrntrnts A%t-rtrc sh.tn s uu[stand,nb hate !vc•n rctroacricc•Ic adjusted fu rt-nett Al stud, (k idrnds and stt,ck Splits E:.trn,nbs lxcr common share cakr,l.ucd aher dcdut;wns in 1991. !992, 1991.:990. 19S9. 198', and 19ti-, n%l,rcfcrrcd suvA tlix-Ocncls ur 51.) m:lhu_t• SAi-5 rmlllnn• S7 ; m,ILnn- Sy million, Sl O 9 nidlirn. SS 9 nnllton and : ! rntll,rn, resl r([ itrle 11cr .Barr amnuuts for all ix -rolls preened rctltm rl,t at't,p ;,n n(dit- Staumr nr of 1 r,a.nrial Acw.ur,Ia); Stan,l.tr.!• \n- 129 l:arni-tcs Pt.- Shar, -'':Aajr 17r-rc•n,iwr 31 JoT:,11 u,x1, dn-fr.icn.lsant, sP.:rs "' Rt:llct.ts ncc p:uc ahprc-(anon,;,, ar Drtrrnhcr 51. of one- shary o, oinimon siock 1`uft:I,a>ct: on DM(MiWr j1. 1')hS. assumMnE, [hat no s((rck dicidrild ur truck sphrs octu.rcd aftrr vic1, tia[c lBAons or do&vsl 88 89 9G 91 92 93 94 9. 96 9; 98 Book Value per Common Share 68 89 90 91 92 n3 94 95 % 97 98 15 Supplemental Financial Information (dollars in vndhons) Years Ended December 31, Consolidated(-) General Insurance Operating Results 1998 1997 Gross premiums written $20,684 $18,742 Net premiums written 14,586 13,408 Net premiums earned 14,098 12,421 Statutory underwriting profit (loss) 412 266 Adjusted underwriting profit (loss) 531 490 Net investment income 2,192 1,854 Realized capital gains 205 128 Operating income $ 2,928 $ 2,472 0) Total columns may not equal the sum of individual group totals due to consolidating adjustments 1998 1997 Nct Pcrccnr Ncr Perccnr Premiums of Premiums of General Insurance by Major Segment uh,crul Total Writrcn lonl Foreign S 4,799 32 9% $ 4,370 32 6 o Brokerage 8,002 54 9 7,885 588 Personal lines 1,422 9 7 812 6 1 Mortgage guaranty 363 2 5 341 2 5 Total S 14,586 100 0% $13,408 100 0% Domestic Brokerage 54 9% amm Foreign 32 9% Domestic Personal Lines 9 7% Domestic Mortgage Guaranty 2 5% 16 Amcmasi lnrcr-mirnonal (frmil), Inc 311c1 SUl1]lll arjce Domestic Foreign Totals=► Brokerages_ Persc►nal Lines — `4 Guarani}- — — 1`J9t< — — y 1 1,N7 4 1498 — 191) 1998 199' 199 1` V9 11198 199s S13,362 S12.024 S12,018 $1 i.272 S1.485 $,g55 S381 $3419 S7.367 $6.750 9,787 9,()3S 8,002 7,885 1,422 812 363 341 4,799 i,37() 9,471 8,352 7,814 7.207 1,280 79f1 .377 355 4.027 A.O69 (61) (137) (269) (269) 53 16 155 116 473 403 9 (7) (217) (1 Al 1 72 18 154 116 522 -'i97 1,754 1,485 1.570 1,356 S7 52 6S 6i 438 369 198 57 186 53 11 1 1 3 7 71 S 1,961 S 1.535 S 1.539 S 1.26S S 1-0 j 71 S223 S152 S 967 S 937 — -- — -- —T)[:I! —. — — 1?rtrt]c�[ic— -- — — — ---- !-()rciht] — - 1_ifir In,trranrc Operartr)g lle.strlr, — — 1995 — -- 191 — 9 — 1`)IS— I"0 J`P)N --- Nr[-rn►un]s— — — — — — — -- S 10,247~ $ 9_�) 2h ~ j 735 S 55; S 9,50�9 S 9.373 Nct im-c-anon root ix 3,232 2.S96 920 839 2,312) 2,057 Realized Capital gams (lo,"CO (35) 21 (1) (2) (34) 2; Opc•ra[ir►g +nrcrm(, 1.750 1.5 % 1 ! 49 12 3 l ,Ei 31 l 448 Lift tnsur Lice in -force S499.167 S436,5'i 3 S61.2 2 i S59.517 S437,94-i S377,056 1998 General and Life Revenues' tttta+ foreign Lite 39 7% cmm Domestic Brokerage 31 6% rr ForetKn GerreraJ 17.rJ96 « 11 bomesttc Life 5 6% >r� Dnmesl)c Personal Lnes 4 6% iiiiiiiiimiiiii Domestic Mortgage Gvaranty 1 5% pc,y,S.115 'he � of gm,"r M%r mxr fol vfcmoj ny ea,�•J. me p!e:ntr, .come. ar4 N.t we5'rneni mane 11 Corporate Directory Corporate Officers Maurice R. Greenberg Chairman and Chief Executive Officer Evan G. CirEenburg President and Chief Ope•raring Officer Thomas R. 'Cizzto Senior Vicc Chairman General Insurance Edward F. Matthews Vice Chairman [nvestmtnis and Finailc ;11 jcn•ices Fdmund SW. Tse Viet, C:h:urman, Lift• Insurance - Frank G. Wisncr Vice Chairman, External Affairs Robert M. Sandler I'X(erJtt%T VtCU PCCSidCnt, Senior Casualty Actuary and Senior Choirs Officer Howard 1. Smith Execurrve Vice President. Chief lmancial Officer and Comptroller Senior Advisers Edwin A.G. Manton John J. Roberts Ernest E. Stempel Ronald: J. Anderson Senior Vice President and Chairman and Chief Executive O;fict•r of AIG Companies in Japan and Korea William N- Dooley Sen[Or ''ice President. Financial ",rrvlces Lawrence W. Fnglish Senior Viec Prc•sidenc, Adnnnisrracion Axel 1. Freudmann Senior V ire I'residt Ill, Human R"OLIRC5 I_- Oakley Johnson Scninr Vicc I'residL:iit. Cwporarr Atf.:irs Win J. Neuger lcnior Vice Premdt•nt and Chief Invesuncnt Ofiiccr Ernest T. Patrikis Scnuir Vice Presiden::in(! Gcnenil Cutinwl Michael J. C:astelh Vrcc• Prc.gjdent and I)c-po • Carnpri-oller lidxvard T- Cloonan Vice President. Corporarc Affairs Stephen Coilesaii-i Vice President Research and I)evrlop tnt•nr Kevin 13. 1;itzpatrick- Vict• President. Real I.sr-lae ln%-csrmrnrs Harold S. JacoboNvitr Vice Presidc•rir, Claims I.mgauon Robert P. Jacobson Vice President and Deputy Comptroller Donald Kanak Vice President and President and Chief Operating Officer of AIG Ct;mpanit•s in Japan and Korea William P. Krivoishik Vice President and Chief Information Officer Robert E. Lewis Vice President and Chief Credit Officer Charles M. Lucas V ILT President and DiCCLtor of Marko Risk Management Richard Merski Vice President, Corpxirarc Affairs Christian M. Milton Vice President, RULnMirarice Michael Mitrovic Vice President Worldwide Financial Services Claims Frank I ctrahto II Vice l"n-mcient and Dircccor of Taxes Kathleen E_ Shannon Vice President and Sucreran, Joseph H. limansks Vice Presidcrir and Comptroller John T Wouster, Jr. Vice Presidenc, C.OmmUnrc300115 Cesar C. Zalamea Vice President, Invv%tmenrs Louis F. Zearo Vice Presidenr and Dcpittp Comptroller Carol A. McFare 'f reasure r Keith L. Duckett Dirccror of Internal Audit 18 Antc: ic;:n lnu-rrt:Ltrtin.tl (Imul" Inc. ;rise} 5uhv,fi:Lncti Domestic General Insurance Life Iruuranc•c lnteroatiorrd Ad%lsory Board Kristian P. moor R. Kendall Nottingham Dr. Henry A. Kissinger Execurrvv Vice President Executive Vice PresidenL Chairman, Inu•roational Advisory Board Doiestic General Insurance Life Insurance- Former Unir(•cl States Secretary of Stace Kevin H. Keller Nicholas A. O'Kulich Chairman, Kissinger Associates, Inc Senior Vice Presidcrir Senor Vicc Prvsidet.r Robcrr L- Crandall Dumestic General lnsurancc I-Ltc Ir1SUCLr,(C Rctircd Chairman David M. Hupp Frank Chan AA-IR Corlxinu,on and Americ-an Airlines, Inc. Vice President Vice Prrsidenr Dr. Otto Graf l.amhsdorff Domestic General Insura,iC(- I-Lft• lnsurancc• Former German \f iorsrr•r of Econnn„cs Jose L. Cuisia, Jr. \Vt,sstn & Partners Ftcrcil;n C�encr,(l lL1}Llr:ln« \!,rr Prestde:ir Erling S- 1-orcntzen I -Lit' Insurance Ch;iirnl:Ln Martin J- Sullivan f{,Kier-�I-ri% Ko:n- I-oremvcn Eml�rcc•nclinwritos, S A. Execurrye Vice Presidcn[ 1%Lrr Pre-sidrnt Juliman S. (Mayan, K.li.l:- Foreibn Gc•nt•ral lnsurancc I i(c Insurance Founder ;wd C-1mirm;en Hamilton C. Da Silva \\ (ac•rry � �-ndorf Ol:n:Ln (.rroml� ut (:nntlrnnt s - Vtct• Prt•sLatrnr Vrcr: 11rc•sicic"r.t :lrrrlr;t,s:tdor Kl:tier An:utcl 1'antarac}ittn Forc ign G cneral lnsur:ulcr L:ic• Insurance l"urntrr PfLmle' ,\finrurr nf']'h:nf:uul Jcffre%- M- Kestenbaum (-lrairmanl Saha-l:n,on Corp , Ltd Vice Prusidc•r1t Thr Itt. Hon. Lord Prior, PC ForeLgn General Insurance Ch;r,r nra,) Joseph C. Smetana, Jr- The Arah- linrrsh Ch;tmtx-r of Commurcc VIcr Premdenr foreign General losumlme ("-IL;Linuan Robert J. Thomas FmcrgHn5 \Iarkers Cofporation Vice President Dr. Stephan Sc'hrrli(llteiny Foreign Gcncral lnsurancc Cai:urm:Ln Nichol:cs -S- Tyler AN -OVA Holdnt:� AG Vwu Pr(-%Lderlt !\'ashirr�;rrrn 5tc ifr Forctrn General Insurance Founder and Chairwan Nicholas C. Walsh sycip, Gurres, Velayo & Co - Vice Pr(-srdent Ratan N. Tara Fnrcrgn GCneral InS(rfan(C Chaumarl Tara Sans Ud Ambassador Bernard Vernier-Pallicc Former Ambassador to Lhc Uniic•d States from France Retired Prc5LdC11t Director General Renault Automobile Company 13 Corporate l C 0 ri T a n i r. 0 a Directory Directors M. Bernard Aidlnoff Senior C.nurl5trl Sullivan & Cromwell New York, New York lai Broad Chairman and Chief F\ccucive Ofhter SunAmerica In(. Los AngvleN. Ctlrforn+a Pei-yuan Chia Former V:cc-Clrurman Citicorp and C.rtrhank, N A NcS. Turk, Nc%v York Marshall A. Cohen Canino•] Ca�suls E3r+x'k 1 13hrkwt-11 "I oronco, Om.tno, Canada Barber 13. (;unable, Jr- E=ormcr President Alexander, New York darter] S. Feldstem Prrrlessor of Lconunoc, Harvard i ini.(r<rry Prc•stdcnt hire.:! of Erononur Rc•u•arch C:tmhrrd,i_-c. Ala ;arhusctts Ellen V. Futter Prc•,irc!cnr American Nluscum of Narural I-Imory \-tea• York, Ncv, York Lcslic I_. Gonda Chairman Inte'rnarionA Lease Finance' C:orlxaraturn Los Ange1cs, CCalrfornia Evart G- Greenberg President and Chief Operating Officer American International Group, Inc. New York, Nev., Work Maurice R. Greenberg Chairman and Chief Exccurivc Officcr Amerrran Mu-matiomil Groul>. Inc. Nea• York-, Nca' York Carla A. 11111s Chairrrlan Hills & Comp:lm Fortner [Jnrlt•d Stares Tride Rcpresentltiv(• Wit-Jim);t nn. 17-C. Ranh J- 1lrrcncnlecc•r I'11r:lnl 1.t1 (•[>n 5111Caral I{rtirrtl 1'r(r• (;h,irrntan P:tr(Icntial Inslir.incc Cornh.ult of Am(•riui Motllvm. i uw ler- tu) Eidward F. Matthcws Veec (jharrman Invc<cTnemt , And hnuncial S(•ry rccs Amum.ui lnrcrnatiomal Grot:p. Inc Ncw )'o.k-. New Fork Dean I'. Phypers Rt'lirc" Sun:m VICc Picvdcnt hicurn.atumal 13u,rrle„ Madmw% (•orjxrratuna Nc%N (.imman, (_orant,u icu[ I loward I- Smith Eart utive Vrrc Prc-sidvnl. (_isref Fin:u?c'r.tl O'lice: and (_Cwnhrtnlicr Aniurrt ail. Internarron.rl Group, hIC NeSy Ym'. iNc5y York Thomas R. Tlzl.io Srnrm Vier Chairman ( irnc•r:tl 1 n,uranctr American hitcrnivionA (soul?, In(-. Nc%v York, Ncty York Edmund S.W. •Ise Vice• C.harnnan, !_eft- Insuranct- Arnerrc.m International Group. Inc- 1 (one, Korig Jac S- W introb Vic(- Chairman and Chief (')1x•ruing Officer SunArncrica Inc Lcu Angeles, (Arfornrt Frank G. 'Wisner Vice Chairman, lixrt•rn.rl Aff:ur. American International Group, Inc. Nea• fork_ N(-w York Honorary Directors Marion F. Fajen Rcured Vrcc President and Sucrcl.ary American InternXional Group, Inc i�v' Mollies, Iowa Houghton Freeman Relircil Vice Chairman Amcrrcan International Groul), Inc Scotvc, Vt•rmont Joan I. Hoxvvil Ru:iTcd (Amirman of the• 1:xt<utrvc C.ommlttec j ry Henjchrikfer Bank & 'l'ru',t (ornpanl Grrvinvich• (.onnet:ttCur Edmoo A-G. r\laimm Se,tiur A.lcrsnr l or+nee I_zrruriyc VrCV Pru,idvm Amt-rrran Intcrn.ic+onal Group, Inr- �'cirk. )'0Tk Jutlrl J xohcrts Serrtor A51. etor mmicr Vicc (,Irlirn'an Amcritan hirernattcmA Groulr. ]nt, \r55• j'urk. \c•xx- 1•urk :rrlcsr L_ Stenllx•l Senior A(!Xisur Formt t V,tr Chairman A!ncri---,u) Inicrna mmil Gmul,, Inc l hmil( ln. Burmirda 20 Shareholder InformatioiZ American lntcrnarional Group, Iru_ and SubLd Gtrit'S Corporate Headquarters Office American International Group, Inc-. 70 Pine Strut New York, New York 10270 Telephone: (212) 770-7000 Stock Market Listings New York, London, Parts, Swiss and Tokyo Stock Exchanges Trading symbol_ AIG? AIG Stock Trtding & StatiNm al Inforinatiom Common Stock Priccs't"Ibis Idend} II,gh 1.,r«' IitdcruII I �r?ti Firm Quarter ti(,% (17 jtlflio Third Quarrt-r Fnttril,Ot..lrrrr iilo :. W', 11 f17(. I=fnt Qkjarrcr 56 '/_ 47'f,. S(Nn5 Sc-condQuartei GG if. 50'/, i'wIf "Third Quaricr % l 63 %a f! 11i(I Fourth ( ,r.trtvr i'l'/. r,j A, a ()50 Numlxr of sharcltoldcrs 2 i.200- Cornmon ,hares 1.237 > rndhorr") darker capitalization at 1I1/99 S 1 19 6 billion- r,l5hare rnforinaonn rvflecta the 3-for-2 split if, ri,t. iwrt,,rf.r 50Ix-t,cni common stock clivtdcn,t.- I'aid Jul% ? I, I`J`)N- `h' As rrlx,rrr.l on the NYSE t-umlxnuc -l:ilw by nit: 1'atr011.11 t)Uutain)rl 1iirCJU, l ncorlx)rrrc•d 1 Rcflecrs the acyuisinor, of SunAincrica lnc on fanu:t:.r 1, 1999 CCltltl%CI Sullivan & Cromwell 125 Broad Street New York, New York 100() i Independent Accountant~ PncewaterhotueCoopers I.LP 1177 Avenue of dre Americas New York, New York 10036 Annual Meeting of Shareholders The 1999 shareholders' meenztg will be held or! Wednesday, ,\-fay 19, 1999 ar 11-00 a.m at the offices of AIG, 72 Wall Street, eighth floor, New York, New York - Shareholder Assistance Visit the AIG Corlxnate wt•b site at htrp I/www aig com Requests for copies of the Annual Report to Sharchokim and Annual Report On Form 10-K for the year ended December 31, 1995, III(: Quartcrly Srarisiical Supt-)lcmc•nr for Financial Atialcsts, xid!or TheSummary of Sc•cunries Held. should be directed to - Director of Investor Relations American Itlrernational Croup, inc 70 Ptnr hrfct•r Nt-w York, New York 102-10 (212) 770-093 Transfer Agent and Registrar -AIG Common Stock first Chs(-.tho 1 ru%r Company of N'cxv York 1' O Bo\ 2500 Jersey City, New Jersey 07303-2500 1-500-1 6- 2617 c-matft:nt>ti corn Trestee-SutiArncrica (:al)ital "1-rtist il-8-35:%. Trust Originated Preferred Securities (SAipV) and SttnAnterica Capital Trust III -8 30'7r, '1 rust Originated Preferred Securities (SAipX ) The Kink of Neu. York ? I wt-St Street Nc.v York. New York 10015 21 1. rT ric;ln lnrurr'�'r011:1l Group, Inc. ffAMCGOi NMI, Strc•cr 0 rds Corporate Root Estate 535 w Chicago Avenue Chicago, Illinois 60671 312 467.2000 April 14, 2000 VIA FEDERAL EXPRESS City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Department of Economic Development Attention: David C. Biggs RECE Y tD APR 17 2000 DEPARTMENT OF ECONOMIC DEVELOPMEN Re: Statement of Interest and Request for Proposal for Redevelopment of Huntington Center within the Huntington_ Beach Redevelo2ment Project Area Dear Mr. Biggs: This letter shall serve as a response to the request for proposal sent to Montgomery Ward, LLC ("Montgomery Ward") from the Redevelopment Agency of the City of Huntington Beach (the "Agency") dated March 3, 2000. It is the understanding of Montgomery Ward that the Agency intends for the above -referenced site to be rehabilitated and repositioned into a high quality, well integrated retail and entertainment center. This letter shall set forth Montgomery Ward's intention with respect to the Montgomery Ward's use of the portion of the site owned by Montgomery Ward (the "M W Property"). Montgomery Ward has operated a retail store in Huntington Beach Mall since 1966, owns the MW Property and has every intention of continuing to operate its retail store and automotive center in Huntington Beach Mall. The retail store and automotive center currently being operated by Montgomery Ward at Huntington Beach Mall is very valuable to Montgomery Ward's business. Pursuant to your request, we have attached the Statement of Interest for Participation in the Huntington Beach Redevelopment Project and Montgomery Ward would be eery interested in renovating its retail store and automotive center as part of any redevelopment of the Huntington Beach Mail, provided that sufficient funds were made available by the Agency or any developer which owns the remaining portion of the property within the Huntington Beach Redevelopment Project Area (the "Project Area"). In order to facilitate such renovation, we have enclosed a copy of renderings and specifications that would be used as a basis to renovate Montgomery Ward's retail store and (586801 1 - 4110100 3 52 PM) Montgomery Ward's Proposal ATTACHMENT #4 David C. Biggs April 14, 2000 Page 2 automotive center. Montgomery Ward would be willing to complete a full upgrade of its retail store at Huntington Beach Mall provided that either public funds or developer funds were made available as a contribution to Montgomery Ward to renovate its retail store and automotive center. In the event Montgomery Ward were to undertake a complete renovation of its retail store and automotive center, such renovation would require the following funding: I . Site expenses of $750,000; 2. Interior and exterior remodel between $3,000,000 and $3,500,000; and 3. Automotive Center renovation costs of approximately $250,000. Montgomery Ward would only perform a complete renovation of its retail store and automotive center if Montgomery Ward received a significant contribution either through public funding or developer funding. Montgomery Ward believes that a renovation of its retail store and automotive center would enhance the Project Area as well as provide additional sales for Montgomery Ward, however, Montgomery Ward is currently renovating a substantial number of its retail stores and in many cases such retail store is being renovated with a contribution from the developer. It is the belief of Montgomery Ward that with public funding or developer funding Montgomery Ward would undertake a complete renovation of its Huntington Beach retail store and automotive center. It has come to the attention of Montgomery Ward that Ezralow Retail Properties intends to submit a proposal that would include monies to be used to cause a condemnation of Montgomery Ward's property at Huntington Beach. Based on such information, Montgomery Ward feels it is necessary to inform the City of Huntington Beach that it will use all of its legal remedies to fight any condemnation of the MW Property as Montgomery Ward has every intention of continuing to operate its retail store and automotive center. The MW Property has an appraised value in excess of $14,000,000 in addition to the value of Montgomery Ward's business being operated on the MW Property and we believe it is in the best interest of all parties to include Montgomery Ward in any redevelopment of the Project Area and to work with Montgomery Ward to provide either public funds or developer funds to cause the renovation of its retail store and automotive center. (506801 1 . 4110100 3 52 PM) David C. Biggs April 14, 2000 Page 3 If you have any questions or comments regarding the enclosed matter, please contact Mr. Loren Hohman, Director of Real Estate ot' Montgomery Ward ((312) 467-6241). Very truly yours, MONTGOMERY WARD, LLC cc: Loren H. Hohman Corey E. Light, Esq. (586801 1 - 4110/00 3 52 PM) I ii STATEMENT OF INTEREST FOR PARTICIPATION IN THE HUNTINGTON BEACH REDEVELOPMENT PROJECT I hereby express my interest in participating in the Huntington Beach Redevelopment Project: Name of Property Owner/Tenant: Montpomeri Ward Development, LLC a Delaware limited liability company, Attn: Loren Il. Hohman, Director of Real Estate Phone: (312) 467-6241 2. Home Address: 535 West Chicago Avenue, Chico,_ Illinois 60671 3. Address of Property owned or rented in the Project Area: 7777 Edinger Avenue 4. Name of business in the Project Area: Wards Retail Store and Automotive Center Phone: Not Applicable We 5. + own (x); *am -a-!e-VA!{-)fr and wish to rehabilitate K; 91 7 My present type of business is: Retail Store Nature of proposed participation: Renovation of Wards Retail Store and Automotive Center I understand that submission of this Statement of Interest does not in any way obligate me to participate in the Project. Signed: " Return to: Title: esident Redevelopment Agency of the City of Huntington Beach 2000 Main Street Date: April 14 2000 Huntington Beach, California 92648 - •� I � 1 sil k7m -- -- -- ---- 34'- 7 318' - --- 518' C ALLUNATLED J MAIAPOLSCONKECTI - SET OF OF rERS 1 T- 1 314- --, uto I'll 1 /4' �wa---L 4'-0 1!4' exp?ffev I nMV W[z7itL�r II LLLMINATEO J onoaar.'w NON4LLumNATTD 1 FRONT ELEVATION SCALE- 3116•=1'-O' COLOR SPECIFICATIONS FACES- WARDS- WHITE 7328 ICON: BLACK AUTO EXPRESS: 3M #3630-33 RED RETURNS: WARDS- PMS-400C ICON & AUTO EXPRESS. BLACK NEON: WARDS: 4500 WHITE AUTO EXPRESS: CLEAR RED ELECTRICAL SPECIFICATIONS 15mm NEON - -- j �� 120V REMOTE TRANSFORMERS �_ 97 15.2 TOTAL AMPS dL __ u.cetwic �w'tt � (1) 12OV120A CIRCUITS REOUIRED I •TYPICAL PERSPECTIVE VIEW NOT TO SCALE 150 COLORED IMPACT -MODIFIED ACRYLIC _ SIB' HEAT ---;`' jj• • 11W PLASTIC LIP--,�'••_ Y - GLUED IN GROOvE GS SCREW •-- 1 V ' 5" -«1 -i• ' , 063 ALUMINUM RETURN "t• �� ,` 318' THREADED ROD w/ CAPTIVATED NUT ON LETTER BACK, AND ANGLE - STRINGER BEHIND STUD WALL APPLICATIONS r i STANDARD TUBE SUPPORT AS PER NEC 6DD-41 15mm NEON TUBES - r� ,,'• i .090 ALUMINUM BACK 120V REMOTE TRANSFORMER - �'-�---� W1TH GLR-8 FUSE AND HOLDER I AS PER NEC 600.3 I; 14- II 150 IMPACT MODIFIED - J ACRYLIC ELECTROBfT TO EMT CONNECTOR LOCKABLE SWITCH ON 2X4 JUNCTION BOX AS PER NEC 600-8 (U-L- LISTED} L TO PRIMARY ELECTRIC AS PER NEC 6OD-5 (U-L LISTED) I _ 31W EXPANSION ANCHOR n FOR SOLID WALLS INDMDUALLY WIRED --- r 4 TOGGLE SWITCH VMHIN r LETTER (2FA04-78-20AMP) U_L LISTED AS PER NEC 600-3 DRAINHOLE PER LOWS POT --� IN EACH LETTER AS PER NEC 600 7 TYPICAL SECTION NOT TO SCALE HEM! - 1 V-10 3/4' r •• FRONT ELEVATION SCALE: 1 /2' = V-O' COLOR SPECIFICATIONS FACE: WARDS PUSH THRU LTRS-- CLEAR ACRYLIC WITH 3M #3635-70 WHITE DIFFUSER (60%) BACKGROUND FACE: BRUSHED ALUMINUM 118' GRID LINES: BLACK CABINET. BRUSHED ALUMINUM ELECTRICAL SPECIFICATIONS (3) F108 HIGH OUTPUT COOL WHITE I nn+.s iw�iu'ir:ln. FLUORESCENT LAMPS I10""""n"`""0"01 (1) JEFF 256-3120 BALLAST Imo- lilC7fA1C i1071 3.5 TOTAL AMPS (1) 277V120A CIRCUITS REQUIRED • � '- 'tom ice.' �� 0 TYPICAL PERSPECTIVE VIEW NOT TO SCALE 040 BRUSHED ALUM- FACE - (CURVED TO 26' RADIUS) 063 ALUM- STRIP BRUSHED ALUMINUM FINISH - - ALUMINUM ANGLE --f_ -040 BRUSHED ALUM- FACE .090 ALUMINUM'—. BACKER .063 ALUM- FILLER 040 BRUSHED ALUM- FACE - (CURVED TO 26• RADIUS) .090 ALUMINUM BACKER — BEHIND .040 FACE 1- SQUARE ALUM TUBE W/ ANGLE FOR HOLDING ACRYLIC LETTER BACK ' 1 rI' THREADED ROD WITH ANGLE STRINGER B;HIND STUDDED WALLS SMALL PAN w•r —'' , TOMBSTONE SOCKETS r S 112' EXPANSION ANCHOR FOP SOLID WALLS 3;4• THICK CLEAR ACRYLIC - LETTER w. WHITE DIFFUSER AND WHITE ACRYLIC BACK INDIVIDUALLY WIRED TOGGLE SWITCH U.L. LISTED AS PER NEC 603-3 CONTINUOUS ALUMINM — HINGE FOR ACCESS DOORS TYPICAL SECTION NOT TO SCALE I C63 ALUM. ACCESS DOOR y 2-4 i Lmeath and Company • Signs Nationwide T-2" INTERIOR MALL SIGN — TO: Loren Hohman FROM: Norm Abplanalp DATE: March 29, 2000 RE: HUNTINGTON BEACH, CA SCOPE OF UPGRADE WORK The following list denotes areas of potential work to upgrade the location functionally and visually. SITE • Construct 34 landscape islands in existing parking fields complete with 6" curb and new planting soil. • Construct 1,000 lineal feet of perimeter landscape areas complete with 6" curb and new planting soil. • Construct new planting areas in retail walk perimeters. Provide irrigation system to all planting areas. • Provide landscape planting for all new and existing islands, perimeters and walkway areas. Planting material to be compatible with center master plan and meet all city standards. • Repave existing parking areas adjacent to Wards retail store and auto service center. Repair/remove all areas of deterioration and prepare surface for a new 1 %" layer of asphalt. • Re -stripe Wards parking fields with appropriate handicap, compact and conventional size stalls complete with pedestrian walkways to meet all city standards. RETAIL STORE Remodel, renovate and reconstruct existing retail sales and customer support areas to new state-of-the-art prototype standards. Provide new perimeter wall fixture merchandise systems complete with focal walls and valance construction. • Provide new floor freestanding merchandise fixtures. • Provide new fitting room, service centers and merchandise display fixtures. Provide new fine jewelry casework, lighting and display modules. • Install new state -of -the art general and accent lighting systems. • New prototype carpet and file floor covering. • Prototype exterior entrance fagade design on South and North elevations, complete with bow front, entrance modules and new awnings, new aluminum entrance system. • New decorative walks paving. • New painted or EFIS wall surfaces. • New "Wards" contemporary sign program. AUTO CENTER • Remodel and reconstruct existing sales area and customer support areas to new state - of -the art prototype standards. Refurbish and repaint service area. • New EFIS fascia system. • Paint and/or resurface all wall areas. • New aluminum entrance system. • Replace and/or renew overhead doors. • New prototype sign program. In effect, this upgrade program provides a completely new retail interior and exterior. cc: Don Docken Bob Clark Huntington Center Proposal Analysis Matrix ATTACHMENT #5 i. Name, address, telephone & fax number ii. Organization of Developer 2. Leaset: i. Description of proposed land uses ii Number and size of structures HUNTINGTON CENTER PROPOSAL ANALYSIS Burlington Coat Factory Warehouse of Huntington Beach Huntington Center Associates, LLC Burlington Coat Factory Warehouse Corporation 1830 Route 130 Burlington, NJ 08016 (609) 387-7800 Not specified Burlington Coat Factory Warehouse Corporation No proposed leases other than its own lease with the owners of the HB Center No development concept presented, other than their interest to continue to lease the property No proposed description of land uses other than their desire to lease the property as is currently the case No description of structures proposed c/o Ezralow Company, LLC 23622 Calabasas Rd., Ste 100 Calabasas, CA 91302 (818) 223-3535 Fax (818) 223-3536 Delaware limited liability company and other subsidiaries managed by Bryan Ezralow Montgomery Wards Development, LLC Montgomery Wards Development, LLC c/o Loren H. Hohman, Director of Real Estate 535 West Chicago Ave. Chicago, IL 60671 (312) 467-6241 Delaware limited liability company managed by Montgomery Wards ,LLC No leases presented other than potential tenants mentioned at various meetings with representatives No lease presented of Ezralow and the leases on existing tenants at the HB Center Extensive development proposal (78 pages) in the form of a Specific Plan proposal Specific Plan proposal describes in detail the land uses anticipated for the property Specific Plan describes in detail the number of structures proposed, their square footage, their design and tentative uses Page 1 of 3 Limited proposal to only renovate store No proposal of land uses other than the store which Montgomery Wards occupies and the auto center which it operates Proposal to renovate store only describes the materials to be used, their color scheme and improvements desired HUNTINGTON CENTER PROPOSAL ANALYSIS iii. Breakout of total cost of proposed redevelopment Project program was submitted under Financial investment $4 to $.5 million. prior correspondence. Proposed Requesting financial assistance from No cost proposal was included development in $125 to $150 million range. Requested subsidy in the $15 center developer or Agency. Assistance undetermined at this point in time to $17 million range. iv, Schedule of performance 4. Financial Capabilily i. Copy of certified financial statement ir Copies of annual reports iii Statement indicating finance redevelopment iv. Banking references No schedule of performance submitted Indicates that demolition of center is as Burlington has no plans to perform to begin in the fall, perhaps in No performance schedule submitted any form of redevelopment October - 60 days for demolition. Construction to take 12 to 16 months No financial statement was submitted No annual report provided No financing plan provided No banking references submitted No financial statement provided Only the financial statement of their financial partner provided, Sun America; American International Group, Inc. No annual report provided. Submitted marketing brochure and the financial report for 1998 for Sun America, American International Group No financing plan provided other than a statement that Ezralow has the capacity to tap the capital markets Banking references submitted - City National Bank Page 2 of 3 No financial statement provided No annual report provided. Privately held company No financing plan submitted No banking references submitted i. List of development projects ii. Descriptions and illustrations of projects iii. Developers experience in ownership and management 6. Additional Information HUNTINGTON CENTER PROPOSAL ANALYSIS No list of development projects were submitted No brochures or descriptions or illustrations of projects submitted Burlington did not submit any description of the company's experience in owning and managing shopping centers No additional information submitted other than the lease to its current store Ezralow provided a brochure of the company and some of its projects Ezralow provided a brochure of the company and some of its projects. This includes illustrations and pictures of some of its projects Ezralow submitted a company brochure indicating experience in ownership and management of real estate properties including shopping centers Ezralow submitted three additional pieces of information to supplement their proposal. This included their experience in working with the retail industry, the enumeration of the various leases, ownership and easements, as well as the indication of its lease with Burlington Coat Factory Page 3 of 3 No list of prior projects submitted No descriptions or illustrations of prior projects submitted No description of the company's ownership record and property management experience submitted No additional information submitted other than to indicate that Montgomery Wards would vigorously defend its position should the Agency and Ezralow seek condemnation of its property JUN--16 2000 11:34 ALTHE[MER & GRAY CHICAGO 312 715 4800 P.02iO4 Muds Corporato AM! Estato s35 }% --ii cago Avenue C^ ugo. 11;-ron CGe7 12 467 M. 3une 16, 2000 Q _ r City of Huntington Beach_ - Department of Economic Development - cJ x 2000 Main Street Huntington Beach, CA n Attn: David C. Biggs Re- Supplement to Statement of Interest and Request for Proposal for Redevelopment of Huntington Center within the Huntington Beach Redevelopment Project Area Dear Mr. Biggs. - This letter shall serve as a supplement to the letter sent to you by Montgomery Ward, LLC (`Montgomery Ward") dated April 14, 2000 (the "Original Letter"), which Original Letter served as Montgomery Ward's response to the Request For Proposal, which Request For Proposal was sent to Montgomery Ward by the Redevelopment Agency of the City of Huntington Beach (the "Agency"). As a clarification of Montgomery Ward's statement in its response to the Request for Proposal, Montgomery Ward believes it is in a position to remodel its retail store in such a manner that will fit architcctwally with the redevelopment of Huntington Center. Montgomery Ward is a major retailer which operates 251 stores (approximately 20,000,000 square feet) and operates distribution centers With approximately 3,500,000 square feet. Prior to the end of this year Montgomery Ward will have renovated 78 of its retail stores and has plans to remodel at least 40 retail stores in 2001. These are more than traditional remodels. The look and feel of the remodeled stores are dramatically different and many people have felt these are new ground up stores. Montgomery Ward is involved in numerous innovative and leading malls throughout the country such as the Arrowhead Mall located in Phoenix. Arizona and Northeast Mall located in Hurst, Texas (Dallas metropolitan area). Montgomery Ward is a major occupant in over 40 shopping centers owned by Siman Property Group, the largest shopping center operator in the United States. Montgomery Ward has the expertise, experience and financial commitment to redevelopment which makes Montgomery Ward uniquely qualified to ensure the success of the redevelopment of Huntington Center. We have 1604Q" I .61S100 11 SC AW J'JN-16-2000 11=34 ALTHEIMER $ GRAY CHICAGO 312 715 4900 P.03iO4 David C. Biggs June 16, 2000 Page attached a fact sheet that describes in some detail additional information regarding the present status of Mortgornery Ward. All existing occupants at Huntington Center have been negatively impacted by the closin_ of stores and the lack of activity at Huntington Center, however, Montgomery Ward is very excited about the prospect of the remodeling of its facilities and the redevelopment of Huntington Center. Therefore, assuming the economics of the renovation are reasonable taking into account the requirements of the proposed Huntington Center Specific Plan, recognizing that the details of such plan have not been finalized, Montgomery Ward will renovate and remodel its retail store. If you have any questions or comments regarding the enclosed matter, please do not hesitate to contact either Loren Hohman, Director of Real Estate of Montgomery Ward at (312) 467-6241 or Spencer H. Heine, Executive Vice President and General Counsel of Montgomery Ward at (312) 467-2220. Very truly yours, MONTGOMERY WARD, LLC 1 Z� . ay- CA cc: Mayor David Garofalo Ray Silver Gels Duran Howard Zcicfsky Jane James Gail C. Hutton, Esq. Paul D'Alessandro, Esq. Murray 0. Kane, Esq. Cormic Brockway Loren H. Hohman Corey E. Light, Esq. Jonathan C. Curtis, Esq. Michael Adams (6069e4.