Exhibit 10.3
ASSET MANAGEMENT
AND
DISPOSITION AGREEMENT
This Asset Management and Disposition Agreement (the "Agreement") is
made this 26th day of August, 1997, between PRICESMART, INC., a Delaware
corporation (the "Owner") and PRICE ENTERPRISES, INC., a Delaware corporation
(the "Agent").
RECITALS
A) Owner owns certain real property (the "Property or Properties") listed on
Exhibit A attached hereto.
B) Owner and Agent wish to agree with respect to management and other
services to be provided by the Agent with respect to the Properties.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
GENERAL TERMS AND CONDITIONS
1.01 TERM OF AGREEMENT.
This Agreement shall be for a term (the "Term") commencing September 1,
1997 and terminating August 31, 1999, however, either party may terminate this
Agreement upon at least sixty (60) days prior written notice to the other
party.
1.02 AGENTS - PROPERTY MANAGEMENT DUTIES AND AUTHORITY.
A) Agent shall take all reasonable actions to perform the following
duties in connection with management of the Properties:
1. Enforce the terms of tenant leases with respect to the
Properties, including, but not limited to collection of rents and other charges
payable by tenants, subject to Section 1.02 E.
2. Seek prospective tenants, negotiate the lease of vacant space
and prepare appropriate lease documentation; however, all terms and
conditions of a lease are subject to the approval of Owner and Owner shall
execute all leases.
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3. Settle disputes with tenants.
4. Pay all real estate taxes and assessments, personal property
taxes and other fees imposed upon or due with respect to the Properties.
5. Obtain casualty and liability insurance with respect to the
Properties with such coverage, deductibles and insurance companies approved by
the Owner, in accordance with Section 1.03.
6. Pay all casualty and liability insurance premiums with respect
to the Properties.
7. Pay all utility bills and other operating expenses of the
Properties not otherwise required to be paid by tenants.
8. Maintain and repair the Properties in a good and safe condition
to the extent not otherwise required to be maintained and repaired by the
tenants.
9. Supervise on-site personnel.
10. Maintain books and records of collections of rent and other sums
paid to Agent in connection with Agent's management of the Properties and of
expenditures made by Agent in carrying out its duties and responsibilities
under this Section 1.02, and deliver monthly financial statements to Owner.
11. Hire brokers in connection with the sale or lease of properties
and enter into broker agreements, subject to Section 1.05 and 1.06.
12. Negotiate Purchase and Sale Agreements with respect to
Properties which Owner chooses to sell. However, all terms and conditions of a
purchase and sale agreement are subject to the approval of the Owner and the
Owner shall execute all such agreements.
13. Take such other actions normally performed by a property
manager, for the orderly management of properties.
B) In carrying out its duties under paragraph A) above, the Agent is
authorized to:
1. Engage necessary professional services, including, but not
limited to accountants and attorneys, at the expense of the Owner.
2. Open one or more separate bank accounts (the "Agency
Account(s)"), into which all receipts will be deposited and from which all
disbursements will be made.
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3. Enter into such contracts on behalf of Owner as Agent deems
appropriate in connection with carrying out its duties and exercising its
authority under this Article I.
C) All costs and expenses incurred by the Agent in carrying out its
duties under Section 1.02 (but not including Agent's normal overhead and
operating expenses or salaries of Agent's employees, for which Owner shall have
no responsibility) shall be paid from the Agency Account. If the Agency
Account does not have sufficient funds to pay for an expenditure, the Owner
shall deposit into the Agency Account, an amount equal to such deficiency.
Under no circumstances whatsoever shall the Agent be required to advance its
own funds for any cost or expense. In the event a single expenditure is
estimated to exceed Five Thousand Dollars ($5,000), the Agent shall obtain the
Owner's prior written approval for such expenditure.
D) Any "on-site" property manager or other personnel shall be employees
of the Owner and not the Agent.
E) No litigation (including administrative proceedings, arbitration or
court proceedings) concerning the Properties or Agent's management thereof
shall be commenced on behalf of Owner or Agent without Owner's prior written
consent.
1.03 INSURANCE.
A) The Agent shall maintain casualty (including earthquake) and
comprehensive general liability insurance on the Properties in the same form
and monetary levels that were in place on August 31, 1997.
B) Agent and Owner shall be named as co-insureds on all insurance
policies, as their interests may appear and there shall be cross-liability
endorsements.
