<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 13, 1997
REGISTRATION STATEMENT NO. 333-25279
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 5 TO
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES
---------------
BOSTON PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS GOVERNING INSTRUMENTS)
8 ARLINGTON STREET
BOSTON, MASSACHUSETTS 02116
(617) 859-2600
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
---------------
MORTIMER B. ZUCKERMAN, CHAIRMAN
EDWARD H. LINDE, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BOSTON PROPERTIES, INC.
8 ARLINGTON STREET
BOSTON, MASSACHUSETTS 02116
(617) 859-2600
(NAME AND ADDRESS OF AGENT FOR SERVICE)
---------------
COPIES TO:
GILBERT G. MENNA, P.C. WALLACE L. SCHWARTZ, ESQ.
GOODWIN, PROCTER & HOAR LLP SKADDEN, ARPS, SLATE,
EXCHANGE PLACE MEAGHER & FLOM LLP
BOSTON, MASSACHUSETTS 02109 919 THIRD AVENUE
(617) 570-1000 NEW YORK, NEW YORK 10022
(212) 735-3000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Amendment No. 5 to this Registration Statement is an exhibit-only
filing.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table itemizes the expenses incurred by the Company in
connection with the offering of the shares of Common Stock being registered
hereby. All of the amounts shown are estimates, except the Securities and
Exchange Commission Registration Fee.
<TABLE>
<CAPTION>
ITEM AMOUNT
---- --------
<S> <C>
Securities and Exchange Commission Registration Fee............. $273,561
NASD Fee........................................................ 30,500
New York Stock Exchange Listing Fee............................. 210,600
Transfer Agent's and Registrar's Fees........................... *
Printing Fees................................................... *
Legal Fees and Expenses (other than Blue Sky)................... *
Accounting Fees and Expenses.................................... *
Blue Sky Fees and Expenses (including fees of counsel).......... *
Miscellaneous Expenses.......................................... *
--------
Total......................................................... $ *
========
</TABLE>
- --------
* To be filed by amendment.
ITEM 31. SALES TO SPECIAL PARTIES.
See Item 32.
ITEM 32. RECENT SALES OF UNREGISTERED SECURITIES.
On April 8, 1997, the Operating Partnership was formed with Boston
Properties, Inc., a Massachusetts Corporation ("BP-Massachusetts"), as general
partner and an affiliate as a limited partner. The sale of the interests in the
Operating Partnership was made in reliance on Section 4(2) of the Securities
Act of 1933, as amended (the "Securities Act").
On April 9 and 15, 1997, the Company entered into an Omnibus Option Agreement
(or, in the case of one entity, a similar agreement) with a total of 80
individuals (the "Individuals") and entities ("Entities") (including entities
such as trusts or limited partnerships in which one or more of the Individuals
may have the primary economic or a controlling interest). None of the Entities
was formed for the purpose of entering into the Omnibus Option Agreement and
acquiring OP Units. Such agreement provides that the Operating Partnership can,
at its option and without any further action by such Individuals or Entities,
acquire all or any of the interests of the Individuals or Entities in the 74
Properties (collectively, the "Interests"). The right of the Operating
Partnership to acquire all or any of the Interests from the Individuals and
Entities and to issue OP Units in exchange therefor is subject only to the
fulfillment of conditions (principally, the completion of the Offering) beyond
the control of the Individuals and Entities. The total number of OP Units that
will be issued to the Individuals and Entities will depend on the final
offering price of a share of Common Stock in the Offering. Such agreement was
entered into and will be consummated in reliance on Section 4(2) of, and
Regulation D under, the Securities Act.
On April 11, 1997, BP-Massachusetts and Boston Properties, Inc., a Delaware
corporation ("BP-Delaware"), and the Operating Partnership, entered into a
number of agreements (including a merger agreement and a contribution
agreement) that memorializes (i) the issuance of Common Stock by BP-Delaware to
the stockholders of BP-Massachusetts (Messrs. Zuckerman and Linde) upon
consummation of a reincorporation merger in connection with the Formation
Transactions and (ii) the contribution to the Operating Partnership of
II-1
<PAGE>
the proceeds of the Offering and the management and development operations
currently held by BP-Massachusetts. Such agreements were entered into and will
be consummated in reliance on Section 4(2) of the Securities Act.
ITEM 33. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate, as amended, and Bylaws provide certain limitations
on the liability of the Company's directors and officers for monetary damages
to the Company. The Certificate and Bylaws obligate the Company to indemnify
its directors and officers, and permit the Company to indemnify its employees
and other agents, against certain liabilities incurred in connection with their
service in such capacities. These provisions could reduce the legal remedies
available to the Company and the stockholders against these individuals. See
"Certain Provisions of Delaware Law and The Company's Certificate and Bylaws--
Limitation of Liability and Indemnification."
The Company's Certificate limits the liability of the Company's directors and
officers to the Company to the fullest extent permitted from time to time by
Delaware law. The DGCL permits, but does not require, a corporation to
indemnify its directors, officers, employees or agents and expressly provides
that the indemnification provided for under the DGCL shall not be deemed
exclusive of any indemnification right under any bylaw, vote of stockholders or
disinterested directors, or otherwise. The DGCL permits indemnification against
expenses and certain other liabilities arising out of legal actions brought or
threatened against such persons for their conduct on behalf of the corporation,
provided that each such person acted in good faith and in a manner that he
reasonably believed was in or not opposed to the corporation's best interests
and in the case of a criminal proceeding, had no reasonable cause to believe
his or her conduct was unlawful. The DGCL does not allow indemnification of
directors in the case of an action by or in the right of the corporation
(including stockholder derivative suits) unless the directors successfully
defend the action or indemnification is ordered by the court.
The Company has entered into indemnification agreements with each of its
directors and executive officers. The indemnification agreements require, among
other matters, that the Company indemnify its directors and officers to the
fullest extent permitted by law and advance to the directors and officers all
related expenses, subject to reimbursement if it is subsequently determined
that indemnification is not permitted. Under these agreements, the Company must
also indemnify and advance all expenses incurred by directors and officers
seeking to enforce their rights under the indemnification agreements and may
cover directors and officers under the Company's directors' and officers'
liability insurance. Although the form of indemnification agreement offers
substantially the same scope of coverage afforded by law, it provides
additional assurance to directors and officers that indemnification will be
available because, as a contract, it cannot be modified unilaterally in the
future by the Board of Directors or the Stockholders to eliminate the rights it
provides. It is the position of the SEC that indemnification of directors and
officers for liabilities under the Securities Act of 1933, as amended (the
"Securities Act") is against public policy and unenforceable pursuant to
Section 14 of the Securities Act.
ITEM 34. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED.
Not applicable.
ITEM 35. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Exhibits. The following is a complete list of Exhibits filed or
incorporated by reference as part of this Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
*1.1 --Form of U.S. Purchase Agreement
*1.2 --Form of International Purchase Agreement
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
*1.1 --Form of U.S. Purchase Agreement
*1.2 --Form of International Purchase Agreement
+3.1 --Form of Amended and Restated Certificate of Incorporation of the
Company
+3.2 --Form of Amended and Restated Bylaws of the Company
4.1 --Form of Shareholder Rights Agreement dated as of June , 1997
between the Company and BankBoston, N.A., as Rights Agent.
4.2 --Form of Certificate of Designation for Series X Junior
Participating Cumulative Preferred Stock, par value $.01 per
share
4.3 --Form of Common Stock Certificate
5.1 --Opinion of Goodwin, Procter & Hoar LLP regarding legality of the
shares of the Common Stock issued
8.1 --Opinion of Goodwin, Procter & Hoar LLP regarding tax matters
10.1 --Form of Amended and Restated Agreement of Limited Partnership of
the Operating Partnership
10.2 --1997 Stock Option and Incentive Plan
+10.3 --Form of Noncompetition Agreement between the Company and
Mortimer B. Zuckerman
+10.4 --Form of Employment and Noncompetition Agreement between the
Company and Edward H. Linde
10.5 --Form of Employment Agreement between the Company and certain
executive officers
10.6 --Form of Indemnification Agreement between the Company and each
of its directors and executive officers
+10.7 --Omnibus Option Agreement by and among Boston Properties Limited
Partnership (the "Operating Partnership") and the Grantors named
therein dated as of April 9, 1997
*10.8 --Revolving Credit Agreement with BankBoston, N.A.
+10.9 --Form of Registration Rights Agreement among the Company and the
persons named therein
*10.10 --Form of Hotel Lease Agreement
+10.11 --Option Agreement between Boston Properties Limited Partnership
and Square 36 Properties Limited Partnership dated April 15, 1997
+10.12 --Form of Certificate of Incorporation of Boston Properties
Management, Inc.
+10.13 --Form of By-laws of Boston Properties Management, Inc.
+10.14 --Form of Limited Liability Agreement of ZL Hotel LLC
*10.15 --Form of Option Agreement to Acquire the Property known as Sumner
Square
10.16 --Loan Modification Agreement between Lexreal Associates and
Mitsui Seimei America Corporation relating to loan secured by 599
Lexington Avenue
10.17 --Loan Modification and Extension Agreement by and between
Southwest Market Limited Partnership, a District of Columbia
limited partnership, Mortimer B. Zuckerman and Edward H. Linde
and the Sumitomo Bank, Limited, for One Independence Square,
dated as of September 26, 1994
10.18 --Loan Modification and Extension Agreement by and among Southwest
Market Limited Partnership, a District of Columbia limited
partnership, Mortimer B. Zuckerman and Edward H. Linde and the
Sumitomo Bank, Limited, for Two Independence Square, dated as of
September 26, 1994
10.19 --Construction Loan Agreement by and between the Sumitomo Bank,
Limited and Southwest Market Limited Partnership, dated as of
August 21, 1990
10.20 --Construction Loan Agreement by and between the Sumitomo Bank,
Limited and Southwest Market Limited Partnership for Two
Independence Square, dated as of February 22, 1991
*10.21 --Consent and Loan Modification Agreement regarding One
Independence Square between the Sumitomo Bank, Limited and
Southwest Market Limited Partnership dated as of June , 1997
*10.22 --Consent and Loan Modification Agreement regarding Two
Independence Square between the Sumitomo Bank, Limited and
Southwest Market Limited Partnership dated as of June , 1997
10.23 --Form of Amended and Restated Loan Agreement between Square 36
Office Joint Venture and the Sanwa Bank Limited dated as of June
, 1997
10.24 --Indemnification Agreement between Boston Properties Limited
Partnership and Mortimer B. Zuckerman and Edward H. Linde
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
21.1 --Schedule of Subsidiaries of the Company
+23.1 --Consent of Coopers & Lybrand, L.L.P.
+23.3 --Consent of Spaulding & Slye
23.4 --Consent of Goodwin, Procter & Hoar llp (included in Exhibits 5.1
and 8.1)
+23.5 --Consent of Mr. Patricof to be named as a proposed director
+23.6 --Consent of Mr. Seidenberg to be named as a proposed director
+23.7 --Consent of Mr. Turchin to be named as a proposed director
+27.1 --Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment
+ Previously filed
ITEM 36. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, BOSTON
PROPERTIES, INC. CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-11 AND HAS DULY CAUSED THIS
AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BOSTON, THE COMMONWEALTH
OF MASSACHUSETTS, ON THIS 12TH DAY OF JUNE, 1997.
Boston Properties, Inc.
/s/ Edward H. Linde
By: _________________________________
NAME: EDWARD H. LINDE
TITLE: PRESIDENT AND CHIEF
EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT TO
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Mortimer B. Zuckerman Chairman of the June 12, 1997
- ------------------------------------- Board of Directors
MORTIMER B. ZUCKERMAN
/s/ Edward H. Linde President and Chief June 12, 1997
- ------------------------------------- Executive Officer,
EDWARD H. LINDE Director (Principal
Executive Officer)
/s/ David G. Gaw Chief Financial June 12, 1997
- ------------------------------------- Officer (Principal
DAVID G. GAW Financial Officer
and Principal
Accounting Officer)
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<C> <S> <C>
*1.1 --Form of U.S. Purchase Agreement
*1.2 --Form of International Purchase Agreement
+3.1 --Form of Amended and Restated Certificate of Incorporation
of the Company
+3.2 --Form of Amended and Restated Bylaws of the Company
4.1 --Form of Shareholder Rights Agreement dated as of June ,
1997 between the Company and BankBoston, N.A., as Rights
Agent
4.2 --Form of Certificate of Designation for Series X Junior
Participating Cumulative Preferred Stock, par value $.01
per share
4.3 --Form of Common Stock Certificate
5.1 --Opinion of Goodwin, Procter & Hoar LLP regarding legality
of the shares of the Common Stock issued
8.1 --Opinion of Goodwin, Procter & Hoar LLP regarding tax
matters
10.1 --Form of Amended and Restated Agreement of Limited
Partnership of the Operating Partnership
10.2 --1997 Stock Option and Incentive Plan
+10.3 --Form of Noncompetition Agreement between the Company and
Mortimer B. Zuckerman
+10.4 --Form of Employment and Noncompetition Agreement between
the Company and Edward H. Linde
10.5 --Form of Employment Agreement between the Company and
certain executive officers
10.6 --Form of Indemnification Agreement between the Company and
each of its directors and executive officers
+10.7 --Omnibus Option Agreement by and among Boston Properties
Limited Partnership (the "Operating Partnership") and the
Grantors named therein dated as of April 9, 1997
*10.8 --Revolving Credit Agreement with BankBoston, N.A.
+10.9 --Form of Registration Rights Agreement among the Company
and the persons named therein
*10.10 --Form of Hotel Lease Agreement
+10.11 --Option Agreement between Boston Properties Limited
Partnership and Square 36 Properties Limited Partnership
dated April 15, 1997
+10.12 --Form of Certificate of Incorporation of Boston Properties
Management, Inc.
+10.13 --Form of By-laws of Boston Properties Management, Inc.
+10.14 --Form of Limited Liability Agreement of ZL Hotel LLC
*10.15 --Form of Option Agreement to Acquire the Property known as
Sumner Square
10.16 --Loan Modification Agreement between Lexreal Associates
and Mitsui Seimei America Corporation relating to loan
secured by 599 Lexington Avenue
10.17 --Loan Modification and Extension Agreement by and between
Southwest Market Limited Partnership, a District of
Columbia limited partnership, Mortimer B. Zuckerman and
Edward H. Linde and the Sumitomo Bank, Limited, for One
Independence Square, dated as of September 26, 1994
10.18 --Loan Modification and Extension Agreement by and among
Southwest Market Limited Partnership, a District of
Columbia limited partnership, Mortimer B. Zuckerman and
Edward H. Linde and the Sumitomo Bank, Limited, for Two
Independence Square, dated as of September 26, 1994
10.19 --Construction Loan Agreement by and between the Sumitomo
Bank, Limited and Southwest Market Limited Partnership,
dated as of August 21, 1990
10.20 --Construction Loan Agreement by and between the Sumitomo
Bank, Limited and Southwest Market Limited Partnership for
Two Independence Square, dated as of February 22, 1991
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<C> <S> <C>
*10.21 --Consent and Loan Modification Agreement regarding One
Independence Square between the Sumitomo Bank, Limited and
Southwest Market Limited Partnership dated as of June ,
1997
*10.22 --Consent and Loan Modification Agreement regarding Two
Independence Square between the Sumitomo Bank, Limited and
Southwest Market Limited Partnership dated as of June ,
1997
10.23 --Form of Amended and Restated Loan Agreement between
Square 36 Office Joint Venture and the Sanwa Bank Limited
dated as of June , 1997
10.24 --Indemnification Agreement between Boston Properties
Limited Partnership and Mortimer B. Zuckerman and Edward
H. Linde
21.1 --Schedule of Subsidiaries of the Company
+23.1 --Consent of Coopers & Lybrand, L.L.P.