+ - SIS100 11 59 AM) JUN-16-2000 11:35 ALTHEINER & GRAY CHICAGO 312 715 4800 P.04iO4 SUMMARY OF THE PRESENT STATUS OF MONTGOMERY WARD 1. Montgomery Ward has been in business for 128 years and became a wholly-om{med subsidiary of General Electric Capital Corporation in August of 1999. 2. Montgomery Ward operates 251 retail stores in 30 states. 3 Montgomery Ward has 43 stores in California including a number of stores located in major malls such as the following shopping centers. a. Topanga Plaza (Canoga Park); b. Mission Valley (San Diego); c. Plaza Bonita (National City); and d. Del Arno Fashion Center (Torrance) 4 Montgomery Ward is located in major malls throughout the country and is also in many major power centers. 5. Montgomery Ward will have remodeled 78 stores by the end of 2000 and the remodeled stores will be 48% of the company's business by year end. 6. Montgomery Ward's remodeled stores have shown spectacular results, with 201,o comparable store increases and the remodeled stores are performing at 20% above the rest of the chain. 7. The remodeled stores have open aisles, are much brighter and have improved adjacencies. (611114 1 • 8115AH 6:55 MA) ' TOTAL P.P,4 JUN--16-2000 11:34 DELIVER To David C. Biggs Mayor David Garofalo Ray Silver Gus Duran Howard Zelefsky Jane James Ga,I C- Hutton, Esq Paul D'Alessandro, Esq Murray O. Kane Connie Brockway Loren H. Hochman Spencer H. Heine Jonathan C Curtis, Esq Michael Adams FAX Special Instructions: Date: June 16, 2000 Material Being Faxed: ALTHE I PIER & GRAY CHICAGO LAW OFFICES HpE�MMER RA FACSIMILE COVER PAGE COMPANYICITY,ST,COUNTRY DlreCtor of Economic Development -City of Huntington Beach City of Huntington Beach City of Huntington Beach Redevelopment Agency- City of HunVngton Beach Community Development -City of Huntington Beach Community Development -City of Huntington Beach City Attorneys Office -City of Huntington Beach City Attorney's Office -City Huntington Beach Kane. Ballmer 8 Berkman City of Huntington Beach Montgomery Ward. LLC Montgomery Ward, LLC Sheppard, Mullin, Richter & Hampton LLP Consultant From: Corey E. Light FAX # 714-536-5232 714-375-5087 714-375-5087 714-375-5087 714-374-1540 714-374-1540 714-374-1590 714-374-1590 213-625-0931 714-374-1557 467-6249 41ri -3064 213.620-1398 714-374-2211 'total Number Pages (including cover page): 4 Pages Original Documents: Will X Will Not 312 715 4G00 P.01iO4 1 O SCLrrH WACKIER DFIIVy CHICAGO ILLINOIS 6000O-"46a 'EL: Q 1 21 7 1 5.4000 FAD(. Ia I of 7 1 5•4eac CONTACT PHONE # 714-536-5909 714-536-5582 714-536-55432 714-536-5582 714-536-.5,911 714-536-5511 714-536-5555 714-535-5555 213-617-0480 714-536-5404 467-6241 467-2220 213-620-1780 714-374-5678 Phone #: (312) 715-4858 Fo0ow By Mail CHICAGO WARSAW PRAGUE KYIV BRATISLAVA ISTANBUL SHANGHAI BUCHAREST i_CNpCN MINUTES HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY Council Chamber, Civic Center Huntington Beach, California Monday, December 6. 1999 A videtope of the 7:00 p m portion of this meeting is on file in the Office of the City Clerk JOINT MEETING BETWEEN CITY COUNCIL/REDEVELOPMENT AGENCY & HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY (125.40) ROLL CALL OF THE HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY DIRECTORS Present= Julien, Harman, Green, Dettloff, Bauer, Sullivan, Garofalo Absent: None PUBLIC FINANCING AUTHORITY MINUTES APPROVED A motion was made by Garofalo, second Dettloff to approve and adopt minutes of the December 21, 1998 meeting of the Huntington Beach Public Financing Authority as written and on file in the Office of the Secretary. The motion carried unanimously with Director Julien abstaining as she had not been present at the meeting_ ADJOURNMENT Chairman Garofalo adjourned the annual meeting of the Huntington Beach Public Financing Authority. ATTEST: Secretary Secretary Chairman • • • City Council Meeting June 19, 2000 Item F-2 N Q Q a� r Center's Historical Decline ■ In 1984,Huntington Center was placed in a Redevelopment Project Area because of the declining area; ■ JC Penney left in August of 1994; ■ In 1995, Burlington Coat Factory took over the building, however, it occupies only two of the three floors; Slide 2 Center's Historical Decline ■ The Broadway closed its store in August of 1996. ■ Many shops have closed their doors since 1994. Slide 3 Sales Tax Revenue Decline ■ Sales taxes in 1990 $ 1.5 million ■ Sales taxes in 1998 $ 850,000 ■ One major anchor's sales volume has declined by 30% between 1994/95 and 1998/99. Slide a 2 Sales Tax Revenue Decline ■ Assessed values have declined: - 1993/94 $94 million - 1999/00 $45 million ■ Additional assessment valuation appeals now pending. Slide 5 Additional Background ■ The community has long clamored the redevelopment of the Center. ■ The Agency has attempted to work with the previous property owners of the Center to cause its redevelopment. ■ The ownership of a majority of the Center changed as of 1999. Slide 5 3 Agency Objectives ■ To rehabilitate and reposition the Center into a high -quality, well integrated retail/enter- tainment Center; ■ To revitalize the economic viability of the Center; ■ To encourage comprehensive changes to both physical and tenant composition. Slide 7 Agency Objectives ■ To unify the development of the Center; ■ To maintain the Center as a superior quality development; ■ To advance the Redevelopment Plan's goal to implement high - quality design and use standards. Slide 8 4 yf ' 33 = Agency Consultants ■ Confirm Agency's beliefs that a unified development and maintenance will attract the combination of high caliber tenants to reposition the Center; ■ Indicate that high -caliber redevelopment and tenants will attract the necessary financing to reposition the Center into a first-rate retail and entertainment Center. Slide 9 Request For Proposals ■ The Agency issued RFP's and Statement of Interest to qualified owners and long- term tenants within the Huntington Center. ■ The RFP described the objectives of the Agency and the Redevelopment Plan. ■ Proposals were sought to redevelop the ,zap entire Huntington Center. IK; A,.- v'- Slide 10 5 = Proposals Received ■ Burlington Coat Factory ■ The Ezralow Company ■ Montgomery Wards Only one proposal met the goals, objectives and requirements stated in the RFP - The Ezralow Company. . I Side t t Economic Development f'r Department's Recommendation Y ■ Recommends the Ezralow for proposal several reasons: - Only submission addressing the Agency's stated goal of comprehensive development; - Proposal offered detailed plans; - Only company that submitted the documents required in the RFP necessary to properly evaluate its plans, experience and financial capability. 4 yy� Slide Q 6 Economic Development Department's Recommendation ■ Montgomery Wards addressed only the renovation of its two buildings. ■ Burlington Coat Factory only indicated its desire to continue leasing its property at Huntington Center. Slide 13 Economic Development Department's Recommendation ■ The Redevelopment Agency of the City of Huntington Beach enter into negotiations (for a period of 60 days) with The Ezralow Company (or one of its affiliates or subsidiaries) for an owner Participation Agreement (OPA) for the Redevelopment of the Huntington Center. Slide 14 7 Cd ° fe CITY OF HUNTINGTON BEACH Interoffice Communication 11 Economic Development Department I'O: Honorable Chairman and Redevelopment Agency Members C VIA: Ray Silver, City Administrator FROM: David C. Biggs, Economic Development Directo DATE: June 19, 2000 n SUBJECT: Supplemental Information Regarding Agenda Item F-2 The City Council has received copies of numerous letters from the attorneys for Montgomery Ward's and Burlington Coat Factory regarding the proposed redevelopment of Huntington Center. Attached for the Agency's information is a response from Murray Kane, Agency Special Counsel (Attachment 1). to one; of the letters that questions the owner participation process. June Ailin, with Kane, Ballmer & Berkman, will be in attendance to answer any questions raised by the Redevelopment Agency. Additional information regarding the Agency's role in the Specific Plan being proposed for Huntington Center is provided in a memo to the Planning Commission (Attachment 2). Attachments .1:1:nitl%fflc]Rn,:ilCl::LCL:tIF71 lLLIliCULinn dui Response from Murray Kane, Agency Special Counsel • MURRAY0 KANE BRUCE D BALLMER GLENN F WASSERMAN R_ BRUCE TEPPER. JR JOSEPH w PANNONE ROYCE K JONES STEPHANIE R SCHER JUNE AILIN MICHAEL J KARGER PRINCIPALS KANE, BALLMER & BERKMAN A LA— COPPORATION 51S SOUTH FIGUEROA STREET. SUITE 1850 LOS ANGELES. CALIFOR.NIA 0007L TELEPHONE 12131 617-0480 FAX 12171 625-093, Jonathan C. Curtis, Esq. Sheppa-rd, Mullin, Richter & Hampton 333 South Hope Street, 48' Floor Los Angeles, California 90071 Dear Mr. Curtis: June b, 2000 ROBERTP_BERKMAN RCTIREO EUGENE B JACOBS A oRO►CSSIONAL COPPO-ATION OT COUNSEL RECEIVED JUN 0 s 2000 DEPARTMENT OF ECONOMIC DEVELOPMUIT We are counsel to the Redevelopment Agency of the City of Huntington Beach (the "Agency"), and have been asked by the Agency to prepare this letter in response to your letter dated April 28, 2000 regarding Montgomery Ward and its property located in the Huntington Beach Mall. • The Montgomery Ward property is situated within the Site (as defined in the request for proposal, "RFP"), which is part of the Huntington Beach Redevelopment Project Area and subject to the Redevelopment Plan for the Huntington Beach Redevelopment Project ("Redevelopment Plan"). The Agency is seeking to redevelop the Site in order to achieve economic revitalization of the region and to the further the purposes of the Redevelopment Plan. In order to effectuate the Redevelopment Plan and accomplish the redevelopment purposes set forth above, the Agency is endeavoring, through the RFP process, to provide Montgomery Ward and other qualifying owners within the Site with a reasonable and good faith opportunity to participate in the redevelopment of the Site. To that end, the Agency is governed by the California Redevelopment Law (Health and Safety Code § 33000, et seg.) provisions regarding owner participation: § 33339. "Every redevelopment plan shall provide for participation in the redevelopment of property in the project area by the owners of all or part of such property if the owners agree to participate in the redevelopment in conformity with the redevelopment plan adopted by the legislative body for the area." § 33339.5. "Every redevelopment plan shall extend reasonable preference to persons who are engaged in business in the project area to reenter in business within the redevelopment area if they otherwise meet the requirements prescribed by the redevelopment plan." • § 33380. "An agency shall permit owner participation in the redevelopment of property in the project area in conformity with the redevelopment plan adopted by the • Jonathan C. Curtis, Esq. June 6. 2000 Page 2 legislative body for the area." § 33345. "With respect to each redevelopment project, each agency shall, within a reasonable time before its approval of the redevelopment plan adopt and make available for public inspection rules to implement the operation of owner participation in connection with the plan." California courts have interpreted the meaning of owner participation under these sections, and have determined that in pursuing the goals and objectives of redevelopment, an agency has broad discretion to not only impose reasonable terms and conditions upon any right of owner participation, but also to determine whether owner participation shall be permitted in a particular redevelopment project. However, in the event an agency determines to permit owner participation, the agency is required to make a reasonable and good faith attempt to allow such participation. The California Supreme Court states in Re Redevelopment Plan for the Bunker Hill Urban Renewal Project, 61 Cal.2d 21 (1964): "The imposition of reasonable terms and conditions upon the right to participate as • the agency may deem necessary or appropriate in light of the redevelopment proposed would seem to be not only within the power but a duty of the agency..." (Id. at 60) The Bunker Hill court continues by stating that owner participation is not an absolute right inherent in property ownership in a redevelopment project area, and reiterates and adopts the following reasoning set forth in Fellom v. Redevelopment Agency of City and County of San Francisco, 157 Cal.App.2d 243 (1958): "[It] is apparent from reading all of the sections and the entire law that there is provision for a method of redevelopment without participation by owners of the land. For instance, the express power of eminent domain would negate the necessity of participation by owners, if the Agency in its exercise of its constitutional powers acts fairly and without discrimination. Even the language of section 33701 [now section 333391, ... contemplates that participation be not extended to all owners of the property. This, of course, imposes upon the agency a duty of reasonableness and good faith, if they wish to make participation available to part of the owners of the property embraced in the redevelopment project." (61 Cal.2d at 59-60, 157 Cal.App.2d at 250) Bunker Hill and Fellom have since been applied to uphold limitations on owner participation in Huntington Park Redevelopment Agency v. Duncan, 141 Cal.App.3d 17 at 26 (1985), wherein the court states that an "owner of a particular parcel does not have an absolute right to develop that parcel", and M.A. Sanguuinetti v. City Council of the City of Stockton, 231 Cal.App.2d 813 (1965), Jonathan C. Curtis, Esq. June 6, 2000 Page 3 wherein the court confirms that the "Community Redevelopment Law permits, but does not require, owner participation, and whether or not and in what instances owner participation may be permitted is necessarily confided in the sound judgement of the agency in the adoption of the plan." The "Rules Governintz Participation and Preferences by Prooerty Owners and Business Occupants for the Huntington Beach Redevelopment Project" dated August 1996 (the "Rules"), promulgated and adopted by the Agency pursuant to § 33345 and the Redevelopment Plan, conform to the statutory and case law set forth above. These Rules apply to the Site and qualifying Owners and Business Occupants (as defined in the Rules) within the Site, including Montgomery Ward: § 301. Opportunities for Owner Participation "Owners of real property within the [Huntington Beach Redevelopment] Project Area shall be extended reasonable opportunities to participate in the redevelopment of property in the Project Area if such Owners agree to participate in the redevelopment in conformity with the [Redevelopment] Plan and these Rules." § 302. Preferences for Persons Enaaized in Business in the Proiect Area "Business Occupants engaged in business in the Project Area shall be extended • reasonable preference to reenter in business within the redeveloped area if they otherwise meet the requirements prescribed by the Plan and these Rules." The Rules specify, however, that Owner Participation opportunities are limited by various factors and minimum requirements, including the following: § 402 (2). "The Participant's proposed improvements and/or redevelopment conform or will conform to: the goals and objectives established by the Agency.:." § 402 (3). "The Agency retains its authority to determine in its sole and reasonable discretion whether the proposed Participant's (s') development conforms to and furthers the goals and objectives of the Plan and any specific development proposals on the basis of all the facts and circumstances pertaining to the proposed Participant's development." § 601. "The Agency may in its sole discretion determine that a participation proposal is not feasible or in the best interest of the Project or the community, or is otherwise limited by one or more of the criteria set forth in Section 402 hereof. -The Agency retains and shall exercise the discretion vested in it by law to consider and determine whether the proposal or proposals for redevelopment submitted by an Owner or Owners for participation in the Project Area conforms to, and meets the goals and objectives of, the Plan. The Agency shall exercise said discretion reasonably, in good 0 faith, and without discrimination." • Jonathan C. Curtis, Esq. June 5, 2000 Page 4 Furthermore, the Rules allow the Agency to establish preferences among owners seeking participation: § 403. "If conflicts develop between the desires of participants for particular sites or land uses, the Agency is authorized to exercise its reasonable discretion and establish reasonable priorities and preferences among the Participants and to determine a solution of consideration of objective facts concerning the proposals ... To the extent multiple owners are included within a proposed development site, an Owner with a majority interest in the total proposed development site may be determined by the Agency to have a preference over an Owner with a minority interest in the proposed development site." Likewise, the Rules specify that Business Reentry Preferences are limited by various factors and minimum requirements as set forth in the Rules: § 502 (2). "The improvement on the business premises made or proposed to be made • shall (unless otherwise approved by the Agency) meet, or shall be brought up to meet, a structural condition equal to or better than that required for a new structure or improvement of equivalent size, location, use and occupancy as required by the building and safety laws and regulations then applicable in the City, and shall conform to the Plan." The Rules also allow the Agency to establish preferences among business owners seeking similar preferences: § 503. "If conflicts develop between the desires of participants for particular sites or land uses, the Agency is authorized to exercise its reasonable discretion and establish reasonable priorities and preferences among the Business Occupants and to determine a solution by consideration of objective facts concerning the proposals..." Pursuant to the Rules and California law, the Agency, through the RFP process, is seeking development proposals for redevelopment of the Site from Montgomery Ward and other qualifying Owners, in order to provide the parties with a reasonable and good faith opportunity to participate in the redevelopment of the Site. The Agency intends to consider Statements of Interest and Development Proposals (as defined in the RFP) submitted by Montgomery Ward and other qualifying Owners pursuant to the UP, and shall do so reasonably, in good faith, and without discrimination. • However, in considering Statements of Interest and Development Proposals, the Agency may exercise the discretion vested in it by law and the Rules to impose reasonable terms and conditions • Jonathan C_ Curtis, Esq. June 6, 2000 Page 5 on any right of owner participation and, ultimately, to determine whether or not a participation proposal is feasible or in the best interest of the Redevelopment Project or the community. In addition, Bunker Hill, Fellom, Huntington Park and Sanguinetti, supra, make it clear that the Agency, after review and consideration of Statements of Interest and Development Proposals, nonetheless retains authority to reject any or all participation proposals and determine that owner participation will not be permitted in the redevelopment of all or any portion of the Site. The Agency has not made such a determination at this time. However, all determinations made by the Agency with regard to owner participation shall take into account the goals and objectives of the Agency and Redevelopment Plan, and shall be made with the purpose of effectuating the Redevelopment Plan and furthering the purposes of redevelopment under California law. At this time, the Agency is in the process of considering Statements of Interest and Development Proposals submitted by qualif}°ing Owners for redevelopment of the Site, including the Statement of Interest from Montgomery Ward, and intends to give due consideration to the statement and proposal, reasonably, in good faith, and without discrimination. The Agency will be evaluating proposals and considering determination regarding the Owner Participation process at its meeting of June 19, 2000, which commences at 7:00 P.M. • Please feel free to contact Gus Duran, Housing & Redevelopment Manager (714) 374-1529 at the Agency with any questions regarding the status of the Agency's review of Montgomery Ward's submittals. Sincerely, KANE, BALLMER & BERKMAN /Y0 VO. Murray . Kane Kathy Ng cc: David Biggs/ Gail Hutton 0 Hb\Ccnic6Wards Lu nnemo to rianninu %.ommission ATTACHMENT #2 F4O CITY OF HUNTINGTON BEACHInteroffice Communication Economic Development Department TO: Honorable Chairman and Planning Commission Members VIA: Howard Zelefsky, Planning Director FROM: David C. Biggs, Economic Development Directo jug DATE: June 16, 2000 SUBJECT: Proposed Specific Plan for Huntington Center I understand that questions have been raised at the Planning Commission regarding the Redevelopment Agency's involvement in the possible redevelopment of Huntington Center. The purpose of this memorandum is to address two areas: (1) the Agency's role • in the Specific Plan process; and (2) the redevelopment process. Specific Plan Process The adopted Redevelopment Plan for the City designates the City's General Plan and Zoning Code as the land use controls for the purposes of redevelopment. The City's 1996 General Plan requires the preparation and approval of a Specific Plan for the Huntington Center area before any development can occur in the area, including redevelopment. As such, the Agency has been supportive of the efforts to develop a Specific Plan for Huntington Center. The Specific Plan process for Huntington Center commenced under Macerieh's ownership. At the time, the Redevelopment Agency was a co -applicant when the Specific Plan application was submitted. Contrary to claim now being asserted, Montgomery Ward was consulted by Macerich on the Specific Plan. When Wards did not respond to a request to be a co -applicant for the Specific Plan, the Redevelopment Agency became a co -applicant, and Wards was advised of this in writing (Attachment 1). Additional background information is provided on the Redevelopment Agency's statutory basis to be an applicant or co -applicant for the Specific Plan as prepared by Murray Kane, Agency Special Counsel. (Attachment 2) Since that time, I have had regular contact with Wards regarding the future of Huntington • Center. When Ezralow purchased Macerich's holdings at the end of 1999, Ezralow substituted in as the Agency's co -applicant for the Specific Plan. Ezralow utilized the g:Idavidlprojecislhuntctr�spceific plan memo.doc • draft of the Macerich Specific Plan and made some modifications to reflect their ideas for the area. On June 5, 2000, the City and the Redevelopment Agency became co - applicants for the Specific Plan and Ezralow withdrew their application. The Agency has relied on Ezralow, to a great degree, to work with other property owners and tenants in the area covered by this proposed Specific Plan. This is due to existing contractual relationship that exists among these parties and to which the Agency or City is not a party. Earlier this year, 1 met with Mr. Loren Hohman, Real Estate Director for Montgomery Ward in my office. We discussed the possible redevelopment of Huntington Center, Montgomery Wards' interests, and the status of the proposed Specific Plan. Mr. Hohman indicated to me that he was working with Ezralow on the redevelopment of Huntington Center and was being consulted on the draft Specific Plan. In particular, we specifically discussed elements of the proposed Specific Plan, including the fact that it proposed to eliminate automotive related uses. Mr. Hohman told me he was going from our meeting to an appointment with Ezralow to discuss Huntington Center and the Specific Plan. In this meeting, I offered to get Mr. Hohman a copy of the draft Specific Plan, which he declined, stating he could get a copy from Ezralow. On May 23, 2000, I met with Mr. Hohman and two other representatives from Ward's at the International Council of Shopping Centers tradeshow in Las Vegas. We spoke about the timing for consideration of the Specific Plan and the redevelopment process. Mr. • Hohman asked to be provided with a copy of the final draft specific plan. Upon my return to the office on Friday, May 26, 2000, 1 conveyed this request to Jane James in Planning and she sent out the requested materials to Sheppard, Mullin, Richter, and Hampton, the attorneys representing Montgomery Wards. Also, while in Las Vegas, I accompanied Mr. Don Docken, Senior Vice President for Ward's, together with another city staff person, on a site visit to one of their new prototype stores. This is a single story, 96,000"- sf store. Mr. Docken indicated that Ward's new prototype stores range between 90,000 square feet and 130,000 square feet, excluding the automotive use, in a single -story format. Redevelopment Process A primary goal of the Redevelopment Agency is to facilitate the revitalization of Huntington Center. During Macerich's ownership, the Agency had preliminary discussions regarding a redevelopment program and some level of financial assistance. Macerich's decision to sell the Center placed any redevelopment processes on hold. Once Ezralow took ownership and sufficiently advanced the development of the proposed Specific Plan, the Agency initiated the formal redevelopment process. This involved requesting Letters of Intent and proposals from property owners, and • others with a property interest, for the comprehensive redevelopment of Huntington Center. Three responses were received by the deadline. On June 19, 2000, the g.\day id%projectslhuntctr\specific plan memo doc • Redevelopment Agency will be evaluating these responses. Staff is recommending the Agency negotiate with Ezralow for the redevelopment of Huntington Center. Additional background information is included in the attached Request for Redevelopment Agency Action for June 19- 2000. (Attachment 3) • The selection of Ezralow as the master developer for Huntington Center does not preclude the other two respondents, nor any other tenants, from being involved in the future project. This will ultimately be addressed with the context of the negotiations, with the scope of development and tenant mix to be determined in the future. The Redevelopment Agency negotiations and future actions will be taken in order to ensure a development scenario which best meets the goals and objectives for the site. We would encourage the Planning Commission to take action and approve the Specific Plan on June 20, 2000. This will ensure that any negotiations for the redevelopment of the area are undertaken with the Specific Plan parameters in place to guide these efforts. Please feel free to contact me if I can answer any questions or provide additional information. DCB:ls xc: Mayor and City Council Members Ray Silver, City Administrator Gail Hutton, City Attorney Murray Kane, Agency Special Counsel Gus Duran, Housing & Redevelopment Manager g:\davfdlprojectslhuntctr\speciric plan memo.doc • • Letter to Mr. Loren Homan --- Montgomery Ward's • ATTACHMENT, #1 City of Huntington Beacl �.