1.04 INDEMNITY.
A) The Owner agrees to indemnify and save the Agent completely harmless
from any and all costs, expenses, attorneys' fees, suits, liabilities, damages
or claim for damages, including, but not limited to those arising out of any
injury or death to any person or persons or damage to any property of any kind
whatsoever and to whomever belonging, including Owner, in any way relating to
the management of the Properties by the Agent or the performance or exercise of
any of the duties, obligations, powers or authorities herein or hereafter
granted to the Agent, except for the negligence or willful misconduct of the
Agent or its employees and except for the Agent's breach of its covenants under
this Agreement.
B) The Agent agrees to indemnify and save the Owner completely harmless
from any and all costs, expenses, attorneys' fees, suits, liabilities, damages
or claim for damages, including, but not limited to those arising out of any
injury or death to any person or persons or damage to any property of any kind
whatsoever and to whomever
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belonging, including Agent, caused by the negligence, or willful misconduct
of the Agent or its employees in the performance or exercise of any of the
duties, obligations, powers or authorities under this Agreement or hereafter
granted to the Agent or caused by the Agent's breach of its covenants under
this Agreement, except for the negligence or willful misconduct of the Owner
or its employees or due to the Owner's breach of its covenants under this
Agreement. The Agent shall not be liable for any error of judgment or for
any mistake of fact or law, or for anything which it may do or refrain from
doing, except in cases of willful misconduct or negligence.
C) The provisions of paragraph A) and B) above shall not apply to the
extent the amount of the indemnity involved is covered by insurance.
1.05 COMPENSATION OF AGENT - PROPERTY MANAGEMENT.
Owner shall pay Agent a management fee for each Property as follows:
A) Each Property with a minimum annual rent greater than Two Hundred
Thousand Dollars ($200,000) - fee equal to three percent (3%) of annual minimum
rent.
B) Each Property which is unimproved land - Two Thousand Four Hundred
Dollars ($2,400) per year.
C) Each Property not covered by A) or B) above - Six Thousand Dollars
($6,000) per year.
Such compensation shall be payable in monthly installments in arrears for
each Property on the first day of each calendar month during the Term.
1.06 COMPENSATION OF AGENT - LEASING.
In the event a lease is entered into to lease space in any of the
Properties and such lease is fully executed during the Term or within sixty
(60) days after the expiration of the Term, the Owner shall pay the Agent as
compensation with respect to such lease as follows:
A) On leases other than ground leases covered by paragraph B)
below, the fee shall be based upon the gross leasable floor area of the leased
premises as follows:
1) 50,000 s.f. or more $.50 per square foot
2) 25,000 - 49,999 s.f. $.75 per square foot
3) 10,000 - 24,999 s.f. $1.00 per square foot
4) Up to 9,999 s.f. $1.25 per square foot
B) On ground leases, the fee shall be two percent (2%) multiplied
by the average fixed annual rent during the first five (5) lease years
beginning on the Rent Commencement Date, multiplied by the number of years
during the lease term, but not
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more than ten (10) lease years, subject to the following: Fixed annual rent
shall NOT include taxes, utilities, insurance, maintenance, alterations,
repairs, and other expenses paid by a tenant in connection with the premises,
and shall not include cost of living increases or percentage rent.
C) The compensation due Agent under this Section 1.06 shall be due
and payable within ten (10) days after:
(i) Tenant has paid the first month's rent; and
(ii) the Tenant has opened for business or the Tenant has paid
the first six (6) months rent.
D) Any agreements to pay commissions to any and all brokers shall
be approved, in advance, by Owner. Broker fees are to be paid by Owner.
1.07 COMPENSATION OF AGENT - SALES.
A) In the event a purchase and sale agreement is entered into to sell
any portion or all of any Property and such agreement is fully executed during
the Term or within sixty (60) days after the expiration of the Term, then if
and when escrow closes, Owner shall pay the Agent, as compensation with respect
to such sale, an amount computed as follows:
1) Unimproved land - Two percent (2%) of the Purchase Price.
2) Milwaukee - Flat fee of Fifteen Thousand Dollars ($15,000) if
lease termination is negotiated prior to expiration of the lease term.
3) All other Properties - One and one-half percent (1.5%) of the
Purchase Price.
B) Any agreements to pay commissions to any and all brokers shall be
approved in advance by Owner. Brokers fees are to be paid by Owner.
C) Notwithstanding the aforementioned, no compensation under this
Section 1.08 will be due to agent for properties that close prior to September
30, 1997.