+23.3 --Consent of Spaulding & Slye
23.4 --Consent of Goodwin, Procter & Hoar LLP (included in
Exhibits 5.1 and 8.1)
+23.5 --Consent of Mr. Patricof to be named as a proposed
director
+23.6 --Consent of Mr. Seidenberg to be named as a proposed
director
+23.7 --Consent of Mr. Turchin to be named as a proposed director
+27.1 --Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment
+ Previously filed
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT 4.1
Boston Properties, Inc.
and
BankBoston, N.A
as Rights Agent
----------------------
Shareholder Rights Agreement
Dated as of June 16, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section Page
1. Certain Definitions......................................................1
2. Appointment of Rights Agent..............................................7
3. Issue of Right Certificates..............................................8
4. Form of Right Certificates..............................................10
5. Countersignature and Registration.......................................11
6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates.................12
7. Exercise of Rights; Exercise Price; Expiration Date of Rights...........12
8. Cancellation and Destruction of Right Certificates......................15
9. Reservation and Availability of Preferred Stock.........................15
10. Preferred Stock Record Date.............................................16
11. Adjustment of Exercise Price, Number and Kind of Shares or Number of
Rights..................................................................17
12. Certificate of Adjusted Exercise Price or Number of Shares..............25
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power....25
14. Fractional Rights and Fractional Shares.................................28
15. Rights of Action........................................................29
16. Agreement of Right Holders..............................................29
17. Right Certificate Holder Not Deemed a Shareholder.......................30
18. Concerning the Rights Agent.............................................30
19. Merger or Consolidation or Change of Name of Rights Agent...............31
20. Duties of Rights Agent..................................................32
(i)
<PAGE>
21. Change of Rights Agent..................................................34
22. Issuance of New Right Certificates......................................35
23. Redemption..............................................................35
24. Exchange................................................................36
25. Notice of Certain Events................................................38
26. Notices.................................................................39
27. Supplements and Amendments..............................................39
28. Successors..............................................................40
29. Determinations and Actions by the Board of Directors....................40
30. Benefits of this Agreement..............................................41
31. Severability............................................................41
32. Governing Law...........................................................41
33. Counterparts............................................................41
34. Descriptive Headings....................................................41
Exhibit A -- Certificate of Designation of
Series X Junior Participating
Cumulative Preferred Stock
Exhibit B -- Form of Right Certificate
(ii)
<PAGE>
SHAREHOLDER RIGHTS AGREEMENT
----------------------------
Agreement, dated as of June 16, 1997, between Boston Properties, Inc.,
a Delaware corporation (the "Company"), and BankBoston, N.A., a national banking
association (the "Rights Agent").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Board of Directors of the Company desires to provide
shareholders of the Company with the opportunity to benefit from the long-term
prospects and value of the Company and to ensure that shareholders of the
Company receive fair and equal treatment in the event of any proposed takeover
of the Company; and
WHEREAS, on June 13, 1997, the Board of Directors of the Company
authorized and declared a dividend distribution of one Right (as such term is
hereinafter defined) for each outstanding share of Common Stock, par value $0.01
per share, of the Company outstanding as of the close of business on June 16,
1997 (the "Record Date"), and contemplates the issuance of one Right for each
share of Common Stock of the Company issued (whether originally issued
(including upon the conversion of Excess Stock (as such term is defined in the
Company's Certificate of Incorporation, as amended), into Common Stock) or sold
from the Company's treasury) between the Record Date and the earlier of the
Distribution Date or the Expiration Date (as such terms are hereinafter
defined), each Right initially representing the right to purchase one one-
thousandth of a share of Series A Junior Participating Cumulative Preferred
Stock of the Company having the rights, powers and preferences set forth on
Exhibit A hereto, upon the terms and subject to the conditions hereinafter set
- ---------
forth (the "Rights"); and
WHEREAS, the Company desires to appoint the Rights Agent to act as
rights agent hereunder, in accordance with the terms and conditions hereof;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
-------------------
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
----------------
hereinafter defined) who or which, together with all Affiliates (as such term is
hereinafter defined) and Associates (as such term is hereinafter defined) of
such Person, shall be the Beneficial Owner (as such term is hereinafter defined)
of more than 15% of the Common Shares (as such term is hereinafter defined) then
outstanding, but shall not include (i) the Company, (ii) any Subsidiary (as such
term is hereinafter defined) of the Company, (iii) any employee benefit plan or
compensation arrangement of the Company or any Subsidiary of the Company or (iv)
any Person holding shares of Common Stock of the Company organized, appointed or
established
<PAGE>
by the Company or any Subsidiary of the Company for or pursuant to the terms of
any such employee benefit plan or compensation arrangement (the Persons
described in clauses (i) through (iv) above are referred to herein as "Exempt
Persons").
Notwithstanding the foregoing, no Person shall become an "Acquiring
Person" as the result of an acquisition by the Company of Common Shares which,
by reducing the number of Common Shares outstanding, increases the proportionate
number of Common Shares beneficially owned by such Person to more than 15% of
the Common Shares then outstanding; provided, however, that if a Person shall
-------- -------
become the Beneficial Owner of more than 15% of the Common Shares then
outstanding by reason of share purchases by the Company and shall, after such
share purchases by the Company, become the Beneficial Owner of any additional
shares (other than pursuant to a stock split, stock dividend or similar
transaction) of Common Shares and immediately thereafter be the Beneficial Owner
of more than 15% of the Common Shares then outstanding, then such Person shall
be deemed to be an "Acquiring Person."
In addition, notwithstanding the foregoing, a Person shall not be an
"Acquiring Person" if the Board of Directors of the Company determines that a
Person who would otherwise be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this Section 1(a), has become such inadvertently, and
such Person divests as promptly as practicable (or within such period of time as
the Board of Directors determines is reasonable) a sufficient number of shares
of Common Stock of the Company so that such person would no longer be an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
Section 1(a).
Furthermore, in recognition that Original Partners who present their
OP Units to the Operating Partnership for redemption may, if the Company in
accordance with the Operating Partnership Agreement acquires such OP Units in
exchange for shares of Common Stock of the Company, own in excess of 15% of the
Common Shares, no Original Partner shall be an Acquiring Person unless such
Original Partner Beneficially Owns both (i) more than 15% of the Common Shares
then outstanding and (ii) a greater Economic Interest than such Original
Partner's Original Economic Interest. The preceding two paragraphs shall apply,
mutatis mutandi, to Original Partners after taking into account the preceding
sentence.
(b) "Adjustment Shares" shall have the meaning set forth in
-----------------
Section 11(a)(ii) hereof.
(c) "Affiliate" and "Associate" shall have the respective meanings
--------- ---------
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations (the
"Rules") under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date of this Agreement; provided, however, that no
-------- -------
Person who is a director or officer of the Company shall be deemed an Affiliate
or an Associate of any other director or officer of the Company solely as a
result of his or her position as director or officer of the Company.
(d) A Person shall be deemed the "Beneficial Owner" of, and shall
----------------
be deemed to "beneficially own," any securities:
----------------
2
<PAGE>
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, beneficially owns (as determined
pursuant to Rule 13d-3 of the Rules under the Exchange Act, as in effect on
the date of this Agreement);
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has:
(A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time or upon the satisfaction
of any conditions or both) pursuant to any agreement, arrangement or
understanding (whether or not in writing) (other than customary
agreements with and between underwriters and selling group members with
respect to a bona fide public offering of securities) or upon the
exercise of conversion rights, exchange rights, rights (other than the
Rights), warrants or options, or otherwise; provided, however, that a
-------- -------
Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," (1) securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange; (2) securities issuable upon exercise
of these Rights at any time prior to the occurrence of a Triggering
Event; or (3) securities issuable upon exercise of Rights from and after
the occurrence of a Triggering Event, which Rights were acquired by such
Person or any of such Person's Affiliates or Associates prior to the
Distribution Date or pursuant to Sections 3(a), 11(i) or 22 hereof; or
(B) the right to vote pursuant to any agreement, arrangement or
understanding (whether or not in writing); provided, however, that a
-------- -------
Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," any security under this clause (B) if the agreement,
arrangement or understanding to vote such security (1) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the Rules of the
Exchange Act and (2) is not also then reportable by such person on
Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(C) the right to dispose of pursuant to any agreement,
arrangement or understanding (whether or not in writing) (other than
customary arrangements with and between underwriters and selling group
members with respect to a bona fide public offering of securities); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such
Person or any of such Person's Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing) (other than
customary agreements with and between underwriters and selling group members
with respect to a bona fide public offering of
3
<PAGE>
securities) for the purpose of acquiring, holding, voting (except pursuant
to a revocable proxy as described in clause (B) of Section 1(d)(ii) hereof)
or disposing of any securities of the Company;
provided, however, that (1) no Person engaged in business as an underwriter of
- -------- -------
securities shall be deemed the Beneficial Owner of any securities acquired
through such Person's participation as an underwriter in good faith in a firm
commitment underwriting until the expiration of forty (40) days after the date
of such acquisition, (2) no Person who is a director or an officer of the
Company or a partner of the Operating Partnership shall be deemed, as a result
of his or her position as a director or officer of the Company or a partner of
the Operating Partnership or as a result of any action taken in any such
capacity, the Beneficial Owner of any securities of the Company that are
beneficially owned by any other director or officer of the Company or any other
partner of the Operating Partnership, (3) no shares of the Company's Common
Stock which may be issuable, in accordance with the Operating Partnership
Agreement, in exchange for units of limited partnership interest in the
Operating Partnership (or in any other limited partnership in which the Company
or an Affiliate of the Company acts as general partner) which may be presented
for redemption shall be considered to be Beneficially Owned by a Person who owns
such units until such Person actually receives shares of the Company's Common
Stock in exchange therefor and (4) the Beneficial Ownership of securities of the
Company owned by a Group shall in no event include any such securities
Beneficially Owned by L-Related Parties or Z-Related Parties who are members of
such Group.
(e) "Business Day" shall mean any day other than a Saturday, Sunday,
------------
or a day on which banking institutions in the City of New York, New York are
authorized or obligated by law or executive order to close.
(f) "Certificate" shall mean the Company's Amended and Restated
-----------
Certificate of Incorporation as in effect at the closing of the Initial Public
Offering.
(g) "Close of Business" on any given date shall mean 5:00 P.M., New
-----------------
York, New York time, on such date; provided, however, that if such date is not a
-------- -------
Business Day it shall mean 5:00 P.M., New York, New York time, on the next
succeeding Business Day.
(h) "Common Shares" shall mean shares of Common Stock of the Company
-------------
and shares of Excess Stock which are issued upon the conversion of shares of
Common Stock of the Company into Excess Stock.
(i) "Common Stock" when used in reference to the Company shall mean
------------
the common stock, par value $0.01 per share, of the Company or any other shares
of capital stock of the Company into which such stock shall be reclassified or
changed. "Common Stock" when used with reference to any Person other than the
Company organized in corporate form shall mean (i) the capital stock or other
equity interest of such Person with the greatest voting power or (ii) the equity
securities or other equity interest having power to control or direct the
management of such Person or, if such Person is a Subsidiary of another Person,
the Person or
4
<PAGE>
Persons which ultimately control such first-mentioned Person and which have
issued any such outstanding capital stock, equity securities or equity interest.
"Common Stock" when used with reference to any Person not organized in corporate
form shall mean units of beneficial interest which shall be entitled to exercise
the greatest voting power of such Person or, in the case of a limited
partnership, shall have the power to remove or otherwise replace the general
partner or partners.
(j) "Current Value" shall have the meaning set forth in Section
-------------
11(a)(iii) hereof.
(k) "Distribution Date" shall have the meaning defined in Section
-----------------
3(a) hereof.
(l) The "Economic Interest" of an Original Partner means a
-----------------
percentage equal to (x) 100 multiplied by (y) the sum of the number of shares of
Common Stock of the Company and OP Units owned by such Original Partner divided
by the total number of OP Units (including OP Units owned by the Company) then
outstanding. If the Conversion Factor (as defined in the Operating Partnership
Agreement) is not equal to 1.0 at the time that the Economic Interest is being
determined, then all references in this definition to a number of OP Units shall
refer to that number of OP Units multiplied by the Conversion Factor.
(m) "Exercise Price" shall have the meaning defined in Section
--------------
4(a) hereof.
(n) "Expiration Date" and "Final Expiration Date" shall have the
--------------- ---------------------
meanings set forth in Section 7(a) hereof.
(o) "Fair Market Value" of any securities or other property shall
-----------------
be as determined in accordance with Section 11(d) hereof.
(p) "Group" shall have the meaning ascribed thereto in clause (b)
-----
of the definition of "Person."
(q) "Initial Public Offering" means the initial public offering of
-----------------------
Common Stock of the Company by the Company pursuant to a Registration Statement
on Form S-11 (No. 333-25279).
(r) "L-Related Party" shall have the meaning ascribed thereto in
---------------
the Certificate.
(s) "Operating Partnership" shall mean Boston Properties Limited
---------------------
Partnership, a Delaware limited partnership, and any successor thereto, and
"Operating Partnership Agreement" shall mean the Amended and Restated Agreement
of Limited Partnership of the Operating Partnership, as amended.
5
<PAGE>
(t) "Original Partner" means a person who became a limited
----------------
partner of the Operating Partnership contemporaneously with the closing of the
Initial Public Offering and the Formation Transactions (as defined in the
Registration Statement relating to the Initial Public Offering) or who was a
partner before such time.
(u) "Original Economic Interest" means, with respect to a
--------------------------
particular Original Partner, the Economic Interest of such Original Partner
immediately after the closing of the Initial Public Offering and the Formation
Transactions (as defined in the Registration Statement relating to the Initial
Public Offering).
(v) "Person" (a) shall mean an individual, a corporation, a
------
partnership, an association, a joint stock company, a trust, a business trust, a
government or political subdivision, any unincorporated organization, or any
other association or entity, and (b) a "group" as that term is used for purposes
of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (any such
group under this clause (b), a "Group").
(v) "Preferred Stock" shall mean shares of Series A Junior
---------------
Participating Cumulative Preferred Stock, par value $0.01 per share, of the
Company having the rights and preferences set forth in the form of Certificate
of Designation attached hereto as Exhibit A.
---------
(w) "Preferred Stock Equivalents" shall have the meaning set forth
---------------------------
in Section 11(b) hereof.
(x) "Principal Party" shall have the meaning defined in Section
---------------
13(b) hereof.
(y) "Redemption Price" shall have the meaning defined in Section
----------------
23 hereof.
(z) "Right Certificate" shall have the meaning set forth in
-----------------
Section 3(a).
(aa) "Related Party" shall have the meaning ascribed thereto in
-------------
the Certificate.
(bb) "Section 11(a)(ii) Event" shall have the meaning set forth in
-----------------------
Section 11(a)(ii) hereof.
(cc) "Section 11(a)(ii) Trigger Date" shall have the meaning set
------------------------------
forth in Section 11(a)(iii) hereof.
