Construction, Operation And Recipricol Agreement

EXHIBIT 10.3


86-82744


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PARK PLAZA MALL,
LITTLE ROCK, ARKANSAS


CONSTRUCTION, OPERATION AND
RECIPROCAL EASEMENT AGREEMENT


by and among


CONSTRUCTION DEVELOPERS, INCORPORATED,


AN ARKANSAS CORPORATION,


DILLARD DEPARTMENT STORES, INC.,


A DELAWARE CORPORATION,


and


HERRING-MARATHON MASTER PARTNERSHIP B,


A TEXAS GENERAL PARTNERSHIP


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[STAMP]


TABLE OF CONTENTS


PAGE
---- PARTIES .............................................................................. 1 RECITALS ............................................................................. 1 DEFINITIONS .......................................................................... 2


PART I


ARTICLE I DESIGN ................................................................ 7


Section 1.1 Designing ............................................................. 7 Section 1.2 Plans for Common Area Site Work ....................................... 8 Section 1.3 Approval of Preliminary Plans ......................................... 8 Section 1.4 Plans and Specifications by Developer ................................. 9 Section 1.5 Approval of Final Plans ............................................... 10 Section 1.6 Design Schematics by Department Store ................................. 10 Section 1.7 Parking Requirements .................................................. 11 Section 1.8 Effect of Approval .................................................... 11 Section 1.9 Compliance with Laws .................................................. 11 Section 1.10 Preparation of Plans and Document Approval ............................ 11


PART II


ARTICLE II CONSTRUCTION OF SHOPPING CENTER ....................................... 12


Section 2.1 Common Area Site Work ................................................. 12 Section 2.2 Construction by Dillard ............................................... 12 Section 2.3 Changes in Buildings .................................................. 13 Section 2.4 Construction Requirements and Standards ............................... 13 Section 2.5 Progress Reports ...................................................... 15 Section 2.6 Future Expansion ...................................................... 15 Section 2.7 Insurance During Construction ......................................... 16 Section 2.8 Liens 17


PART III


ARTICLE III OPERATION ............................................................. 17


Section 3.1 Shopping Center Name .................................................. 17 Section 3.2 Tenant Selection ...................................................... 18 Section 3.3 Advertising and Promotional Service ................................... 18 Section 3.4 Common Areas Operation ................................................ 19 Section 3.5 Resident Manager ...................................................... 20 Section 3.6 Utilities ............................................................. 20 Section 3.7 Taxes ................................................................. 20 Section 3.8 Insurance During Operation ............................................ 20 Section 3.9 Maintenance ........................................................... 25 Section 3.10 Compliance with Laws .................................................. 27 Section 3.11 Signs ................................................................. 28


ARTICLE IV OPERATING COVENANTS ................................................... 29


Section 4.1 Developer Operating Covenant .......................................... 29 Section 4.2 Dillard Operating Covenant ............................................ 30 Section 4.3 Temporary Cessation of Business ....................................... 32


(i)


PAGE
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PART V


ARTICLE XI MISCELLANEOUS ..................................... 57


Section 11.1 Parties Not Partners .............................. 57 Section 11.2 No Waiver ......................................... 57 Section 11.3 Captions .......................................... 58 Section 11.4 Governing Law ..................................... 58 Section 11.5 Severable Provisions .............................. 58 Section 11.6 Modification ...................................... 58 Section 11.7 Counterparts ...................................... 58 Section 11.8 Developer's Liability ............................. 58 Section 11.9 Estoppel Certificate .............................. 59 Section 11.10 No Public Dedication .............................. 60 Section 11.11 No Third Party Beneficiary ........................ 60 Section 11.12 Land Covenants .................................... 60 Section 11.13 Force Majeure ..................................... 61 Section 11.14 Term .............................................. 61 Section 11.15 Termination Rights ................................ 61 Section 11.16 Recording ......................................... 62 Section 11.17 Notices ........................................... 62 Section 11.18 Successors ........................................ 63 Section 11.19 Mortgagee's Right to Cure Defaults ................ 63 Section 11.20 Limitation of Mortgagee's Liability ............... 63