� ED 2000 MAIN STREET CALI FORNIA 926U J U L 1 6 J�$ * f DEPARTMENT OF ECONOMIC DEVELOPMENT DER .q7. *EN 7 C- L"�E:-QP}l ENT July 15, 1998 Director 714/536-5582 Redevelopment 7I4,536-5582 FAX 714/375-5087 Housing 714/536-5542 Mr. Loren Hohman - Regional Real Estate Manager Montgomery Ward's Corporation 535 West Chicago Ave. 25" North Chicago, Illinois 60671 Dear Mr. Hohman: Mont,-, otnery Ward's Store at the Huntington Beach Mall This letter is to advise you that the Macerich Company is working in cooperation with the Redevelopment Agency of the City of Huntington Beach to redevelop what is now known as the Huntington Beach Mall, located at the intersection of Beach Boulevard, Edinger Avenue and the San Diego Freeway. The project involves reconfiguring the mall into an open-air entertainment • retaiI center with a new 18_ screen movie theater complex; new retail anchors and resta�ralt s.-� Macerich has attempted to have Montgomery Ward's cooperation in filing its entitlement applications with the city, but they have been unsuccessful in securing the necessary signatures on the applications. Since the Montgomery Ward's store is within the city's redevelopment project area, the Redevelopment Agency has decided to be the entitlement co -applicant with the Macerich Company. This will allow the Macerich Company and the Redevelopment Agency to continue planning and implementing the redevelopment of this significantly important project for the City of Huntington Beach. If you have any questions regarding the Redevelopment Agency's interest in the redevelopment of this Huntington Beach Mall or how this may affect Montgomery Ward's, please feel free to give me a call at (714) 375-5909. If you would like to speak directly with the lead person who is coordinating this effort on behalf of the Agency, please contact Gus Duran of my office at 7141374-1529. Sincerely, C. */r David C. Biggs Director of Economic Development xc* John Genovese . Tom Jayred 7r14/98%IONTGOM 0 • Memo from Kane, Ballmer & Berkman ATTACHMENT #2 • KANE, BALLMER & BERKMAN A LAW CCIMR&Ti0N 515 SOUTH FIOUEROA s rREE I I. SUITE 1853 LOS ANGLES. CAL1FORMA 00071 TEM11ONS (211) 617-QN 0 FAX :111162%.0931 MEMORANDUM TO: David Biggs, Director, Department of Economic Development City of Huntington Beach FROM: Murray Kane, Agency Special Counsel DATE: June 15, 2000 R.E. Statutory Basis for Agency Specific plan Co -Application The following is a brief outline of the statutory basis justifying the Agency's joining as applicant or co -applicant in the application for Specific Plan for Huntington Center, within the Huntington Center component of the Huntington Beach Redevelopment Plan (the "Redevelopment Plan"): 1. Section 6 of Ordinance No. 3343 approving the Redevelopment Plan provides that: "In order to implement .__the Redevelopment Plan hereby approved, the City Council hereby declares its intention to undertake and complete any proceeding necessary to be carried out by the City of Huntington Beach under the provisions of the Redevelopment Plan." Such proceedings would include a specific plan. 2. Section 900.8 of the Redevelopment Plan specifically provides for aid and cooperation between the City and Agency in carrying out the Redevelopment Plan including "...the adoption of specific plans._.". Section 33020 of the California Communiy Redevelopment Law, found at Sections 33000 et seq. of the California Health & Safety Code (the "CRL"), provides that " `Redevelopment' means the planniag.... replanning, redesign,_ of all or part of a survey area " 4. Section 33220 of the CRL provides thm "for the purpose of aiding and co- operating in the planning. -.of redevelopment projects... any public body...may: ...(d) Plan or replan, zone or rezone any part of such area and make any legal exceptions from building regulations ane ordinances." With respect to a specific plan, this section would be implernented by the City at the request of the • Redevelopment Agency involved. In this particular case, such request properly took the form of the application for :he specific plan. • Request for Redevelopment Agency Action - 6/19 ATTACHMENT #3 • u • Council/Agency Meeting Held: Deferred/Continued to: ❑ Approved ❑ Conditionally Approved O Denied City Clerk's Signature Council Meeting Date: June 19, 2000 Department ID Number: ED 00-26 CITY OF HUNTINGTON BEACH REQUEST FOR REDEVELOPMENT AGENCY ACTION SUBMITTED TO: HONORABLE CHAIRMAN AND REDEVELOPMENT AGENCY MEMBERS SUBMITTED BY: RAY SILVER, Executive Director PREPARED BY: DAVID C. BIGGS, Director of Economic Development Pf SUBJECT: Approve Developer Selection from Huntington Center Owner Participation Proposals Statement of Issue, Funding Source, Recommended Action, Alternative Action(s), Analysis, Environmental Status, Attachment(s) Statement of Issue: On March 3, 2000, the Redevelopment Agency issued a Statement of Interest and Request For Proposal (RFP) letter to all the major property owners and long- term tenants in the Huntington Center redevelopment site. The letters requested proposals for the redevelopment of the entire Huntington Center. Three proposals were submitted (Burlington Coat Factory, The Ezralow Company and Montgomery Wards). The Agency Board needs to select a respondent to undertake the comprehensive redevelopment of the site. Funding Source: Not applicable at this time Recommended Action: Direct staff to negotiate an Owner Participation Agreement with Huntington Center Associates, LLC, an Ezralow Company subsidiary, for the comprehensive redevelopment of Huntington Center. Alternative Action: Do not select an overall developer for the entire Huntington Center. Analysis: On November 26, 1984, the Redevelopment Agency Board adopted the Huntington Center Commercial District Redevelopment Plan. One of the principal reasons for the adoption of the plan was the obsolescence of the Huntington Center and the need to redevelop it. As time has progressed, the center has lost two of its anchor stores and has become severely deteriorated. JC Penney left the Center in August of 1994; Broadway closed its store in August of 1996. The replacement store for JC Penney only occupies two of three floors in the building. REQUEST FOR REDEVELOPMENT AGENCY ACTION MEETING DATE: June 19, 2000 DEPARTMENT ID NUMBER: ED 00-26 The City has seen its sales tax revenue from the site decline from over $1.5 million in 1990 to less that $850,000 in 1998. One of the existing anchors has seen its sales volume decline by 30% between 1994/95 and 1998/99. The gross assessed value of the site, which has dramatically driven down the Redevelopment Agency revenues, has declined from $94 million in 1993/94 to $45 million in 1999/00. In addition, there are property owner initiated assessed valuation appeals now pending. The community has long clamored its redevelopment, as the center has become an eyesore. The Agency attempted to work with the various owners of the center over the past 10 years to no avail. Recently a new owner has come into the picture and has demonstrated the interest to pursue the Center's redevelopment. The Agency intends for the Huntington Center to be rehabilitated and repositioned into a high -quality, well -integrated retail and entertainment center under unified ownership. To that end, the Agency has determined that, in order to revitalize the economy of the center and to best achieve the redevelopment goals of the Agency and Redevelopment Plan, the Agency may need to encourage comprehensive changes to both the structural and tenant composition of the Huntington Center. The Agency believes that unified development of the Huntington Center will allow for the oversight and site control necessary to effectively redevelop and maintain the center as a superior quality development, and will advance the Redevelopment Plan's stated goal of implementing design and use standards to assure high aesthetic and environmental quality, and providing unity and integrity to developments within the Project Area (Redevelopment Plan, Section 500). In addition, Agency expert consultants confirm that unified development and maintenance of the Huntington Center in the highest standards will enable the center to attract the combination and caliber of tenants as well as financing necessary to reposition it into a first-rate retail and entertainment center. Because of the Huntington Center's location as a major gateway to the City, it is vital to the interests of the City that the Huntington Center be redeveloped in a manner that will significantly enhance the image of the community and set the standard desired for future high -quality development in the City. The Agency believes that the unified, comprehensive development and maintenance of the center as envisioned by the Agency will accomplish these purposes as well as those set forth in the Redevelopment Plan. In order to effectuate the Redevelopment Plan and accomplish the objectives described above, the Agency issued a Request for Proposal and Statement of Interest (RFP) (Attachment 1) to qualifying owners and long-term tenants within the Huntington Center. The RFP described the objectives of the Agency and Redevelopment Plan, and sought proposals for the redevelopment of the entire Huntington Center in accordance with such objectives. Three proposals were submitted - Burlington Coat Factory (Attachment 2), The Ezralow Company (Attachment 3) and Montgomery Wards (Attachment 4). Agency staff has carefully reviewed and analyzed the three proposals in light of both the goals and objectives described above and the specific requirements set forth in the RFP (see Attachment 5 for summary matrix), and has come to the conclusion that only the proposal from The Ezralow Company meets these goals, objectives and requirements. RCAHBMaII _ - -2- fusmn in-nq aM REQUEST FOR REDEVELOPMENT AGENCY ACTION MEETING DATE: June 19, 2000 DEPARTMENT ID NUMBER: ED 00-26 The Economic Development Department is recommending The Ezralow Company's proposal for several reasons. First, it was the only submission which addressed and proposes to fulfill the Agency's stated goal of comprehensive development - the proposal offered detailed plans prepared by experts for the extensive redevelopment of the Huntington Center in its entirety. The submissions by Montgomery Ward and Burlington Coat Factory, however, did not address the Agency's stated goal of comprehensive development. Rather, Montgomery Ward only addressed the renovation of its two individual buildings, and Burlington Coat Factory only addressed its desire to continue leasing property within the Huntington Center. Based on their proposals, it does not seem that either Montgomery Ward or Burlington Coat Factory desire or are willing to engage in a comprehensive redevelopment of the Huntington Center as envisioned by the Agency, instead, they want only to maintain their individual stores. However, fragmented development proposals will not accomplish the goals and objectives established by the Agency and Redevelopment Plan. Second, The Ezralow Company was the only party which submitted essentially all of the documents which were required by the RFP and necessary for the Agency to adequately evaluate the potential participant's redevelopment plans for the Huntington Center as well as • the potential participant's development experience and financial capability (please see Attachment 5). Montgomery Ward and Burlington Coat Factory did not submit these essential documents. For these reasons, the Economic Development Department recommends that Agency staff enter into negotiations with The Ezralow Company (or any one or its affiliates or subsidiaries) for an Owner Participation Agreement for the redevelopment of the Huntington Center. If this recommendation is approved, staff will negotiate for a 60-day period, during which the selected participant shall be required to provide adequate assurances to Agency that the participant has definitive plans for and is capable of attracting the combination and caliber of tenants as well as financing necessary to rehabilitate and reposition the entire Huntington Center into a first-rate, unified development. Environmental Status: None for this action. Attachments : 1 1 RFP Letter. 2 Burlington Proposal_ • 3 Ezralow Proposal. 4 Montgomery Wards Proposal. 5 Huntington Center Proposal Analysis Matrix. R('4►IRMnII - '" _�_ a,r,nn..n.n�. .R• FROm.,:_1UCNMAN & ASSOCIATES PHONE NO. : 2133850595 Jun. 19 2000 02:57PM P2 TUCHMAN & ASSOCIATES ATTORNEYS AT LAW 3435 WILSHIRE BOULEVARD 30TH FLOOR LOS ANGELES. CALIFORNIA 90010 PHONE 213.385.8000 - FAX 213.3S5-0595 June 19, 2000 Sent via United States Certified Mail Return Receipt Requested and Facsimile (714)374- 1557 Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attention: Mr. Ray Silver of the Redevelopment Agency Sent via United States Certified Mail Return Receipt Requested and Facsimile(714)375- 5087 Department of Economic Development of -� the City of Huntington Beach 2000 Main St. Huntington Beach, CA 92648 Attention. David Biggs and Gus Duran Sent via United States Certified Mail Return Receipt Requested and Facsimile(213)625- 0931 Kane, Ballmer & Berkman 515 South Figueroa St. Suite 1850 Los Angeles, California 90071 Attention Murray Kane, Esq. Re: Economic Development DWartmenr Hearing on Monday .Tune 19 2000 at 7: 0 pM. regarding its lane 2 2000 letter rY ag rding proposals submitted to redevelop Huntington Center Dear Honorable Chairman and Redevelopment Agency Members. As you are aware, our offices represent Burlington Coat Factory Warehouse of Huntington Beach, inc. who is a long term tenant at the property commonly known as the "Huntington Center Mall"("Huntington Center"). Please be advised that Burlington Coat lvactory("Burlington") presents the following comments and objections to the June 19, 2000 meeting re ,arding approval of the developer from the Huntington Center Owner Participation Proposals We requested by separate letter dated June 16, 2000 that this hearing be continued for a minimum ofone month, without public comment or testimony in order to allow Burlington to study the Proposed Plan and to work out its legal claims against Ezralow, Huntington Center Associates("E7ralow Entities") and the City of Huntington Beach. l.X� CDMM1nNICA—T)aN V, FROM : TUCHMAN & ASSOCIATES PEE NO. : 2133650595 Jun. 19 2000 02:57PM P3 Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 2 The staff report of June 16, 2000 prepared for this meeting incorrectly states the proposal submitted by Burlington. Burlington wants to participate in the redevelopment of the Huntington Center as part of the overall plan of ; edevelopment Burlington is prepared to make a reasonable investment in tenant improvements in order to develop its leasehold so that it will conform to the overall design scheme. Burlington however, strenuously objects to the conceptual design plans submitted by Ezralow because in at least one proposal, Burlington's demised premises is razed and Burlington is specifically excluded from the redeveloped shopping center. Burlington holds a thirty year lease which was entered into on April 6, 1995. There now remains approximately twenty four and a half years on Burlington's leasehold. Specifically, Article XVII of the lease agreement states, inter alia, that a conceptual design plan which razes Burlington's demised premises shall: 1. provide Burlington with a minimum of 120,000 Gross Leasable Area in the new Shopping Center, 2. allow Burlington the opportunity to review and comment on any "conceptual design plan' for the reconfigured Shopping Center; 3. the parties shall submit all disputes, if any, regarding the design plans to final and binding arbitration; and 4 the Rent, Common Area Costs and Real Estate Taxes are the same as that with the existing premises. As is currently known to Burlington, the Ezralow entities and officials from the City of Huntington Beach and the Redevelopment Agency for the City of Huntington Bea ch(" Redevelopment Agency") have engaged in numerous non-public discussions regarding this redevelopment project. The proposals submitted by the Ezralow entities which are being considered by the Redevelopment Agency are in contravention to the lease obligations it has with Burlington. On March 31, 2000 the Ezralow entities submitted and signed the Application to submit draft Specific Plan Number 13 to the City and the Redevelopment Agency. On May 24, 2000 Burlington fled a lawsuit against the Ezralow entities for submitting redevelopment proposals to the city and Redevelopment Agency which are in contravention to its lease obligations. The causes of action pled are Breach of Contract, Specific Performance, Injunctive Relief and Declaratory relief. On June 1, 2000 Burlington noticed the Ezralow entities ex -pane for a Temporary Restraining Order and Order to Show Cause for Preliminary Injunction to restrain and enjoin the Ezralow entities from submitting and/or proceeding with design proposals which raze Burlington's premises and are not in conformity with the lease provisions. The ex-parte application papers were filed and served on June 2, 2000 and the matter was set to be heard in front of Judge Latimer Gould on June 7, 2000_ On June 7, 2000 the matter came for hearing and the Ezralow entities made representations to the Court that it was up to the City of Huntington Beach and the FROM : TUCHMAN 8 ASSDCIATES PHONE NO. : 2133850595 Jun. 19 2000 02:58PM P4 Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 3 Redevelopment Agency to determine if it wants Burlington in the Huntington Center. At that time the Court continued the hearing until the morning of June 13, 2000, the day of the scheduled planning commission meeting. The court continued the hearing in order to have the City of Huntington Beach and/or the Redevelopment Agency submit a declaration that it was their decision and not the Ezralow entities decision to present a design proposal that excludes Burlington from the redeveloped shopping center. On June 9, 2000 Mr. Howard Zelefsky, the Director of Planning submitted a sworn declaration to the Court that on June 5, 2000 Mr. Ray Silver, City Administrator/Executive Director of the Redevelopment Agency unilaterally took action to designate the city and the Redevelopment Agency as the applicants for the Specific Plan Number 13 proposal. Mr. Silver did not have authority to take this action unilaterally and if other city and/or Redevelopment Agency Officials were involved in this action it clearly violated the Brown Act. Accordingly, the June 5, 2000 action is illegal and invalid. Through this action the city and the Redevelopment Agency has engaged in an arbitrary and capricious act violating the due process rights of Burlington and designed to specifically and tortiously interfere with Burlington's contractual rights with the Ezralow entities. This act was the sole cause and basis for the Court to deny Burlington's requested injunctive relief. For the sole benefit of only one of the applicants (the Ezralow entities) the city and the Redevelopment Agency interfered with Burlington's contractual rights and the Court's processes by allegedly taking the illegal and invalid action of June 5, 2000. Accordingly, Burlington has now commenced (or will shortly commence) a Federal Action against the City of Huntington Beach, the Redevelopment Agency, Mr Ray Silver and Howard Zelefsky for: violations of the Brown Act for conducting numerous non-public and secret meetings including the June 5, 2000 action, intentional tortious interference with contract and 1983 Civil Rights violations. Despite numerous requests for information and as required by California Government Code section 54954.1, the City and Agency has failed to inform Burlington of numerous meetings. On April 4, 2000 and April 12,2000 Burlington requested all documents regarding the redevelopment The City and the Redevelopment Agency has provided only minimal documentation and even Ezralow's application had to be obtained from other sources. There still remains numerous documents which have been requested and have not been provided or even identified, despite Burlington's numerous requests Burlington was unaware of a planning commission study session conducted on May 9, 2000. More over, on May 8, 2000 Mr. Krsto Mijanovic from the offices of the undersigned was at the City of Huntington Beach and spoke with Mr. Gnus Duran the Housina and Redevelopment June ig, 4vvv Page 4 further unaware of a June 1, 2000 Design Review Board meeting. These are just several of the many meetings that the city and the Redevelopment Agency have conducted with the inclusion of Ezralow entities and to the willful exclusion of Burlington and other owners. SUIVIMARY OF COMMENTS AND OBJECTIONS Based upon the foregoing, Burlington objects to the proposals submitted by the Ezralow entities and the June 19, 2000 meeting of the Redevelopment Agency on, inter alia, the following grounds' l . E.zralow's Proposals Are Unlawful and Invalid As A Matter Of Law Because They Are In Violation of Municipal Code Sections 247.02 and 215.08; 2. The City's Invalid and Unlawful Action of Becoming The Applicant On June 5, 2000 Was In Violation Of The Brown Act and Without Authority. 3. Proper Notice of the June 19, 2000 Redevelopment Agency Meeting Has Not Been Given In Accordance With Municipal Code Section 248.02 and Government Code Section 65094 Because It Is Unclear As To Whose Proposals Are Being Considered; 4. The City and the Redevelopment Agency's Complicity With The Ezralow Entities Creates a Bias Preventing A Fair An Impartial Hearing On The Proposals For Redevelopment 5. Ezralow's Proposals Violates Government Code Section 65852 Concerning Unifortnity of Regulations and Violates Established Law Prohibiting Arbitrary interference With Private Business. 6. EZralow's Proposals Constitutes Unlawful Discriminatory Spot Zoning Directed To Exclude A Business Owner 7. Burlington Further Joins In On All The Objections Set Forth By Montgomery Wards. Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 5 FROM : TUCHMAN & ASSOCIATES PHONE NO. : 2133850595 Jun. 19 2000 03:00PM P1 Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 5 1. z low's Prelposals Are Unlawful and Invalid As A Matter Of Law Because They Are In Violation of yunicipal Code Sections 247.02,and 215.08 Ezralow's proposals cannot be considered because they are in violation of Section 247 02 and 215.08 of the City's Municipal Code ("Code'). Code Section 215 08 provides as follows: An amendment to reclassify progeny to a SP District may be initiated by a property owner or authorized agent, the Planning Commission, or the City Council. If the property is not under a single ownership, all owners shall join in the application, and a map showing the extent of ownerships shall be submitted with concept plans and materials. Similarly, Code section 247.02 provides as follows. - Amendments to the zoning provisions, standards or map may be initiated by motion of the City Council or Planning Commission, or any other person or agency. if property that is the subject of an application not initiated by the City is in more than one ownership, all the owners or their authorized agents sliall join in filing the application. Pursuant to the Rules Governing Participation and Preferences by Property Owners And Business Occupants For the Huntington Beach Redevelopment Project Section 11(200) General Definitions: F. "Owner" means any person, persons, corporation, association, partnership, or other entity holding recorded fee title to or a long term lease of real property in the Project Area for so long as such Owner holds such title or long term lease. The Ezralow entities submitted an application to the City for the draft Specific Plans (zoning map and zone text amendment), and the application was only signed by Huntington Center Associates(the entity included in the Ezralow entities) and not by any other owner, including Burlington. Ezralow's proposals are invalid pursuant to Municipal Code section 247.02 and 215 08 and therefore cannot be considered. Redevelopment Agency of the City of Huntington Beach June 19, 20W Page 6 2. The City's Invalid and Unlawful Action of Becomini The Applicant On June 5,2000 Was In Viglation Of The Brewp ASt and Withou uthori . Throughout this process, the city and the Redevelopment Agency have been in wilful violation of the Brown Act in order to support the Ezralow entities. Despite numerous requests, including the written requests of April 4th and 12th of 2000, Burlington has not been provided with the public records and documentation regarding this redevelopment project. More over, Burlington has not been kept informed of the public meetings despite its expressed request pursuant to California Government Code section 54954.1. The Brown Act codified in California Government Code section 54950 et seq. specifically provides that "the legislature finds and declares that the public commissions, boards and councils and the other public agencies in this State exist to aid in the conduct of the people's business." As of late Friday, June 9, 2000 Burlington first learned that Mr. Ray Silver, City Administrator and Executive Director of the Agency, unilaterally declared by memorandum dated June 5, 2000 that the City and Agency were the "applicants." Given these events, it is now uncertain as to who is the true "applicant." Since Mr. Silver is neither the Planning Commission nor the City Council, and since Mr. Silver has no authority to make application in his capacity as City Administrator (see Code Chapter 2.08) or otherwise, the application by the Ezralow entities and action by Mr. Silver are both invalid and improper. The City Charter of the City of Huntington Beach under Article IV section 401 specifically enumerates the powers of a City Administrator and nowhere under the enumerated powers does it provide Mr. Silver with the power to unilaterally take the June 5, 2000 action. Accordingly without a duly noticed public hearing the actions taken by Mr. Silver on June 5, 2000 are null and void pursuant to California Government Code section 54960.1 Request to cure or correct the invalid action is hereby made. iceo Stockt.Qn NewWapers,Inc. v. Redmlopment Agency of the City of Stockton (1985)171 Cal.App_3d 95. More over, the city and the Redevelopment Agency have consistently failed to inform Burlington of numerous meetings including but not limited to meeting of April 13, May 9 and June 1 of 2000. Accordingly, Burlington objects to the hearing and any action that may be taken at the June 19, 2000 hearing on the grounds that any decision made on any proposal submitted by Ezralow is invalid and illegal because Burlington has not been made aware of all the proposals submitted and the information surrounding them. Further, the June 5, 2000 action of Mr. Ray FROM : TUCHMAN 8 ASSOCIATES PHONE NO. : 2133850595 Jun. 19 2000 03:01PM P2 Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 7 Silver, the City Administrator and Executive Director of the Redevelopment Agency has created an incurable taint on this proceeding by intentionally interfering with Burlington's contractual and due process rights 3. Proper Notice of the June 19, 2000 Redevelopment Agency_Meeting Has Not Been Griven In Accordance With Municipal Code Section 249.02 and Government Code Section 65094 Because It Is Unclear As To Whose Proposals Are Being Considered Code Section 249 02 requires, among other things, that the form of the notice for hearing include "a general explanation of the matter to be considered, including a general description of the area affected..." Similarly, Government Code Section 65094 requires "a general explanation of the matter to be considered." The notice provided for the June 19, 2000 meeting is impermissibly vague in that it is impossible to determine who and what proposals are being considered. The proposal submission deadline date as set forth in the Redevelopment Agency's own March 3, 2000 letter specifically states May 2, 2000 as the submission deadline. Accordingly, the city and/or Redevelopment Agency June 5, 2000 action is untimely. The June 5, 2000 action taken by Mr. Ray Silver appears that the applicant for the proposals submitted by Ezralow are now that of the City and Redevelopment Agency. The staff report entitled City of Huntington Beach Request For Redevelopment Agency Action received late Friday, June 16, 2000, however still refers to the Ezralow Company's proposals and makes no reference to the city becoming the applicant. Further, the draft Specific Plant number 13 and the proposals submitted by the Ezralow entities are one in the same. Burlington has no way of knowing what proposals are being considered and therefore the notice for this hearing is vague and ambiguous. Burlington will directly suffer undue prejudice because one of the two design plans specifically excludes Burlington from the redeveloped shopping center and therefore must know who and what is being considered. 4. The 04 and the Redevelopment Agency's CornRlicijy With The Ezralow _Entities Creates a Bias Preventing A Fair An Impartial Hearing On The Proposals For Redevelopment The June 5, 2000 invalid and improper action by the city and Redevelopment Agency has created an impermissible bias preventing a fair and impartial hearing on the proposals for redevelopment. Since Ezralow's proposal is Specific Plan Number 13 it is without question that FROM : TUCHMAN $ ASSOCIATES PHONE NO. : 2133350595 .Turf. 19 2a00 03:02PM P3 Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 8 an improper bias has been created and the interests of Burlington and other business owners will not be fairly and impartially heard. See Gibwn v. Berryhill (1977) 69 Cal.App 3d 983; W also Clark v. City of Hermosa Beach (1996) 48 Cal.AppAth 1152(holding that a denial of a fair hearing occurred when city council introduced new issues during its discussions that had not previously been discussed and applicants were denied the opportunity to be heard on them and the council exhibited bias causing the application to be denied_) It is patently clear and obvious that the city and the Redevelopment Agency is exhibiting an unfair and- prejudicial bias in favor of the Ezralow entities at the expense of Burlington. The June 5, 2000 action which was performed without any meeting or notice was designed to tortiously interfere with Burlington's contractual rights and the processes of the Court. In effect, the city and the Redevelopment Agency are assisting and unlawfully using its powers to remove Burlington from the redeveloped shopping center for the sole and only benefit of the Ezralow entities. 