(dd) "Section 13 Event" shall mean any event described in clauses
----------------
(x), (y) or (z) of Section 13(a) hereof.
(ee) "Section 24(a)(i) Exchange Ratio" shall have the meaning set
-------------------------------
forth in Section 24(a)(i) hereof.
6
<PAGE>
(ff) "Section 24(a)(ii) Exchange Ratio" shall have the meaning set
--------------------------------
forth in Section 24(a)(ii) hereof.
(gg) "Spread" shall have the meaning set forth in Section
------
11(a)(iii) hereof.
(hh) "Stock Acquisition Date" shall mean the date of the first
----------------------
public announcement (which for purposes of this definition shall include,
without limitation, the issuance of a press release or the filing of a publicly-
available report or other document with the Securities and Exchange Commission
or any other governmental agency) by the Company or an Acquiring Person that an
Acquiring Person has become such.
(ii) "Subsidiary" shall mean, with reference to any Person, any
----------
corporation or other entity of which securities or other ownership interests
having ordinary voting power sufficient, in the absence of contingencies, to
elect a majority of the board of directors or other persons performing similar
functions of such corporation or other entity are at the time directly or
indirectly beneficially owned or otherwise controlled by such Person either
alone or together with one or more Affiliates of such Person.
(jj) "Substitution Period" shall have the meaning set forth in
-------------------
Section 11(a)(iii) hereof.
(kk) "Triggering Event" shall mean any Section 11(a)(ii) Event or
----------------
any Section 13 Event.
(ll) "Z-Related Party" shall have the meaning ascribed thereto in
---------------
the Certificate.
Section 2. Appointment of Rights Agent. The Company hereby appoints
---------------------------
the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall prior to the Distribution Date
(as hereinafter defined in Section 3(a)) also be the holders of the Common Stock
of the Company) in accordance with the terms and conditions hereof, and the
Rights Agent hereby accepts such appointment. The Company may from time to time
appoint such Co-Rights Agents as it may deem necessary or desirable. In the
event the Company appoints one or more Co-Rights Agents, the respective duties
of the Rights Agent and any Co-Rights Agents shall be as the Company shall
determine. The Company shall give ten (10) days prior written notice to the
Rights Agent of the appointment of one or more Co-Rights Agents and the
respective duties of the Rights Agent and any such Co-Rights Agents. The Rights
Agent shall have no duty to supervise, and shall in no event be liable for, the
acts or omissions of any such Co-Rights Agent.
7
<PAGE>
Section 3. Issue of Right Certificates.
---------------------------
(a) From the date hereof until the earlier of (i) the Close of
Business on the tenth calendar day after the Stock Acquisition Date or (ii) the
Close of Business on the tenth Business Day (or such other calendar day, if any,
as the Board of Directors may determine in its sole discretion) after the date a
tender or exchange offer by any Person, other than an Exempt Person, is first
published or sent or given within the meaning of Rule 14d-4(a) of the Exchange
Act, or any successor rule, if, upon consummation thereof, such Person would be
the Beneficial Owner of more than 15% of the Common Shares then outstanding
(and, if such Person is an Original Partner, such person's Beneficial Ownership
of Common Shares and OP Units after consummation would cause the Economic
Interest of such Person to exceed such Person's Original Economic Interest)
(including any such date which is after the date of this Agreement and prior to
the issuance of the Rights) (the earlier of such dates being herein referred to
as the "Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of Section 3(b) hereof) by the certificates for the Common Stock of
the Company registered in the names of the holders of the Common Stock of the
Company (which certificates for Common Stock of the Company shall be deemed also
to be certificates for Rights) and not by separate certificates, and (y) the
Rights will be transferable only in connection with the transfer of the
underlying shares of Common Stock of the Company. As soon as practicable after
the Distribution Date, the Rights Agent will, at the Company's expense, send, by
first-class, insured, postage prepaid mail, to each record holder of the Common
Stock of the Company as of the Close of Business on the Distribution Date, at
the address of such holder shown on the records of the Company, one or more
certificates, in substantially the form of Exhibit B hereto (the "Right
---------
Certificates"), evidencing one Right for each share of Common Stock of the
Company so held, subject to adjustment as provided herein. In the event that an
adjustment in the number of Rights per share of Common Stock of the Company has
been made pursuant to Section 11(o) hereof, the Company may make the necessary
and appropriate rounding adjustments (in accordance with Section 14(a) hereof)
at the time of distribution of the Right Certificates, so that Right
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Close of Business
on the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) With respect to certificates for the Common Stock of the
Company issued prior to the Close of Business on the Record Date, the Rights
will be evidenced by such certificates for the Common Stock of the Company on or
until the Distribution Date (or the earlier redemption, expiration or
termination of the Rights), and the registered holders of the Common Stock of
the Company also shall be the registered holders of the associated Rights. Until
the Distribution Date (or the earlier redemption, expiration or termination of
the Rights), the transfer of any of the certificates for the Common Stock of the
Company outstanding prior to the date of this Agreement shall also constitute
the transfer of the Rights associated with the Common Stock of the Company
represented by such certificate.
8
<PAGE>
(c) Certificates for the Common Stock of the Company issued after
the Record Date, but prior to the earlier of the Distribution Date or the
redemption, expiration or termination of the Rights, shall be deemed also to be
certificates for Rights, and shall bear a legend, substantially in the form set
forth below:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Shareholder Rights Agreement
between Boston Properties, Inc. and BankBoston, N.A., as Rights
Agent, dated as of June 16, 1997, as amended, restated, renewed or
extended from time to time (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy of
which is on file at the principal offices of Boston Properties,
Inc. and the stock transfer administration office of the Rights
Agent. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates
and will no longer be evidenced by this certificate. Boston
Properties, Inc. may redeem the Rights at a redemption price of
$0.001 per Right, subject to adjustment, under the terms of the
Rights Agreement. Boston Properties, Inc. will mail to the holder
of this certificate a copy of the Rights Agreement, as in effect
on the date of mailing, without charge promptly after receipt of a
written request therefor. Under certain circumstances, Rights
issued to or held by Acquiring Persons or any Affiliates or
Associates thereof (as defined in the Rights Agreement), and any
subsequent holder of such Rights, may become null and void. The
Rights shall not be exercisable, and shall be void so long as
held, by a holder in any jurisdiction where the requisite
qualification, if any, to the issuance to such holder, or the
exercise by such holder, of the Rights in such jurisdiction shall
not have been obtained or be obtainable.
With respect to such certificates containing the foregoing legend, the Rights
associated with the Common Stock of the Company represented by such certificates
shall be evidenced by such certificates alone until the Distribution Date (or
the earlier redemption, expiration or termination of the Rights), and the
transfer of any of such certificates shall also constitute the transfer of the
Rights associated with the Common Stock of the Company represented by such
certificates. In the event that the Company purchases or acquires any shares of
Common Stock of the Company after the Record Date but prior to the Distribution
Date, any Rights associated with such Common Stock of the Company shall be
deemed canceled and retired so that the Company shall not be entitled to
exercise any Rights associated with the shares of Common Stock of the Company
which are no longer outstanding. The failure to print the foregoing legend on
any such certificate representing Common Stock of the Company or any defect
therein shall not affect in any manner whatsoever the application or
interpretation of the provisions of Section 7(e) hereof.
9
<PAGE>
(d) Notwithstanding anything in this Agreement to the contrary, in
the event that prior to the earlier of the Distribution Date or the redemption,
expiration or termination of the Rights, any shares of Common Stock are retired
and canceled in connection with the conversion of such shares to Excess Stock
pursuant to Article IV(D) of the Company's Certificate of Incorporation, as
amended, then the associated Rights shall be deemed to be similarly retired and
canceled.
Section 4. Form of Right Certificates.
--------------------------
(a) The Right Certificates (and the forms of election to purchase
shares and of assignment and certificate to be printed on the reverse thereof)
shall each be substantially in the form of Exhibit B hereto and may have such
---------
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law, rule or regulation or with any rule or
regulation of any stock exchange on which the Rights may from time to time be
listed, or to conform to customary usage. The Right Certificates shall be in a
machine printable format and in a form reasonably satisfactory to the Rights
Agent. Subject to the provisions of Section 11 and Section 22 hereof, the Right
Certificates, whenever distributed, shall be dated as of the Record Date, shall
show the date of countersignature, and on their face shall entitle the holders
thereof to purchase such number of one one-thousandths of a share of Preferred
Stock as shall be set forth therein at the price set forth therein (the
"Exercise Price"), but the number of such shares and the Exercise Price shall be
subject to adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee
of an Acquiring Person (or of any Associate or Affiliate of an Acquiring Person)
who becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding (whether or not in writing)
regarding the transferred Rights, the shares of Common Stock of the Company
associated with such Rights or the Company or (B) a transfer which the Board of
Directors of the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of Section
7(e) hereof, and any Right Certificate issued pursuant to Section 6, Section 11
or Section 22 upon transfer, exchange, replacement or adjustment of any other
Right Certificate referred to in this sentence, shall have deleted therefrom the
second sentence of the existing legend on such Right Certificate and in
substitution therefor shall contain the following legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring
10
<PAGE>
Person or an Affiliate or an Associate of an Acquiring Person (as such
terms are defined in the Rights Agreement). This Right Certificate and
the Rights represented hereby may become null and void under certain
circumstances as specified in Section 7(e) of the Rights Agreement.
The Company shall give notice to the Rights Agent promptly after it becomes
aware of the existence and identity of any Acquiring Person or any Associate or
Affiliate thereof. The Company shall instruct the Rights Agent in writing of
the Rights which should be so legended. The failure to print the foregoing
legend on any such Right Certificate or any defect therein shall not affect in
any manner whatsoever the application or interpretation of the provisions of
Section 7(e) hereof.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Right Certificates shall be executed on behalf of the
Company by its Chairman of the Board of Directors, or its President or any Vice
President and by its Treasurer or any Assistant Treasurer, or by its Secretary
or any Assistant Secretary, either manually or by facsimile signature, and shall
have affixed thereto the Company's seal or a facsimile thereof which shall be
attested to by the Secretary or any Assistant Secretary of the Company, either
manually or by facsimile signature. The Right Certificates shall be manually
countersigned by an authorized signatory of the Rights Agent and shall not be
valid for any purpose unless so countersigned, and such countersignature upon
any Right Certificate shall be conclusive evidence, and the only evidence, that
such Right Certificate has been duly countersigned as required hereunder. In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by an authorized
signatory of the Rights Agent, and issued and delivered by the Company with the
same force and effect as though the person who signed such Right Certificates
had not ceased to be such officer of the Company; and any Right Certificates may
be signed on behalf of the Company by any person who, at the actual date of the
execution of such Right Certificate, shall be a proper officer of the Company to
sign such Right Certificate, although at the date of the execution of this
Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at one of its offices designated as the appropriate place for
surrender of Right Certificates upon exercise or transfer, books for
registration and transfer of the Right Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
11
<PAGE>
Section 6. Transfer, Split Up, Combination and Exchange of Right
-----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
- ---------------------------------------------------------------------
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the Close of Business on the Distribution
Date, and at or prior to the Close of Business on the Expiration Date, any Right
Certificate or Certificates may be transferred, split up, combined or exchanged
for another Right Certificate or Certificates, entitling the registered holder
to purchase a like number of one one-thousandths of a share of Preferred Stock
(or following a Triggering Event, preferred stock, cash, property, debt
securities, Common Stock of the Company or any combination thereof) as the Right
Certificate or Certificates surrendered then entitled such holder to purchase
and at the same Exercise Price. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate shall make such request in
writing delivered to the Rights Agent, and shall surrender the Right Certificate
or Certificates to be transferred, split up, combined or exchanged, with the
form of assignment and certificate duly executed, at the office or offices of
the Rights Agent designated for such purpose. Neither the Rights Agent nor the
Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Right Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Right Certificate and shall have provided
such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b),
Section 7(e) and Section 14 hereof, countersign and deliver to the Person
entitled thereto a Right Certificate or Certificates, as the case may be, as so
requested. The Company may require payment by the registered holder of a Right
Certificate, of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Right Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security satisfactory to them, and reimbursement to the Company and the Rights
Agent of all reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Right Certificate, if mutilated, the
Company will execute and deliver a new Right Certificate of like tenor to the
Rights Agent for countersignature and delivery to the registered owner in lieu
of the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Exercise Price; Expiration Date of
------------------------------------------------------
Rights.
- ------
(a) Subject to Section 7(e) hereof, the registered holder of any
Right Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the office or offices of the Rights Agent designated for such
12
<PAGE>
purpose, together with payment of the aggregate Exercise Price for the total
number of one one-thousandths of a share of Preferred Stock (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercised, at or prior to the earlier of (i) the
Close of Business on the tenth anniversary of the date of this Agreement (the
"Final Expiration Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof or (iii) the time at which such Rights are
exchanged as provided in Section 24 hereof (the earliest of (i), (ii) or (iii)
being herein referred to as the "Expiration Date"). Except as set forth in
Section 7(e) hereof and notwithstanding any other provision of this Agreement,
any Person who prior to the Distribution Date becomes a record holder of shares
of Common Stock of the Company may exercise all of the rights of a registered
holder of a Right Certificate with respect to the Rights associated with such
shares of Common Stock of the Company in accordance with the provisions of this
Agreement, as of the date such Person becomes a record holder of shares of
Common Stock of the Company.
(b) The Exercise Price for each one one-thousandth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be one
hundred dollars ($100), shall be subject to adjustment from time to time as
provided in Section 11 and Section 13 hereof and shall be payable in lawful
money of the United States of America in accordance with Section 7(c) below.
(c) As promptly as practicable following the Distribution Date,
the Company shall deposit with a corporation, trust, bank or similar institution
in good standing organized under the laws of the United States or any State of
the United States, which is authorized under such laws to exercise corporate
trust or stock transfer powers and is subject to supervision or examination by a
federal or state authority (such institution is hereinafter referred to as the
"Depositary Agent"), certificates representing the shares of Preferred Stock
that may be acquired upon exercise of the Rights and the Company shall cause
such Depositary Agent to enter into an agreement pursuant to which the
Depositary Agent shall issue receipts representing interests in the shares of
Preferred Stock so deposited. Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase and the certificate on
the reverse side thereof duly executed, accompanied by payment of the Exercise
Price for the shares to be purchased and an amount equal to any applicable
transfer tax (as determined by the Rights Agent) in cash, or by certified check
or bank draft payable to the order of the Company, the Rights Agent shall,
subject to Section 20(k) hereof, thereupon promptly (i) requisition from the
Depositary Agent (or make available, if the Rights Agent is the Depository
Agent) depository receipts or certificates for the number of one one-thousandths
of a share of Preferred Stock to be purchased and the Company hereby irrevocably
authorizes the Depositary Agent to comply with all such requests, (ii) when
appropriate, requisition from the Company the amount of cash, if any, to be paid
in lieu of issuance of fractional shares in accordance with Section 14 hereof,
(iii) promptly after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of such
Right Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt promptly deliver such cash to or
upon the order of the registered holder of such Right Certificate. In the event
that the Company is obligated to issue
13
<PAGE>
other securities (including Common Stock) of the Company, pay cash or distribute
other property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash or other property are
available for distribution by the Rights Agent, if and when appropriate. The
payment of the Exercise Price may be made in cash or by certified or bank check
payable to the order of the Company, or by wire transfer of immediately
available funds to the account of the Company (provided that notice of such wire
transfer shall be given by the holder of the related Right to the Rights Agent).