ARTICLE II
REAL ESTATE DEVELOPER
2.01 PROJECT DEVELOPER.
In the event the Owner and the Agent agree that the Agent is to be
the "Developer" of any of the Properties, then the provisions of this Article
II shall apply
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(subject to modification and/or additional terms to be negotiated, as may be
relevant to the particular Property or development which is involved), and
the Agent will supervise and implement all development functions in
connection with the development property from the initial planning stages
through actual completion of construction.
Notwithstanding anything herein to the contrary, if at any time the
Owner wishes to terminate the Agent (whether or not due to cause), the Agent
shall be terminated as the developer solely at the Owner's election.
2.02 COMPENSATION.
A) The Agent's total compensation for services rendered to as the
Developer ("Development Fee") shall be an amount equal to three percent (3%) of
all "Construction Costs" as defined below for each project developed by Agent
as provided herein. In the event the Agent is terminated as the Developer
before a project is completed, the Agent shall be entitled to a Development Fee
based upon the amount of "Construction Costs" incurred as of the date of
termination.
B) The Development Fee for each project shall be paid as follows:
The Agent shall estimate the total Construction Costs as defined herein for the
project and the total number of months to complete the development of the
project from start to finish (the "Development Period"). The Owner shall pay
to the Agent, each month during the Development Period, an amount equal to the
product of the estimated total Construction Costs multiplied by three percent
(3%), divided by the number of months estimated to complete the Project. Upon
completion of the Project, if the actual Construction Costs exceed the
estimated Construction Costs, then the Owner shall pay the Agent such
additional amount due for the Development Fee; or if, upon completion of the
Project, the estimated Construction Costs exceed actual Construction Costs,
then the Developer shall refund to the Owner any excess Development Fee
received by the Agent. For example, if Construction Costs are estimated to be
$100,000.00, and it is estimated that it will take one (1) year to complete the
Project, then the Agent would be paid $3,000.00 at the rate of Two Hundred
Fifty Dollars ($250.00) per month for twelve (12) months (or until completion
of the Project, whichever occurs first). If the actual Construction Costs were
$200,000.00 and the estimated payments actually paid were $3,000.00, then the
Owner would pay the Agent an additional $3,000.00 ($200,000 x 3% = $6,000 -
$3,000) upon completion of the Project. However, if the actual Construction
Costs were only $50,000.00, then the Agent would reimburse the Owner $1,500.00
upon completion of the Project.
C) The term "Construction Costs" shall mean: The actual direct
cost of all work, labor, architectural and engineering fees, services and
materials consumed in the planning and construction of project improvements;
excluding, however: work and labor performed by employees of Agent or any
related entity, overhead expenses of Agent or any related entity, development
permit fees and other similar fees paid to any governmental body, agency, or
utility company, interest, and marketing expenses.
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2.03 PLANS.
A) After the Agent and Owner have agreed that the Agent is to be
the Developer for a Property, Developer shall cause to be prepared and
submitted to the Owner, for its approval, an Overall Development Plan setting
forth in outline form the projected development of the real estate. The
Overall Development Plan shall set forth the description of all major
buildings, streets, utilities, and other improvements to be made in the
development of the land and, to the extent possible, shall set forth the
separate Projects (as hereinafter defined) of the development, and shall
contain an estimate of the total cost thereof.
B) Within a reasonable time after the Overall Development Plan has
been approved by the Owner, Agent shall cause to be prepared and submitted to
the Owner, for its approval, a Project Development Plan for the Project to be
constructed. As used herein the term "Project" shall mean and refer to an
individual building or complex of buildings which are developed as a unit,
along with the central or common facilities appurtenant in whole or in part
thereto. Central or common facilities may be a part of one or more Projects.
The Project Development Plan for each Project shall set forth the following:
(1) Amount and location of the land to be used in the Project
("Project Land");
(2) Amount and location of the land, if any, to be used in the
construction of central or common facilities or site improvements in connection
with the Project ("Common Land");
(3) Description of buildings and other improvements to be
placed on the Project Land ("Project Improvements");
(4) Description of buildings and other improvements to be
placed on the Common Land ("Common Improvements");
(5) Anticipated use of the Project Improvements and the
estimated revenues therefrom;
(6) Estimated cost of constructing the Project Improvements,
including all on and off-site costs and all charges ordinarily classified as a
part of the construction costs of the building;
(7) Estimated cost of constructing the Common Improvements and
all charges ordinarily classified as a part of the construction costs of such
improvements;
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(8) Cash flow projections for the Project; and
(9) All other information relative to the Project desired by
the Owner.