SIGNATURE PAGE


EXHIBITS


EXHIBIT A Part I Shopping Center Tract
Part II Dillard Tract
Part III Condev Tract
Part IV Developer Tract
Part V Reserve Tract


EXHIBIT B Plot Plan


(ii)


CONSTRUCTION, OPERATION AND RECIPROCAL


EASEMENT AGREEMENT


THIS CONSTRUCTION, OPERATION AND RECIPROCAL EASEMENT AGREEMENT (hereinafter referred to as the "Agreement"), made as of the 15th day of December, 1986, to be effective as of December 31, 1986 (such later date being hereinafter sometimes referred to as the "Date of this Agreement"), by and among HERRING-MARATHON MASTER PARTNERSHIP B, a Texas general partnership, having its principal place of business at One Galleria Tower, Suite 1200, 13355 Noel Road, Dallas, Texas 75240-6614 (hereinafter referred to as "Developer"), CONSTRUCTION DEVELOPERS, INCORPORATED, an Arkansas corporation, having its principal place of business at 900 West Capitol Avenue, Little Rock, Arkansas 72201 (hereinafter sometimes referred to as "Condev"), and DILLARD DEPARTMENT STORES, INC., a Delaware corporation, having its principal place of business at 900 West Capitol Avenue, Little Rock, Arkansas 72201 (herein sometimes referred to as "Dillard Store"; Condev and Dillard Store being hereinafter sometimes referred to collectively as "Dillard").


W I T N E S S E T H:


WHEREAS, Developer, Dillard Store and/or Condev have heretofore or simultaneously with the effectiveness of this Agreement each acquired fee simple title to certain adjoining parcels of land (hereinafter referred to respectively as the "Developer Tract", "Dillard Tract" and "Condev Tract"), each as shown on the Plot Plan attached hereto as Exhibit B; and


WHEREAS, there is presently located (a) on the Developer's Tract a fully improved and developed shopping center with a partially enclosed courtyard style design which Developer shall modify and reconstruct as an enclosed mall, and (b) on the Dillard Tract a fully improved and developed department store,


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each of which have been opened to the public and have carried on business for an extended period of time; and


WHEREAS, Condev has heretofore or simultaneously with the effectiveness of this Agreement acquired fee simple title to a tract of land hereinabove described as the Condev Tract, which is adjacent to the Developer Tract upon which Dillard Store and/or Condev shall construct or cause to be constructed a department store and other improvements; and


WHEREAS, in order to make use of their Tracts as an integrated shopping center, Developer, Dillard Store and Condev desire to exchange with each other certain easements in, to, over, under and across their respective Tracts and to make certain other covenants and agreements, all as hereinafter provided and more specifically set forth; and


WHEREAS, it is the intention of this Agreement to set forth the rights, obligations, duties and responsibilities of the Parties in connection with the development and use of the buildings and the operation thereof.


NOW, THEREFORE, for valuable consideration paid by each of the Parties to the other, the receipt and sufficiency of which are hereby acknowledged, and in further consideration of the mutual covenants and agreements herein contained, it is hereby contracted, covenanted and agreed as follows, to-wit:


DEFINITIONS


As used in this Agreement, the following words and phrases, shall mean:


(1) "BUILDING(S)" - all Improvements to and upon the Shopping Center
Tract, excluding the Common Areas, (except the Enclosed Mall), the
Outdoor Selling Area, if any, and the landscaping, if any, between
the exterior perimeter walls of Buildings and the Building Perimeter
Sidewalks.


(2) "BUILDING PERIMETER SIDEWALK" - sidewalks that adjoin either (a) the
exterior perimeter walls of the Buildings situated upon the Shopping
Center Tract, or (b) landscaping adjacent to the exterior perimeter
walls of said Buildings, all as shown on the Plot Plan.