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Section 11(a)(ii) Event or Section 13
Event, any Rights beneficially owned by (i) an Acquiring Person or any Associate
or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person
(or of any Associate or Affiliate of an Acquiring Person) who becomes a
transferee after the Acquiring Person becomes such or (iii) a transferee of an
Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights, the shares of Common Stock of the Company associated with such Rights or
the Company, or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall be null and
void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company shall use all reasonable efforts to
ensure that the provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but shall have no liability to any holder of Right Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or any Affiliates or Associates of an Acquiring
Person or any transferee of any of them hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder of Rights upon the occurrence of any
purported exercise as set forth in this Section 7 unless such registered holder
shall have (i) completed and signed the certificate contained in the form of
election to purchase set forth on the reverse side of the Right Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
14
<PAGE>
Section 8. Cancellation and Destruction of Right Certificates. All
--------------------------------------------------
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Right Certificates to the Company.
Section 9. Reservation and Availability of Preferred Stock.
-----------------------------------------------
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock or any authorized and issued shares of Preferred Stock held in
its treasury, the number of shares of Preferred Stock that will be sufficient to
permit the exercise in full of all outstanding and exercisable Rights. Upon the
occurrence of any events resulting in an increase in the aggregate number of
shares of Preferred Stock issuable upon exercise of all outstanding Rights in
excess of the number then reserved, the Company shall make appropriate increases
in the number of shares so reserved.
(b) The Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares of Preferred Stock
issued or reserved for issuance to be listed, upon official notice of issuance,
upon the principal national securities exchange, if any, upon which the Common
Stock of the Company is listed or, if the principal market for the Common Stock
of the Company is not on any national securities exchange, to be eligible for
quotation on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or any successor thereto or other comparable quotation system.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, or as soon as required by law following the Distribution Date, as the
case may be, a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities purchasable upon
exercise of the Rights on an appropriate form, (ii) cause such registration
statement to become effective as soon as practicable after such filing and (iii)
cause such registration statement to remain effective (with a prospectus that at
all times meets the requirements of the Securities Act) until the earlier of (A)
the date as of which the Rights are no longer exercisable for such securities or
(B) the Expiration Date. The Company will also take such action as may be
appropriate under, and which will ensure compliance with, the securities or
"blue sky" laws of the various states in connection with the exercisability of
the Rights. The Company may temporarily suspend, for a period of time not to
exceed ninety (90) days after the date determined in accordance with the
provisions of the first sentence of this Section 9(c), the
15
<PAGE>
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect, in each case with prompt written notice
to the Rights Agent. Notwithstanding any such provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction unless the
requisite qualification in such jurisdiction shall have been obtained.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Preferred Stock
delivered upon the exercise of the Rights shall, at the time of delivery of the
certificates or depositary receipts for such shares (subject to payment of the
Exercise Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Right Certificates
or of any certificates for shares of Preferred Stock upon the exercise of
Rights. The Company shall not, however, be required to pay any transfer tax
which may be payable in respect of any transfer or delivery of Right
Certificates to a person other than, or in respect of the issuance or delivery
of securities in a name other than that of, the registered holder of the Right
Certificates evidencing Rights surrendered for exercise or to issue or deliver
any certificates for securities in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Right Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Preferred Stock Record Date. Each Person in whose name
---------------------------
any certificate for Preferred Stock (including any fraction of a share of
Preferred Stock) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of the shares of Preferred Stock
represented thereby on, and such certificate shall be dated, the date upon which
the Right Certificate evidencing such Rights was duly surrendered and payment of
the Exercise Price (and any applicable transfer taxes) was made; provided,
--------
however, that if the date of such surrender and payment is a date upon which the
- -------
Preferred Stock transfer books of the Company are closed, such person shall be
deemed to have become the record holder of such shares on, and such certificate
shall be dated, the next succeeding Business Day on which the Preferred Stock
transfer books of the Company are open; and further provided, however, that if
------- -------- -------
delivery of shares of Preferred Stock is delayed pursuant to Section 9(c), such
Person shall be deemed to have become the record holder of such shares of
Preferred Stock only when such shares first become deliverable. Prior to the
exercise of the Right evidenced thereby, the holder of a Right Certificate shall
not be entitled to any rights of a shareholder of the Company with respect to
shares for which the Rights shall be exercisable, including, without limitation,
the right to vote, to receive dividends or other distributions or to exercise
any preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
16
<PAGE>
Section 11. Adjustment of Exercise Price, Number and Kind of Shares
-------------------------------------------------------
or Number of Rights. The Exercise Price, the number and kind of shares covered
- -------------------
by each Right and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Stock
payable in shares of Preferred Stock, (B) subdivide the outstanding
Preferred Stock, (C) combine the outstanding Preferred Stock into a
smaller number of shares or (D) issue any shares of its capital
stock in a reclassification of the Preferred Stock (including any
such reclassification in connection with a consolidation or merger
in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e)
hereof, the Exercise Price in effect at the time of the record date
for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares
of capital stock issuable on such date, shall be proportionately
adjusted so that the holder of any Right exercised after such time
shall be entitled to receive the aggregate number and kind of
shares of capital stock which, if such Right had been exercised
immediately prior to such date and at a time when the Preferred
Stock transfer books of the Company were open, such holder would
have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the
-------- -------
consideration to be paid upon the exercise of a Right be less than
the aggregate par value of the shares of capital stock of the
Company issuable upon exercise of a Right. If an event occurs which
would require an adjustment under both Section 11(a)(i) and Section
11(a)(ii) hereof, the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to the provisions of Section 24 hereof, in the
event any Person, alone or together with its Affiliates and
Associates, shall become an Acquiring Person (a "Section 11(a)(ii)
Event"), then promptly following any such occurrence, proper
provision shall be made so that each holder of a Right, except as
provided in Section 7(e) hereof, shall thereafter have a right to
receive, upon exercise thereof at the then current Exercise Price
in accordance with the terms of this Agreement, such number of
shares of Preferred Stock of the Company as shall equal the result
obtained by (x) multiplying the then current Exercise Price by the
then number of one one-thousandths of a share of Preferred Stock
for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, whether or not such Right
was then exercisable, and dividing that product by (y) 50% of the
Fair Market Value per one one-thousandth of a share of the
Preferred Stock (determined pursuant to Section
17
<PAGE>
11(d)) on the date of the occurrence of a Section 11(a)(ii) Event
(such number of shares being referred to as the "Adjustment
Shares").
(iii) In lieu of issuing any shares of Preferred Stock in
accordance with Section 11(a)(ii) hereof, the Company, acting by
or pursuant to resolution of the Board of Directors, may, and in
the event that the number of shares of Preferred Stock which are
authorized by the Company's Certificate of Incorporation but not
outstanding or reserved for issuance for purposes other than upon
exercise of the Rights is not sufficient to permit the exercise in
full of the Rights in accordance with the foregoing subparagraph
(ii) of this Section 11(a), the Company, acting by or pursuant to
resolution of the Board of Directors, shall: (A) determine the
excess of (X) the Fair Market Value of the Adjustment Shares
issuable upon the exercise of a Right (the "Current Value") over
(Y) the Exercise Price attributable to each Right (such excess
being referred to as the "Spread") and (B) with respect to all or
a portion of each Right (subject to Section 7(e) hereof), make
adequate provision to substitute for the Adjustment Shares, upon
payment of the applicable Exercise Price, (1) cash, (2) a
reduction in the Exercise Price, (3) Preferred Stock Equivalents
which the Board of Directors has deemed to have the same value as
shares of Common Stock of the Company, (4) debt securities of the
Company, (5) other assets of the Company or (6) any combination of
the foregoing which, when added to any shares of Preferred Stock
issued upon such exercise, has an aggregate value equal to the
Current Value, where such aggregate value has been determined by
the Board of Directors based upon the advice of a nationally
recognized investment banking firm selected by the Board of
Directors; provided, however, that if the Company shall not have
-------- -------
made adequate provision to delive r value pursuant to clause (B)
above within thirty (30) days following the later of (x) the first
occurrence of a Section 11(a)(ii) Event and (y) the date on which
the Company's right of redemption pursuant to Section 23(a)
expires (the later of (x) and (y) being referred to herein as the
"Section 11(a)(ii) Trigger Date"), then the Company shall be
obligated to deliver, upon the surrender for exercise of a Right
and without requiring payment of the Exercise Price, shares of
Preferred Stock (to the extent available) and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to
the Spread. If the Board of Directors shall determine in good
faith that it is likely that sufficient additional shares of
Preferred Stock could be authorized for issuance upon exercise in
full of the Rights, the 30-day period set forth above may be
extended to the extent necessary, but not more than ninety (90)
days after the Section 11(a)(ii) Trigger Date, in order that the
Company may seek stockholder approval for the authorization of
such additional shares (such period, as it may be extended, being
referred to herein as the "Substitution Period"). To the extent
that the Company determines that some action need be taken
pursuant to the first and/or second sentences of this Section
11(a)(iii), the Company (x) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding
Rights and (y) may suspend the exercisability of the Rights until
the expiration of
18
<PAGE>
the Substitution Period in order to seek any authorization of
additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to
determine the value thereof. In the event of any such suspension,
the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended and a
public announcement at such time as the suspension is no longer in
effect. For purposes of this Section 11(a)(iii), the value of the
Preferred Stock shall be the Fair Market Value (as determined
pursuant to Section 11(d) hereof) per share of the Preferred Stock
on the Section 11(a)(ii) Trigger Date and the value of any
Preferred Stock Equivalent shall be deemed to have the same value
as the Preferred Stock on such date.
(b) If the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them
(for a period expiring within forty-five (45) calendar days after such record
date) to subscribe for or purchase Preferred Stock (or securities having the
same or more favorable rights, privileges and preferences as the shares of
Preferred Stock ("Preferred Stock Equivalents")) or securities convertible into
Preferred Stock or Preferred Stock Equivalents at a price per share of Preferred
Stock or per share of Preferred Stock Equivalents (or having a conversion price
per share, if a security convertible into Preferred Stock or Preferred Stock
Equivalents) less than the Fair Market Value (as determined pursuant to Section
11(d) hereof) per share of Preferred Stock on such record date, the Exercise
Price to be in effect after such record date shall be determined by multiplying
the Exercise Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of shares of Preferred
Stock outstanding on such record date, plus the number of shares of Preferred
Stock which the aggregate offering price of the total number of shares of
Preferred Stock and/or Preferred Stock Equivalents to be offered (and the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such Fair Market Value and the denominator of which
shall be the number of shares of Preferred Stock outstanding on such record
date, plus the number of additional shares of Preferred Stock and Preferred
Stock Equivalents to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible); provided,
--------
however, that in no event shall the consideration to be paid upon the exercise
- -------
of a Right be less than the aggregate par value of the shares of capital stock
of the Company issuable upon exercise of a Right. In case such subscription
price may be paid in a consideration part or all of which shall be in a form
other than cash, the value of such consideration shall be the Fair Market Value
thereof determined in accordance with Section 11(d) hereof. Shares of Preferred
Stock owned by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustments shall be
made successively whenever such a record date is fixed; and in the event that
such rights or warrants are not so issued, the Exercise Price shall be adjusted
to be the Exercise Price which would then be in effect if such record date had
not been fixed.
(c) If the Company shall fix a record date for the making of a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a
19
<PAGE>
consolidation or merger in which the Company is the continuing or surviving
corporation), of evidences of indebtedness, cash (other than a regular periodic
cash dividend out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Preferred Stock, but including any dividend
payable in stock other than Preferred Stock) or convertible securities,
subscription rights or warrants (excluding those referred to in Section 11(b)),
the Exercise Price to be in effect after such record date shall be determined by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the Fair Market Value (as
determined pursuant to Section 11(d) hereof) per one one-thousandth of a share
of Preferred Stock on such record date, less the Fair Market Value (as
determined pursuant to Section 11(d) hereof) of the portion of the cash, assets
or evidences of indebtedness so to be distributed or of such convertible
securities, subscription rights or warrants applicable to one one-thousandth of
a share of Preferred Stock and the denominator of which shall be the Fair Market
Value (as determined pursuant to Section 11(d) hereof) per one one-thousandth of
a share of Preferred Stock; provided, however, that in no event shall the
-------- -------
consideration to be paid upon the exercise of a Right be less than the aggregate
par value of the shares of capital stock of the Company issuable upon exercise
of a Right. Such adjustments shall be made successively whenever such a record
date is fixed; and in the event that such distribution is not so made, the
Exercise Price shall again be adjusted to be the Exercise Price which would be
in effect if such record date had not been fixed.
(d) For the purpose of this Agreement, the "Fair Market Value" of
any share of Preferred Stock, Common Stock or any other stock or any Right or
other security or any other property shall be determined as provided in this
Section 11(d).
(i) In the case of a publicly-traded stock or other security,
the Fair Market Value on any date shall be deemed to be the average of
the daily closing prices per share of such stock or per unit of such
other security for the 30 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; provided, however,
-------- -------
that in the event that the Fair Market Value per share of any share of
stock is determined during a period following the announcement by the
issuer of such stock of (x) a dividend or distribution on such stock
payable in shares of such stock or securities convertible into shares of
such stock or (y) any subdivision, combination or reclassification of
such stock, and prior to the expiration of the 30 Trading Day period
after the ex-dividend date for such dividend or distribution, or the
record date for such subdivision, combination or reclassification, then,
and in each such case, the Fair Market Value shall be properly adjusted
to take into account ex-dividend trading. The closing price for each
day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the
securities are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the
20
<PAGE>
principal national securities exchange on which such security is listed
or admitted to trading; or, if not listed or admitted to trading on any
national securities exchange, the last quoted price (or, if not so
quoted, the average of the last quoted high bid and low asked prices) in
the over-the-counter market, as reported by NASDAQ or such other system
then in use; or, if on any such date no bids for such security are
quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market
in such security selected by the Board of Directors of the Company. If
on any such date no market maker is making a market in such security,
the Fair Market Value of such security on such date shall be determined
reasonably and with utmost good faith to the holders of the Rights by
the Board of Directors of the Company, provided, however, that if at the
-------- -------
time of such determination there is an Acquiring Person, the Fair Market
Value of such security on such date shall be determined by a nationally
recognized investment banking firm selected by the Board of Directors,
which determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and the holders of
the Rights. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which such security is listed
or admitted to trading is open for the transaction of business or, if
such security is not listed or admitted to trading on any national
securities exchange, a Business Day.
(ii) If a security is not publicly held or not so listed or
traded, "Fair Market Value" shall mean the fair value per share of stock
or per other unit of such security, determined reasonably and with
utmost good faith to the holders of the Rights by the Board of Directors
of the Company, provided, however, that if at the time of such
-------- -------
determination there is an Acquiring Person, the Fair Market Value of
such security on such date shall be determined by a nationally
recognized investment banking firm selected by the Board of Directors,
which determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and the holders of
the Rights; provided, however, that for the purposes of making any
-------- -------
any adjustment provided for by Section 11(a)(ii) hereof, the Fair Market
Value of a share of Preferred Stock shall not be less than the product
of the then Fair Market Value of a share of Common Stock multiplied by
the higher of the then Dividend Multiple or Vote Multiple (as both of
such terms are defined in the Certificate of Designation attached as
Exhibit A hereto) applicable to the Preferred Stock and shall not exceed
---------
105% of the product of the then Fair Market Value of a share of Common
Stock multiplied by the higher of the then Dividend Multiple or Vote
Multiple applicable to the Preferred Stock.