5. Ezralow's Proposals Violates agyrrnment Code Section 65852 Concerning Uniformity of Regulations and Violates Established haw Prohibiting Arbitrary interference With Private Business Government Code section 65852 governs the uniformity of regulations within a particular zone by prohibiting unreasonable discrunination against particular properties within a similar zone classification. Section 65852 provides in relevant part: All such regulation shall be uniform for each class or kind of building or use of land throughout each zone, but the regulation in one type of zone may differ from those in other types of zones. The proposals submitted by Ezralow violates this code section and California case law in that by presenting proposals that specifically raze Burlington's demised premises without offering any other facility for Burlington in the proposed concept plans, the city and the Redevelopment Agency are attempting to unlawfully restrict the type of businesses allowed to operate at the Huntington Center for the benefit of the Ezralow entities. "The legislature may not, under the guise of protecting public interests, arbitrarily interfere with private business, or impose unusual and unnecessary restrictions upon lawful occupations." Lawton v. Steele. 152 U.S. 133, 137(1804). See also Q'Hagen v- Board of Zoning Adjustment 19 Cal.App.3d 151 (1971); McDonald's ,Systems of California. Inc. v Board of Permit Appeals 44 Cal.App 3d 525, 548(1975). The design plans submitted by the Ezralow entities eliminates Burlington from the redevelopment, accordingly should Ezralow be adopted as the developer pursuant to their Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 9 submitted proposals, the city and the Redevelopment Agency will Arbitrarily and intentionally assist Ezralow entities in their attempt to remove Burlington from the redeveloped Shopping Center. Furthermore should the Ezralow entities be adopted as the developer then the Redevelopment Agency's own rules governing the redevelopment project will be violated. The City and Redevelopment agency has failed to comply with Section V at 501 of the Rules Governing Participation and Preferences by Property Owners and Business Occupants For the Huntington Beach Redevelopment Project which provides: A (501) Methods for Extending Reentry Preferences Whenever a Business Occupant will be displaced by Agency action from the Project Area, the Agency will, prior to such displacement, detertnine: I) whether such Business Occupant desires to relocate directly to another location within the Project Area, or 2) if suitable relocation accommodations within the Project Area are not available prior to displacement, whether such Business Occupant would desire to reenter in business within the Project Area at a later date should suitable accommodations become available. For those Business Occupants who desire to relocate directly to another location within the Project Area, the Agency will make reasonable efforts to assist such Business Occupants to find accommodations suitable to their needs. A record of Business Occupants who cannot be or do not want to be directly relocated within the proposed development site, but who have stated that they desire to reenter into business in the Project Area whenever suitable locations and rents are available, will be maintained by the Agency. The Agency will make reasonable efforts to assist such Business Occupants to find reentry accommodations at locations and rents suitable to their needs. The City and Redevelopment Agency has failed to consult or try to work with Burlington to ensure that it can continue its operation at the redeveloped Shopping Center. In fact the City and Redevelopment Agency has specifically worked with Ezralow to the exclusion of Burlington and the city and Redevelopment Agency's actions regarding this development have been specifically aimed at assisting the Ezralow entities in removing Burlington permanently from the Shopping Center. 6_ Ezralow's Proposals Constitutes Unlawful Discriminatory Spot and Snob Zoning Directed To Exclude A Business Owner Spot and snob zoning occurs where a small parcel of property is restricted and given less rights that the surrounding property, thereby creating an "island" in the middle of a larger sea FROM : TUCHMAN & ASSOCIATES PHONE NO. : 2133650595 Jun. 19 2000 03:06PM P1 Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 10 devoted to other uses. She Wilkinsv. City of San Bernardino, (1946) 9 Cal 2d 332, 340. It can also occur where the zoning amendment may appear valid on its face, but the circumstances surrounding its adoption, the purpose of the amendment and its ultimate objective are found to be an unlawful exercise of the legislative power. G&D Holland Construction Co. v. City of Marysville (1970) 12 Cal. App. 3d 989, 996; _e also Arnel Development Co. v_. City of Costa Mesa (1981) 126 Cal.App.3d 330, 337["A City cannot unfairly discriminate against a particular parcel of land and the courts may properly inquire as to whether the scheme of classification has been applied fairly and impartially in each instance.] Here, the design proposals submitted by Ezralow are in direct contravention to the spot and snob zoning restrictions. More over, Ezralow's proposals have unfairly discriminated against Burlington, becausc its demised premises is going to be razed and no other accommodation has been afforded to it_ Ezralow's proposals and the identical draft Specific Plan Number 13 attempt to create an intentional barrier to the existing business of Burlington. The stated objectives for this redevelopment contained at page two of the June 16, 2000 staff report for this June 19, 2000 hearing states: The Agency intends for the Huntington Center to be rehabilitated and repositioned into a high quality, well integrated retail and entertainment center under unified ownership To that end, the Agency has determined that, in order to revitalize the economy of the center and to best achieve the redevelopment goals of the Agency and Redevelopment Plan, the Agency may need to encourage comprehensive changes to both the structural and tenant composition of the Huntington Center. Without any study or hearing, the city and the Redevelopment Agency is taking actions that unfairly discriminate against the retail business performed by Burlington for the sole benefit of the Ezralow entities. By considering the Ezralow entities as developers with their proposed conceptual design plans that specifically exclude Burlington, the city and the Redevelopment Agency are unfairly and invalidly performing "snob" and "spot" zoning. 7. Conclusion Based on the foregoing and the objections and comments submitted by Montgomery Ward, we request on behalf of Burlington that the Redevelopment Agency of City of Huntington Beach's hearing be indefinitely postpone the hearing on determining the developer for this redevelopment project to address the matters set forth in this letter. Burlington has expressed to the City, the Redevelopment Agency and the Ezralow entities its desire and willingness to work together to have a successful redevelopment of the Huntington Center. Notwithstanding such Page 11 efforts by Burlington, the City, the Redevelopment Agency and the Ezralow entities have moved forward in a concerted adversarial manner towards Burlington in order to remove it from this redevelopment project. Burlington has been left with no choice but to exercise its rights and remedies to protect its property and business interests. Burlington has been severally prejudiced by the actions of the city and the Redevelopment Agency and therefore requests that the city and the Redevelopment Agency discontinue its biased and prejudicial actions, and consider the interests of Burlington in an effort to work together for a comprehensive redevelopment of the Shopping Center. Very truly yours, TUCHMLAM & ASSOCIATES M A- HMAN FPOM TUCHMCLJ & ASSOCIATES PHONE NO. : 2133850595 Jun. 19 2000 02:55PN P1 FAX TO: FIRM NAIvE: FAX NO.: FROM: REGARD TO: MCIDIAN & ASSOCIATES . roRNEYS AT LA1L ?3Tii FLOOR LOS A-W ELZS. CAU.FORARA 90010 PHONE :13 185 I000 - FAX 21) 395 0595 FAX COVER SHEET (d G y S� (✓e r�R�cCe ve I o�,�,P_� eh�y Cl'L cc Lunil'y'(4 foil 8ecicl� C C,�iA OUR FILE NO.: DATE & TIME: V 1 ~Cif G4 M(ga. fir 1► U v1 �'o Fac r U /4 .295-6 NO. OF PACES (Including this page) : Per Your Request Per Our Conversation For Your Information SPECIAL COIVIlviEWS Response Requested Response Not Required Please call us upon Receipt. THIS FACSfM1LE )S INTENDED ONLY FOR THE PERSON TO WHOM rr IS ADDRESSED AND MAY CONTAIN PRIVILEGED, PROPRIETARY. OR OTHER DATA PROTECTED FROM DMCL.OSURE UNDER APPLICABLE LAW. IF YOU ARE VO T THE ADDRESSEE OR THE PERSON RESPONSIBLE FOR DELIVERING THIS TO THE ADDRESSEE, YOU ARE HEREBY NOTME.D THAT COPYING OR DISTRIBL-TDZG TI-OS TRANSMISSION J5 PftOH MFTM IF YOU HAVE RECM(M TMS FACSDAE IN ERROR. PLEASE. TELEPHONE US I45.ti5EDIATELY AND RETURN fT BY MAIL TO THE PERSON AT THE ABOVE ADDRESS- THANX YOU. Cer, yx SHEPPARD, MULLIN, RICHTER & HAMPTON LLP • �� r�n ai�ir. •.u..�w5..iw ..C« r ww Or[15. O... t Ow.O+ar.Or.1 WRITERS DIRECT LINE (213) 620-1780 jcurt-ls@smrh.com HAND DELIVERED ATTORNEYS AT LAW FORTY-EIGHTH FLOOR 333 SOVTH HOPE STREET LOS ANGELES. CALIFORNIA 00071-1ad8 TELEPHONE (213) 6Z0-1780 FACSIMILE [213) 620-1398 June 19, 2000 Redevelopment Agency Board Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 M1� C- O a C� c. r- OUR FILE NUMBER r�T I09,92503 ;, Ir RECEIVED J U N 1 9 2000 DEPARTMENT OF ECONOMIC DEVELOPMENT Re: Ci y of Huntington Beach Redevelopment Agency Hearing on Mond4y, June 19 2000/A enda Item N9, F-2/Develo er Selection from Huntington Center Owner Participation Proposals Honorable Chairman Garofalo and Redevelopment Agency Board Members: This Firm represents Montgomery Ward, LLC ("Montgomery Ward") in connection with the above -referenced matter. As you may know, Montgomery Ward is the owner of approximately 13.47 acres of real property (the "Montgomery Ward Pro a ") located in what is commonly known as the "Huntington Center Mall" ("Huntington Center"). INTRODUCTION AND REQUEST TO REDEVELOPMENT AGENCY BOARD Montgomery Ward is a major retailer which operates 251 stores (approximately 20,000,000 square feet) and is involved in numerous innovative and leading malls throughout the country. Prior to the end of this year, Montgomery Ward will have renovated 78 of its retail stores and has plans to remodel at least 40 of its retail stores in 2001. Montgomery Ward has the expertise, experience and financial commitment to redevelopment which makes Montgomery Ward uniquely qualified to ensure the success of the redevelopment of the Huntington Center, as explained more fully in the Montgomery Ward Response (as defined below) to the RFP (as defined below), LAJ--�_ CMIn�11C� L 0 5 A N G E L E S ■ O R A N G E C 0 LI N T Y a 5 A N 0 1 E G 0 ■ S A N F R A N C 1 5 C 0 SHEPPARD. MULLIN. RICHTER & HAMPTON L,F Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 2 which includes a supplemental letter dated June 16, 2000 to the City of Huntington Beach ("City") and the Redevelopment Agency of the City of Huntington Beach ("Agency"). Given this expertise, experience and financial commitment to redevelop- ment, and given that Montgomery Ward is one of the two major land owners of the Huntington Center, Montgomery Ward should clearly be chosen as the "developer" for the Montgomery Ward Property and Agency Staff should be instructed to negotiate an owner participation agreement ("OPA") with Montgomery Ward for the Montgomery Ward Property. With respect to the remainder of the real property constituting the Huntington Center, a separate OPA should be entered into with a third party for its redevelopment. There is absolutely no need or reason for the Huntington Center to be under some type of "unified" ownership or control, as suggested in the RFPs that were sent out by the City and the Agency on or about March 3, 2000. However, to ensure consistency of the redevelopment of the Huntington Center, the Specific Plan (as defined below) could be adopted, if appropriately modified. Also, two or more OPAs could be simultaneously considered and entered into by the Agency to ensure appropriate redevelopment of the entire Huntington Center. If Montgomery Ward is not chosen as the "developer" for the Montgomery Ward Property with instructions to the Agency Staff to negotiate a separate OPA with Montgomery Ward to protect Montgomery Ward's rights as a property owner and operating business, then we submit the following comments and objections as to the RFP, the process and procedures related thereto and the other matters set forth below.'-' =' Each of the correspondence, documents and other materials referenced or referred to herein, as well as all other documents and materials relating to this matter and/or the Huntington Center on file with the City or the Agency or otherwise considered records of the City or the Agency, are hereby incorporated herein by this reference and made a part of this hearing and the record by this reference. SHEPPARD, MULLIN, RICHTER & HAMPTON UP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 3 BACKGROUND FACTS AND SUMMARY OF COMMENTS AND OBJECTIONS IF MONTGOMERY WARD IS NOT CHOSEN AS "DEVELOPER" FOR THE MONTGOMERY WARD PROPERTY Background Facts Montgomery Ward has owned and operated its store, including the automotive facility, at the Montgomery Ward Property since approximately 1966. The Montgomery Ward Property is owned in fee by Montgomery Ward and constitutes a substantial portion of the Huntington Center. In addition, Montgomery Ward has certain easement and other rights over the balance of the Huntington Center pursuant to that certain Construction, Operation and Reciprocal Easement Agreement, dated July 19, 1965 (as amended). The Huntington Center is part of the Huntington Beach Redevelopment Project ("Redevelopment Plan"), which was approved and adopted by the City Council of the City on or about December 16, 1996 by Resolution No. 3343. "Rules Governing Participation and Preferences by Property Owners and Business Occupants for the Huntington Beach Redevelopment Project," dated August 1996 ("Owner Participation Rules"), were adopted as required by California Community Redevelopment Act to govern the participation of property owners in connection with redevelopment under the Redevelopment Plan. As noted above, the Montgomery Ward Property is owned by Montgomery Ward. The balance of the real property constituting the Huntington Center is owned by Huntington Center Associates, LLC (Huntington Center Associates, LLC, the Ezralow Company, and all of their affiliates and related entities are hereinafter referred to as "HCA" and such balance of the real property is hereinafter referred to as the "HCA Pro a "). HCA acquired the HCA Property in or about November of 1999. Prior to that time, the HCA Property had been under a variety of ownerships, as generally discussed in the Agency's staff report. Portions of the HCA Property have been allowed to deteriorate over the years by HCA and its predecessors and/or as a result of action or inaction by the City and the Agency. In fact, it is our understanding that many leases for portions of the HCA Property were allowed to lapse and not renewed, and tenants and businesses were evicted. SHEPPARD, MULLIN, RIGHTER & HAMPTON LLP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 4 These actions and inactions have harmed Montgomery Ward and prevented it from redeveloping and upgrading its facilities. The Agency by letter dated March 3, 2000 allegedly requests from Montgomery Ward, HCA and others a "Statement of Interest and Request for Proposal for Redevelopment of Huntington Center within the Huntington Beach Redevelopment Project Area" ("RFP"). Within the time required by the RFP, Montgomery Ward submitted to the Agency its Statement of Interest and Response to the RFP, which was later clarified and supplemented by letter dated June 16, 2000 (collectively, "Montgomery Ward Response"). HCA also submitted a response to the RFP by a letter from their attorneys, Whitman Breed Abbott & Morgan LLP, by letter dated May 2, 2000 ("HCA Response"), which included as its alleged redevelopment concept the City of Huntington Beach Specific Plan No. 13, entitled "The Crossings at Huntington Beach" (the "Specific Plan"). Prior to HCA submitting the HCA Response, HCA submitted an application to the City for the establishment of the new Specific Plan as the zoning for the entire Huntington Center. This application is dated March 31, 2000, but, oddly, acknowledged in the "Official Use Only" box as received by the City on March 30, 2000 and distributed by the City on March 16, 2000. The City's Planning Commission held study sessions on May 9, 2000 and May 30, 2000 to consider the Specific Plan, and a formal Planning Commission hearing was held on Tuesday, June 13, 2000, which was continued to a special Planning Commission hearing to be held on June 20, 2000. The formal written notice of the Planning Commission hearing for Tuesday, June 13, 2000 was, at least for the undersigned's notice, meter stamped on June 1, 2000 and postmarked by the U.S. Postal Service on Friday, June 2, 2000. HCA is referenced as the "applicant" for the Specific Plan on this notice. However, on June 9, 2000, we received a facsimile and a copy of the staff report for the Planning Commission hearing which revealed that Ray Silver, City Administrator and Executive Director of the Agency, had unilaterally declared by memorandum dated June S, 2000, that the City and Agency were the "applicants" for the Specific Plan because it was a "city -initiated project." Despite the fact that Montgomery Ward has operated its business in Huntington Center for approximately thirty-five years, under the proposed Specific Plan's SHEPPARD, MULLIN, RICHTER & HAMPTON LLP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 5 two different "Illustrative Conceptual Master Plan" exhibits, Montgomery Ward's buildings are not depicted and the square footage figures of the proposed new or remodeled buildings indicate an exclusion of Montgomery Ward. The RFP that was sent to Montgomery Ward does not mention the Specific Plan and, rather, requests that any submission in response to the RFP provide for a redevelopment concept for the site which includes a "[d]escription of proposed uses and the arrangement of these uses." In the introduction to the RFP, the Agency describes its intent as follows: "The Agency intends for the Site to be rehabilitated and repositioned into a high -quality, well -integrated retail and entertainment center under unified ownership. The Agency believes unified ownership of the Site will allow for the oversight and control necessary to effectively redevelop and maintain the Site, without the problems often associated with fragmented ownership. The revitalized Site is intended to serve the region and to provide new jobs and economic opportunities to residents of the region. In addition, the location of the Site as a major gateway to the City of Huntington Beach, as well as the excellent visibility and accessibility from the 405 Freeway, calls for a superior quality redevelopment that will significantly enhance the image of the community and set the standard desired for future high -quality development in the Edinger Corridor." Montgomery Ward also notes that, for whatever reason, neither the City, nor the Agency, nor HCA ever contacted Montgomery Ward in connection with the development of the draft Specific Plan. In fact, it was only after Montgomery Ward received the RFP that it had any knowledge that some type of "planning" for the Huntington Center must finally be in process. Furthermore, despite discussions with and inquiries to representatives of the City, the Agency and HCA, Montgomery Ward only found out about the draft Specific Plan after receiving documents from the City and the Agency in response to a Public Records Act request. These documents (including the draft Specific Plan) were received at or about the time that Montgomery Ward received the official notice of the Planning Commission hearing on the Specific Plan that was set for June 13, 2000. SHEPPARD, MULLIN, RICHTER & HAMPTON LLP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 6 The RFP expresses the Agency's intent that the Huntington Center be renovated under "unified ownership." Montgomery Ward is surprised as to the Agency's stated belief that "unified ownership of the Site will allow for the oversight and control necessary to effectively redevelop and maintain the Site, without the problems often associated with fragmented ownership." Certainly, with respect to major anchor stores such as Montgomery Ward, this belief is contrary to the common and typical ownership and management structure of successful, major retail and entertainment venues across the United States. By our letter dated April 28, 2000, to the Agency, Montgomery Ward requested a thorough explanation of the meaning of this belief, all facts supporting and justifying this belief and the exact nature of the perceived problems associated with "fragmented" ownership. In addition, we stated in our letter that "until we hear from you, we will assume that this'unified ownership' requirement was just part of a form letter that was sent to many small landowners and businesses, and that it was not intended to apply to major anchor stores such as Montgomery Ward." As of today, we have not received any explanation, facts or other information to support any type of "unified ownership" requirement. Summary of Comments and Objections if Montgomery Ward is Not Chosen as "Developer" for the Montgomery Ward Property I. The Agency Has Not Complied with the California Community Redevelopment Act. A. Overview of the California Community Redevelopment Act. B. The Agency Has Failed to Provide Montgomery Ward with a Reasonable Opportunity to Participate in the Redevelopment of Huntington Center. II. The Agency's Actions Are in Violation of Equal Protection, Substantive Due Process and Procedural Due Process as Guaranteed by the Fourteenth Amendment of the United States Constitution. III. HCA's Response to the RFP Cannot Be Legally Accepted Because it Proposes a Specific Plan That Violates the City's General Plan and Established Law. SHEPPARD, MULLIN, RICHTER & HAMPTON ,,P Redevelopment Agency of the City of Huntington Beach .tune 19, 2000 Page 7 A. The Specific Plan Is Not in Compliance with the General Plan. B. The Specific Plan Does Not Comply with State Law and Municipal Code Requirements for Specific Plans. C. The Specific Plan Constitutes Unlawful Discriminatory Spot Zoning. D. The Specific Plan Violates Government Code Section 65852 Concerning Uniformity of Regulations and Violates Established Law Prohibiting Arbitrary Interference with Private Business. E. The Adoption of the Specific Plan Will Violate the California Environmental Quality Act; an Environmental Impact Report Must Be Prepared. THE AGENCY HAS NOT COMPLIED WITH THE CALIFORNIA COMMUNITY REDEVELOPMENT ACT. A. Overview of the California Community Redevelopment Act. The California Community Redevelopment Act (Health and Safety Code, sections 33000, et seq.) ("Redevelopment Act") was established to provide local officials with the ability to form redevelopment agencies that would be responsible for the planning and implementation ofprograms designed to rehabilitate blighted areas in American cities. The fundamental document governing a redevelopment agency's activities is the redevelopment plan. The California Supreme Court has repeatedly affirmed that the redevelopment plan should be a very general document, providing the redevelopment agency with great flexibility to accommodate changing market conditions, development opportunities and the desires and needs of owners to participate in the redevelopment program. County of Santa Cruz v. City of Watsonville, 177 Cal.App.3d 831(1985); See also, In_r_e_Redevelopment Plan for Bunker Hill 61 Cal.2d 21 (1964). As noted in County of Santa Cruz v. City of Watsonville, su r at 841: SHEPPARD, MULLIN. RICHTER & HAMPTON LLP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 8 "By exercising certain of its powers to implement redevelopment, a redevelopment agency may induce private investment in an area. The success of any redevelopment project is dependent upon whether private lenders, developers, owners, and tenants can be persuaded to participate in the process. Thus, a redevelopment agency is unique among public entities since in order to achieve its objective of eliminating blight it must rely upon cooperation with the private sector. Redevelopment is also a process which occurs over a period of years. These realities dictate that a redevelopment plan be written in terms that enhance a redevelopment agency's ability to respond to market conditions, development opportunities and the desires and abilities of owners and tenants." B. The AgencyAgengy Has Failed to Provide Mont&gme1y Ward with a Reasonable Opportunity to Participate in the Redevelopment of the Huntington Center. Pursuant to Health and Safety Code section 33339, a redevelopment plan must include a provision for participation by owners conditioned upon their agreeing to develop or rehabilitate their property in conformance with the redevelopment plan. Health and Safety Code section 33339 provides, in relevant part: "Every redevelopment plan shall provide for participation in the redevelopment of property in the project area by the owners of all or part of such property if the owners agree to participate in the redevelopment in conformity with the redevelopment plan adopted by the legislative body for the area."y v In addition, Health and Safety Code section 33380 provides that "An agency shall permit owner participation in the redevelopment of property in the project area in conformity with the redevelopment plan adopted by the legislative body for the area." Cal. Health and Safety Code § 33380. SHEPPARD, MULLIN, RICHTER & HAMPTON LLP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 9 Moreover, while a redevelopment plan is not required to have provisions granting priority to current business owners of the property subject to redevelopment, the redevelopment agency is required to adopt rules for owner participation and for preferences to businesses prior to the adoption of the redevelopment plan. Health and Safety Code section 33339.5. Health and Safety Code section 33339.5 provides, in relevant part: "Every redevelopment agency shall extend reasonable preference to persons who are engaged in business in the project area to reenter in business within the redeveloped area if they otherwise meet the requirements prescribed by the redevelopment plan." Here, the Agency has failed to provide a reasonable opportunity for Montgomery Ward to participate in the redevelopment of the Huntington Center in spite of the fact that Montgomery Ward has requested a right to participate in the redevelopment of the Huntington Center. As stated above, on March 3, 2000, the Agency sent out its RFP to Montgomery Ward, HCA and others. The deadlines for the owners and tenants to submit a Statement of Interest and Development Proposal in response to the RFP were April 17, 2000 and May 2, 2000, respectively. In accordance with the time limits set forth in the Agency's RFP, on April 14, 2000, the Montgomery Ward Response was submitted, in which Montgomery Ward expressed its interest in participating in the redevelopment of Huntington Center and outlined its proposed renovation of the store, including the automotive center. Prior to and during this time, however, the City and the Agency were having meetings with HCA regarding HCA's specific development proposal and, apparently, developing an elaborate scheme and schedule to exclude Montgomery Ward and others, but at the same time give the appearance of complying with the Redevelopment Act and its own Owner Participation Rules. For example, beginning on March 30, 2000 (one day prior to the date on HCA's application and more than a month prior to the HCA Response to the RFP), City staff began having meetings with HCA regarding its RFP -- specifically, the proposed Specific Plan -- without any written notice to Montgomery Ward. Thus, at least two weeks before the Agency had received any other Statements of Interest or Development Proposals and prior to the expiration of the Agency's self-imposed deadline SHEPPARD, MULLIN, RICHTER & HAMPTON LLP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 10 for those documents, the Agency was already implementing a scheme with HCA for HCA's development of Huntington Center and the taking of the Montgomery Ward Property. Admittedly, the Redevelopment Act does not require "an absolute requirement of owner participation," however, the Redevelopment Act does require that once owner participation is invited, the Agency has a legal dint r to treat all project applicants, including current owners, with "reasonableness" and "in good faith." In re Redevelopment Plan for Bunker Hill, 61 Cal.2d 21, 60. The aforementioned Agency's actions were neither reasonable nor in good faith. These actions are especially egregious, since the RFP was vague in its requirement for a development concept, and since we now know that the HCA Response to the RFP (the proposed Specific Plan) is an alleged "city - initiated project." This "city -initiated project" of the Specific Plan was never disclosed or made public until after a formal Planning Commission hearing had been noticed. Furthermore, the Agency's so-called "unified ownership" requirement lends additional support to the fact that the Agency's actions have reflected nothing but favoritism and bias towards HCA while simultaneously failing to give all property owners a reasonable and good faith opportunity to participate in the redevelopment of the project area, as required by Health and Safety Code sections 33339 and 33339.5. Despite requests for information and support, there is absolutely no evidence in the record for having this aggregation requirement for development, which is completely contrary to typical mall development and ownership, and completely contrary to Montgomery Ward's substantial redevelopment experience with the substantial renovation of over 78 stores and plans for the substantial renovation of at least 40 additional stores through 2001. As a large property owner and operating business, Montgomery Ward, certainly has the financial capabilities and experience to redevelop its portion of the Huntington Center. With respect to the smaller business, the unified ownership requirement essentially imposes an extreme financial burden on their business operations, thus removing them from the "race." By implementing an arbitrary and unsubstantiated "unified ownership" requirement, the Agency has effectively eliminated all of HCA's competition to the detriment of redevelopment goals and laws, which also precludes the Agency from having the benefit of considering alternatives to HCA's proposal. Further, the Agency ignores the prior efforts by HCA and Montgomery Ward to reach a mutually acceptable agreement to redevelop the Huntington Center. SHEPPARD, MULLIN, RICHTER & HAMPTON LLP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 11 Based on the foregoing, it is clear that the Agency and the City have been in collusion with HCA for HCA to take the Montgomery Ward Property through the Agency's power of condemnation, and thereby allow HCA to redevelop the entire Huntington Center. These actions are in direct violation of State and local law and should not be further condoned by the Agency Board and the City Council. I1. THE AGENCY'S ACTIONS ARE IN VIOLATION OF EQUAL PROTECTION, SUBSTANTIVE DUE PROCESS AND PROCEDURAL DUE PROCESS AS GUARANTEED BY THE FOURTEENTH AMENDMENT OF THE UNITED STATES CONSTITUTION. The due process clause of the Fourteenth Amendment of the United States Constitution protects individuals against government deprivations of property without due process of law. U.S. Const., 14' Amend. and Cal. Const., Art. I § 7. If a governmental action is clearly arbitrary and unreasonable, such action will be declared unconstitutional and a violation of substantive due process. Village of Euclid v. Ambler Realty Co., 47 S. Ct. 114 (1926); see also, Lockary v. K917 F.2d 1150 (9" Cir. 1990) [government conduct that is malicious, irrational or plainly arbitrary will not be sustained]. The premise behind the equal protection clause is that no person shall be denied the same protection of law that is enjoyed by another person in similar circumstances. Hawn v. County of Ventura, 73 Cal.App.3d 1009 (1977). Here, as set forth in detail above, by engaging in negotiations with HCA and considering HCA's Specific Plan before receiving any other development proposals, by "hiding the ball" that the Specific Plan was actually a "city -initiated project," by pursuing an improper RFP process to give the appearance of complying with the Redevelopment Act and the Agency's own Owner Participation Rules, by including arbitrary and unsupported "unified ownership" and other requirements under the RFP, and by the other actions of the City and the Agency, the Agency will unfairly discriminate against Montgomery Ward and deny Montgomery Ward a reasonable opportunity to participate in the redevelopment of Huntington Center. See, e.g., Hawn v. County of Ventura. 