(3) "COMMON AREA" - all areas within the exterior boundaries of the
Shopping Center Tract (including, but not limited to, all items of
Common Area shown on Exhibit B) which are for the general use,
convenience and benefit of all the Parties hereto (and their tenants,
subtenants,


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customers, employees, concessionaires and other Permittees) and not the
Floor Area intended for the exclusive use and occupancy of an Occupant (and
its customers, concessionaires and other Permittees), including but not
limited to:


(a) the Parking Area and individual Parking Spaces for motor vehicles of
customers and employees of each Department Store and other Occupants,
including multilevel Parking Spaces, if any;


(b) roadways, driveways, aisles, islands, entrances and exits to and from
public roadways and streets to provide vehicular access included in
such Parking Area;


(c) sidewalks, walkways, Building Perimeter Sidewalks and stairways to
provide pedestrian access included in such Parking Area;


(d) landscaped and exterior planted areas (except landscaping between the
exterior perimeter walls of the Buildings and the Building Perimeter
Sidewalks);


(e) the Enclosed Mall; and


(f) ramps, truck ways, loading areas (excluding those designed or intended
for the exclusive use of a Party hereto or Occupant as hereinafter
defined) delivery passages, truck tunnels and service corridors
connecting therewith.


(4) "COMMON AREA IMPROVEMENTS" - all construction and improvements in and to
the Common Area (except the Enclosed Mall) provided for in the Plans and
Specifications.


(5) "COMMON BUILDING COMPONENT" - any structural part of a Building, such as
footings, foundations, supports, walls and roofs, located on more than one
Tract situated within the Shopping Center Tract.


(6) "COMMON UTILITY FACILITIES" - storm drainage systems, gas pipelines, water
pipelines, fire protection systems, power and telephone cables and similar
utilities serving the Shopping Center Tract and located either within the
Common Areas or without the Shopping Center Tract but extending to the
Building Perimeter Sidewalks (but not closer than five (5) feet to Building
exterior walls) on the Tract of each Party and which are intended for the
common use of the Parties.


(7) "DEPARTMENT STORE" - Dillard.


(8) "DEPARTMENT STORE TRACTS" - the land belonging to Dillard Store and/or
Condev, being the Shopping Center Tract less the Developer's Tract,
consisting of the Dillard Tract and the Condev Tract, and each being fully
described by metes and bounds on Exhibit A hereto and as shown on the Plot
Plan attached as Exhibit B.


(9) "DESIGN SCHEMATICS" - drawings or renderings (including front and side
elevations and perspectives, for the exterior, of the Developer's
Buildings, and the landscaping, if any, between the exterior perimeter
walls of Buildings and the Building Perimeter Sidewalks) that show
the general appearance to be anticipated in certain Improvements to be
constructed.


(10) "DEVELOPER BUILDINGS" - all buildings located on the Developer Tract as
shown on Exhibit B.


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(11) "DEVELOPER TRACT" - the land belonging to Developer, being the Shopping
Center Tract less each Department Store Tract, and being fully described by
metes and bounds on Exhibit A hereto and as shown on the Plot Plan attached
as Exhibit B.


(12) "ENCLOSED MALL" - (herein sometimes called "Mall" when the context requires
"Mall" to mean "Enclosed Mall") that portion of the Building on the
Developer Tract designated "Enclosed Mall" on the Plot Plan which presently
is occupied by a partially enclosed, courtyard style mall, but which
Developer will modify and reconstruct as an enclosed mall, and including,
without limitation, covered and roofed malls, courts and arcades on one or
more levels, all of which are mechanically heated and air conditioned for
climatic control, but excluding those areas and Improvements designated or
used as "kiosks" or boutiques (or otherwise, for income-producing purposes)
and service corridors that are part of the Common Areas.


(13) "FLOOR AREA" - the space in a horizontal plane occupied by the surface of
each floor within a completed Building, and the space in a horizontal plane
occupied by the surface of each floor within a completed kiosk,
boutique or similar income producing Improvements not within a Building,
said space being measured in square feet, determined by the linear
dimensions in feet from the outside of the exterior Building perimeter
walls to the outside of the exterior Building perimeter walls (except party
walls as to which the center thereof, instead of the exterior faces
thereof, shall be used), including any such space covered by:


(a) basements and other similar subterranean areas;


(b) balconies and mezzanines, other than those used exclusively for stock
or storage purposes;


(C) walls and columns;


(d) elevators, dumbwaiters, stairs, escalators and conveyors; and


(e) mechanically heated or air conditioned Outdoor Selling Area;


but excluding any such space covered by:


(f) the Enclosed Mall;


(g) electrical and/or mechanical rooms and/or penthouses used to serve any
Occupant;


(h) transformer room or vault;


(i) sheds used exclusively for Common Area maintenance purposes;


(j) unenclosed truck docks;


(k) decked storage areas above floor level; and


(1) Outdoor Selling Areas not mechanically heated or air conditioned;


and the said Floor Area of each Party hereto shall be certified by said
Party's architect to the other Party.