(iii) In the case of property other than securities, the Fair
Market Value thereof shall be determined reasonably and with utmost good
faith to the holders of Rights by the Board of Directors of the Company,
provided, however, that if at the time of such determination there is an
-------- -------
Acquiring Person, the Fair Market
21
<PAGE>
Value of such property on such date shall be determined by a nationally
recognized investment banking firm selected by the Board of Directors,
which determination shall be described in a statement filed with the
Rights Agent and shall be binding upon the Rights Agent and the holders
of the Rights.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Exercise Price; provided, however,
-------- -------
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest hundred-thousandth of a share of Common Stock of the
Company or ten-millionth of a share of Preferred Stock, as the case may be, or
to such other figure as the Board of Directors may deem appropriate.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment or
(ii) the Expiration Date.
(f) If as a result of any provision of Section 11(a) or Section 13(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Stock,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Stock contained in Section 11(a), (b), (c), (d), (e), (g) through (k)
and (m), inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 hereof
with respect to the Preferred Stock shall apply on like terms to any such other
shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of one one-thousandths of a
share of Preferred Stock (or other securities or amount of cash or combination
thereof) purchasable from time to time hereunder upon exercise of the Rights,
all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Exercise Price as a result of the
calculations made in Section 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Exercise Price, that number of one one-thousandths of
a share of Preferred Stock (calculated to the nearest one ten-millionth) as the
Board of Directors reasonably determines is appropriate to preserve the economic
value of the Rights, including, by way of example, that number obtained by (i)
multiplying (x) the number of one one-thousandths of a share of Preferred Stock
for which a Right may be exercisable immediately prior to this adjustment by (y)
the Exercise Price in effect immediately prior to such adjustment of the
Exercise Price and (ii) dividing the product so obtained by the Exercise Price
in effect immediately after such adjustment of the Exercise Price.
22
<PAGE>
(i) The Company may elect on or after the date of any adjustment of
the Exercise Price to adjust the number of Rights, in substitution for any
adjustment in the number of shares of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of one one-thousandths of a
share of Preferred Stock for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
one hundred-thousandth) obtained by dividing the Exercise Price in effect
immediately prior to adjustment of the Exercise Price by the Exercise Price in
effect immediately after adjustment of the Exercise Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Exercise Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Right Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Right Certificates on such record date Right Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders shall
be entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein (and may bear, at
the option of the Company, the adjusted Exercise Price) and shall be registered
in the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Exercise Price or
the number of one one-thousandths of a share of Preferred Stock issuable upon
the exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Exercise Price per share and the number of
shares which were expressed in the initial Right Certificates issued hereunder
without prejudice to any adjustment or change.
(k) Before taking any action that would cause an adjustment reducing
the Exercise Price below the then stated value, if any, of the number of one
one-thousandths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable shares of Preferred Stock at such adjusted
Exercise Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
the number of one one-thousandths of a share of Preferred Stock or
23
<PAGE>
other capital stock or securities of the Company, if any, issuable upon such
exercise over and above the number of one one-thousandths of a share of
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Exercise Price in effect prior
to such adjustment; provided, however, that the Company shall deliver to such
-------- -------
holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional shares upon the occurrence of the event requiring
such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Exercise Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment a majority of the Board of
Directors shall determine to be advisable in order that any consolidation or
subdivision of the Preferred Stock, issuance wholly for cash of any shares of
Preferred Stock at less than the Fair Market Value, issuance wholly for cash of
shares of Preferred Stock or securities which by their terms are convertible
into or exchangeable for shares of Preferred Stock, stock dividends or issuance
of rights, options or warrants referred to hereinabove in this Section 11,
hereafter made by the Company to holders of its Preferred Stock, shall not be
taxable to such shareholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date and so long as the Rights have not been redeemed
pursuant to Section 23 hereof or exchanged pursuant to Section 24 hereof, (i)
consolidate with (other than a Subsidiary of the Company in a transaction which
complies with the proviso at the end of this sentence), (ii) merge with or into,
or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction or a series of related transactions, assets or earning power
aggregating 50% or more of the assets or earning power of the Company and its
Subsidiaries taken as a whole, to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with the proviso at the end of this sentence) if (x) at the time of or
immediately after such consolidation, merger or sale there are any rights,
warrants or other instruments outstanding or agreements or arrangements in
effect which would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights, or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale the shareholders of a
Person who constitutes, or would constitute, the "Principal Party" for the
purposes of Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and Associates;
provided, however, that this Section 11(n) shall not affect the ability of any
- -------- -------
Subsidiary of the Company to consolidate with, merge with or into, or sell or
transfer assets or earning power to, any other Subsidiary of the Company. The
Company further covenants and agrees that after the Distribution Date it will
not, except as permitted by Section 23 or Section 27 hereof, take (or permit any
Subsidiary to take) any action if at the time such action is taken it is
reasonably foreseeable that such action will substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights.
(o) Notwithstanding anything in this Agreement to the contrary, in the
event the Company shall at any time after the date of this Agreement and prior
to the Distribution
24
<PAGE>
Date (i) declare or pay any dividend on the outstanding Common Stock of the
Company payable in shares of Common Stock of the Company or (ii) effect a
subdivision, combination or consolidation of the outstanding shares of Common
Stock of the Company (by reclassification or otherwise than by payment of
dividends in shares of Common Stock of the Company) into a greater or lesser
number of shares of Common Stock of the Company, then in any such case (A) the
number of one one-thousandths of a share of Preferred Stock purchasable after
such event upon proper exercise of each Right shall be determined by multiplying
the number of one one-thousandths of a share of Preferred Stock so purchasable
immediately prior to such event by a fraction, the numerator of which is the
number of shares of Common Stock of the Company outstanding immediately prior to
such event and the denominator of which is the number of shares of Common Stock
of the Company outstanding immediately after such event, and (B) each share of
Common Stock of the Company outstanding immediately after such event shall have
issued with respect to it that number of Rights which each share of Common Stock
of the Company outstanding immediately prior to such event had issued with
respect to it. The adjustments provided for in this Section 11(o) shall be made
successively whenever such a dividend is declared or paid or such a subdivision,
combination or consolidation is effected.
(p) The exercise of Rights under Section 11(a)(ii) shall only
result in the loss of rights under Section 11(a)(ii) to the extent so exercised
and shall not otherwise affect the rights of holders of Right Certificates under
this Rights Agreement, including rights to purchase securities of the Principal
Party following a Section 13 Event which has occurred or may thereafter occur,
as set forth in Section 13 hereof. Upon exercise of a Right Certificate under
Section 11(a)(ii), the Rights Agent shall return such Right Certificate duly
marked to indicate that such exercise has occurred.
Section 12. Certificate of Adjusted Exercise Price or Number of
---------------------------------------------------
Shares. Whenever an adjustment is made as provided in Section 11 or Section 13
- ------
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Preferred Stock and the Common Stock of the Company a copy of such certificate
and (c) mail a brief summary thereof to each holder of a Right Certificate in
accordance with Section 26 hereof. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment contained therein and
shall not be deemed to have knowledge of any such adjustment unless and until it
shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power.
- -------------
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
transaction which is not prohibited by Section 11(n) hereof), and the Company
shall not be the continuing or surviving corporation of such consolidation or
merger, (y) any Person (other than a Subsidiary of the Company in a transaction
which is not prohibited by the proviso at the end of the first sentence of
Section
25
<PAGE>
11(n) hereof) shall consolidate with the Company, or merge with and into the
Company and the Company shall be the continuing or surviving corporation of such
merger and, in connection with such merger, all or part of the shares of Common
Stock of the Company shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the Company
shall sell, mortgage or otherwise transfer (or one or more of its Subsidiaries
shall sell, mortgage or otherwise transfer), in one transaction or a series of
related transactions, assets or earning power aggregating 50% or more of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any other Person or Persons (other than the Company or any Subsidiary of the
Company in one or more transactions, each of which is not prohibited by the
proviso at the end of the first sentence of Section 11(n) hereof), then, and in
each such case, proper provision shall be made so that: (i) each holder of a
Right, except as provided in Section 7(e) hereof, shall have the right to
receive, upon the exercise thereof at the then current Exercise Price in
accordance with the terms of this Agreement, such number of validly authorized
and issued, fully paid and nonassessable shares of freely tradeable Common Stock
of the Principal Party (as hereinafter defined in Section 13(b)), free and clear
of rights of call or first refusal, liens, encumbrances, transfer restrictions
or other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Exercise Price by the number of one one-thousandths
of a share of Preferred Stock for which a Right is exercisable immediately prior
to the first occurrence of a Section 13 Event, and dividing that product by (2)
50% of the Fair Market Value (determined pursuant to Section 11(d) hereof) per
share of the Common Stock of such Principal Party on the date of consummation of
such consolidation, merger, sale or transfer; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation,
merger, sale, mortgage or transfer, all the obligations and duties of the
Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be
deemed to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply to such Principal Party; and (iv)
such Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its Common Stock to permit
exercise of all outstanding Rights in accordance with this Section 13(a) and the
making of payments in cash and/or other securities in accordance with Section
11(a)(iii) hereof) in connection with such consummation as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its shares of Common Stock thereafter
deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), the Person that is the issuer of
any securities into which shares of Common Stock of the Company are
converted in such merger or consolidation, or, if there is more than one
such issuer, the issuer of Common Stock that has the highest aggregate Fair
Market Value (determined pursuant to Section 11(d)), and if no securities
are so issued, the Person that is the other party to the merger or
consolidation, or, if there is more than one such Person, the Person the
Common Stock of which has the highest aggregate Fair Market Value
(determined pursuant to Section 11(d)); and
26
<PAGE>
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions, or, if each Person that is a party to such
transaction or transactions receives the same portion of the assets or
earning power transferred pursuant to such transaction or transactions or if
the Person receiving the largest portion of the assets or earning power
cannot be determined, whichever Person the Common Stock of which has the
highest aggregate Fair Market Value (determined pursuant to Section 11(d));
provided, however, that in any such case, (1) if the Common Stock of such Person
- -------- -------
is not at such time and has not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act ("Registered Common
Stock") or such Person is not a corporation, and such Person is a direct or
indirect Subsidiary or Affiliate of another Person who has Registered Common
Stock outstanding, "Principal Party" shall refer to such other Person; (2) if
the Common Stock of such Person is not Registered Common Stock or such Person is
not a corporation, and such Person is a direct or indirect Subsidiary of another
Person but is not a direct or indirect Subsidiary of another Person which has
Registered Common Stock outstanding, "Principal Party" shall refer to the
ultimate parent entity of such first-mentioned Person; (3) if the Common Stock
of such Person is not Registered Common Stock or such Person is not a
corporation, and such Person is directly or indirectly controlled by more than
one Person, and one or more of such other Persons has Registered Common Stock
outstanding, "Principal Party" shall refer to whichever of such other Persons is
the issuer of the Registered Common Stock having the highest aggregate Fair
Market Value (determined pursuant to Section 11(d)); and (4) if the Common Stock
of such Person is not Registered Common Stock or such Person is not a
corporation, and such Person is directly or indirectly controlled by more than
one Person, and none of such other Persons has Registered Common Stock
outstanding, "Principal Party" shall refer to whichever ultimate parent entity
is the corporation having the greatest stockholders' equity or, if no such
ultimate parent entity is a corporation, "Principal Party" shall refer to
whichever ultimate parent entity is the entity having the greatest net assets.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless prior thereto (x) the Principal Party shall have
a sufficient number of authorized shares of its Common Stock, which have not
been issued or reserved for issuance, to permit the exercise in full of the
Rights in accordance with this Section 13, and (y) the Company and each
Principal Party and each other Person who may become a Principal Party as a
result of such consolidation, merger, sale or transfer shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms
set forth in Section 13(a) and (b) and further providing that, as soon as
practicable after the date of any consolidation, merger, sale or transfer of
assets mentioned in Section 13(a), the Principal Party at its own expense will:
(i) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities purchasable
upon exercise of the Rights on
27
<PAGE>
an appropriate form, use its reasonable best efforts to cause such
registration statement to become effective as soon as practicable after such
filing and use its reasonable best efforts to cause such registration
statement to remain effective (with a prospectus that at all times meets the
requirements of the Securities Act) until the Expiration Date;
(ii) use its reasonable best efforts to qualify or register the
Rights and the securities purchasable upon exercise of the Rights under the
blue sky laws of such jurisdictions as may be necessary or appropriate;
(iii) use its reasonable best efforts to list (or continue the
listing of) the Rights and the securities purchasable upon exercise of the
Rights on a national securities exchange or to meet the eligibility
requirements for quotation on NASDAQ; and
(iv) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply
in all respects with the requirements for registration on Form 10 under the
Exchange Act.
(d) In case the Principal Party which is to be a party to a
transaction referred to in this Section 13 has a provision in any of its
authorized securities or in its Certificate of Incorporation or By-laws or other
instrument governing its corporate affairs, which provision would have the
effect of (i) causing such Principal Party to issue (other than to holders of
Rights pursuant to this Section 13), in connection with, or as a consequence of,
the consummation of a transaction referred to in this Section 13, shares of
Common Stock of such Principal Party at less than the then current Fair Market
Value (determined pursuant to Section 11(d)) or securities exercisable for, or
convertible into, Common Stock of such Principal Party at less than such Fair
Market Value, or (ii) providing for any special payment, tax or similar
provisions in connection with the issuance of the Common Stock of such Principal
Party pursuant to the provisions of this Section 13, then, in such event, the
Company shall not consummate any such transaction unless prior thereto the
Company and such Principal Party shall have executed and delivered to the Rights
Agent a supplemental agreement providing that the provision in question of such
Principal Party shall have been canceled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section 11(o)
hereof, or to distribute Right Certificates which evidence fractional Rights. If
the Company elects not to issue such fractional Rights, the Company shall pay,
in lieu of such fractional Rights, to the registered
28
<PAGE>
holders of the Right Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction of the
Fair Market Value of a whole Right, as determined pursuant to Section 11(d)
hereof.