73 Cal.App.3d 1009 (1977). These actions are malicious, irrational and plainly arbitrary in clear violation of the equal protection and substantive due process protections provided by the Fourteenth Amendment of the United States Constitution. Furthermore, the insufficient notice and lack of ability to participate also constitute a denial of procedural SHEPPARD. MULLIN, RICHTER S HAMPTON LLP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 12 due process under the Fourteenth Amendment. See, L.g., Carey v. Pi hus, 98 S.Ct. 1042 (1978). These actions in violation of the Fourteenth Amendment should not be condoned or allowed to continue by the Agency Board. III. HCA'S RESPONSE TO THE RFP CANNOT BE LEGALLY ACCEPTED BECAUSE IT PROPOSES A SPECIFIC PLAN THAT VIOLATES THE ITY'S GENERAL PLAN AND ESTABLISHED LAW. The HCA Response is a development proposal that is the Specific Plan. As described below, this Specific Plan proposed by HCA violates the City's General Plan, the City's Municipal Code ("Code") and State law. The Agency cannot now choose HCA as the "developer" based upon a proposal (the Specific Plan) that is unlawful. To do so would result in the Agency proposing to contract with HCA through an OPA to undertake unlawful acts, and the Agency cannot contract to undertake unlawful acts. If the Agency were to do so, it would violate State law, including the Redevelopment Act, and be acting in an arbitrary, irrational and unreasonable manner, which provides additional grounds of violation of each of the principles and laws set forth above. A. The Specific Plan Is Not in Compliance with the General Plan. The City's General Plan requires that "development be designed to account for the unique characteristics of project sites and objectives for community character and in accordance with the Development "Overlay" Schedule (Table LU-3)." See Policy LU 7.1.2. General Plan Policy LU 15.1.1 requires "the formulation, adoption, and implementation of Specific Plans for areas designated with a "Specific Plan Overlay" (-- SP)." The Huntington Center is designated with a Specific Plan Overlay. Table LU-4 of the General Plan specifies the land use category for the Huntington Center as "Commercial Regional (CR)." The Specific Plan does not comply with State law and the City's Code requirements for specific plans, as explained in Paragraph B below. As a result, the Specific Plan is not in compliance with the General Plan, and HCA's Response cannot be accepted because it is not consistent with the General Plan. SHEPPARD, MULLIN, RICHTER & HAMPTON LLP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 13 We note that the "Commercial Regional (CR)" designation under the General Plan permits, among other things, anchor department stores and automobile sales and service facilities and similar region -serving uses. The Montgomery Ward store and automotive sales and service facility are integrated facilities, and there can be no dispute that Montgomery Ward is an anchor department store. Given the foregoing and also the consistency of automobile repair with region -serving uses, certainly Montgomery Ward's store and automotive sales and service facilities are permitted and consistent with the General Plan. These facilities should be expressly permitted and depicted in any specific plan. We also note that permitting car stereo and alarm installation under the Specific Plan, but not permitting Montgomery Ward's integrated store and automotive sales and service facilities, would be impermissible discriminatory zoning, as discussed in Paragraph C below. B. The Specific Plan Does Not Comply with State Law and Municipal Code Requirements for Specific Plans. Section 65451(a) of the California Government Code provides in relevant part as follows: "(a) A specific plan shall include a text and a diagram or diagrams which specify all of the following in detail: (1) The distribution, location, and extent of the uses of land, including open space, within the area covered by the plan. (2) The proposed distribution, location, and extent and intensity of major components of public and private transportation, sewage, water, drainage, solid waste disposal, energy, and other essential facilities proposed to be located within the area covered by the plan and needed to support the land uses described in the plan. (3) Standards and criteria by which development will proceed, and standards for the conservation, development, and utilization of natural resources, where applicable. SHEPPARD, MULLIN, RICHTER & HAMPTON LLP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 14 (4) A program of implementation measures including regulations, programs, public works projects, and financing measures necessary to carry out paragraphs (1), (2), and (3)." The Specific Plan does not meet these requirements of the Government Code because it does not specify in detail the distribution or location of any uses of land. Rather, the Specific Plan has two different "Illustrative Conceptual Master Plan" exhibits which specifically note the following: "This illustrative shows a hypothetical development scenario on the project site." The location and distribution of the uses and other essential facilities (including utilities and other infrastructure) are not specified (they are only "hypothetical") and are merely deferred to another day through potential future environmental review under CEQA and an improper site plan review process under Section 2.3 of the Specific Plan, which process is done solely by the Planning Director without any requirement for public hearing or notice. This could result in any and all of the uses and other essential facilities permitted or required under the Specific Plan to be constructed anywhere, which is not consistent with Government Code section 65451. By delegation to a future date of an essential element of a Specific Plan, as required by law, General Plan Implementation Program I-LU4 and Code Chapter 215 will also be violated by not having the Planning Commission and City Council consider the location and distribution of uses. Section 2.0 of the Specific Plan similarly violates this Implementation Program and Code Chapter 215 by allowing modifications of the Specific Plan by the Planning Director when determined by the Planning Director to be minor. By allowing this, all notice and hearing procedures under this and other Chapters of the Code are ignored and violated for amendments to the Specific Plan_ In summary, the Specific Plan should be a tool to provide certainty regarding the location and distribution of future development in Huntington Center in compliance with State and local law. However, as currently proposed, the Specific Plan would create complete uncertainty regarding the development of the Huntington Center in violation of law and unlawfully delegate the authority to determine the location and distribution of land uses and essential facilities to the Planning Director. SHEPPARD, MULLIN, RICHTER & HAMPTON LLP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 15 C. The Specific Plan Constitutes Unlawful Discriminatory Sot Zoning. Spot zoning occurs where a small parcel of property is restricted and given less rights that the surrounding property, thereby creating an "island in the middle of a larger sea devoted to other uses. Wilkins v. Ci1y of San Bernardino, 29 Cal.2d 332, 340 (1946). It can also occur where the zoning amendment may appear valid on its face, but the circumstances surrounding its adoption, the purpose of the amendment and its ultimate objective are found to be an unlawful exercise of the legislative power. G&D Holland Construction Co. v. City of Marysville. 12 Cal.App.3d 989, 996 (1970);-See also, Arnel Development Co. v. City of Costa Mesa, 126 Cal.App.3d 3 30,337 (1981) ["A City cannot unfairly discriminate against a particular parcel of land and the courts may properly inquire as to whether the scheme of classification has been applied fairly and impartially in each instance.] Here, the Specific Plan as proposed by HCA in the HCA Response (or if adopted by the City or the Agency in its current form) would unfairly discriminate against Montgomery Ward. The Specific Plan establishes planning concepts, design and architectural guidelines and other development standards for the Huntington Center. In so doing, there is a proposal to unreasonably narrow the uses normally permitted in a commercial regional center, including, without limitation, Montgomery Ward's automotive center and other uses, but allow other automotive work to take place (car stereo and alarm installation). These restrictions essentially limit the rights of a property owner to develop the site in comparison to the rights of owners of surrounding property similarly situated, both on -site and off -site. See, e.g., Ross v. Cily of Yorba Linda. 1 Cal.AppAth 954 (1991). Given the foregoing, it is apparent that the real motive behind the implementation of the Specific Plan is to attempt to remove Montgomery Ward and certain other businesses that are not desired by the City, the Agency or HCA from the Huntington Center by making it improbable for Montgomery Ward to comply with the Specific Plan. This is discriminatory spot zoning and not a legitimate governmental purpose for which the City and the Agency can exercise their police power. SHEPPARD. MULLIN, RICHTER & HAMPTON LLP Redevelopment Agency of the City of Huntington Beach .tune 19, 2000 Page 16 D. The Specific Plan Violates Government Code Section 65852 Concernin Uniformity of Regulations and Violates Established Law Prohibiting Arbitrary Interference with Private Business. Government Code section 65852 governs the uniformity of regulations within a particular zone by prohibiting unreasonable discrimination against particular properties within a similar zone classification. Section 65852 provides in relevant part: "All such regulations shall be uniform for each class or kind of building or use of land throughout each zone, but the regulation in one type of zone may differ from those in other types of zones." The Specific Plan is in violation of this Section 65852 in that, as noted above, it restricts the uses and manner of conducting the use (must be Italian theme) generally allowed in a regional commercial center including, without limitation, a retail store with an integrated automotive center. Moreover, the Specific Plan (as proposed by City Staff provides for amortization of alleged nonconforming uses (including building design) which have not been applied in other commercial retail centers throughout the City. Furthermore, the Specific Plan is in violation of California case law in that by establishing very limited design and architectural requirements for the Huntington Center which we now understand (as not opposed by HCA) must be implemented within three years, there would be unlawful restriction on the type of businesses allowed to operate at the Huntington Center for the benefit of one adjacent property owner (FICA). "The legislature may not, under the guise of protecting public interests, arbitrarily interfere with private business, or impose unusual and unnecessary restrictions upon lawful occupations." Lawton v. Steele, 152 U.S. 133, 137 (1804). Se g also O'Hagen v. Board of Zoning Adjustment, 19 Cal.App.3d 151 (1971); McDonald's Systems of California, Inc. v. Board of Permit Anneals, 44 Cal.App.3d 525, 548 (1975). The design and architectural guidelines are being established to promote an "Italian" village atmosphere for the benefit of one adjacent property owner. The conceptual plans and renderings of the Specific Plan do not include Montgomery Ward or other tenants currently on site. Basically, by imposing the planning concepts on the future development and/or rehabilitation of Huntington Center which are required to be implemented within SHEPPARD, MULLIN, RICHTER & HAMPTON LLP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 17 a very short time period, the Specific Plan is imposing unusual and unnecessary restrictions for the purpose of unlawfully limiting Montgomery Ward's business on its own property. E. The Adoption of the Specific Plan Will Violate the California Environmental Quality Act; an Environmental Impact Report Must Be Prepared. 1. The City must Prepare and Certify an EIR for the Proposed Specific Plan. a. Overview of CEQA. CEQA was enacted in response to the well - documented failure of state and local governmental agencies to consider fully the environmental implications of their actions. Selmi, The Judicial Development of the California Environmental Quality Act, 18 U.C.D.L. Rev. 197 (1984)Y The California Supreme Court has repeatedly affirmed that CEQA must be interpreted liberally "to afford the fullest possible protection to the environment within the reasonable scope of the statutory language." Laurel Heights Improvement Assn. v. The Regents of the University of California ("Laurel Heights I"), 47 Cal.3d 376, 390 (1988), quoting from Friends of Mammoth v. Board of Supervisors 8 Cal.3d 247, 259 (1972). Two of the central purposes of CEQA are to inform governmental decision makers and the public about the potential significant environmental effects of a proposed project and to identify ways that environmental damage can be avoided or significantly reduced. Guidelines §§ 15002(a) (1) and (2). The EIR is the heart of CEQA. Guidelines § 15003(a). As noted by the California Supreme Court, the EIR: "is the primary means of achieving the Legislature's considered declaration that it is the policy of this state to'take all action necessary to protect, rehabilitate, and enhance the environmental quality of the state.' (§ 21001, subd. (a).) ... Because the EIR must be certified or rejected by public officials, it is a document of accountability. If CEQA is '-' The Office of Planning and Research has promulgated guidelines to implement CEQA. 14 Cal. Code of Regs. § 15000, et seq. (the "Guidelines"). SHEPPARD, MULLIN. RICHTER & HAMPTON alp Redevelopment Agency of the City of Huntington Beach .Tune 19, 2000 Page 18 scrupulously followed, the public will know the basis on which its responsible officials either approve or reject environmentally significant action, and the public, being duly informed, can respond accordingly to action with which it disagrees. [Citations]. The EIR process protects not only the environment but also informed self-government." Laurel Heights I, supra, at 39V' CEQA provides for a three -tiered environmental analysis. First, the lead agency determines whether the project is exempt from CEQA review. Guidelines § 15061. If the lead agency concludes that the project is not exempt from CEQA, the lead agency then conducts an initial study to ascertain whether to prepare an EIR or a negative declaration in connection with the project. The lead agency may only adopt a "negative declaration" when the initial study concludes that "there is no substantial evidence ... that the project may have a significant effect on the environment" and further CEQA review is unnecessary. Cal. Pub. Res. Code § 21080(c)(1). CEQA applies only to "discretionary projects." Cal. Pub. Res. Code §§ 21080(a) and (b)(1); Guidelines § 15268(a). A discretionary project is one which "requires the exercise of judgment or deliberation when the public agency or body decides to approve or disapprove a particular activity, as distinguished from situations where the public agency or body merely has to determine whether there has been conformity with applicable statutes, ordinances, or regulations. Guidelines § 15357. `-' An EIR serves "to demonstrate to an apprehensive citizenry that the agency has in fact analyzed and considered the ecological implications of its action." No Oil, Inc. v. Ci1y of Los Angeles, 13 Cal.3d 68, 86 (1974). An EIR also allows the public to "determine the environmental and economic values of their elected and appointed officials, thus allowing for appropriate action on election day should a majority of the voters disagree." People v. County of Kern, 39 Cal.App.3d 830, 842 (1974). "The report ... may be viewed as an environmental'alarm bell' whose purpose it is to alert the public and its responsible officials to environmental changes before they have reached ecological points of no return." Coun , of Ingo v. Yony 32 Cal.App.3d 795, 810 (1973). SHEPPARD, MULLIN, RICHTER & HAMPTON LLP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 19 b. Fair Argument Test Requires an EIR. If the administrative record contains substantial evidence that any aspect of a project "may have a significant effect on the environment," the lead agency must prepare an EIR. Cal. Pub. Res. Code § 21100; Guidelines §§ 15002(f)(1), 15063(b)(1) and 15064(a)(1).S' Put another way, "... if a Lead Agency is presented with a fair argument that a project may have a significant effect on the environment, the Lead Agency shall prepare an EIR even though it may also be presented with other substantial evidence that the project will not have a significant effect. (No Oil. Inc. v. Cily of Los Angeles, 13 Cal.3d 68 (1974))." Guidelines § 15064(g)(1). (emphasis added). See also Friends of "B" Street v. Ci!y oof Hay Ward,, 106 Ca1.App.3d 988, 1002 (1980). A trial court is entitled to independently review an agency's determination that there was no evidence upon which a fair argument could be made that an EIR was required. As the court stated in Friends of "B" Street, supra: "if there was substantial evidence that the proposed project might have a significant environmental impact, evidence to the contrary is not sufficient to support a decision to dispense with preparation of an EIR and adopt a Negative Declaration, because it could be Tairly argued' that the project might have a significant environmental impact. Stated another way, :f the trial court perceives substantial evidence that the project might have such an impact, but the Agency failed to secure preparation of the required EIR. the Agency's action is to be set aside because the agency abused its discretion by failing to proceed 'in a manner required by law'. (Pub. Res. Code § 21168.5.)" 106 Cal.3d at 1002. (Emphasis added). 5' Professor Sehni pointed out that one of the reasons that courts are permitted to closely examine CEQA decisions is that public agencies "are subject to political pressure to avoid the full EIR process" which is certainly the case here. Selmi, supra, at 227. SHEPPARD, MULLIN, RICHTER & HAMPTON uo Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 20 Under the fair argument standard, deference to the lead agency's determin- ation is not appropriate and its decision not to require an EIR can be upheld "only when there is no credible evidence to the contrary." Sierra Club v. Count y of Sonoma, 6 Cal.AppAth 1307, 1317-18 (1992). The fair argument standard requires the reviewing court to employ "a certain degree of independent review of the record, rather than the typical substantial evidence standard which usually results in great deference being given to the factual determinations of the agency." Quail Botanical Gardens Foundation, Inc. v. City of Encinitas, 29 Ca1.App.4th 1597, 1602 (1994). The Supreme Court has concluded that the interpretation of CEQA "which will afford the fullest possible protection to the environment is one which will impose a low thresholds requirement for preparation of an EIR." No Oil Inc. v. Ci1y of Los Angeles, supra, at 84. Given the magnitude of the proposed development under the Specific Plan and the anticipated significant adverse environmental impacts associated with demolition and construction, the Specific Plan is a "project" under CEQA that will have a significant adverse impact on the environment. Therefore, the City and the Agency will have to prepare an EIR. 2. The Specific Plan is a Project under CEQA. Public Resources Code section 21065 defines project as "an activity which may cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical activity which is directly undertaken by any public agency." Cal. Pub. Res. Code § 21065; Guidelines § 15378(a); see also, Goleta Union School District v. Regents of the Universi1y of Californi 37 Cal.AppAth 1029, 1030 (2d Dist. 1995). The enactment and amendment of zoning ordinances has been determined to be an activity undertaken by a public agency that are subject to CEQA. City of Carmel -by -the -Sea v. Board of Supervisors, 183 Cal.App.3d 229 (1986). Here, the Specific Plan is seeking an amendment to the zoning of the property from CG (General Commercial) and CG-FP2 (General Commercial - Flood Plain) to Specific Plan No. 13. Accordingly, the Specific Plan is a project for purposes of CEQA review. SHEPPARD, MULLIN, RICHTER & HAMPTON ALP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 21 3. The City and the Agency Must Undertake CEQA Review Before Proceeding with the Adoption of the Specific Plan. Public agencies shall not undertake actions relating to a proposed public project that would have a significant adverse effect on the environment, or limit its choice of alterations or mitigation measures, before complying with CEQA. Guidelines § 15004(b)(2). Under this standard, agencies may not make a formal decision to proceed with use of a site without first completing the CEQA review. In the instant case, should the City approve the Specific Plan, or the Agency take any action based thereon, it will be in violation of the aforementioned provision of CEQA. The Specific Plan establishes a master development plan including, without limitation, planning concepts, design and architectural guidelines and other development standards for the Huntington Center. There has been no review or analysis in accordance with CEQA of the impacts relating to, among other things, changes and limitations of uses, new permissible heights, utilities, traffic and circulation, and the effect of removing the site from the Flood Plain Overlay District. This and other analyses are all left to another day after the new standards under the Specific Plan are adopted. This will also preclude any consideration of alternatives. Moreover, once approved, any future development will only be subject to site plan review by the Planning Director, rather than a public hearing process before the Design Review Board, the Planning Commission and/or City Council. Furthermore, the Planning Director can even make amendments to the Specific Plan without any public notice or hearing if he determines they are "minor." Thus, by proposing to approve the Specific Plan before undertaking the appropriate and required environmental review, the City is essentially limiting its ability to have any further decision -making authority in connection with the future development of Huntington Center. This is in violation of CEQA and is not allowed. 4. The Elements -of Tiering Are Not Met. Tiering is a process provided for by the Legislature in order to allow agencies to avoid repetitiveness, wasted time, and unnecessary premature speculation. See Cal. Pub. Res. Code §§ 21065, 21093(a); Guidelines § 15152. SHEPPARD, MULLIN, RICHTER & HAMPTON LLP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 22 To qualify for the use of tiering, later projects must, (1) be consistent with the program, plan, policy, or ordinance for which an EIR has been prepared and certified, (2) be consistent with applicable local land use plans and zoning of the city, county, or city and county in which the later project would be located; and (3) not trigger the need for a subsequent EIR or supplement to an EIR. Cal. Pub. Res. Code § 21094(b). in addition, before deciding that tiering may be used with respect to a later project, the lead agency must prepare an "initial study or other analysis" to assist it in determining whether the project may cause any significant impacts not analyzed in a prior EIR. Cal. Pub. Res. Code § 21094(c); Guidelines § 15152(f). Here, the City and/or Agency have not prepared an initial study to analyze the potential adverse environmental impacts of the Specific Plan. Accordingly, before the City can approve the Specific Plan, an initial study will have to be prepared. In fact, to date, there exists no complete or legally adequate environmental analysis of: (i) the proposed conceptual plans contemplated by the Specific Plan; (ii) the development of these specific acres or analysis of the proposed design and architectural guidelines; or (iii) a program of mitigation which if implemented would eliminate any and all potential for adverse environmental impacts. Thus, before any further action is taken on the Specific Plan, an initial study will have to be prepared and the proper environmental review under CEQA must be performed. 5. The UY and the Agency Have Unlawfully "Split" the Project for Purposes of Environmental Review. As noted above, the term "project" has been broadly defined under CEQA. "Project" means "the whole of an action, which has the potential for resulting in a physical change in the environment, directly or indirectly ...." Guidelines § 15378(a). All phases of project planning, implementation and operation must be considered in the initial study for a project. Guidelines § 15063(a)(1). The term "project" refers to the activity which is being approved and which may be subject to several discretional approvals by governmental agencies. The term "project" does not mean each separate governmental approval. Guidelines § 15378(c). Under CEQA, a project must be fully analyzed in a single environmental document. An agency may not split a project into two or more segments with mutually SHEPPARD, MULLIN, RICHTER & HAMPTON LLP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 23 exclusive environmental documents. Citizens Assn. for Sensible Development of Bisho Area v. County of Ingo 172 Cal.App.3d 151, 165 (1985). Similarly, an agency cannot overlook a project's cumulative impacts by separately focusing on isolated parts of the whole. McQueen v. Board of Directors, 202 Ca1.App.3d 1136, 1144 (1988). In Citizens Assn. for Sensible Development of Bishop Area v. County of Ingo• supra, a county split a shopping center project into two segments, the first part consisting of general plan amendments and zoning classifications, and the second part involving a tentative map approval and road abandonment. The public agency prepared a separate negative declaration for each project segment. Because the project applicant had requested related discretionary approvals at different times, the county had failed to understand that it was dealing with a single project. The court overtured the negative declarations and the project approvals, holding that an agency cannot prepare mutually exclusive environmental documents for a single project. Citizens Assn. for Sensible Development of Bishop Area, supra, at 165-67. The project description in a CEQA document must include: "an analysis of the environmental effects of future expansion or other action if. (1) it is a reasonable foreseeable conse- quence of the initial project; and (2) the future expansion or action will be significant in that it will likely change the scope or nature of the initial project or its environmental effects." Laurel Heights 1, supra, at 396. In Laurel Heights I the Regents proposed the relocation of a biomedical research facility to a portion of a building located in the residential neighborhood. The EIR for the project failed to analyze the cumulative impacts of the anticipated full use of the building as a biomedical facility within a few years. The California Supreme Court rejected the Regent's argument that, because the proposed expansion had not been formally approved, the EIR's analysis could be limited to the project in its initial form. Evidence in the record indicated that, despite the lack of a formal approval, the Regent's ultimate plans were clear. Therefore, because the expansion was reasonably foreseeable, and was likely to change the scope or nature of the initial project or its environmental effects, the EIR should have discussed at least the general effects of the reasonably foreseeable future uses and the anticipated measures for mitigating those effects. Laurel SHEPPARD, MULLIN, RICHTER & HAMPTON LLP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 24 Heights 1, supra • at 396-398. "The fact that precision may not be possible ... does not mean that no analysis is required." 