2.04 CONSTRUCTION OF PROJECT.
Within a reasonable time after the Project Development Plan for a
Project has been approved by the Owner, the Agent shall:
A) Cause to be prepared and submitted to the Owner, for its
approval, the detailed plans and specifications ("Plans and Specifications")
for such Project, and
B) After the Plans and Specifications have been approved by
the Owner, submit the Plans and Specifications to not less than three (3)
reputable independent contractors qualified to construct the Project
Improvements and Common Improvements for the Project for review and bidding,
and then
C) After approved by the Owner, accept the lowest and best bid
made by such contractors or resubmit the Plans and Specifications for re-
bidding until an acceptable bid is made, and then
D) Negotiate a construction contract with the successful
contractor and, when approved by the Owner, execute such contract on behalf of
the Owner and enforce the obligations of the contractor thereunder.
ARTICLE III
MISCELLANEOUS
3.01 ARBITRATION OF DISPUTES.
(A) Any controversy or claim arising out of this Agreement, or any
breach of this Agreement, shall be settled by arbitration in accordance with
the Rules of the American Arbitration Association then in effect, as modified
by this Section 3.01 or by the further written agreement of the parties.
(B) Such arbitration shall be conducted in San Diego, California.
(C) Any judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. The arbitrators shall not,
under any circumstances, have any authority to award punitive, exemplary or
similar damages, and may not, in any event, make any ruling, finding or award
that does not conform to the terms and conditions of this Agreement.
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(D) Nothing contained in this Section 3.01 shall limit or restrict
in any way the right or power of a party at any time to seek injunctive relief
in any court and to litigate the issues relevant to such request for injunctive
relief before such court (i) to restrain the other party from breaching this
Agreement or (ii) for specific enforcement of this Section 3.01. The parties
agree that any legal remedy available to a party with respect to a breach of
this Section 3.01 will not be adequate and that, in addition to all other legal
remedies, each party is entitled to an order specifically enforcing this
Section 3.01.
(E) The parties hereby consent to the jurisdiction of the federal
courts located in San Diego, California for all purposes under this Agreement.
(F) Neither party nor the arbitrators may disclose the existence or
results of any arbitration under this Agreement or any evidence presented
during the course of the arbitration without the prior written consent of both
parties, except as required to fulfill applicable disclosure and reporting
obligations, or as otherwise required by law.
(G) Each party shall bear its own expenses incurred in the
arbitration. If either party refuses to submit to arbitration any dispute
required to be submitted to arbitration pursuant to this Section 3.01, and
instead commences any other proceeding, including, without limitation,
litigation, then the party who seeks enforcement of the obligation to arbitrate
shall be entitled to its attorneys' fees and costs incurred in any such
proceeding.
3.02 INTEGRATION.
This Agreement and the exhibits attached hereto shall constitute the
entire Agreement between Landlord and Tenant and supersede any and all prior
written or oral agreements, representations, and warranties between and among
the parties and their agents, with regard to the matters covered by this
Agreement.
3.03 MODIFICATION.
No modification, waiver, amendment, discharge, or change of this
Agreement shall be valid unless the same is in writing and signed by the party
against which the enforcement of such modification, waiver, amendment,
discharge, or change is or may be sought.
3.04 SEVERABILITY.
In the event any term, covenant, condition, provision, or agreement
contained herein is held to be invalid, void, or otherwise unenforceable, by
any court of competent jurisdiction, such holding shall in no way affect the
validity or enforceability of any other term, covenant, condition, provision,
or agreement contained herein.
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3.05 GOVERNING LAW.
This Agreement and the obligation of the parties hereunder shall be
interpreted, construed, and enforced in accordance with the laws of the State
of California.
3.06 TERMINOLOGY.
All personal pronouns used in this Agreement, whether used in the
masculine, feminine, or neuter gender, shall include all other genders; the
singular shall include the plural and vice versa. "Business Day" means other
than Saturday, Sunday, or holiday. In the event that the time for performance
of an act under this Agreement falls on a Saturday, Sunday, or holiday, the
date for performance of such act shall be extended to the next business day.
3.07 BINDING EFFECT.
Except as otherwise herein provided, this Agreement shall be binding
upon and inure to the benefit of the parties hereto, and their respective
successors and assigns.
3.08 CAPTIONS.
Article and section titles or captions contained herein are inserted
as a matter of convenience and for reference, and in no way define, limit,
extend, or describe the scope of this Agreement or any provisions hereof. All
reference to section numbers herein shall mean the sections of this Agreement.
Executed as of the date first written above.
AGENT OWNER
PRICE ENTERPRISES, INC. PRICESMART, INC.
BY: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ BY: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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ITS: Chairman, President and CEO ITS: Chairman, President and CEO
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