(b) The Company shall not be required to issue fractions of shares
of Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-thousandth of a share of Preferred Stock,
the Company may pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the Fair Market Value of one one-thousandth of a share of Preferred
Stock. For purposes of this Section 14(b), the Fair Market Value of one one-
thousandth of a share of Preferred Stock shall be determined pursuant to Section
11(d) hereof for the Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of
----------------
this Agreement, other than rights of action vested in the Rights Agent pursuant
to Sections 18 and 20 hereof, are vested in the respective registered holders of
the Right Certificates (or, prior to the Distribution Date, the registered
holders of the Common Stock of the Company); and any registered holder of any
Right Certificate (or, prior to the Distribution Date, of the Common Stock of
the Company), without the consent of the Rights Agent or of the holder of any
other Right Certificate (or, prior to the Distribution Date, of the Common Stock
of the Company), may, in such registered holder's own behalf and for such
registered holder's own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act in
respect of, his right to exercise the Right evidenced by such Right Certificate
in the manner provided in such Right Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and shall be entitled to specific
performance of the obligations hereunder and injunctive relief against actual or
threatened violations of the obligations hereunder of any Person subject to this
Agreement. Holders of Rights shall be entitled to recover the reasonable costs
and expenses, including attorneys' fees, incurred by them in any action to
enforce the provisions of this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
--------------------------
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
29
<PAGE>
(a) prior to the Distribution Date, each Right will be
transferable only simultaneously and together with the transfer of shares of
Common Stock of the Company;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office or offices of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer;
(c) subject to Sections 6(a) and 7(f), the Company and the Rights
Agent may deem and treat the person in whose name a Right Certificate (or, prior
to the Distribution Date, the associated certificate representing Common Stock
of the Company) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Right Certificates or the associated certificate representing Common Stock of
the Company made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and, subject to the last sentence of Section 7(e), neither
the Company nor the Rights Agent shall be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as the result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligations; provided, however, that the Company must use
-------- -------
its best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Shareholder. No
-------------------------------------------------
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the shares of Preferred
Stock or any other securities of the Company which may at any time be issuable
on the exercise of the Rights represented thereby, nor shall anything contained
herein or in any Right Certificate be construed to confer upon the holder of any
Right Certificate, as such, any of the rights of a shareholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent such
compensation as shall be agreed to in writing between the Company and the Rights
Agent for all services rendered by it hereunder and, from time to time, on
demand of the Rights Agent, its
30
<PAGE>
reasonable expenses and counsel fees and disbursements and other disbursements
incurred in the administration and execution of this Agreement and the exercise
and performance of its duties hereunder. The Company also agrees to indemnify
the Rights Agent for, and to hold it harmless against, any loss, liability, or
expense, incurred without gross negligence, bad faith or willful misconduct on
the part of the Rights Agent, for anything done or omitted by the Rights Agent
in connection with the acceptance and administration of this Agreement,
including the costs and expenses of defending against any claim of liability
arising therefrom, directly or indirectly. The provisions of this Section 18(a)
shall survive the expiration of the Rights and the termination of this
Agreement.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Right
Certificate or certificate representing Common Stock of the Company, Preferred
Stock, or other securities of the Company, instrument of assignment or transfer,
power of attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it in good faith
and without negligence to be genuine and to be signed and executed by the proper
Person or Persons.
(c) The Rights Agent shall not be liable for consequential damages
under any provision of this Agreement or for any consequential damages arising
out of any act or failure to act hereunder.
Section 19. Merger or Consolidation or Change of Name of Rights
---------------------------------------------------
Agent.
- -----
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or shareholder services business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall
succeed to the agency created by this Agreement, any of the Right Certificates
shall have been countersigned but not delivered, any such successor Rights Agent
may adopt the countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the
31
<PAGE>
Rights Agent may adopt the countersignature under its prior name and deliver
Right Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, the Rights Agent may countersign
such Right Certificates either in its prior name or in its changed name; and in
all such cases such Right Certificates shall have the full force provided in the
Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations expressly imposed by this Agreement upon the following
terms and conditions, by all of which the Company and the holders of Right
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel selected by it
(who may be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent as
to any action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "Fair Market Value") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof shall be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by a
person believed by the Rights Agent to be the Chairman of the Board of
Directors, a Vice Chairman of the Board of Directors, the President, a Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or an Assistant
Secretary of the Company and delivered to the Rights Agent. Any such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for its own
gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section 7(e) hereof) or any
adjustment required under the
32
<PAGE>
provisions of Sections 11, 13 or 23(c) hereof or responsible for the manner,
method or amount of any such adjustment or the ascertaining of the existence of
facts that would require any such adjustment (except with respect to the
exercise of Rights evidenced by Right Certificates after receipt of a
certificate describing any such adjustment furnished in accordance with Section
12 hereof), nor shall it be responsible for any determination by the Board of
Directors of the Company of the Fair Market Value of the Rights or Preferred
Stock pursuant to the provisions of Section 14 hereof; nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock of the Company or
Preferred Stock to be issued pursuant to this Agreement or any Right Certificate
or as to whether any shares of Common Stock of the Company or Preferred Stock
will, when so issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder and
certificates delivered pursuant to any provision hereof from any person believed
by the Rights Agent to be the Chairman of the Board of Directors, any Vice
Chairman of the Board of Directors, the President, a Vice President, the
Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of
the Company, and is authorized to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer. Any application by the Rights Agent for
written instructions from the Company may, at the option of the Rights Agent,
set forth in writing any action proposed to be taken or omitted by the Rights
Agent under this Agreement and the date on or after which such action shall be
taken or such omission shall be effective. The Rights Agent shall not be liable
for any action taken by, or omission of, the Rights Agent in accordance with a
proposal included in such application on or after the date specified in such
application (which date shall not be less than five (5) Business Days after the
date any officer of the Company actually receives such application, unless any
such officer shall have consented in writing to an earlier date) unless, prior
to taking any such action (or the effective date in the case of an omission),
the Rights Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the Rights
Agent under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
33
<PAGE>
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents.
(j) No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
if there shall be reasonable grounds for believing that repayment of such funds
or adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause (1) or clause (2)
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
----------------------
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company by
first class mail. The Company may remove the Rights Agent or any successor
Rights Agent (with or without cause) upon thirty (30) days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Stock of the Company and Preferred Stock by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit his Right Certificate for inspection by the Company),
then the incumbent Rights Agent or the registered holder of any Right
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be (a) a corporation organized and doing
business under the laws of the United States or of the State of New York (or of
any other state of the United States so long as such corporation is authorized
to do business as a banking institution in the State of New York), in good
standing, which is authorized under such laws to exercise stock transfer or
corporate trust powers and is subject to supervision or examination by federal
or state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $100,000,000 or (b) an Affiliate of a
corporation described in clause (a) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall
34
<PAGE>
file notice thereof in writing with the predecessor Rights Agent and each
transfer agent of the Common Stock of the Company and the Preferred Stock, and
mail a notice thereof in writing to the registered holders of the Right
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any
----------------------------------
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Exercise Price per share and the number or kind or class of
shares of stock or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares of Common Stock of
the Company following the Distribution Date and prior to the redemption or
expiration of the Rights, the Company (a) shall, with respect to shares of
Common Stock of the Company so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereafter issued by the Company, and (b)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company, issue Right Certificates representing the appropriate
number of Rights in connection with such issuance or sale; provided, however,
-------- -------
that (i) no such Right Certificate shall be issued if, and to the extent that,
the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
person to whom such Right Certificate would be issued, and (ii) no such Right
Certificate shall be issued if, and to the extent that, appropriate adjustments
shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption.
----------
(a) The Board of Directors of the Company may, at its option,
redeem all but not less than all of the then outstanding Rights at a redemption
price of $0.001 per Right, appropriately adjusted to reflect any dividend
declared or paid on the Common Stock of the Company in shares of Common Stock of
the Company or any subdivision or combination of the outstanding shares of
Common Stock of the Company or similar event occurring after the date of this
Agreement (such redemption price, as adjusted from time to time, being
hereinafter referred to as the "Redemption Price"). The Rights may be redeemed
only until the earlier to occur of (i) 5:00 P.M., New York, New York time, on
the tenth calendar day after the Stock Acquisition Date or (ii) the Final
Expiration Date.
(b) Immediately upon the action of the Board of Directors ordering
the redemption of the Rights, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors ordering
the redemption of the Rights, the Company shall give notice of such
35
<PAGE>
redemption to the Rights Agent and the holders of the then outstanding Rights by
mailing such notice to the Rights Agent and to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the Transfer Agent for the
Common Stock of the Company. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23 or Section
24 hereof or in connection with the purchase of shares of Common Stock of the
Company prior to the Distribution Date.
(c) The Company may, at its option, pay the Redemption Price in
cash, shares of Common Stock of the Company (based on the Fair Market Value of
the Common Stock of the Company as of the time of redemption) or any other form
of consideration deemed appropriate by the Board of Directors.
Section 24. Exchange.
--------
(a) (i) The Board of Directors of the Company may, at its option,
at any time on or after the Distribution Date, exchange all or
part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the
provisions of Section 7(e) hereof) for shares of Common Stock of
the Company at an exchange ratio of one share of Common Stock of
the Company per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the
date hereof (such exchange ratio being hereinafter referred to as
the "Section 24(a)(i) Exchange Ratio"). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect
such exchange at any time after any Person (other than an Exempt
Person), together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of 50% or more of the Common
Stock of the Company.
(ii) Notwithstanding the foregoing, the Board of Directors of
the Company may, at its option, at any time on or after the
Distribution Date, exchange all or part of the then outstanding
and exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 7(e) hereof) for
shares of Common Stock of the Company at an exchange ratio
specified in the following sentence, as appropriately adjusted to
reflect any stock split, stock dividend or similar transaction
occurring after the date of this Agreement. Subject to the
adjustment described in the foregoing sentence, each Right may be
exchanged for that number of shares of Common Stock of the Company
obtained by dividing the Spread (as defined in Section 11(a)(iii))
by the then Fair Market Value per one one-thousandth of a share of
Preferred Stock on the earlier of (x) the date on which any person
becomes an Acquiring Person or (y) the date on which a tender or
exchange offer by any Person (other than an
36
<PAGE>
Exempt Person) is first published or sent or given within the
meaning of Rule 14d-4(a) of the Exchange Act or any successor
rule, if upon consummation thereof such Person would be the
Beneficial Owner of more than 15% of the shares of Common Stock of
the Company then outstanding (such exchange ratio being referred
to herein as the "Section 24(a)(ii) Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors shall not be
empowered to effect such exchange at any time after any Person
(other than an Exempt Person), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or
more of the Common Stock of the Company.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of shares of Common Stock of the
Company equal to the number of such Rights held by such holder multiplied by the
Section 24(a)(i) Exchange Ratio or the Section 24(a)(ii) Exchange Ratio, as
applicable. The Company shall promptly give notice of any such exchange in
accordance with Section 26 hereof and shall promptly mail a notice of any such
exchange to all of the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent; provided, however, that the
-------- -------
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such
notice of exchange will state the method by which the exchange of the shares of
Common Stock of the Company for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of Section 7(e) hereof)
held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at
its option, may substitute Preferred Stock (or Preferred Stock Equivalent, as
such term is defined in Section 11(b) hereof) for Common Stock of the Company
exchangeable for Rights, at the initial rate of one one-thousandth of a share of
Preferred Stock (or Preferred Stock Equivalent) for each share of Common Stock
of the Company, as appropriately adjusted to reflect adjustments in the voting
rights of the Preferred Stock pursuant to the terms thereof, so that the
fraction of a share of Preferred Stock delivered in lieu of each share of Common
Stock of the Company shall have the same voting rights as one share of Common
Stock of the Company.
(d) In the event that there shall not be sufficient shares of
Common Stock of the Company or Preferred Stock (or Preferred Stock Equivalent)
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional shares of
Common Stock of the Company or Preferred Stock (or Preferred Stock Equivalent)
for issuance upon exchange of the Rights.
37
<PAGE>
(e) The Company shall not be required to issue fractions of Common
Stock of the Company or to distribute certificates which evidence fractional
shares of Common Stock of the Company. If the Company elects not to issue such
fractional shares of Common Stock of the Company, the Company shall pay, in lieu
of such fractional shares of Common Stock of the Company, to the registered
holders of the Right Certificates with regard to which such fractional shares of
Common Stock of the Company would otherwise be issuable, an amount in cash equal
to the same fraction of the Fair Market Value of a whole share of Common Stock
of the Company. For the purposes of this paragraph (e), the Fair Market Value
of a whole share of Common Stock of the Company shall be the closing price of a
share of Common Stock of the Company (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
------------------------
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular periodic cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with, or to effect any sale, mortgage or other transfer (or to
permit one or more of its Subsidiaries to effect any sale, mortgage or other
transfer), in one transaction or a series of related transactions, of 50% or
more of the assets or earning power of the Company and its Subsidiaries (taken
as a whole) to, any other Person (other than a Subsidiary of the Company in one
or more transactions each of which is not prohibited by the proviso at the end
of the first sentence of Section 11(n) hereof), (v) to effect the liquidation,
dissolution or winding up of the Company, or (vi) to declare or pay any dividend
on the Common Stock of the Company payable in Common Stock of the Company or to
effect a subdivision, combination or consolidation of the Common Stock of the
Company (by reclassification or otherwise than by payment of dividends in Common
Stock of the Company) then in each such case, the Company shall give to each
holder of a Right Certificate and to the Rights Agent, in accordance with
Section 26 hereof, a notice of such proposed action, which shall specify the
record date for the purposes of such stock dividend, distribution of rights or
warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of the shares of Common Stock of
the Company and/or Preferred Stock, if any such date is to be fixed, and such
notice shall be so given in the case of any action covered by clause (i) or (ii)
above at least twenty (20) days prior to the record date for determining holders
of the shares of Preferred Stock for purposes of such action, and in the case of
any such other action, at least twenty (20) days prior to the date of the taking
of such proposed action or the date of participation therein by the holders of
the shares of Common Stock of the Company and/or Preferred Stock, whichever
shall be the earlier; provided, however, no such notice shall
-------- -------
38
<PAGE>
be required pursuant to this Section 25 as a result of any Subsidiary of the
Company effecting a consolidation or merger with or into, or effecting a sale or
other transfer of assets or earnings power to, any other Subsidiary of the
Company in a manner not inconsistent with the provisions of this Agreement.
(b) In case any Section 11(a)(ii) Event shall occur, then, in any
such case, the Company shall as soon as practicable thereafter give to each
registered holder of a Right Certificate and to the Rights Agent, in accordance
with Section 26 hereof, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under
Section 11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this
-------
Agreement to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, by facsimile transmission or by nationally
recognized overnight courier addressed (until another address is filed in
writing with the Rights Agent) as follows:
Boston Properties, Inc.
8 Arlington Street
Boston, Massachusetts 02116
Attention: President
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Right
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, by facsimile transmission or by
nationally-recognized overnight courier addressed (until another address is
filed in writing with the Company) as follows:
BankBoston, N.A.
c/o Boston Equiserve Limited Partnership
150 Royall Street
Canton, MA 02021
Attention: Administration
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate (or, prior to
the Distribution Date, to the holder of any certificate representing shares of
Common Stock of the Company) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution
--------------------------
Date, the Company and the Rights Agent shall, if the Company so directs,
supplement or amend any provision of this Agreement as the Company may deem
necessary or desirable
39
<PAGE>
without the approval of any holders of certificates representing shares of
Common Stock of the Company. From and after the Distribution Date, the Company
and the Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holder of Right Certificates in order (i)
to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereof in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Right Certificates (other than an Acquiring Person or any Affiliate
or Associate of an Acquiring Person); provided, however, that from and after the
-------- -------
Distribution Date this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence, (A) a time period relating to when
the Rights may be redeemed at such time as the Rights are not then redeemable or
(B) any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of, and the benefits to, the
holders of Rights (other than an Acquiring Person or any Affiliate or Associate
of an Acquiring Person). Upon the delivery of such certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the Rights Agent
shall execute such supplement or amendment. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock of the Company. Notwithstanding any other
provision hereof, the Rights Agent's consent must be obtained regarding any
amendment or supplement pursuant to this Section 27 which alters the Rights
Agent's rights or duties.
Section 28. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors.