1d at 399. Another case that illustrates this principle is Whitman v. Board of Supervisors, 88 Cal.App.3d 397 (1979). In Whitman, an EIR was prepared in connection with an application to drill an exploratory oil and gas well, which omitted discussion of a contemplated pipeline if the well proved productive. The court found the EIR inadequate and explained that "[t]he record before us reflects that the construction of the pipeline was, from the very beginning within the contemplation of [the] overall plan for the project and could have been discussed in the EIR in at least general terms." Id. at 414- 15. (Emphasis added.) Under the current circumstances, the Specific Plan suffers from the same problems that occurred in Laurel Heights I and Whitman. First, there has been absolutely no environmental analysis performed in connection with development requirements, permitted uses, location of uses and exemptions from City procedures and requirements and all other matters that are set forth in the Specific Plan. Second, any potential analysis, actions and mitigation measures that may be associated with the actual development of the property are deferred to another day, which is an attempt like Citizens Assn. f-0 Sensible Development of Bishop Area v. C_unty of Inyo, supra, to split the general plan and zoning classification i.e the Specific Plan) from subsequent required approvals (site plan review by the Planning Director, etc.). This is an egregious violation under the current circumstances because of the current attempts of the City and the Agency to say that the Specific Plan was covered by a very general General Plan EIR. As a result, in accordance with CEQA, the City and the Agency need to properly prepare an EIR or other environmental document under CEQA prior to the approval of the Specific Plan. 6. The Adoption of the Specific Plan As Currently_ Contemplated Without Enyirorimental Review Would Unlawfully_ Defer Environmental Review. CEQA requires that environmental review and the formulation of appropriate mitigation measures occur at the earliest feasible state in the planning process. Cal. Pub. Res. Code § 21003.1. CEQA also provides that any proposed negative declara- tion should only be prepared for a project when "revisions in the project plans or proposals made by or agreed to by the applicant before the proposed negative declaration is released for public review would avoid the effects or mitigate the effects to a point SHEPPARD, MULLIN, RICHTER & HAMPTON LLP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 25 where clearly no significant effect on the environment would occur...." Cal. Pub. Res. Code § 21080(c)(2). The case of Sundstrom v. County of Mendocino. 202 Cal.App.3d 296 (1988), illustrates these principles. In Sundstrom, the public agency approved a use permit for a motel and restaurant that included a private sewage treatment plant. The initial study did not analyze the environmental impacts of the treatment plant, but instead required that the developer prepare a hydrological study after the approval of the negative declaration. The study was to provide a basis for establishing additional mitigation measures for the project. The court held that the public agency violated CEQA by including a condition that contemplated revisions to the project after the final adoption of the negative declaration. The court further held that the deferral of environmental review for the treatment plant ran counter to CEQA policy, which required environmental review at the earliest feasible change in the planning process. The court also noted that any mitigation measures added by the administrative staff as a result of this study would be exempt from public scrutiny since the public agency had already approved the negative declaration. The entire Specific Plan and the procedures set forth therein are an unlawful deferral of environmental review. First, no initial study was prepared for the Specific Plan to analyze potential environmental impacts and mitigation measures incorporated into the project, since environmental review would only be done with site plan reviews by the Planning Director. As a result, neither the impacts nor the proposed conditions for mitigation are analyzed, including those for or relating to uses, light, glare, noise, aesthetics, traffic and circulation, geotechnical, hazardous waste, air quality, parking, flooding, construction and utilities, and each are deferred to another day. This type of deferral of environmental review and mitigation is not permitted under CEQA or the Guidelines and forms yet another unlawful proposal that is a part of the HCA Response. SHEPPARD, MULLIN, RicHTER & HAMPTON LLP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 26 7. The Adoption of the Specific Plan As Currently Contemplated without Environmental Review Will Result in an Unlawful Failure to Undertake a Cumulative Analysis of the Project's Environmental Impacts. An environmental document must discuss "cumulative impacts" when they are significant. Guidelines § 15130(a). However, even if a cumulative impact is not deemed significant, the document must explain the basis for the conclusion. Citizens to Preserve the Ojai v. Coun1y of Ventura, 176 Cal.App.3d 421, 429 (1985). "Cumulative impacts" are defined under CEQA as two or more individual effects which, when considered together, are considerable or which compound or increase other environmental impacts. Cal. Pub. Res. Code § 21083(b). By failing to prepare an Initial Study and undertake any environmental analysis under CEQA, there will be no analysis of potential "cumulative impacts," which is not permitted under CEQA. IV. CONCLUSION. Given Montgomery Ward's expertise, experience and financial commitment to redevelopment, and given that Montgomery Ward is one of the two major landowners of the Huntington Center, Montgomery Ward should be chosen as the "developer" for the Montgomery Ward Property and Agency Staff should be instructed to negotiate an OPA with Montgomery Ward for the Montgomery Ward Property. With respect to the remainder of the real property constituting the Huntington Center, one or more separate OPAs should be considered with one or more third parties for its redevelopment, but only in a manner that complies with applicable law as discussed above. for SHEPPARD, MULLIN, RICHTER & HAMPTON ux I .A LCOLE M OON7017288Q-1 SHEPPARD, MULLIN, RICHTER & HAMPTON LLP Redevelopment Agency of the City of Huntington Beach June 19, 2000 Page 27 cc: Mr. Ray Silver Mr. Howard Zelefsky Mr. David C. Biggs Mr. Gus Duran Ms. Jane James Gail C. Hutton, Esquire Paul D'Alessandro, Esquire Murray Q. Kane, Esquire Mr. Douglas Gray James C. Hughes, Esquire Mr. Spencer H. Heine Mr. Loren H. Hohman Corey E. Light, Esquire Caren Manchester, Esquire -k**- DOW JONES: 79.73 SECTION C ;',vvww.kcstar.eorn F FV:WED FROM ib, L5 Te )r, e_ST,.F�7., v -IL P4ART OF TH D AT THE "T ING Of AND fVIADE A PART THE RECORD AT THE OF THE, CITY COUNCIL MEETING OF _/'q_C0 . ; CLERK - n _& � ;:�' � �,,ZjP_KWAY, CITY CLERK OFFICE F Inc: CITY CLERK CONNIE BROCKWAY, CITYCLERK -W S&P: 9.79 AW NASDAP� 6539 .-AW, 30-YEAR T-OND YIELD: 5.90 THE KANSrLS CITY -'T,?_q Wednesday, June 7, 200( I WTNDYYANGrrhe Kansas Ory Star Wider aisles hpnv pr-ved popular with sL%-ppt, according to L.,unis.Keeft manager of the Oak Park Mall Wards story. The store also has much more scIling spa" and n larger jewelry department. Shoppers lj .o d a inew Wards Better gra:ie of me-chwidise 2-ccompardes store remodding h m&k -, By JOYCE SMITH the culmination of Wails' 4 0 N=of:251 SddeI The Kansas City Star stra-tegy to keep its maxim' ��PAI niche between the discoun- h 4"16061 lfh .4f i e IL 9� _M p asizes bariene Bruntq of tern and the upscale retailers, 1— Osawatomie, Th,� plan induceddroving 0 Kan., expected a .: naercl.,. dise, increasing the ldghtint, aetd cl easy- mutine shopping effectiveness of marketing 'tio 6alayout. experience C experience when and advertising, and improv- 01aken she visited Wards in Oak Park ing customs service. n Mail recently. But Brunts was The company, whi, 1i sturxned at the changes she emerged from two years of RM N 3rchan- 'd' Irt, Ve is - found. Chapter 11 bankruptcy last. ng!0pjt Q_ metservice. "It's gorgeous," Brunts said. August is remodeling 33 of its o"M b n y GE - iffifoid- Conn ... "I was shocked when I came "Wards stores this year, includ in. You can see where you Ing the Oak Park Mall store. it anank, _f b need to go, and the prices are also remodeled three stores in good, too." 19M and 40 stores in 1999, outPup � {ration Last - V4 Remodeled stores such as AuNd-d- the one in Overland Park am See WARDS, C-6 WARDS: Stores,, stock changing Continued from C-1 of the chain's 251. "The (remodeled) stores are do- ing very well, with 20 percent in- creases" in monthly sales, com- pared with a year earlier, said Chuck Knittle, a spokesman for Wards in Chicago. The Oak Park Wards increased its ,.selling space by a third by taking over the former MC Sporting Qoods location, along with unused stockroom space. Inventory has ,been expanded in every depart- ,ment. The jewelry counter has been moved to the main entrance on the tpp level and has doubled in size. Wards also is building on its .strong furniture business by carry- ing such name brands as Broyhill and Bassett. Furniture displays of- fer complete living room, dining room and bedroom settings. Cus- lomers can outfit their entire house in one style. "We've been selling furniture over 125 years; it's always been a mainstay," said Dennis Keefer, store manager at the Oak Park Wards, who has worked for the company for 39 years. "We've in- creased the brands, along with the quality and the style, dramatically. Johnson County is a market that has accepted our furniture very well." The furniture department takes up more than half of the lower level and is surrounded by related de- partments, including domestics, window treatments and lamps. Along with more and better mer- chandise; the remodeled Wards stores are designed to offer their time -crunched customers a more enjoyable and efficient shopping experience. I Instead of a "jigsaw puzzle —lay- out, the new design has a circular racetrack design. In addition, cus- tomers can clearly see across the store,. and various departments are identified by large, overhead signs. Customers previously relied on more -complicated, color -coded maps to navigate the store. The main aisles are twice as large as they were in the previous design. Eights have been doubled to give the store a much brighter appear- ance. The store also has increased the number and size of its fitting rooms and streamlined its check- out areas. Wards' core "fashion" customer is a 30- to 55-year-old woman with a household income of $25,000 to $50,000. She has traditional values, seeks value and quality, is focused on family and feels time pressure. The company has a broader base for its appliance and furniture cus- tomer. That customer could be a man or woman, age 26 to 65, with a household income of $25,000 to $85,000. Montgomery Ward, which is owned by GE Capital of Stamford, Conn., also has stores at Blue Ridge Mall, Indian Springs Marketplace, Metro North Shopping Center and Ward Parkway Center. Those stores will not be remodeled this year. The company has not made its plans fi- nal for store remodelings in 2001. "Yes, we are, very pretty now," Keefer said. "The stores are very bright now and the stores are easier to shop. And we have an expanded assortment, a lot better brands. But you have to have the customer ser- vice, all those things with the focus on customer service. That's what brings it all together." To reachfoyceSmith, call (816) 234-7750 orsend e-mail to jsmith@knstarcom BUSINESS At left. :he redestgned jewel. department at the springfield store. Below. employee Shirley Ilregal inspects apparel armed at a more Stylish custotnv. Wards, at Age 127; Gets a Facelift and Trendy Wares WARDS. From E I sanneday trips to Wal-Mart on the law end and Nordstrom the high end. Others have opted for Target and Kohl's —hybrids that position thenr -elves scm, afire between discounters and dt- partment scares 'Ihe [riddle has been z tough place to be." sail Stephen Late, an analyst with the investment firm A.G. Edwards. In this emronment. it's neither here nor there lmong its peers. Monti omery Ward is definite- ty ti.e sickest. And its losse are piling up. even as it attempts to emerge trom two years of operatutL ;order Chapter 11 bankruptcy protection. It report- ed a S 106 million loss in the .First quarter ended April I Although that's an improvement over a $141 million loss in the year-earlier period, its stiH a sign that a turnaround is still far away for Wards Meanwhile, sales in the quarter dropped 5.6 perccm to"nuilion from V r 2 mQm thatgh that decline reflected the dosing of 39 stares, Sarre -store sales --an industry barometer that measures sales at stores open more than a year —rase 3 percent during the period. industry observers question whether there will be enough money in Montgomery Ward's coffers to renovate all of its stores over the next several %eats. although company ofctals say they plan to do 5o. In the Washington area. the company wriD need to upgrade its four other stores —Temple Hills. Hyatts-.Ue..Manassas and Wheaton. Even more cash. observers say. w 31 be needed to market to shoppers who have snubbed the compa_ nr during the past decade_ " If then• re not really renn'enatLxL and if they don't have a dearly new profile to communicate to the consumer ... Td say a s all over.- said Sonny seals. a retail consultant +nth :LT- Keamev in Atlanta. Montgomery Ward however. conunues to sur- prLse the indusm-. In February. the retailer sauurea critics t>,.' announcirg that it would attempt to V emerge from bank rl - protection. General Elec- tric Capital Corp.. its largest creditor. will acquire all of Montgomery Ward. Then tame the new store design —which shop- pers and analysts applaud. The new design features wide aisles. with a "racetrack' design that allows customers to view most of the merchandise without having to wander aimlessly. And so far. managers have resisted the urge to cram every available space with sales rad{c and big sgni--a pet peeve of man+ cortsumers. In place of ordinary towels. there are Egyptian o=o daft m hues of hrotue and mx&e- The apparel is trendy and easy to match On the racks are styles maxib to what you'd see at Old Navy or Aberawbe & Fitch. khaki caprn pants. short A -line skirts and sweater sets with ?.-length sleevers. 'Two years ago. we would have had this ... but a yea: late; said Martin Nobles. manager of the Svmgfield strme- After years of giving Montgomery Ward the cold shoulder, shoppers say they're beginning to warm up. Corprew. an Alexandria resident. said Montgomery Ward stores were ;o cluttered tha: site rarefy found what she wanted But at tine Springfield store this week. she said she wa enjoying her shopping spree. Pamela Una tg iatn a homemaker tmm Alex- andria, said the selection of clothing has gone from 'old kgey and homely" to fashionable. 'Now look at this shirt.' said Gmnirrgl'arn. waving a gray, fitted T-Jurt_ 'Isn't dw cute?' Montgomery Ward. the sevent}rlargest depart- ment store chain m the nation. has faced marry arises since it was fouanded in 1872. In 1985. when Montgomery Ward was part of Mobil Corp.. the realer disoon=ued its catalogue and laid off 5.000 ernployces Three years later. Mobrl sold the company to a marugertmt group led by Berrnard Bresnan and GE Capital. Steil. the retarger floundered. It filed for Chapter 11 bettkmrputi in July 1997. Even as it struggles to win back con=ners- Montgomery Ward win have less of a challenge in the Washington area. company and kK2i real estate officials said Most of the retailers stores in this area are in strong locations. Said Peter H. Framson. a principal with the ref: estate firm Trammell Crow Co. in %161, an. -tit. matter how bad it has been- and rn some market= they have completekv shuttered their stores. m- has been a good market for them . - .. Tnev' ve he their gromd very. well.- �I Zn: tvaoina_ ton iia5± ij Bts SATC�f:DAY. �C-LY 3- 199L� i -- 1, 1' w k` r 411 ��-� L -i.f, rj-lees' • _ i . - • t R y t f "• i n yt'.i.wM o- r •wcrs Nt' � ' The romwed Wards uon at Soft4fidd USE f0shm the 4kzbwd a tMw -neepaeh` du+tMt tnae uhes mtemers as orb apm r eeufiw Pme hoar srhk6 own retal saetiee is dauty viswe. _ �t Old Store New AuMe www s Etuirraas ,argent oar.. _ relai%wl 1 thf UnMd S Montgomery Card Alters Its Entire Strategy opera 9 r;,;;° pAMC 8, Srrr-vvtr STo(;celr omtw)ff is offffn aettdy apparel and have stores to t?vn 30 7,t�„r•- - :-n,; S:s:? a n:r• furnistweL At the Saar ttnse. it is sperldttW Spee"Lo Currentty Uric up t0 Q rr&on a pop t0 renovate 40 of to 252 V Rdww C ter i l ton Cy ,Lct a tew years ago. 4lontganery Ward's stores natamwxk. mrlu hU five of its we aroteC11 Its part or i tfio a bsiuon om4rd elmtx-vame'd swm in the Wutmom ata. Workers are reoegani lion of Wand Darts (erli) and fast-µord ntersairvnent campk-W the rienovad" at Sprt %&K all of al le rnotrin - i rerters t run away.) Falk Church Annam is and Lau tt A Starr ¢r all of m cornoany- But the re*AA 's star in Sprulfield feels Waldorf viiV be rrAm ed by Oaober- i De a nes- place. Ilse name has char4rd — Executrvts say they re mcaLraffed by the firivient 9.000 ► varft Dot h±anmwwr% Hard, The wtute reui1Ls. So far, Ory say. sates at the rerwated door Cks are ow am me - I?x huldw4 his uores .are 40 Wart above the -hun s beet+ anutted. The store is uo&ed .nth ite to avowe- But no mmum hou spdfv its stores tiut cvstarrrs sav then re more ]iitef) W put now scan and 10 nutter What LIM retailer 1 on awr budi s ant: to then romes. C21LS iLseff. ttS f mLrr is SUIT hazy i-2a9 15 li . a dtaenmt Vim.- said tlartha Car- Ltlte J C perry and ;ears }lonigorrrry 149 Pr" said as she 9VDPped at the store Barber Ward has taund rueu lnppe'C 1: the MLwv 5 t 16 : S � thuweek'Befcim- it was De.Wfryy - cuddle area of retaong Shoptxn¢ t'.abrLs fuVe .ia %loworriery Ward & co of Chg2v po{arued• wrth num ccutamen maldnil S-971 r •Sl- prruare+ to esnerim Tom beniaupuv prow- ' um later '--•ts quarter. the 127-yearoid xc U ARDS. U Cat 3 ;aurrttS r �• Y arcv.+5 ane ��. I i l - -- ] "W 0 PUBLIC EY4= Wards gets .0 rnn stomgnmery Ward had a retail- r � ut5 idea in 187 He wouid pru+ide ,lualrty merchantItse to Waal consumers by direct marl --Sa hsFaction O: }par \4:nry Sack" was 1-^e,,uaran!ee Vat.0 was the Comersione I of the v in i the IB-`corauloglog • it took ::he com Irr pans more :han ,0 cars :o open -is fast _ ^� :ire-s[and:nK More - f m 1•Ivmuutdn. lnd . to IrF \�+ 1926 The early ^^Mesa[+hisY worked DDV#4 lairly L+ell for [he �� Page company for ,everal Sueef deredes r Level 'ben came View t hanges_ And not all or the changes were - -- pns,nye for the campanv that was then i; :,nu•..n asMontgomery Wards- � In ]968_ the company was merged into Cunlatner Corp of America to torn Maecor Then Big Od got unvolved wh" :he compa- ny was purchased by Mobil to I976 � Catalog Operations. on which the com- penvwas fuundrd. were drsconttnued in The - I%i retail opeuntx+s were anorce-d irom Mobil in 190 to a 53 8 million I"er- agr.1 buyocl lid by sensor management f hat was followed be a bankruptcy frl- + `s ,rig After a two-year iestrlcturing Wards ,- emerged trom bankrtlptcy protection to A.gu,e and under the o-nership or GE Cap, -.al has deseioped a plan to put it on sf ,uccrsul track r - in :ate IQQ3. Wardf launched three pro- :anFe store, and expanced the p-otorvpe to add.hvital ,rows in :aN, including units A, ire in Square Mall and Crossixmils Mall The hint store converted to the new concept is at Heritage Park NWl - making a Oklahoma Crts- the ricer market .o be corn- plc:rly shtrtL 1 to the new look in the Chicago-ba,ed chain ra 25i ,tares in 32 State•, I — Carrie Harrison. core manager is ,tlio-cst City and l:.iren Nelson, rhstnct :ra n.itief. say Me'+ew concept c+lace, Wards !,rn,e-en :hr u7Saie department stores and the a,counc ,tares on the retail map I he few Jes.grn was developed :o be lush en-,,, able and efttciene Harrison pointed out the wide circular ats!es Dro, iding a cleat sight line irom ,-iFparc4 to �—eln and ac:es- xirirs Shoppers are easily ied into men-s r and c_n.ldren", apparel and shorn The sae: Koods are all on the !first floor 0 the :Vfe In lashrnny and _i.e, Wards is orrerute more brands and .tan upgraded its prita-e label merchandise. i farrtyin Bald I - But these I, sumething mtLLrng Irom the trad-nonal departvrterit store la, out The dirlerew departments are not cluttered with ca,h registers and unCi% dual payment argil, Harrison said :hat one or the malor ,hanRcs n that cash rcgnters are at the door sou pas:o[ alllmef C-^a n{ii S[' when you lea,e rather than paving ui cacti department I , The Circular IayOut alM+ is used on The sccond floor where fhrrnthrre. appliances. ; hn,sewlre,- la,.n and gardenrlrcrronrrsand home decor nercnarldise 15 round urn,rurr- -A the middle of the circa lar a,,lcs „n the sec,ino IlO•ir ,u-rounded br the or -her department, iiya Uri. there �s a clear ,Ight Itne br!,. rn drpa rtmcns to encourage Crn,3•Slee+pp;Rg br!wr•cr depart. ments Nelson says furniture is displaved tan innovative in 0E-Jahurna City room groups, unlike some other de; art- menl stores. -A lot of department srores do no: even offer to neure anymore.' she said But t ta! is part of the plan for ss-,t:ds -You can completely redecorate or rjr. ntsh your home drum merchandise a, ailable on the second level." she said Nelson was named dtarrtcr :Rar.aftcr in April She came to Oklahoma CGry from Chicago where she was manager or a store near the companv's neadquarters From tic: new ofhce at the Penn Square Mall store. she oversees 13 stores to Oklahoma. reaas- `ltssoun. Kansas and ArkarMs l4el,,On ha, been with wards for -hue Years Harrison has been with ysaras for seen Years. starring as an apparel manager She has been manager of the Hentage Park Mall store for three years As they showed the new store dea,gn. Hamson and Vdson both stopped to offer friendly help and get comments Irom shop- pers who were not famlhar with the new design Many of those shoppen fit taro the core customer Wards has targeted Har•rism describes the core Cashion cus. tourer as being a 30-55 year -old female with household tncome of S25 J00 to $50.000 She is family focused.::me p"%surcd and seeks value and quality in fashion areas The core harcittnes customer could be male M female age 26-b5 rears Old with household iricome of S25010 to S85.400 But Even with all the changes for xards. there art still corwW.ons with the original retail concept of selling to rural customers That Aaron -Montgomery Ward had when he started the company t28 years ago Areas of rural Oklahuma not far tram the Heritage Park Mall store provide the tihdwelt City uAir a market that Wards in larger cities do not have "we sell a [,it of tractors at IF s ,tire Harnsnrt said Da,"* Pagt es no rrW+ g q *tor or me Journal RecorU me rrrelComas yot,r ccJ enis and conv iourions -oil -ta'r react` nrm oy prone at 2T6.2&-k. W tar at 279-2890 o, ov e ma-i dpnge0plrnaireCctrd corn D1 httpJ7w�r�-pilolonliM.tam FIeUtrginian [1Ul wEDNESDAC MAY 2ti. i999 s - BUSINESS NFws A NEW STRATEGY: Mon -garner. Vla:c tin•:eii:-i ire 1 1a: i, kiy` is awe' brisnli' ano .ewer Wang -a. _' 4 Ia3tute5 htwc.er b:;ti,d-.name nlerchanai5e- It :aCently debuted one or ;hose stores at Lyrnhda'en Mail ,n 'J,rS ":a 5eacn °na' ,lards store %s managed by Greg Plisoc. �eior. Wards broadens its appeal Struggling chain rolls out new stare format in Hampton and Virginia Beach SY t[ttw[FER GOLDILArf ,r ,, .,Rr r!n YtNigw KOCH — outside. worker art rmadaig back and forth on scaf- :.il rniR. cluppuig away at the sign !kit ,i Txck •.rsde r,,eals ':'mot '4,nt goniery ward h Co at U,-mihaven }Lril is already a much djffertnt store AS ne C'ucaRo-based :etadirg giant attempts to emerjte Innis its tirancial ¢rott!c,. Montgomery hard :s rolling out iii new "Wards" pmlorype at 40 cif i:s locations. the 5[ures in Hampton arid %V9,nia Mach art am na tbem Mantgumery Ward. Jx seventh. largest department start rietarler in :he nation with 252 stores in 32 stales, went through a $3 9 billion Ieveraged buyout in 1989 It was the Idri;esl management led buyout in US history :Throughout the 'gas. :he company has u tcd to develop its ipectalty retail for.-nat. cmQhasizi.14 electroruts and home office goods The company Filed for Chapter 41 banlc upicv In July 199" after It faikd IQ mach an agreement to extend SI 4 billion in loans- Thr fdutg capped a kxi11 sbde for the department store chain acd armed to give it (]me :o reduce cusls, tui losses and post. :rots itsctf between the discounts-s and the departmenr aiores Since 1997, the company has been trying to R-brand Wards as an emir! Shupping experience One of Ward's challenges, qb- servers say. has becn CampennR with +uch drscuuntrrs as 7'arRet and Wal-Mart in price and value. and competing With other tradr- uonal department stores in brands and merchandise In April. GE Capital Inc , the fi. nancing arm of Genera] Electric Co.. agreed to sequin al] of Mont- gomery Ward Holding Co. Inc. paying at least S650 million for the 43 percent of the company that ri does not already own. plus :he SiR- nature Group. Ward s direct mar. keting irni. GE: Capital is One of slonlgomery [Ward's !argest credi- tors Urder the plan, the company would tsicrlle from bans raptcy in August after -tie-eorRaniunon Alan is approved by a hankruptcy judge in Delaware- A hearing is set for July 15 The company unveiled its new prototype in three Stores last year, and sales at thou stores have n. creased 40 percent over the year before Stuntgomery [yard plans to remodel 40 stores this year and to rtmodel half the chain in the next two rears Clearer sight lines. new signs. brighter lighting and additional vendors are among the main at. .raC(3urs at the 95.000.<quarr-foot -tore. The company has doubled :he size of its self -serve shoe do partment, and fcaturc5 Brands Soh as Billie Bov. Steve Madocn and Bellim Sports - The so-called "racetrack IQ. — mar" is designed to guide shop. pers more easily through :)e 5tort The format has been de. i:gncd to enCourage 'cross shup' ping." :he flow of one department to another For cxarnpte, clectmn- ics such as stereos and TV sets are directly across the afslc from ready-to-iisseniblc home enterlam. merit centers 'F.vc-titiuryf has been "_Csigried +nth the idea that we last ume. crunched shoppers that need fash. icn and yaluc.•• said store manager Greg P'nsm The target demographic for Wards is women, 30 to 55 years old. wirh a household income of S25.000 to 550.000 and with family and time pressures "Hopefully. the new format wail work for Them, provided that it's economically viable to replicate this prOlWA a across the chain," Aid Pam Stubing, associate direc. for of the national rndusW ser. vices. retail consumer products group at Ernst h Young " tt depends an their cash flow." and their ability to emerge from Chapter 11. she added 8100mbers 9usiness News ion- inhwea 10 ihts report Friday, November 5.1999 MONEY SC BUSINESS - fhe Macornb Daily F'r^. 