(14) "GROSS LEASABLE AREA" - Floor Area intended and ready for the exclusive use
and occupancy of an Occupant,


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prospective or actual, measured in square feet, determined by the linear
dimensions in feet, from the center of joint partitions, party walls or
interior walls (or the outside of the exterior Building perimeter walls,
as applicable) to the center of joint partitions, party walls or interior
walls (or the outside of the exterior Building perimeter walls, as
applicable), excluding any Floor Area:


(a) in any public meeting hall or auditorium;


(b) in any public restroom that is neither leased by an Occupant nor a
Department Store;


(c) in Shopping Center management offices and in Advertising and
Promotional Service offices, all of which shall not exceed a total of
3,000 square feet; and


(d) to be used by or for the Occupants and their Permittees in common with
each other;


and the said Gross Leasable Area of each Party hereto shall be certified by
said Party's architect to the other Parties, provided that any dispute
about such certification shall be submitted to arbitration under the
provisions of Section 9.4 of this Agreement.


(15) "IMPROVEMENTS" - all improvements to land of every nature and kind,
including underground utility installations, upon the Shopping Center
Tract, including the Common Areas, the Enclosed Mall, the Buildings, and
the landscaping.


(16) "MALL TENANT" - any Occupant occupying Gross Leasable Area in the Developer
Buildings adjoining the Enclosed Mall.


(17) "OCCUPANT" - any person, including the Parties hereto, who is legally
entitled to the exclusive use and occupancy of any Floor Area under the
rights contained in a deed or written lease agreement.


(10) "OUTDOOR SELLING AREA" - the land, being a portion of the Shopping Center
Tract and any Improvements situated thereon, that may be from time to time
exclusively appropriated for permanent or temporary outdoor selling, as
designated on the Plot Plan or as agreed upon later by consent of all the
Parties hereto, said Outdoor Selling Area being exclusive of the Common
Areas, the Enclosed Mall, and the Buildings and the landscaping, if any,
between the exterior perimeter walls of Buildings and the Building
Perimeter Sidewalks situated upon the Shopping Center Tract.


(19) "PARKING AREA" - the land area within the Shopping Center Tract intended
for the use of permitting licensed motor vehicles to enter into, park upon
and exit from said Tract, together with the Improvements thereon (i.e., the
paved area used for bays, aisles, driveways, entrances and exits, and the
parking deck to be constructed by Developer, located upon said land and
within the areas designated for parking on the Plot Plan).


(20) "PARKING SPACE" - the paved land or parking deck area, marked by painted
striping and situated within the Parking Area, for the use of permitting
one automobile to be situated and parked thereon, and shown on Exhibit B.


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(21) "PARTY" - each separate principal business entity making, entering into and
signing this Agreement, whether or not such business entity is an
individual or individuals (that is, natural person or persons), a
partnership, a joint venture or a corporation, and being either Developer,
Dillard or Condev, or any successor to any such business entities permitted
under the provisions hereof, and being sometimes referred to collectively
herein as the "Parties" or individually as a "Party."


(22) "PHASE I" - the land and buildings on the Shopping Center Tract as of the
date of execution of this Agreement.


(23) "PHASE II" - the land and buildings on the Shopping Center Tract after
completion of the renovation and remodelling of the existing department
store owned by Dillard, the Developer Buildings and the new building to be
constructed on the Condev Tract and the site work to be performed in
conjunction therewith, the final configuration of said "Phase II" being
shown on Exhibit B hereof.