----------------------------------------------------
For all purposes of this Agreement, any calculation of the number of shares of
Common Stock of the Company outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
Common Stock of the Company of which any Person is the Beneficial Owner, shall
be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the Rules
under the Exchange Act as in effect on the date hereof. The Board of Directors
of the Company shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board of Directors or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including without limitation, the right and
power to (i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board of Directors in
good faith shall (x) be final, conclusive and binding on the Company, the Rights
Agent, the holders of the Rights and all
40
<PAGE>
other parties, and (y) not subject any member of the Board of Directors to any
liability to the holders of the Rights or to any other person.
Section 30. Benefits of this Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any person or corporation other than the Company,
the Rights Agent and the registered holders of the Right Certificates (and,
prior to the Distribution Date, the Common Stock of the Company) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock of the Company).
Section 31. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
- -------- -------
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from the Agreement would adversely affect the purpose or effect
of the Agreement, the right of redemption set forth in Section 23 hereof shall
be reinstated and shall not expire until the Close of Business on the tenth day
following the date of such determination by the Board of Directors.
Section 32. Governing Law. This Agreement, each Right and each
-------------
Right Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such state applicable to contracts to
be made and to be performed entirely within such state. The courts of the State
of Delaware and of the United States of America located in the State of Delaware
(the "Delaware Courts") shall have exclusive jurisdiction over any litigation
arising out of or relating to this Agreement and the transactions contemplated
hereby, and any Person commencing or otherwise involved in any such litigation
shall waive any objection to the laying of venue of such litigation in the
Delaware Courts and shall not plead or claim in any Delaware Court that such
litigation brought therein has been brought in an inconvenient forum.
Section 33. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the
--------------------
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
[Remainder of page intentionally left blank.]
41
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as an instrument under seal and attested, all as of the day and
year first above written.
ATTEST: BOSTON PROPERTIES, INC.
By:------------------------------ By:------------------------------
Name:
Title:
ATTEST: BANKBOSTON, N.A.
By:------------------------------ By:------------------------------
Name:
Title:
42
<PAGE>
Exhibit A
---------
VOTE OF DIRECTORS ESTABLISHING
SERIES X JUNIOR PARTICIPATING CUMULATIVE PREFERRED STOCK
OF
BOSTON PROPERTIES, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware:
VOTED, that pursuant to the authority conferred upon and vested in the
Board of Directors by the Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") of Boston Properties, Inc. (the "Corporation")
the Board of Directors hereby establishes and designates a series of Preferred
Stock of the Corporation, and hereby fixes and determines the relative rights
and preferences of the shares of such series, in addition to those set forth in
the Certificate of Incorporation, as follows:
Section 1. Designation and Amount. The shares of such series shall
----------------------
be designated as "Series X Junior Participating Cumulative Preferred Stock," par
value $.01 per share (hereinafter called "Series X Preferred Stock"), and the
number of shares initially constituting such series shall be 200,000. Such
number of shares may be increased or decreased by resolution of the Board of
Directors and by the filing of a certificate pursuant to the provisions of the
General Corporation Law of the State of Delaware stating that such increase or
reduction has been so authorized; provided, however, that no decrease shall
-------- -------
reduce the number of shares of Series X Preferred Stock to a number less than
that of the shares then outstanding plus the number of shares of Series X
Preferred Stock issuable upon exercise of outstanding rights, options or
warrants or upon conversion of outstanding securities issued by the Corporation.
Section 2. Dividends and Distributions.
---------------------------
(A) (i) Subject to the rights of the holders of any shares of any
series of preferred stock (or any similar stock) ranking prior and superior to
the Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of shares of common stock
and of any other junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March, June,
September and December in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 or (b) subject to the provisions for
adjustment hereinafter set forth, 1,000 times the aggregate per share amount of
all cash dividends, and 1,000 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of common stock or a
A-1
<PAGE>
subdivision of the outstanding shares of common stock (by reclassification or
otherwise), declared on the shares of common stock since the immediately
preceding Quarterly Dividend Payment Date, or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. The multiple of cash and non-
cash dividends declared on the shares of common stock to which holders of the
Series X Preferred Stock are entitled, which shall be 1,000 initially but which
shall be adjusted from time to time as hereinafter provided, is hereinafter
referred to as the "Dividend Multiple." In the event the Corporation shall at
any time after June 13, 1997 (the "Rights Declaration Date") (i) declare or pay
any dividend on the shares of common stock payable in shares of common stock, or
(ii) effect a subdivision or combination or consolidation of the outstanding
shares of common stock (by reclassification or otherwise than by payment of a
dividend in shares of common stock) into a greater or lesser number of shares of
common stock, then in each such case the Dividend Multiple thereafter applicable
to the determination of the amount of dividends which holders of shares of
Series A Preferred Stock shall be entitled to receive shall be the Dividend
Multiple applicable immediately prior to such event multiplied by a fraction,
the numerator of which is the number of shares of common stock outstanding
immediately after such event and the denominator of which is the number of
shares of common stock that were outstanding immediately prior to such event.
The prior sentence shall specifically not apply to the merger of Boston
Properties, Inc., a Massachusetts corporation, with and into the Corporation and
any transaction or action taken in contemplation or furtherance thereof.
(ii) Notwithstanding anything else contained in this paragraph (A),
the Corporation shall, out of funds legally available for that purpose, declare
a dividend or distribution on the Series A Preferred Stock as provided in this
paragraph (A) immediately after it declares a dividend or distribution on the
shares of common stock (other than a dividend payable in shares of common
stock); provided that, in the event no dividend or distribution shall have been
declared on the shares of common stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $1.00 per share on the Series A Preferred Stock shall nevertheless
be payable on such subsequent Quarterly Dividend Payment Date.
(B) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix
in accordance with
A-2
<PAGE>
applicable law a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than such
number of days prior to the date fixed for the payment thereof as may be allowed
by applicable law.
Section 3. Voting Rights. In addition to any other voting rights required
-------------
by law, the holders of shares of Series X Preferred Stock shall have the
following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series X Preferred Stock shall entitle the holder thereof to 1,000
votes on all matters submitted to a vote of the stockholders of the Corporation.
The number of votes which a holder of a share of Series A Preferred Stock is
entitled to cast, which shall initially be 1,000 but which may be adjusted from
time to time as hereinafter provided, is hereinafter referred to as the "Vote
Multiple." In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare or pay any dividend on shares of common stock
payable in shares of common stock, or (ii) effect a subdivision or combination
or consolidation of the outstanding shares of common stock (by reclassification
or otherwise than by payment of a dividend in shares of common stock) into a
greater or lesser number of shares of common stock, then in each such case the
Vote Multiple thereafter applicable to the determination of the number of votes
per share to which holders of shares of Series X Preferred Stock shall be
entitled shall be the Vote Multiple immediately prior to such event multiplied
by a fraction, the numerator of which is the number of shares of common stock
outstanding immediately after such event and the denominator of which is the
number of shares of common stock that were outstanding immediately prior to such
event.
(B) Except as otherwise provided herein or by law, the holders of shares of
Series A Preferred Stock and the holders of shares of common stock and the
holders of shares of any other capital stock of this Corporation having general
voting rights, shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(C) (i) Whenever, at any time or times, dividends payable on any shares
of Series X Preferred Stock shall be in arrears in an amount equal to at least
two full quarter dividends (whether or not declared and whether or not
consecutive), the holders of record of the outstanding shares of Series X
Preferred Stock shall have the exclusive right, voting separately as a single
class, to elect two directors of the Corporation at a special meeting of
shareholders of the Corporation or at the Corporation's next annual meeting of
shareholders, and at each subsequent annual meeting of stockholders, as provided
below. At elections for such directors, each Series X Preferred Share shall
entitle the holder thereof to 1,000 votes in such elections.
(ii) Upon the vesting of such right of the holders of shares of Series
X Preferred Stock, the maximum authorized number of members of the Board of
Directors shall automatically be increased by two and the two vacancies so
created shall be filled by vote of the holders of the outstanding shares of
Series X Preferred Stock as hereinafter set forth. A
A-3
<PAGE>
special meeting of the stockholders of the Corporation then entitled to vote
shall be called by the Chairman of the Board of Directors or the President or
the Secretary of the Corporation, if requested in writing by the holders of
record of not less than 10% of the shares of Series X Preferred Stock then
outstanding. At such special meeting, or, if no such special meeting shall have
been called, then at the next annual meeting of shareholders of the Corporation,
the holders of the shares of Series X Preferred Stock shall elect, voting as
above provided, two directors of the Corporation to fill the aforesaid vacancies
created by the automatic increase in the number of members of the Board of
Directors. At any and all such meetings for such election, the holders of a
majority of the outstanding shares of Series X Preferred Stock shall be
necessary to constitute a quorum for such election, whether present in person or
proxy, and such two directors shall be elected by the vote of at least a
majority of the shares of Series X Preferred Stock held by such shareholders
present or represented at the meeting. Any director elected by holders of shares
of Series X Preferred Stock pursuant to this Section may be removed at any
annual or special meeting, by vote of a majority of the shareholders voting as a
class who elected such director, with or without cause. In case any vacancy
shall occur among the directors elected by the holders of shares of Series X
Preferred Stock pursuant to this Section, such vacancy may be filled by the
remaining director so elected, or his successor then in office, and the director
so elected to fill such vacancy shall serve until the next meeting of
shareholders for the election of directors. After the holders of shares of
Series X Preferred Stock shall have exercised their right to elect directors in
any default period and during the continuance of such period, the number of
directors shall not be further increased or decreased except by vote of the
holders of shares of Series X Preferred Stock as herein provided or pursuant to
the rights of any equity securities ranking senior to or pari passu with the
Series X Preferred Stock.
(iii) The right of the holders of shares of Series X Preferred
Stock, voting separately as a class, to elect two members of the Board of
Directors of the Corporation as aforesaid shall continue until, and only until,
such time as all arrears in dividends (whether or not declared) on the Series X
Preferred Stock shall have been paid or declared and set apart for payment, at
which time such right shall terminate, except as herein or by law expressly
provided subject to revesting in the event of each and every subsequent default
of the character above-mentioned. Upon any termination of the right of the
holders of the Series X Preferred Stock as a class to vote for directors as
herein provided, the term of office of all directors then in office elected by
the holders of shares of Series A Preferred Stock pursuant to this Section shall
terminate immediately. Whenever the term of office of the directors elected by
the holders of shares of Series X Preferred Stock pursuant to this Section shall
terminate and the special voting powers vested in the holders of the Series X
Preferred Stock pursuant to this Section shall have expired, the maximum number
of members of this Board of Directors of the Corporation shall be such number as
may be provided for in the By-laws of the Corporation, irrespective of any
increase made pursuant to the provisions of this Section.
(D) Except as otherwise required by applicable law or as set forth herein,
holders of Series X Preferred Stock shall have no special voting rights and
their consent shall not be
A-4
<PAGE>
required (except to the extent they are entitled to vote with holders of shares
of common stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever dividends or distributions payable on the Series A Preferred
Stock as provided in Section 2 are in arrears, thereafter and until all accrued
and unpaid dividends and distributions, whether or not declared, on shares of
Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A Preferred Stock
and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of
all such shares are then entitled;
(iii) except as permitted in subsection 4(A)(iv) below, redeem, purchase
or otherwise acquire for consideration shares of any stock ranking
on a parity (either as to dividends or upon liquidation, dissolution
or winding up) with the Series A Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise acquire
shares of any such parity stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred
Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series
X Preferred Stock, or any shares of any stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding
up) with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by
the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under subsection (A) of this Section
4, purchase or otherwise acquire such shares at such time and in such manner.
A-5
<PAGE>
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
-----------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
preferred stock and may be reissued as part of a new series of preferred stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation
--------------------------------------
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made (x) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares of Series
A Preferred Stock shall have received an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (1) $1,000.00 per share or
(2) an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount to be
distributed per share to holders of shares of common stock, or (y) to the
holders of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock and all other
such parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up. In
the event the Corporation shall at any time after the Rights Declaration Date
(i) declare or pay any dividend on shares of common stock payable in shares of
common stock, or (ii) effect a subdivision or combination or consolidation of
the outstanding shares of common stock (by reclassification or otherwise than by
payment of a dividend in shares of common stock) into a greater or lesser number
of shares of common stock, then in each such case the aggregate amount per share
to which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event under clause (x) of the preceding sentence shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of common stock outstanding immediately after such event and the
denominator of which is the number of shares of common stock that were
outstanding immediately prior to such event.
Neither the consolidation of nor merging of the Corporation with or into
any other corporation or corporations, nor the sale or other transfer of all or
substantially all of the assets of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this Section 6.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
--------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of common stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of common stock is changed or exchanged,
plus accrued and unpaid dividends, if any,
A-6
<PAGE>
payable with respect to the Series X Preferred Stock. In the event the
Corporation shall at any time after the Rights Declaration Date (i) declare or
pay any dividend on shares of common stock payable in shares of common stock, or
(ii) effect a subdivision or combination or consolidation of the outstanding
shares of common stock (by reclassification or otherwise than by payment of a
dividend in shares of common stock) into a greater or lesser number of shares of
common stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A Preferred
Stock shall be adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of common stock outstanding immediately after
such event and the denominator of which is the number of shares of common stock
that were outstanding immediately prior to such event.
Section 8. Redemption. The shares of Series A Preferred Stock shall not
----------
be redeemable; provided, however, that the foregoing shall not limit the ability
-------- -------
of the Corporation to purchase or otherwise deal in such shares to the extent
otherwise permitted hereby and by law.
Section 9. Ranking. Unless otherwise provided in the Certificate of
-------
Incorporation or a Certificate of Vote of Directors Establishing a Class of
Stock relating to a subsequently-designated series of preferred stock of the
Corporation, the Series A Preferred Stock shall rank junior to any other series
of the Corporation's preferred stock subsequently issued, as to the payment of
dividends and the distribution of assets on liquidation, dissolution or winding
up and shall rank senior to the common stock.
Section 10. Amendment. The Certificate of Incorporation and this
---------
Certificate of Vote of Directors shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series X Preferred Stock so as to affect them adversely without the affirmative
vote of the holders of two-thirds or more of the outstanding shares of Series X
Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Shares of Series X Preferred Stock may be
-----------------
issued in whole shares or in any fraction of a share that is one one-thousandth
(1/1,000th) of a share or any integral multiple of such fraction, which shall
entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of shares of Series X Preferred
Stock. In lieu of fractional shares, the Corporation may elect to make a cash
payment as provided in the Rights Agreement for fractions of a share other than
one one-thousandth (1/1,000th) of a share or any integral multiple thereof.
A-7
<PAGE>
Exhibit B
---------
[Form of Right Certificate]
Certificate No. R- __________ Rights
NOT EXERCISABLE AFTER ______________, 200_ OR EARLIER IF NOTICE OF REDEMPTION IS
GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF BOSTON
PROPERTIES, INC., AT $0.001 PER RIGHT ON THE TERMS SET FORTH IN THE SHAREHOLDER
RIGHTS AGREEMENT BETWEEN BOSTON PROPERTIES, INC. AND [RIGHTS AGENT], AS RIGHTS
AGENT, DATED AS OF ______________, 199_ (THE "RIGHTS AGREEMENT"). UNDER CERTAIN
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
Right Certificate
BOSTON PROPERTIES, INC.