70 Wards prototypes grad attenti*qn ■ County shoppers notice aesthetic changes as company sheds old look. By Elttabeth A. Cartar mae«no 0my eusness w ixel Fur Crystal Call, a Clinton Township teen ager,and her grandmother, shopping at Wards Is a cross -generational pastime On a recent trip to the new Wards prow - type store in Chnion Township, Call, 19, ex plaunedthat she likes shopping at Wardsas much as her mother, grandmother and great-grandmother have, "My main shops here and she typically drags me ala ig, but I like it," she said "It's definitely trendy They have a lot of styles that hike." Wards is relying on customers such as Call and her female relatives to sustain it as a viable retail competitor Into the 261 century The store even boldly hopes to nudge aside retailers such as Sears, J.C. Penney and Kohl's in terms of sales. The company hopes to accomplish this with the grand reopening of a Wards pro lot ype store that features a less ma:elike Layout, a brighter interior and expAnded departments "We're impressed with the store, how bright and cheerful it is," said Call's grand mother, Joyce Plummer. "We used to shop herebecause my mother likes it really well and it didn't have the variety that it has Wards, which was knuwn as Mont gumery Ward before its bankruptcy filing two yearsago, has recently recovered. It is banking on a rebound with 43 new pruto type stores in 11 slates including two in Michigan, Ilse CI anion Township store and another in Livonia Each prototype store represents a corpo rate investment of $1 million to S2 mill ion to impletnenl the interim and exterior im pruvements, socurding to com pang tAkLals. "Part of the prom s of reorWizat ion was. tolookaitheputtueaf Wardsfortheruture," said Chi LsAoffeLsen, the fktroit distrki rma n ager for Wards "We had to get rid uf the rep utalion rif being dowdy and not fashion right. We had to appeal In that lemale cus Ulmer bet wren the apes of 25wul50." The new conceµi store takes the p1we of the old store established in 1961 uo Cratirn at 15 Mile in Clinton Tbwnshlp The sim e recently celetorarNt its grand re opening Wards wdl have to work hand to r0oaumi Sumorulatl industry analysis haveshrplhe-0 ".rort e pWitt pinto tiT U—i ED,~ Wards tr wges from ba nlirvyAe7 and tries rim more open look al 43 prototype stores across Cie catrrrtry Inchrdkng the on In Ctkrton Toviw @W an Graft at 15 RtW Road. For exalsrpl i. Cis moos cbtlililg delparI o , I, sham here. k located cioee to fhe home ebctrades and ap• pwance deparbrwo for sailer trI Ill tC amnas deparOrrwrts. following Wards because of the bankrupt cy But LizTahir, president of Tahir At As. soc tales. a reta it cansu ll ing coinpiny leased in New Orleans, said Wands needs to repo suton itself in lire markel tined lei cus• tomers know what it stands for "You have logrve the Ward-,fe•lkscredit that they are trying again Arnenca has become so over stored" that it's some trines hard to justify your existence, Tab Ir said "I think the real prublern Is, where dues Wands fit tit" They'rrnot going io he able to com1wre. with Target or Wal Mart in terms of priceursomcof lheEncore iraditrun.dde, partrneni stores ' Thcy,urubvitlu%iy gullti; tit have: tW td o our deluroniewt If they our rrslsi the temptation to Ike; all things it) all lx"Iple. Ihey can ow kV n " Taking a new approach, Wards now fea. lures crms departmental shopping -such as the appliances department right acnrss the aisle fmm the men's apparel department and the luggage deparinient a few steps from housewares "We want to offer all the latest merchan dlsorat prices that people are willing to p:ry, and make it a real shupptngexperience fur the whole t'anidy," Rcoffelsen aokded. In addition to the new store format. W.Irids has hirml50 exii a employers ai the Clinton Township,14-1u and ••xpandetd n� shtw and drapery de.p.n iowitis 11 alurex panded Its home decoration delorimem wish lunillohe aed al rc%n -f W, SLUM :Is Irtwps and ptrtun• Irarut., Watitslaunrhe■f Itit-ttrsi IIll tUpreelWlylK' stunts air tivptrtn1wr I OL* and ulK•nol in other[''Nf ills yeas W.n ens plans to I't-o;.%;Iur 40 Inure stores in the prototype Image dur ing the first pan of 2iM So far. Macomb Counly cusiunters have seemed to noticeand appot-6mv IhedtfTer ences in the Chnton Tow•nsh hp store "It'sieallychangeil,' %aildEiletatldurgof Sterling Helghre, who has shopm-d at Wartis for Al years and was browsing ihnrugh women's apigiml "It ltmks dtfter ent and it looks nice. I think They have sltlne of the ule.cst dull' and Ihelr µruns am gaol " Slurs man-igi-m ni w- Wgnl/e% the Lit l 111.11 the means to rhru hankloptCy sil. clv.11 was Ihrnut;ll lu}'al r'u%IWo[etr% ..Ward% II;I% a Lllslnnlrl h;ar: 0mr lo,, lu,l sla}e.rl with us:lne1 wr'n we IlimiMid liel'IhPIII IF d.,IUx•Ilh.l l', u'h} ter r>,isi.>a ld Ii.wv%dliiwt. sit oer nmii;ii;rt "'Phi Ireyohy 14 t1Ur I o4h liner! is %1, Wild I-, ile lilt' " SLCWN D 114 WLDNEs[)AY, MAY 3, 2000 Montgomery Wards gees new look & NNK.%X%T= R M&%A&W W". MB91<0 ly VINA SAS Montgomery Ward in the Manassas Mall hosted a grand opening over the weekend for its remodeled store "We got an overwhelming number of compliments on the looks and layout of the store," said Sarah Davis, manager. The remodeling represents a major change in the Wards start format to better address customers' needs. In 2000, Wards is remodeling 33 stores to complete all of its locations in Baltimore, Wash- ington, Chicago, San Francisoo, Sacramento, Calif, San Antonio and Oklahoma City As part of the plan, the Manassas store has been total• ly revamped, with all the ante• nor walls removed to give the store a vast, open feeling. 'We have received favorable comments from all of our cus- tumers," said 7bm Kayda, dis- lrict manager. The first 1,000 customers coming into the store Friday and Saturday were givrn gift bags, Construction on remodeling the 85,000•square•foot store began in January and remained open throughout the process. "it was a mess at times, but we now have a much nicer and user-friendly store," Davis said. Ilrra SGOd �iw�ys�s 4a�lr.v A1f]�i.a�r • � 111 mK I l)t 1 V*zd it the M, 1-1-1 Md hosted a ®'arid *W% §k past weeilatd fork mvmq ed tt m . Wes Continued from Page D 1 She said the new circular layout provides a convenient and enjoyable shopping expe- rience while promoting cross - shopping between depart- ments. `The wide aisles and clear sight lines give a warm, invit- ing environment and (one) where affordable fashions are highlighted," Davis said. Shopping carts and strollers are also available for cus- tomers. The store in Fredericks- burg is also celebrating its grand remodeling. For generations past, shop- ping was exciting, and a trip to the department store treat- ed the customer to -the best that retail had to offer. Wards' redesigned stores take the next step in creating a store that provides today's time - crunched shoppers with an experience that is both enjoy- able and efficient, Kayda said. 'Breaking the model of the `jigsaw puzzle' layout of tradi- tional department stores, the new Wards features a circu- lar, racetrack design that cre- ates a comfortable, aestheti- cally pleasing shopping envi- ronment. Gone are the com- plicated color -coded maps, replaced with clear sight lines, warm colors, bright sig- nage and a customer -friendly layout," Kayda said. "Graphics and signage are smart, clear and educational with touches of wit and humor, reinforcing the good taste, value and spirit of Wards," said Davis. With its 100 employees, Wards is open from 10 a.m.- 9:30 p.m. Monday through Friday, 9 a.m.-9:30 p.m. on Saturdays and 11 a.m.-6 p.m. on Sundays. Wards has 251 stores in 32 states with 32,000 full- and part-time employees. It was founded in 1872 by Aaron Montgomery Ward to provide merchandise to rural con- sumers by direct mats. The first retail store opened in Plymouth, Ind., in 1926. • Contact Bennie $carton Jr. at manassasjmCRnol.co+n THE FREE LANCE -STAR, FREDERICKSBURG. VA. 1ULSDAY, APRIL 25, 2om A7 `New look' Wards to unveil changes By 1oBY NAHAs THE FREE LANCE -STAR Wards department store is celebrating, the end of four rttonths of'spi-ing; Cleaning. On Friday, Wards will kick off a grand reopening celebration after remodeling its Spotsylvania Mall store. Wards will have week- end giveaways in honorof its new look. , The new layout means shop. I► I-s now Can find a bigger selec• tion of merchandise arranged around it Circularaisle, called the "ring; road," said Gary Nelthropp, store manager. "'They Can pretty much get it view of'our entire store and move from one area to another just by going around that ring;," Nelthropp said. "it makes it a little bit simpler:" The Chicago -(lased chain, now ownLKl by GE Capital, was found- ed in 1872 by Aaron Montgomery Ward The remodeling; follows a two- year restructuring period after the company filed for Chapter l l bankruptcy protection. The com- pany dropped "Montgornery" from its store signs at that tithe. `I'lie department Store, which has been ucated at Spotsylv;Irlia Mull since it olk,-nec; in 1980, is one of" Si locations Wards is relilWeling; this year. Its Man- assas store is also un the list. Mon, than 7o of W,irtis' lo(•atiorrs Will have I)CUll renICKlUled by the end of they ye,u- Wards operalo, 251 stores in 32 states. Nelthropp says the revamped layout Includes more electronics, apparel and houseware Reins In art easy -to -find layout. hur'nrture lilies including; Bassett anti Broy- hill have been added to the mix of' living room, dining; room and bedn.,om suites already sold at Wards. The upxiates at Wards are the last of severral new I(A)ks for Spotsylvania Mall, said Jill Chaln- Lxrrlin, m,dl market ing;(Iirector Anchor score JC Penney re• COUHIESY/ WARDS Wards is remodeling its stores with a circular 'racetrack' design to make them more accessible to shoppers. This is a remodeled furniture section. modeled its location mist fall. Sews and Belk spruced up their stores prior to that. And 1'acil•ic Sunwear, Motherhood Maternity and Aromid' It,IIi,I all recently upCned here The new look at Wards keeps tht- mall looking; new, tcw, Cliam- herlira said. "It's fre.-sh, dealt and more a(TOssiblc to customers," stye sa ict- "'I'hey (lid a really nice job." BUSINESS August19.IM THE SUN Section Up to data to Annapolis: Janine FurpatruR and her daughter. Shannon. shoppr shoo in the re". odeted wards at Annapolis HAIL TTney arefmm GrasonmUr Wards fmr-YU-S. spa�';�, ends mok,._ey business Retailer rolling out view -kook stores on paid out of bankruptcy MmWwr.0 Fw&% it By LoaaAtha Mtawaa" _ s.ssr.n The stores an brgnter- . the aWn wider. the nxturca updated and the depart - men" more bgIcWy u- 114 ranged- A circular race. track' propels shopper from Wrilture to appllahces to window Mattnents. Just like at rival department stores. tar -Juniors" depart - ment is pushing flared -ley Jeeps with floral [rile In -.M3ses.' the displays fea- ture outfits to thus hil'a'In' colon of gray and black Just to maks sure no One con Rues this updated lncar- nauon with the old, more clultered, leas llsstuon-con- sclous Montgomery Ward - the Chlcago•based retailer has dropped the -Montgom- ery- Rom its name. Starting tomorrow. the new Wards — Reshiy emerged Aug 2 from a two- year battkraptey ordeal that J Included closing more than 100 unprofitable stores — wili I,egbn rolling out 40 newly rentodefed prototype stores The chain plans another 40 oy Apra and another 40 the i next year — half the dram's 752 stores — all at a cost of The bOM Howard Aurpe. vice preattIM oJlhe eastern rrpfon. pauses In the Annapolis Maustore. Company Orcw expect the changes to result In pro)1WtItfy 0y ZOOJ- $100 md1lon Reoperangs in- clude stores In AnnapoW and Iiutel tomorrow and one in Olen Burnie In Oct* - bet. For the 127-year-old mall - order catalog plont". It's all shout regalrung footing :n the hlghiy competitive wortd of retailing- Its an attainable goal. say company oMclvJs. who expeCt Me chain will turn a profit by 2001. The retailer has become convinced of this iaryety be. cause of the sustained sue cess of wards in Towson Market Place as well as stores in LAS Vega and m Bloomingdale, U — ail re - mottled In a test phase In Septernwr Average monthly sales at those stores since then have lumped 40 percept COM- pared w" the eombuted performtrice of the rest of the cha111 the coMpa4y said At another nine star" lust completed under the same format, sales roar IS Percent Saleare expected to rise an avenge 20 pereent at re- modeled store& said How - ad Pare, vice president of the eastern regton -It wasn't a flash in the part' Parye saw yesterday while touring the Annapolia store - Some anatyw remain un. convinced. The chain has been battered by years of losses — Including a $108 mil- lion foil for the fora Quarter that ended April 3 — and an eroding customer Mae as shoppers found alternatir•ee eltherin ISet S(ores.101 Baftimore, MD Wards thinks new look can restore profitability ( Stores, jrom Page In) mass discounters such as Target or hipper shops such as Old Navy. The Chain's financial troubles stemmed from its inability to keep up with consumer shifts, retail ex- perts said. "Wards had a fuzzy image," said Kurt Barnard, president of Ber- nard's Retail Trend Report, of Up- per Montclair, N.J. "It didn't seem to know where it stood_ Was It an apparel store that carried appli- ances or an appliance store that carried apparel?" "Store remodelings are always very good. and re -merchandising is good if you know what you're do- ing, but changing an image in itself is nov an easy thing." he said. One of Wards' biggest chal- lenges will be avoiding bankruptcy again, said Peter A. Chapman, president of Bankruptcy Credi- tors Service, a publisher of a news- letter that tracks bankrupt com- panies. Wards pulled itself out of Chap- ter 11 bankruptcy lar¢ely by pay- ing creditors just 28 cents to 29 cents on the dollar and thanks to a $650 million cash infusion from General Electric Co.'s OE Capital Services division. Chapman said. GE Capital had owned half of Montgomery Ward and acquired the remainder of the chain and its Signature direct marketing unit. Wards' only profitable subsidiary, as part of the bankruptcy restruc- turing. GE Capital played a large role in convincing creditors they could recover no more than a third of the debt. Chapman said. If Wards had liquidated instead. GE would have lost hundreds of millions of dollars on the retailer's credit card portfo- lio. "At the end of the -day. whether you have people walk in circles, squares or tick-tack-toe patterns. that does not generate revenue," Chapman said. "What you need is a place in the market." Wards executives say they have found that, in part by identitytng target shoppers: middle-1ncgVe women between the ages of 30 and "We firmly believe there is "a huge opportunity between dis- counters and department stares." Parge said. "We've always been rock -solid on big -ticket (items) and appliances. We had walked away from the fashion end of the business. It doesn't work. Today. you have to have a mix." Wards has improved and better coordinated its apparel: buying and taken the assortment more upscale, but still offers better val- ue than upper -end department stores, Parge said. The chain also has an edge over mass discount- ers. offeriAg more of a selection in areas such as electronics, appll- anees, furniture and jewelry, he said. "This is much nicer," than the older format, said Janine Fitzpat- rick of GrasonvWe. shopping yes- terday In the Annapolis store for athletic shoes for daughter, Shan- non. 9. "I don't like when stores are cramped. I'm inclined to come more often." "It's easier to find things." Jena Harmon of Annapolis. at Ing that she was drawn by the ldv� er prices. Showing off [he retarlef across from Fiesta Mall. Mesa, AZ THE ARIZO*A REPUBLIC ° FR[DAY AUGUST 20, i999 IGM TWW&1'0 AAn n. ae"C new kook is Store hamper Mace Hrebduk outside the redesigned entnivive to the Mesa Wass store. War' & debuts in Mesa Name, i image shift mark firm's revival By Glen Cr m rharom R� LIMC JMars[ a Few ye1R I1go. Montgomery fetid was tossing off its old catalog- r.tatler image and chismg shoppers wnh a iadtcal new take on ilore design. Fresh from a Icscrygcd buyout led by management. the depirtment store com- pany was bening customers would -arm up w stores sliced into distinct specialty shopping areas Wards figured the format better positioned it I co take on the supersinres that then *err the darlings of rctadintr. Iimes change though, and Yesterday's hip strategy is today-s old thinking. Chastened by a t hapter I I bankruptcy. Montgomery ward rimade itself again and is showing off the new look at a grand reopening today of its Slew store Ju.t west of Fiesta Mall Montgomery «'ardliRwsn-t e�cn to by that name any longer The name on the from of the rt designed store is Wards, a move intended to signal a new image - "We're trying to tell the customer that we are the new wards." wards District Manager Peter Rodrequez said. Wards is spending S1 million to S2 million per store to remodel 40 stores throughout its chain this year Its 6-year- old store at Arrow -head Towne Center in Glendale also is getting the new look and is expected to be finished in October_ Swards his seven stores in the Valley and two in Tucson. Another 40 Wards stores will be remodeled neat Year, and Rodrrquez said more of the .Anzona stores may be renovated though he didn't know which ones. wards' new look was dictated to part from necessity Retail analysis said the company had fallen into a rut. was being outgunned by more upscale department stores and by discounters and needed to restate its caw to customers in a way that established a clear image - Wards filed for Chapter I reorgan- ization in July 1997 and emerged from bankruptcy protection earlier this month The company took a turd took at itself during the reorganization. chopping more than 100 stores and developing a new look, marketing and merchandising for the survivors- Thm stores were renovated to the new format Iasi year, and [he company says customer responded boosting sales at those locations by 40 percent. Work on [he Mesa store stated in May. and Store Manager Mike Hrabchak said sales are up, though he declined to be specific. The 94.6Msquare-foot Mesa store features a -racetrack" layout on each of — PJeaw see II= rirge EJ Electric Avenue salesman Eric Parent, who works in the Mesa Wards audio-visual department, checks out the more customer -friendly design. Wards opens in Mesa. — YARDS, from Page El its two floors that routes shoppers in a wide, circular pattern. Other aisles were widened, too, and the 19-year- old store was brightened with extra light fixtures and new paint, carpet and tile. The changes are designed to better appeal to Wards' two sets of target customers: fashion shoppers made up of 30- to 55-year-old women with a household income from $25,000 to $50,000 and hard - goods customers, people looking for things like televisions, consisting of men and women 26 to 65 years old with household incomes from $25,000 to $85,000. Wards is bombarding shoppers with advertising messages for the redesigned store and flooding Mesa neighborhoods with more than 36,000 videos showing off the new store prototype. Hrabchak, who has managed the Mesa store for about a year, said the changes have completely altered the store's personality. "It's remarkable, the change," he said. "I walk in every day, and I say, `Wow, how did we do this?' It's a totally different place." Glen Creno can be reached at (602) 444-7463 or at glen.creno0pnl.com. £f O' Dws r El Paso, TX CONSUMER: FOPULAr: STORE GETS FACE LIFT irwar e.ewM, E, Paso inn Joe Frtedel, bottom, manager of Wards -it Ctelo Vista Mau, track- aisle Tne store's new, more customer-friendty look is iWalked Wednesday aiong the redesigned store's wide 'race- eacected to gererate mcreasetl sales. Updated Wards to unveil new look 13y Mike Mrkvh*a type." Nineteen of them are r. Pasc t.TeS reopening this month, said JoeFnedel. WardsCieloVista Less char, three weeks after -Iontgomery Wards emerged store manager. The first three prototype irom Chapter. I bankruptcy stores —in Illinois. Maryland protect:on. te company is and Nevada -- opened in unveiling its r-ew image in F1 September 1998- In the first Paso in hopes of improving :txmonthsofOperation. sales ,ales at the stores rost 40 percent Wdrds will hold a 'grand f rum the same period the pre - reopening" today at its EI viousyear. the company said. Paso store inside Ctelo Arista Mall, mariung a dramatic idles for an additional nine store remtidelmKundanaddi- srores just completed under ion of a broader selection of the iame format earlier this merchandise munth are up 15 percent for i the El Pa;o store is nine of July, said Rogger Goddu. 22 Wards stores throughout chairman and CEO of Wards- ' the nation :hat have been remodeled under guidelines Both the reformatted stores 4 of the new "Wards Yr4tO- and last May"s closing of the Wards store in 3unland Park Nlall are integral parts Of the reorganization plan wards filed in April in a federal bankruptcy- court in Delaware. The company emerged from bankruptcy Aug 2- To regain orotitability, the company closed more than 100 under- performingstores And by the end of next veer. Wards will have redesigned 83 of its 252 fu ll-linestores in 32states, Guddu said . For regular Wards cus. tomers at Cielo Vista- the redesign is nothing new - They've been dodging con- struction workers srnce.May. Friedel said The job was completed last week. and the store had a nb- bon-cu:ting ceremony Las: l Friday for its 170 emp]oyees. I Friedel said_ 'I'm glad it's over.- paid CristinaCarderes,afrequent ' Wards customer shopping at thelewelrycounterl' .ursday afternoon- But she says the ' wart was worth"it "The space to took at items is more organized than it was 4 before. It !ooks much more like an upscalel department store It's less'crowded. It seems to have a lot more floor space," Cardenas said. Even though favorably im- pressed, the redesign didn't ; oiease see waroa 7B I 0 CONITNUED FROM 10B Wards C MrK*d from US resolve one of her pet peeves with Wards. "It still takes a long time waiting in line to pay," she said. Immediately upon entering the store, the most noticeable change is the path of the main aisle. Instead of leading customers in a direct line to the doors on the oth- er side of the store, the new Wards aisle forms an oval. Friedel calls it a "racetrack design." "It gives customers a good, clear Ylew of the merchandise," he said. Another renovation giving the store an airy feeling is removal of in-store stockrooms that used to block the line of sight from one side to another Now customers can better navi- gate from department to depart- ment, Friedel said. Customers call the new look "open" and "bright" and laud the expanded selection, he said. "Upgrading merchandise and the quality of materials make it more fashionable," Friedel said. And longtime Wards customer Ann James agrees. "They carry a much better stock," she said Thursday while inspecting a shelf of lotions. Already, the redesigned store appears to be luring more cus- tomers. Though Friedel couldn't be speck, he said sales have improved as the construction has come to completion. Laura Burgos, a I2-year em- ployee who. works behind the jew- elry counter concurs: "Customers love it. It's so bright and open. Sales have picked up." Wards, of course, is not the only department store chain trying to revive flagging sales and change its image. To that end, Sears, Roebuck and Co. is ditching its "Softer Side of Sears" advertising campaign in favor of a morval e ue-focused slo- gan The Good Life at a Great Pricey Guaranteed. Sears, ac- cording to Mark A. Cohan, Sears executive vice president for mar- keting. The campaign is the final in- stallment in a series of changes the retailer announced early this year, including a move toward more trendy clothing, remodeling its stores and selling merchandise on the Internet. — i'ostTritwne . Saturday, August.21, 1999 Munster, IN IAmy A- HnwrrWPosT-TRIBUNE Jerry Koontz of Crown Point (right), manager of the remodeled Wards in Munster, talks with shopper Elwyn Studer of Highland at the store's official reopening Friday. Wards sp.ortS) new look Shoppers at Munster store's reopening Friday liked it By LAuwA PAUL "Across the isle is linen and men's is on Correspondent the corner." Koontz, of Crown Point, said' the �IUNSTER —Ruth Rivera of East remodeling project lasted six months Chicago was one of the first people Fri- and took place in phases so the store did day to visit the remodeled Wards in not have to close. He estimated more Munster. than 5,600 came to the official re -open - The store broke the mold of the con- ing in the morning. fusing jigsaw puzzle layout of older __ "We have a very loyal customer department stores by going to a circular base," Koontz said. "This store has been layou And Rivera liked what she saw. in the area for more than 30 years. They " I u ed to come here before and I did came out to see the new Wards." not care for it," Rivera said. "Before their clothes were not good quality and LAmy A. e3trrr8/Po9RTRI6UNe The remodeled Wards store in Sidney Doolittle, a founding partner now they look much better. With the Munster on Calumet Avenue. with McMillan/Doolittle Limited Liabili- ty Partnership in Chicago, said Wards is y coming out of Chapter 11 bankruptcy to go right away, and the aisles are Jerry Koontz, the Munster store man- and working on getting in the black. much wider." ager, said the circular layout promotes "That means redoing all the stores Once known as Montgomery Ward, "cross shopping" in which customers that remain open," Doolittle said. "They. the retailer is attempting to become can shop for appliances, linens, clothing are looking at their prototypes. They profitable after emerging this month and electronics all at the same time. are quite good and are performing from bankruptcy. To do so, the store "A person who comes in for jewelry well." He used to be vice president of held 19 reopenings across the country can come into the middle of the apparel Wards' international and catalog divi- Friday of revamped prototype stores, floor to look at jewelry and then they sions. including the one in Munster on can see at a glance misses and junior Calumet Avenue. apparel on the other side," Koontz said. Please see New Ward, Page 86 New Wards Remodeled Munster store has reopening Continued ,fom Page B3 "The problem with Wards was not that Wards changed but the rest of the market changed and, it left Wards behind," Doolittle said. Veil Stern, a partner and retail strategist with McMilian/Doolittle LLR said the new Wards appeals to today's consumers. In general consumers have less time to shop." Stern said. "They want to shop less. When they are at the store they are looking to be more efficient m the way they shop. The old retail model was put the milk at t • the back of the store, put the phar- macy in the back and make cus- tomers travel as much through the store as possible. The old theory was the more of the store they see, the more they are going to buy," he said. "The new theory is if you irritate customers too much by making them go through hoops, they'll just leave They have a lot more options." Chris Roffelsen, the trt-state dis- trict manager for Wards, said the new store is very "fashion forward." "We have the styles and brands people are looking for," she said. Loretta Jordan, of Hammond, bought pants, shuts and ties for her husband during a shopping spree at Wards on Friday' "It's kind of weird when you used to come to the old one — the layout is different," Jordan said. "I think they give more space for apparels and linens- I think they did a good job." The Record 0 aLOCKMon, L-it ` r a Monday. November T. 1999 Nation's 1sK- 1,17,-- OF11-1y"F latee, Stockton's Wards store completes its makeover Bywsemme. l RAmd SUNiM MontgORK[y, Wards' Slocktoo Uwe ton nett a three month retakower on a laic that nand make htkw Bunt Madavr Gotta are efts dlat UgAtf that fllall! all Q1Rtptd Orltsaed rieer- chandlse. Citstomea will find ride aisles, anion! casts from" and , rooms. braed•nane displays. bright rightleg. and rtchrl woo Upscale" Isn't ■ norC many avoppery mould use to d—rib* the 'b'tead le -AL" gk-L the nattoaa Oldest d"artment store end • that (or decades tin dt�ted iiry con' ten and catered to mtldm!-11111come lartttlles But Wards shopperl Joanne Huber of Stockton. YtnlyM t surroundings last laces In the .omen's apparel departaiem t m a Dtaunt uurtge n the iroee she has klsotrrt for year>:'h kaka Like one of the moire-cipmffie stares now Ms Iwetyc' Other customen rase equa0ir it wo►s+yearn: sod1madaltne YtizoY Galt. patalrtd nearby to f depattsttesv. -lit looks ogre they added a Ilak mots.r..�r-,.�h�...� and Irs a little beau gtWlW That statement jibes'with the goals of Montgomery wterd esecu- dves. who ate �wer the MOM estatrtm in COMM merry for the L27-year raid companyn and the e*w0y hold calm Of attnKUns rase upscale cnnunne"L The remodding effoe OdBciab ay, is part of a scnaglc plan conceived about three years age and prrc:i- Weeds' armed dlf- The comparry god for Qtaptw I I banbuVcy protaetlon to 1997 and emerged in Atgtpt after a raavctts" effort that bbdu*d shutting down morelthon 100 ,Iom natenwride. Mhrda opaum '.52 stets in 32 stateaI In addition to rrstiodtltrg cases and upgrading merchandise. the plan calk (or rMtitig. marteitrq plans and Improving customer Wards ezecudm !Tate deatitd the uoeds Ideal tipper d buyers as .amen 30 to 55 yeas old wMh annual household Incomes of $25.000 to 550.000-lFurhllum. ekctrartca, apggatm th and oer nonapparel items hat m e a soe- rhot higher target men and women Agin 26-56 witts household incomes Of S25AW to tiSAW These customers are more brand-coniclous.' said Mark Albrechr, wards' I Northern caeforrua disa" m trtadm. One Of the East dp-oee of the shift IS the prominence of the ye%wko department. dr urAmite symbol Of hulltuys ' In Stockton, the secTbn was Pa rrro a Carrel SµWAS SPRUCED UP- The faa,ade or the remodeiM from rise Sherwood Mee par" V The nelien'S Wards Store to north Sloanon is seen last week oldest department Store is pdrshing rltl usage ROOM TO SHOP: The rorttodelso Wards in Sttletton No under arsift Posited fmww town doe mats side entrain and riven an airy look by mmovhl6 pats Of use cell- Iesa aboie Lyle oistnta specs. flee depwarsent b also cat. IIt more-e:peattive hems, such as hVierend aLmo ds. It over a vm Lmpresalon: Sa ximn brands enassBes t 4wW 4obirwtte said " Mb is one of the arst uunga that got remodeled SbW it was pod to. business has been ovoendots' Cnalomen enrMng the store (ran voter deps wamoi vng able' nosier dlCerernom Orb n urm* animal•petnt Lingerie and POk!- mors gray: '11-9 really hot right now.