(24) "PERMISSIBLE BUILDING AREA" - the land within the Shopping Center Tract
upon which a designated Party may construct either its initial Building or
any expansion thereof or its future Building, if any, as provided herein
and as shown on the Plot Plan.


(25) "PERMITTEE" - any Occupant and any officer, director, partner, employee,
agent, contractor, customer, visitor, patient, client, invitee, licensee,
subtenant or concessionaire of any Occupant.


(26) "PLAN AND SPECIFICATIONS" - complete architectural and engineering drawings
and written requirements for the constuction of Improvements, including all
working drawings, Design Schematics and written requirements for
workmanship and materials, all of which show details adequate for the
commencement and pursuit of actual construction.


(27) "PLOT PLAN" - the drawing attached hereto as Exhibit B and made a part
hereof that shows the general nature, size, location and/or shape of:


(a) the Improvements situated or to be situated on the Shopping Center
Tract, including the Permissible Building Areas, the Building
Perimeter Sidewalks, the Common Areas, the Enclosed Mall and the
Buildings;


(b) adjoining and/or nearby public streets or highways; and


(c) the Shopping Center Tract and each component Tract of said Shopping
Center Tract.


(28) "PRELIMINARY PLANS" - those plans and specifications provided for in
Section 1.2.


(29) "RESERVE TRACTS" - those certain tracts of land adjacent to the Shopping
Center Tract, said Reserve Tracts being fully described by metes and bounds
on Exhibit A and shown on Exhibit B.


(30) "RING ROAD" - that portion of the Common Area which is crosshatched and so
designated on Exhibit B.


(31) "SHOPPING CENTER" - the Shopping Center Tract and all Improvements
situated thereon.


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(32) "SHOPPING CENTER TRACT" - the land containing the Developer's
Tract and each Department Store Tract, described by metes and
bounds on Exhibit A hereto and as shown on the Plot Plan attached
as Exhibit B.


(33) "SEPARATE AGREEMENT" - as to Dillard and Condev, the two
Supplemental Agreements between Dillard Store, Condev and
Developer that were made effective as of the Date of this
Agreement, which Separate Agreements set forth certain
confidential understandings and agreements between Developer,
Condev and Dillard Store not set forth herein but which relate to
and bind them and their respective successors in title to the
Developer Tract and the Department Store Tracts, respectively, and
which contain, among other things, specifications of each
Department Store's share and method of allocation of various
expenses relating to the Shopping Center, to which Separate
Agreements reference is hereby made for the sole purpose of
putting all Parties hereto on notice of such Separate Agreements
and each agreement is hereby incorporated herein for such purpose
only, it being understood that such Separate Agreements shall be
effective only as between Dillard Store and Condev, and their
respective successors and assigns, and Developer and its
successors and assigns.


(34) "TRACT" - the parcel of land situated within the Shopping Center
Tract belonging to any Party hereto.


PART I


ARTICLE I


DESIGN


Section 1.1 Designing. (a) Developer shall cause to be performed all Common Area site work within the Shopping Center Tract in accordance with Plans and Specifications prepared by it as provided for in Section 1.2 and approved by the Department Store. Developer represents that it has retained the services of Architecture +, Architects for the preparation of said Plans and Specifications.


(b) On or before sixty (60) days after the Date of this Agreement, Developer, at its expense, shall complete and deliver to the Department Store, for informational purposes only, Design Schematics and material samples for all buildings on the Developer Tract. Said Design Schematics shall be consistent with the Plot Plan, contain not less than 200,000 square feet of Gross Leasable Floor Area of Developer Buildings, be located completely within that portion of the Developer Tract being within the area designated "Permissible Building Area" on the Plot Plan and otherwise be in accordance with the provisions of this Agreement. The Final Plans (as hereinafter defined) for


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Developer Buildings shall he consistent with the Design Schematics as delivered to the Department Store as required by this Section.


Section 1.2 Plans for Common Area Site Work. Developer shall prepare at its expense and submit to the Department Store for its approval, preliminary plans and specifications ("Preliminary Plans") for the Phase II Common Area Improvements (as hereinafter defined) on or associated with the Condev Tract and Dillard Tract which shall provide for:


(a) Pa ...