- Amretta tors& gut she least •fash[enable depwarahru. house+wrea. has per- hAp changed the moat The store hm prorWxnely dis- plryrd preettlum bratda, %wh as Maytag In the appLim" depart• rnmu and vas-scrom sorry tam- sw seta In rite homie ddYTonks department manaesa and drapery •departrttenfl. mth h]gh sale vd- tams at the Stdctaon toner. have oxen poaluoned direcuy serous bow each odw,c More mer4ara• dlse Is on dspta)t Agxv&s said polntlna to a Una of dos -Wo drapery displays Oat omw nary half a stuns waEL The Stodson Sue Is the aRh of Wards 15 Central California stater from Chico to Bakersfield to u ndlergo r-wddb* Thotrgb Mad rds rant dlsctOsie anari W details for doe prwatd► held compenX Albredu stud the Stockton store is considered one of the best -perk mng and bM- patarhxttd store in the segiort. It's alto one of the largest - While the slows physical bound- aries didn't etpand, stockroom wWb and enclaturess were Welker down treipand the Sales Boos Spam for shoe dhi- plays• for oampia. trineased by about 70 peraetM. r(obarene sale_ This allows us to keep more stock on the floor rather than have cvmrrK s Strickr onu.' Rayne an waapa, Sari Oyu Herr fac" Thep are Sons• at the now or rarttrersd swats art Hong debuted in anti uo," Sv000rt's mats in ni^are years, ■ seas, reniodaiad May 19% ■ Old Navy. opened am 19% ■ The Disc Store, Oparwo Sepiernow 11397 �■ pieras. Operd October 1997 ■ Mays, remodew lot T9Q7 ■ Grisboree frtrdrWIS *WWV. Igge ■ WL Fields ComeeR opelied Oerlfer 11999 ■ eamw a NOW@ aDaknom relocated and aPamoo Novwribr t9De ■ GlalibmM Piny PtaRs•rss factvay CWIWIL cPanad OeobTdw ■ Gatasrryr CanbY foorrtpuar Saatram. harOrranl. Opened Oece+1ber ■ "TOM MiadaMe February • Mg Kmsrt, almarww and rertwdsMd Jae ■ Ault (r iiii—A rope hei salon). retiadaad SaPWFAW ■ 1YM"a OuqwK tailridad area rrmpdpap ssownbw ■ Nan- wood" (ill a7op). Sepaniosr ■ Cl.ins famsasorkna rernob Bled ocko r ■ ran sw mended red rsniodelsd gesooar ■ Tatgat arpliri0a I Yid rsniai vied Ocsobar • Gap. GapKIM and brgGq. operwig Ind momH ■ rk"hone, ]atseec 17arwa - 't0eang). Open" on moriei ■ " Music. opens vas mv�t ■ crwwrt Jwreum rswo and swwxSrt0 carry 2000 ■ SaMo &Wprlaee. 9 sprvg 2000 WARDS Continued from F1 Space was a deciding factor, because the remodel required aisles to be widened and added a circular aisle that runs through the store. The cirndar design allows cus- lomers to browse more easily among departments aixd therefore shop between closely positioned, complementary sections, such as girls' and women's apparel, for example. Robinette said. "it opens up the departments. The (previous) aisles prevented (customers) from !ooking around" This so-called cross -shopping, retail experts say, is an essential pan of a department Store's suc- cess. Sears' long -running "softer side of Sears" ad campaign Is an example of the store's attempt to promote apparel sales among cus- tomers who go to the store In search of specific hard goods such as washing machine• and refrig- erators. LWhde Sears' underperforming apparel category has pulled [lawn company profits for at least a year and a half, there's some Midi atfon that the company is turning around, said Tom Tashjian, man- aging director of Banc America Securities in San Francisco. "Ln the past two months, Sears met and beat sales plans," he said, "And the hard -goods side of Sears continues to do well." While Sears and I.C. Penney remain solid companies, they, !Ike Wards, nevertheless face increas- ing competition from discounters and upper -market retailers, he said "The postwar baby --boom cm - comer who's comfortable shopping in an upscale store and a dis- count box store in the same trip would probably pick up basic home goods at Target rather than at Sears and Penney." But remodeling efforts, while updating a store's outdated took, are typically expected to jump- start sales, recall experts sax Such efforts, they say, can boost sales for the store and vicinity. "It's a major step to have that store make a major financial commitment; said Mike Donaghy. manager of Sherwood Matt. "The success of an anchor store typi- cally means success for other stores. The whole mall does well" Weberstown Mall marketing director Alexandra Pappas agrlee& Pappas witnessed an uptick in mall activity after Sears was remodeled in t 9w "They benefited tremendously AGW GhMos by CLIFFORD OTO PROUD MOMENT: George Robinette, left, manager of the Stockton Wads, and district manager Mark Albrecht admire the remodeling. MORE CHOICES: Pam Myers of Stockton looks over the increased selection of women's shoes last week at the newly remodeled Wards in Stockton's Sherwood Mall. from their remodel." Retail fixtures such as Wards also have a tonges terra impart om a community, experts sax In January, Santa Marla becam the latest California community to lose a wards store to the compa- nys remuctwtng, The impact is significant.," said Bob Hatch, president of the Santa Maria Valley Chamber of Com- merce. The store, a downtown fix- ture, was ohm busy, he added Hatch couldn't say why the store dosed but noted that the loss coincided with the entry of several big -boot retailers on the edge of town, induding wal-Mart The newer stores are likely EM- Ing the gap, but the Wards store Big changes )improvements to Montgomery Wards' StoWon store, which paral- lel tt10'ae at recently remodeled stores in Sacramento and Modesto. include: ■ An additional 5.000 square feet of retail space. bringing the total to 75,000 square feet. ■ A c wcular aisle running tnrmo many depart - meets and wider sec- ondary aisles. ■ Additional. more-aocessi- hie dressing room; and cashiers. ■ New lighting factures, increasing brightness by 40 percent ■ Prominent displays of individual brands and styles ■ AditoratL urges signs for departrnents. ■ Upgraded mwdwxfise amass departments including Mweiry. women s apparel and home electronics ■ Addition of trendy items such as anowi-pr+nt lire genie and Pokemon gear. M Expanded cioMing and shoe departs* ts. ■ Expanded non apparel departments, including draperies, bedding and app%anoes• was nevertheless a popular desti- nation for many years. he said. You get used to shopping at a store.... It stayed there white things changed numerous times," i 1 ■ THURSDAY, NOVE 1BE .l8, 1999 ■ ................................................................................................................................................... Pleasant Pleasant Hill. CA M ''^ Wards tl•l ; �.) s P orts -I 1� By Stephanie trYrhght Staff writer Munegumery Ward haw ahu}laned W Wards- ,tr uame [� ,end Ia sprucing up several of Indud- r^;.' `L '�- ' 1Lb Otoreb nationwide. iug Jts btury In Nleasant 11411, l,•.•: �;, ti ''. Clu.pnthem lulu what ilia tympaknyy L callw'inuuvave C.1upt whirls,'the purpose IS t ,'� ? - �• �"' to make shopping easier and - ;' , 4,Y 11 n,u7- cunvrnlenL fur cue• Lull ra, 7' a nrnglc, roan[ drarnatle Wards employeew Pernelid Duncan ekutnes sfstrppcn it) re the stoand otters to assist "In with clink,% Lu the plk!&Mnt 11,11 selling up a new Wards credri card account. Words store is Its streamlined imposed by the building'w lay- 4wor,eas, A cusWmer enter. out. Ing the (runt duord can quick- A Wuch of sophistication ; ly afan the Grat-tewel depart- cslats In the addition of menu and decide which part attractively dlsplayud, stylish � t' >+ , of tha renovated stone they wunlen's faahiuns, and light- wuIt to head fur Colored word is ineurpwa4:d r�- Irplead of being squared off unto the 1-we lctielry depart - into separate deparin,cnu, nle.nt luuntere mid 16ruugh. Elie at,rre contarrld wlIJt the Out the bture Adding to the Comfrany debcribcs as a clrcu. I„ai are the ruby and gold r lar, racetrack design Thiel is Chrlbinldb banners, dangling literally a round path dumo- from the ce,lmg natiug the center of the sture —rhe three mnln guile of the is with departments on the cell. renuvatiu,l ure 1Juality, value r to and uuLblde of It slid but IOokb at prlccs plVple Cabto,ners easily skim ■lung ca,l allurd,' bJ,d Urbble upep, vide -by -side depart. McCoy, btore mutlagrr 7,•, .. {. mcgta rdLlrer than navigating 'We're very proud of u..r �•ts druund runibernume watts or Jl'wvlry department, We have re.gis7g in-bture Irlapa to Fig- bailie nlle ILelilb at ■M.rdablc L I ure out w1wre: Owy wJllt to go prrll•b' . 'l hu only excl•p11011 to this Jlle said she. Jewelry Ime Is deal m Ib the Ih,IJrrn'a unit eK undid slid rww rltcludea p ' �.. _ ,nit aware deparunentb. lapis. judo and platlnua, w146 bull rummi, h,•Innd Yount' shup1wrs fnuly SJLn (rw)hl), S. and B41dnrl.1 Cured, 4, Wards From page 1 pieces. Home items, including bed- ding, linens, curtains and photo frames, have been moved down- stairs, so people in a hurry don't have to trek upstairs for what McCoy says are popular items. The shoe department also accommodates time -crunched shoppers, and the majority of it is on the main floor. Customers who see a sample shoe they like can check the boxes of shoes below .for their size and serve themselves, rather than wait- ing for a sales associate to find it for them. Upstairs, furniture, large home appliances and home electronics are laid out in the same circular design. Furniture, now placed in six different collections, integrates living room. dining room and bedroom groupings to give cus- tomers' an opportunity to see how the furnishings would work together in a home set- ting. ouw co"OWSun p ww Wards sales associate Joe Curry looks on as Glen Richards measures a coffee table in the newly -renovated furniture department. Audrey Richards observes in the background. And the large appliance sec- tion is greatly expanded with lots of built-in stoves and even a GE center, complete with built-in ovens, stoves and a refrigerator. "We have a lot of built-ins that people can actually see instead of just looking at them in a catalog," said McCoy. "Our home electronics (department) is significantly different. Before, it was a dark hole in a corner. Now, it's really open and very interac- tive." McCoy said that in addition to the aesthetic changes. At and the company are also striving to improve customer service by instilling in new sales associates the need to put customers above anything else they need to do in their jobs. The store remained open dur- ing the entire -renovation, and the sales associates endured the process and continued to work hard, McCoy said. 'Tm more proud of my associ- ates than anything else," she said. "They did a wonderful job." Wards is located at 2302 Monument Blvd., in Pleasant Hilt. Store hours are 10 a.m.-9 p.m. Monday through Friday; 10 a.m.-8 p.m. Saturdays; and 11 a.m. to 6 p.m. Sundays. Auto Ezprew is open 7 a_m.-8 p.m. Monday through Fridays; 7 am.-7 p.m. Saturdays; and 10 a.m.-5 p.m. Sundays. Call Wards at 674-6200 for more information. Baisiness3'Qnes Discount chain Save-A_Lot to shut Landover grocery Si1Ve-A-1,01, a T10 frills discount grrxxry slurs chain, is clusink its store in Landover and _ selling off two other of -its stores m-Maryland; - Save -A -Lot says it -is "realign ing its operations in the Wash. ingion, D C , market;' according to a statrmrnt by the St. Louis• based company. The stores in Hyattsville and Oxon Hill will remain open as Save -A -Lot Food Stores but will be independently owned Janet Michel, a spokesman for the company, would not disclose the but cost less Store The stoics' which hive between 14 and 22 employers, overage aWut 12,000 square —� — —feet — substantially smaller than -the average.Safeway or Giant. A-Dimna UE Mart tJ Save-rl-Lut officials anticipate all hourly employees at the Lan. dover store will be offered employment at another chain name of the buyer, The Save•A•Lot stores sell very few products with national labels. Instead, the stores sell custom -label products that look similar to the national brands Save -A -Lot has more than 800 stuns in 35 status The company owns and operates 150 of them Improving market share Hume Depot, the giant home improvement retailer, is ham- mering out plans for seven new stores in the Wash• inglon-Bat- tirnure area. 'file new ` \, locations will all be lk open before the end of the summer, starting with a store in Hagers- town opening May IS In June, Hume Depot will open stores in Ellicott City, Md , and Stafford, Va And four other store open• ings are scheduled for late summer in Hyattsville, Fairfax Circle, Annandale and Colum- bia, Md The locations will range in size from 105,000 square fret to 115,000 square feet and employ between 150 and 200 people cacti. Hume Depot currently has 31 stores in the Washington - Baltimore market and recently converted 1 I of those stores into 24-hour service locations The new stores will ripen with regular business hours and will be converted to 24-hour opera- lions if customer demand is high engugh Xando and Cosi Xando Cost will introduce its new brand to the Washington area this muntli with three new locations in the District and Virginia The new restaurants, which are a result of an October merb er between Xando Coffee and Bar and Cosi Sandwich liar, will offer Xando's traditional coffee and espresso based drinks, and cocktails after 5 p.m., as well Cosi s stgnature sandwiches, pizzas anc: appeliz- ers The locations, which range between 85 and 140 seats, will open at 7GO 1 I th St. in the Dis- trict on May 1, at 700 King St. in Alexandria on May 9 and al 4250 Fairfax Drive in Ballstun on May 22. There are now four Xando Coffee and liar locations and one Cosi l(wairon in the Wash- ington area Wards' new look Montgomery Ward is rein- venting itself in the Washing- ton -Baltimore area The discount retailer, which now goes by the name Wards, will complete the redesign of all of its stores in file area by the end of the year The company, which sells clothing. jewelry, housewares, furniture and apph:races, has already coni- pielcd the r'cdesign of more than half ul the areas stores. The new Wards stores, sport• till', a different layout, wider aisles and in-store signs, have ;,Iready reopened -five -Maryland - slums and six Virginia loca. buns. The stores, which remain open during the renovations, are undergoing a SI million to $2 million makeover New stores N 1ysons Galleria has signed leases with seven new retailers -•• occupying nearly 22,000- square-feet of space. The retailers, scheduled to open by this summer, include Bally, BCBG Max Azria, Bisou Btsou, Mayor's Jewelers, New Man, Sur I.a table and lucky Brand A Modell's Spurting Goods has opened its ninth Washing. tun -area location in German- town The 15,000-square•fool sporting gaids and apparel store, which has about 30 employees, is replacing the company's Rockville store Modoll's, based in New York, has a total of 87 stores 2 The Spurt & Ilealth Cu of Mclean has opened two new Fitness Equations health clubs in -Iysons Currier and Silver Spring The 33,000-square-foul lysons Fitness Equation and 22,000-square -fout club in the Silver Spring area opened mist month • Donna De Marco can be reached at 2021636-4884 Stoic )routs runs every other wcck 08 MONDAY, MAY.I. POW 1 HE WASt ItNGTUfV TIMES APHIL 29, 2000 BUSINESS & FINANCE THE DAILY RECORD 9A Baltimore, MD DETAILING Giant Offers Osteoporosis Testing Grocer, Kaiser Perrnanente Provide Screenings at Baltimore1D.C. Stores n a parunership with Kaiser Permanente, Giant Food will offer usteoporosts bone density sereenungs at select Gi- ant pharmacy stores in Maryl:utd, Washungton wid VugunA. The screenings are being offered in recognition of Na- tional Osteoporosis Month, which beguns May i, and as part of Giant's and Katscr Penwaiente's conututruent to women's health The screenutgs be. -gait April 24 and will nut through June 12 The screenutgs involve a bone density measurement of the heel, wltiCh is a quick, non-invasive and painless procedure that ,provides udurrnatioa about an undividual's risk for developing osteoporosts. Af,,er the screetung, customers are provided with two copies of the results to share with their doctor to use in de- tennining the need for additional testing or rreatinnent Wards' Y.rresses Its 'Aneness' at Security Square Montgomery Ward has unveiled a "smart new look" for its store at Secu- rity Square Mal:. As part of its 2000 plan, Wards is remodeling its 3:3 stores located in Balti- more; Washington; Chicago; Stun Fl-Ancisco. Sacramento, Calif,; San Antonio, Texas; and Oklahoma City, Okla The store at Secunty Square is one of three stores already remodeled and will host its grand re -opening celebration between April 28 and May 20. The retailer says the new look represents a major change in the Wards store formal and emphasizes the merciuundlsung uuuattves Wards has undertaken to reinvigorate its stores and better address the ne-e& of its custonne, S. New features in the new look store include a circular layout geared to prompt cross shopputg to other departments, wider aisles, clear sight lines arid in-store signage ilnu retailer says that all design elements are: uttegratcd avid Con5iSICrtt to communicate the "orien.:ss of Wards " — - -- .. - — - ------ f!i'rer'u Miller but d1l 'Q_vmd ai1yrecord.cum,, j PUBLISHED APRIL 28, 2000 SAN ANTONIO BUSINESS JOURNAL More details about Harcourt campus emerge Clayco Construction Co., the St. Louis - based design/build contractor building the new corporate campus for Harcourt Inc. on the city's North Side, announced more de - Real Estate Roundup MEGAN KAMERICK tails this week about the project. Trammell Crow Co. is developing the campus for Har- court at 19500 Bulverde Road, just north of Loop 1604. Clayco's Dallas office has begun work on the three -building complex, which will total 558,000 square feet on 77 acres. The campus will house The Psychological Corp. and Harcourt Educational Measurement, both subsidiaries of Harcourt Inc. The develop- ment will have a 144,920-square-foot, two- story office building in an L-shape and a 413,000-square-foot operations facility, linked by a 120-foot-long covered walkway. It will have a mezzanine level of almost 50,000 square feet where up to 1,000 em- ployees can score and grade tests, as well as 12 loading docks. The construction will be- with tilt -wall concrete panels .'The campus will include a full -service cafeteria, outdoor patio and 1,500 parking spaces. The new campus is scheduled for completion in early 2001 and will house 700 full-time employees and up to 1,500 employees on a seasonal basis. Development costs were not avail- able. Ward remake Montgomery Ward is rolling out two of its revamped San Antonio stores this week as part of its national effort to reposition itself following its emergence from Chapter 11 bankruptcy proceedings. The Chicago -based retailer is holding grand "re -openings" at its stores in McCre- less Mall and Crossroads Shopping Center to show off its new format and design. These elements include new facades, a circular lay- out to promote cross -shopping between de- partments, wider aisles, user-friendly sig- "We will be much more active in Cie market." - John Voget nage and enhanced product and apparel lines. These are two of the 33 stores Wards is remodeling this year. The other two San An- tonio locations at Windsor Park Mall and at Westlakes Shopping Center, will be com- pleted later this year, says Kathleen O'Neill, spokeswoman for Wards. The re- tailer, which is owned by GE Capital, launched three prototype stores in 1998 and remodeled 40 stores last year. The average Wards store is about 95,000 square feet in size. New alliance CB Richard Ellis, Jones Lang LaSalle and Trammell Crow Co. anno nced they are forming an alliance to develo� e-commerce initiatives focusing on procurements, trans- actions and support services. The three com-. panies will have equal ownership in the new venture, which will likely operate as a sepa- rate business and brand. The companies wield significant weight in the commercial real estate industry, with - more than 1.2 billion square feet of space un- der their management. Last year they execut- ed a total of 6,400 sales transactions, and 30,800 lease transactions nationwide. To- gether they spend more than $5 billion for goods and services. Vogel a oins Kennedy John Vogel has left Grubb & Ellis Co. to take on the job of marketing director for Kennedy -Wilson Inc. Vogel will manage the firm's industrial portfolio, and handle acqui- sitions, dispositions and build -to -suit oppor- tunities. Kennedy -Wilson plans to beef up its activity in build -to -suit work -here, as well as buying and selling property, VogeP: says. "We will be much more active in the mar- ket," he says. Vogel brings with him leasing for Freedom Center and Wetmore Business Park industri- al properties, as well as 2049 Babcock. Kennedy -Wilson, which bought SynerMark Cos. last year, has about 1.25 million in in- dustrial properties it manages here, Vogel says, in addition to its office properties. "It was a tremendous opportunity," he says of the move. automotive 6 � L r1 ;� r.7 Ll l I to 'E � 'I ■ 9 Prototype Plan • Circular racetrack design dominates the store plan • Aisle pattern and openness promote customer browsing and cross shopping • Logical department adjacencies make the store easy to shop • Store openness represents the 'oneness" of Wards • Strong visual appeal for the target customer A lawn and garden - --- -- -- '17 - - _3: �. yL_ _ _ : � ; •.i - � �'-'ram^_ +i -*1 � y--f rJ �- ' .r Earo� 41JY 4 ,tab appliances Qilto; L!, � a 5&j W- iniml 717 electronics X, 7, PpIp- IC, r i Ol, appliances YA -VAW oe� 0 il i Ijl— &one> fffi -1 home textiles 2 0 IW a. am %�Nm 'Pet 6 ----------- ----------------------- -------- ------- -- ------------------------- - - - ---------- 410 9�. IrA -------- " housewares 33 Nv- 3 .-, - ~- `- - -_.' _ I K I misses sportswear w jewelry accesso A, 140 tkAss ries r -- 1 . . . . . . . . . . � y - �•••r. - ��l>v. _ .n "n. 1. \`\ l-� � � - _ young mens ------------ - t --,-J. A -IUI-RM Wards Auto Express • The new softer Auto Express design blends well with any retail environment • Curved forms are an extension of the retail store design • State-of-the-art sales floor equipment and presentation systems • Customer waiting and service are geared to customer lifestyle • Design focus strongly appeals to the female customer 1 Mission Valley, CA • 1999 Phase I Project • Bowed design enhances existing structure • Awnings identify customer entrance • New prototype logo sign Hulen, TX • All new construction • Relocation within existing shopping center • Bowed entrance executed in glass • Skylit escalator well centers plan 'I/ Las Vegas, NV • Bold and centrally focused design defines the new store image • Curved main facade mirrors internal circulation pattern • Customer entrances highlighted by illuminated red awnings • White Wards sign signifies the all new store inside • Store image reflects advertising and marketing programs A& September, 1999 same space new, face'. tl t mat x pppNa cos(" ,41 � 1 Gordan Bedd 9 r Ma par¢I .Womena Aj wt Child p I F. n San Diego (Mission Valley), CA Daly City, CA "Shoppers and analysts applaud the new store design!" — The Washington Post • July 3, 1999 Torrance, CA Visit a new Wart storqIIIIIIIIIIIIIIIIIIIIIIIII The remodeled stores make 'a dramatic statement about the new Wards - a brighter, trendier store that customers want to shop... If you haven't -had the opportunity to see anew Wards store, you really should see what the excitement is all about! We hope that you are able to visit one of the 19 remodeled stores that opened in August or one of the three original Prototypes (Towson, Las.Vegas, Bloomingdale). I 1 The 22 new Wards stores are located in the following cities: East Coast Mountain & Southwest Annapolis, Mesa (East), AZ Laurel and Towson, MID Colorado Springs, CO Falls Church, Hampton, Las Vegas (West), NV Springfield and Virginia Beach, VA El Paso, TX j Midwest Bloomingdale and Chicago (Ford City), IL Livonia, MI (exterior complete end of Oct) Munster, IN Look for an additional. 21 remodeled stores in October, making a total of 43 by year end '99! Sacramento (Citrus Heights), CA Want to visit a new Wards store, but need directions to find it? Log onto our website: www.wa rd s. co m California Daly City, Fresno, Modesto, San Diego (Mission Valley), Sacramento (Citrus Heights), Torrance, and San Jose (Oakridge) Munster, IN "With the new layout you can see where you want to go right away" - a Munster, IN customer to The Gary Post — Tribune • August 21, 1999 Click on the "Check out our Grand Opening Celebration" and then click on "Now at 22 locations", where you'll find a map and driving instructions to new Wards stores. If a new Wards store is not located near you, you can still see a new store. Our website also allows you to take a "virtual tour" of a new store! Either in person or on the website, come see what's in store for you at the new Wards! and feel the difference'. MENW.,v IV' I the new Wards one tearn..i one` company ... "Wider aisles, trendier clothes... another Arizona first" - The Mesa Tribune • August 18, 1999 "Customers love it. It's so bright and open" - Fine Jewelry Associate Laura Burgos in The El Paso Times • August 20, 1999 sy,atV iu�t 7 1 rM 1, r '" 1 x 7J r Chicago (Ford City), IL Mesa (East), AZ Modesto, CA a fresh, new look... El Paso, TX "It's remarkable, the change. I walk in every day and I say, Wow, how did we do this. It's a totally different place" - Mesa Store Manager Mike Hrabchak to the Arizona Republic • August 20, 1999 Colorado Springs, CO "The customers are just responding to it so well" - Laurel Store Manager Jenny Householder to The Laurel Leader • August 26, 1999 "It looks so much bigger with more merchandise!" - a Livonia customer to the Detroit Free Press • August 21, 1999 Hampton, VA v � Springfield, VA Auto Express Ah =TiTM 'A 'I dF F same space NEW 0 December, 1999 Z�ZWMMMM 97 The remodeled stores make a dramatic statement about the new Wards — a brighter, trendier store that customers want to shop... If you haven't had the opportunity to see a new Wards store, you really should see what the excitement is all about! We hope that you are able to visit one of the 40 remodeled stores that opened in 1999 or one of the three original Prototypes (Towson, Las Vegas, Bloomingdale). The 21 new Wards stores that opened in October, 1999 are: East Glen Burnie and St. Charles (waldoro, MD Midwest Niles (Village Crossing) and Orland Park, IL Springfield, MO Mt. Clemens, MI South Pensacola, FL { Columbus, GA x H f � � t �i« r �^wwy Iry a Mountain & Southwest Glendale (Arrowhead), AZ Den er (Westminster) and Littleton, CO Oklahoma City (Crossroads) and Oklahoma City (Penn Square), OK Friendswood (Baybrook) and. H u rst, TX West La Mesa, Pleasant Hill, Stockton, Fullerton, Fremont and Sacramento (Florin), CA Previously opened remodeled stores in 1999: Mesa (west), AZ Daly City, Fresno, Modesto, San Diego (Mission Valley), Sacramento (Citrus Heights), Torrance and San Jose (oakridge), CA Colorado Springs, CO Chicago (Ford City), IL Munster, IN Annapolis and Laurel, MD Livonia, MI (shown in becember 1999 brochure) El Paso, TX Falls Church, Hampton, Springfield and Virginia Beach, VA 7,77 x -,�.. Apparel :.. } yr { j etld6rg k "�x?Hame; ;, Wam s Apperal '� Deaor t s h .f t "The 'racetrack' design moves shoppers around a large circle in the store which ... allows customers to more quickly find what they need. a Daily Southtown • October 31, 1999 t; is�t a new Wards store, Click on the "Check out our Grand Opening Celebration" directions to find ►t? and then click on "Now at 43 locations", where you'll find our website: a map and driving instructions to new Wards stores. If a new Wards store is not located near you, you can still see a new'store. Our website also allows you to take a WWW.Wa rds. co m "virtual tour" of a new store! Either in person or on the website, come see what's In store for you at the new Wards! Stockton, CA lAu. $* ✓�"� �i" I�t 'FI.+ E R`�k,J 9 � kk -�'' r'� h+`"' t C� 5�� q y��M ywf �, RP y�'�4'4 I'µ'y4 RXM4�k d',��µd`ykAy dyff� ydFh SV".. w �*� ° r°Y y^ y�4.� T a'1 'S r�' ! gym`• � � v Y V xt "SPRU'CE Wards st week..Tl is polishii The Record y f t 1fh d 9f mmn.� rare " now s grandopen�ng � , � � < � �s , s B° t r ,� Ord Mt. Clemens, klaho`ma City (crossroads), OK r �..P u. ew _2idid'M d 1. • . a X lY ti tl ; H 1 t t .J:.. 5 t - 4 1 t j 1t t i p 4 4¢ t4 1 b t'� 0 Al wz 1 { y Ip s ru ` one team... one company... i i { m.. r Y { F � .....a.�..W �.�.,:�:.«.«.b. .... �.,..«:...«».....o.«.o,....�».w....:,a,n.�«.«...:,r...,..as,..,.....:,emu..bo.,..�«......:..........-0�.,.«..:v,,.,...«�«,..a.�.p.�. n....... .: ...�,«..ua.,.A.«. � ��i Friendswood (Saybrook), TX "It looks like one of the more expensive stores now. It's lovely." - a Stockton, CA customer to The Record • November 1, 1999 Fremont, CA of the exterior remodel i i n Spring 2000! f^�7 — -r ,` 1,a �w •' ,Jfr'!•''� •'• J.J. 71 r '•. d �',� �r c JJ .'t "• Kati •- •, - '' a{. �'1 •s_ _ ,, ;••`_r � g4 8 .•' 'ate, y, .. ., rd' ✓ �.a , . t � • T,� '�� afi7c..a�,'-iL �.. a` ' �' {r••, ��y, k: lg6 � �'' f} ; _`�i. ^•: u � �..,•• �;l'•,.;aJ�'' i�Y;i;�^ t_ i ff''`•�a v�?r,ir� _� V a. .� _�� , �- �s;r.5 ram',-��c�.f�,`::••' �S':' uS' .h n �� .. .� ,, •ssr'° � ' c = ��„' ""� .0 • ,_- f .�� yam, ,,. ... � ram." . � o •, .r: ,;Y•'� _-�a�..:¢;,;.•..•r—�— ,',;,+. .. •r , mo � - .:• liJ; _ � (7L{ i .!; �• �C. y'y ;•,;,.-n `-ri.��:r. rr-.�•--�:;r -..�. SOD •' S - ! _ a k , ,y ...,r..}� `.--y�: ._.:�.:�.= . �� . =.��=� ,�,aP �=� °� � F I � d ` , .. �• u 0 �I �i n, .sr `' .ate'. - — - Ll To — 1 FRONT ELEVATION SCALE:3/16- •-0• COLOR SPECIFICATIONS FACES: WHITE 7328 RETURNS: PMS-400C NEON: 4500 WHITE ELECTRICAL SPECIFICATIONS 29'- 4— 15mm WHITE NEON 120V TRANSFORMERS 26.4 TOTAL AMPS c�c.RK a (2) 120V/20A CIRCUITS REQUIRED 150 COLORED --:" IMPACT -MODIFIED • ��_ ACRYLIC 5B- HEM W PLASTIC LIP I ,J GLUED IN GROOVE CIS SCREW —.•' ' 063 ALUMINUM RETURN - -• j W THREADED ROD •� I w/ CAPTIVATED NUT ON. _ LETTER BACK, AND ANGLE jIT0 ; STRINGER BEHIND STUD WALL APPUCATIONS r EXTENDED TUBE SUPPORT AS PER NEC 600.41 15mm NEON TUBES I .090 ALUMINUM BACK - -- 120V SELF-CONTAINED ---- TRANSFORMER (PBKM) WITH GL.R-8 FUSE AND HOLDER AS PER NEC 600.3 150 IMPACT MODIFIED ACRYLIC i II 7HWN #12 WIRE AS PER NEC 60032 --I LOCKABLE SWITCH ON 2x4 JUNCTION BOX AS PER NEC 600.0 (U-L. LISTED) TO PRIMARY ELECTRIC AS PER NEC 600-5 (U.L. LISTED) !I 3/8' EXPANSION ANCHOR FOR SOLID WALLS INDIVIDUALLY WIRED --- TOGGLE SWITCH WITHIN LETTER (2FA04.78.20Amp) U.L- Li,STED AS PER NEC 600.3 DRAINHOLE PER LOW SPOT --- IN EACH LETTER AS PER NEC 6OD-3 TYPICAL PERSPECTIVE VIEW TYPICAL SECTION NOT TO SCALE NOT TO SCALE Reath and Company • Signs Nationwide 7'-0" SELF-CONTAINED LTRS. — I