This certifies that _________________________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Shareholder Rights Agreement dated as of _____________, 199_ (the "Rights
Agreement") between BOSTON PROPERTIES, INC. (the "Company") and [RIGHTS AGENT],
as Rights Agent (the "Rights Agent"), to purchase from the Company at any time
after the Distribution Date (as such term is defined in the Rights Agreement)
and prior to the close of business on ____________, 200_ at the office or
offices of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one one-thousandth of a fully paid, non-assessable share of Series
A Junior Participating Cumulative Preferred Stock (the "Preferred Stock") of the
Company, at a purchase price of $_______ per one one-thousandth of a share (the
"Exercise Price"), upon presentation and surrender of this Right Certificate
with the Form of Election to Purchase and the related Certificate duly executed.
The number of Rights evidenced by this Right Certificate (and the number of
shares which may be purchased upon exercise thereof) set forth above, and the
Exercise Price per
B-1
<PAGE>
share set forth above, are the number and Exercise Price as of _______________,
based on the shares of Preferred Stock as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Person (as such terms are defined in the Rights Agreement), (ii) a
transferee of any such Acquiring Person, Associate or Affiliate, or (iii) under
certain circumstances specified in the Rights Agreement, a transferee of a
Person who, after such transfer, became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Exercise Price and the number of
shares of Preferred Stock or other securities which may be purchased upon the
exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal office of the
Company and the designated office of the Rights Agent and are also available
upon written request to the Company or the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock as the Rights evidenced by the
Right Certificate or Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Right Certificate or
Certificates for the number of whole Rights not exercised. If this Right
Certificate shall be exercised in whole or in part pursuant to Section 11(a)(ii)
of the Rights Agreement, the holder shall be entitled to receive this Right
Certificate duly marked to indicate that such exercise has occurred as set forth
in the Rights Agreement.
Under certain circumstances, subject to the provisions of the Rights
Agreement, the Board of Directors of the Company at its option may exchange all
or any part of the Rights evidenced by this Certificate for shares of the
Company's Common Stock or Preferred Stock at an exchange ratio (subject to
adjustment) of one share of Common Stock or one one-thousandth of a share of
Preferred Stock per Right.
B-2
<PAGE>
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Board of Directors of the Company at its
option at a redemption price of $0.01 per Right (payable in cash, Common Stock
or other consideration deemed appropriate by the Board of Directors).
The Company is not obligated to issue fractional shares of stock upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-thousandth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts). If
the Company elects not to issue such fractional shares, in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock, Common Stock or any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by an authorized signatory of the Rights
Agent.
B-3
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
[Corporate Seal] BOSTON PROPERTIES, INC.
Attested: By
------------------------------
Name:
By Title: [Chairman, Vice
---------------------------------- Chairman, President
[Secretary or Assistant Secretary] or Vice President]
Countersigned:
[____________________________],
as Rights Agent
- ------------------------------------
Authorized Signatory
Date of countersignature:
B-4
<PAGE>
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED _____________ hereby sells, assigns and transfers unto
__________________________ (Please print name and address of transferee)
__________________________ this Right Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
_____________ Attorney, to transfer the within Right Certificate on the books of
the within-named Company, with full power of substitution.
Dated:
-------------------
-----------------------------------
Signature
Signature Guaranteed:
------------------------
B-5
<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate ________ are ________
are not being transferred by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Person (as such terms are
defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned ___ did ____ did not directly or indirectly acquire the Rights
evidenced by this Right Certificate from any Person who is, was or became an
Acquiring Person or an Affiliate or Associate of any such Person.
Dated: -------------------------------
------------------- Signature
B-6
<PAGE>
NOTICE
------
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Right Certificate in every
particular, without alteration or enlargement or any change whatsoever.
B-7
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Right Certificate.)
To BOSTON PROPERTIES, INC.:
The undersigned hereby irrevocably elects to exercise ___________ Rights
represented by this Right Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of:
Please insert social security
or other identifying taxpayer number:
-----------------------
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate or if the Rights are being exercised pursuant to Section
11(a)(ii) of the Rights Agreement, a new Right Certificate for the balance of
such Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying taxpayer number:
-----------------------
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated:
-------------
--------------------------------------------
Signature
Signature Guaranteed:
-------------------------
B-8
<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate ________ are ________
are not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Person (as such terms are
defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned ___ did ____ did not directly or indirectly acquire the Rights
evidenced by this Right Certificate from any Person who is, was or became an
Acquiring Person or an Affiliate or Associate of any such Person.
Dated: ------------------------------------
--------------- Signature
B-9
<PAGE>
NOTICE
------
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-10
<PAGE>
EXHIBIT 4.2
Form of Certificate of Designation, Preferences
and Rights of a Series of Preferred Stock
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF A SERIES OF
PREFERRED STOCK
OF
BOSTON PROPERTIES, INC.
Pursuant to Section 151
of the General Corporation Law of the State of Delaware
_____________
BOSTON PROPERTIES, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware, does hereby certify:
That, pursuant to authority conferred upon the Board of Directors by the
Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") of said Corporation, and pursuant to the provisions of Section
151 of the General Corporation Law of the State of Delaware, said Board of
Directors, by a unanimous written consent, dated as of June 11, 1997, adopted a
resolution providing for the designations, preferences and relative,
participating, optional or other rights, and the qualifications, limitations or
restrictions thereof, including, without limiting the generality of the
foregoing, such provisions as may be desired concerning voting, redemption,
dividends, dissolution or the distribution of assets, and conversion or
exchange, of a Series of Preferred Stock, which resolution is as follows:
See attached pages 2A-8A
<PAGE>
VOTE OF DIRECTORS ESTABLISHING
SERIES X JUNIOR PARTICIPATING CUMULATIVE PREFERRED STOCK
OF
BOSTON PROPERTIES, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware:
VOTED, that pursuant to the authority conferred upon and vested in the
Board of Directors by the Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") of Boston Properties, Inc. (the "Corporation")
the Board of Directors hereby establishes and designates a series of Preferred
Stock of the Corporation, and hereby fixes and determines the relative rights
and preferences of the shares of such series, in addition to those set forth in
the Certificate of Incorporation, as follows:
Section 1. Designation and Amount. The shares of such series shall
----------------------
be designated as "Series X Junior Participating Cumulative Preferred Stock," par
value $.01 per share (hereinafter called "Series X Preferred Stock"), and the
number of shares initially constituting such series shall be 200,000. Such
number of shares may be increased or decreased by resolution of the Board of
Directors and by the filing of a certificate pursuant to the provisions of the
General Corporation Law of the State of Delaware stating that such increase or
reduction has been so authorized; provided, however, that no decrease shall
-------- -------
reduce the number of shares of Series X Preferred Stock to a number less than
that of the shares then outstanding plus the number of shares of Series X
Preferred Stock issuable upon exercise of outstanding rights, options or
warrants or upon conversion of outstanding securities issued by the Corporation.
Section 2. Dividends and Distributions.
---------------------------
(A) (i) Subject to the rights of the holders of any shares of any
series of preferred stock (or any similar stock) ranking prior and superior to
the Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of shares of common stock
and of any other junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March, June,
September and December in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 or (b) subject to the provisions for
adjustment hereinafter set forth, 1,000 times the aggregate per share amount of
all cash dividends, and 1,000 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of common stock or a subdivision of the outstanding shares of
common stock (by reclassification or otherwise),
2-A
<PAGE>
declared on the shares of common stock since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series A
Preferred Stock. The multiple of cash and non-cash dividends declared on the
shares of common stock to which holders of the Series X Preferred Stock are
entitled, which shall be 1,000 initially but which shall be adjusted from time
to time as hereinafter provided, is hereinafter referred to as the "Dividend
Multiple." In the event the Corporation shall at any time after June 13, 1997
(the "Rights Declaration Date") (i) declare or pay any dividend on the shares of
common stock payable in shares of common stock, or (ii) effect a subdivision or
combination or consolidation of the outstanding shares of common stock (by
reclassification or otherwise than by payment of a dividend in shares of common
stock) into a greater or lesser number of shares of common stock, then in each
such case the Dividend Multiple thereafter applicable to the determination of
the amount of dividends which holders of shares of Series A Preferred Stock
shall be entitled to receive shall be the Dividend Multiple applicable
immediately prior to such event multiplied by a fraction, the numerator of which
is the number of shares of common stock outstanding immediately after such event
and the denominator of which is the number of shares of common stock that were
outstanding immediately prior to such event. The prior sentence shall
specifically not apply to the merger of Boston Properties, Inc., a Massachusetts
corporation, with and into the Corporation and any transaction or action taken
in contemplation or furtherance thereof.
(ii) Notwithstanding anything else contained in this paragraph (A),
the Corporation shall, out of funds legally available for that purpose, declare
a dividend or distribution on the Series A Preferred Stock as provided in this
paragraph (A) immediately after it declares a dividend or distribution on the
shares of common stock (other than a dividend payable in shares of common
stock); provided that, in the event no dividend or distribution shall have been
declared on the shares of common stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $1.00 per share on the Series A Preferred Stock shall nevertheless
be payable on such subsequent Quarterly Dividend Payment Date.
(B) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Preferred Stock, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares of Series
A Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix in accordance with
3-A
<PAGE>
applicable law a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than such
number of days prior to the date fixed for the payment thereof as may be allowed
by applicable law.
Section 3. Voting Rights. In addition to any other voting rights required
-------------
by law, the holders of shares of Series X Preferred Stock shall have the
following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series X Preferred Stock shall entitle the holder thereof to 1,000
votes on all matters submitted to a vote of the stockholders of the Corporation.
The number of votes which a holder of a share of Series A Preferred Stock is
entitled to cast, which shall initially be 1,000 but which may be adjusted from
time to time as hereinafter provided, is hereinafter referred to as the "Vote
Multiple." In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare or pay any dividend on shares of common stock
payable in shares of common stock, or (ii) effect a subdivision or combination
or consolidation of the outstanding shares of common stock (by reclassification
or otherwise than by payment of a dividend in shares of common stock) into a
greater or lesser number of shares of common stock, then in each such case the
Vote Multiple thereafter applicable to the determination of the number of votes
per share to which holders of shares of Series X Preferred Stock shall be
entitled shall be the Vote Multiple immediately prior to such event multiplied
by a fraction, the numerator of which is the number of shares of common stock
outstanding immediately after such event and the denominator of which is the
number of shares of common stock that were outstanding immediately prior to such
event.
(B) Except as otherwise provided herein or by law, the holders of shares of
Series A Preferred Stock and the holders of shares of common stock and the
holders of shares of any other capital stock of this Corporation having general
voting rights, shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(C) (i) Whenever, at any time or times, dividends payable on any shares
of Series X Preferred Stock shall be in arrears in an amount equal to at least
two full quarter dividends (whether or not declared and whether or not
consecutive), the holders of record of the outstanding shares of Series X
Preferred Stock shall have the exclusive right, voting separately as a single
class, to elect two directors of the Corporation at a special meeting of
shareholders of the Corporation or at the Corporation's next annual meeting of
shareholders, and at each subsequent annual meeting of stockholders, as provided
below. At elections for such directors, each Series X Preferred Share shall
entitle the holder thereof to 1,000 votes in such elections.
(ii) Upon the vesting of such right of the holders of shares of
Series X Preferred Stock, the maximum authorized number of members of the Board
of Directors shall automatically be increased by two and the two vacancies so
created shall be filled by vote of
4-A
<PAGE>
the holders of the outstanding shares of Series X Preferred Stock as hereinafter
set forth. A special meeting of the stockholders of the Corporation then
entitled to vote shall be called by the Chairman of the Board of Directors or
the President or the Secretary of the Corporation, if requested in writing by
the holders of record of not less than 10% of the shares of Series X Preferred
Stock then outstanding. At such special meeting, or, if no such special meeting
shall have been called, then at the next annual meeting of shareholders of the
Corporation, the holders of the shares of Series X Preferred Stock shall elect,
voting as above provided, two directors of the Corporation to fill the aforesaid
vacancies created by the automatic increase in the number of members of the
Board of Directors. At any and all such meetings for such election, the holders
of a majority of the outstanding shares of Series X Preferred Stock shall be
necessary to constitute a quorum for such election, whether present in person or
proxy, and such two directors shall be elected by the vote of at least a
majority of the shares of Series X Preferred Stock held by such shareholders
present or represented at the meeting. Any director elected by holders of shares
of Series X Preferred Stock pursuant to this Section may be removed at any
annual or special meeting, by vote of a majority of the shareholders voting as a
class who elected such director, with or without cause. In case any vacancy
shall occur among the directors elected by the holders of shares of Series X
Preferred Stock pursuant to this Section, such vacancy may be filled by the
remaining director so elected, or his successor then in office, and the director
so elected to fill such vacancy shall serve until the next meeting of
shareholders for the election of directors. After the holders of shares of
Series X Preferred Stock shall have exercised their right to elect directors in
any default period and during the continuance of such period, the number of
directors shall not be further increased or decreased except by vote of the
holders of shares of Series X Preferred Stock as herein provided or pursuant to
the rights of any equity securities ranking senior to or pari passu with the
Series X Preferred Stock.
(iii) The right of the holders of shares of Series X Preferred
Stock, voting separately as a class, to elect two members of the Board of
Directors of the Corporation as aforesaid shall continue until, and only until,
such time as all arrears in dividends (whether or not declared) on the Series X
Preferred Stock shall have been paid or declared and set apart for payment, at
which time such right shall terminate, except as herein or by law expressly
provided subject to revesting in the event of each and every subsequent default
of the character above-mentioned. Upon any termination of the right of the
holders of the Series X Preferred Stock as a class to vote for directors as
herein provided, the term of office of all directors then in office elected by
the holders of shares of Series A Preferred Stock pursuant to this Section shall
terminate immediately. Whenever the term of office of the directors elected by
the holders of shares of Series X Preferred Stock pursuant to this Section shall
terminate and the special voting powers vested in the holders of the Series X
Preferred Stock pursuant to this Section shall have expired, the maximum number
of members of this Board of Directors of the Corporation shall be such number as
may be provided for in the By-laws of the Corporation, irrespective of any
increase made pursuant to the provisions of this Section.
(D) Except as otherwise required by applicable law or as set forth herein,
holders of
5-A
<PAGE>
Series X Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with
holders of shares of common stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever dividends or distributions payable on the Series A Preferred
Stock as provided in Section 2 are in arrears, thereafter and until all accrued
and unpaid dividends and distributions, whether or not declared, on shares of
Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A Preferred Stock
and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of
all such shares are then entitled;
(iii) except as permitted in subsection 4(A)(iv) below, redeem, purchase
or otherwise acquire for consideration shares of any stock ranking on
a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise acquire
shares of any such parity stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred
Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series
X Preferred Stock, or any shares of any stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding
up) with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by
the Board of Directors) to all holders of such shares upon such terms
as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the
6-A
<PAGE>
Corporation could, under subsection (A) of this Section 4, purchase or otherwise
acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
-----------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
preferred stock and may be reissued as part of a new series of preferred stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation
--------------------------------------
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made (x) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares of Series
A Preferred Stock shall have received an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (1) $1,000.00 per share or
(2) an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount to be
distributed per share to holders of shares of common stock, or (y) to the
holders of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock and all other
such parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up. In
the event the Corporation shall at any time after the Rights Declaration Date
(i) declare or pay any dividend on shares of common stock payable in shares of
common stock, or (ii) effect a subdivision or combination or consolidation of
the outstanding shares of common stock (by reclassification or otherwise than by
payment of a dividend in shares of common stock) into a greater or lesser number
of shares of common stock, then in each such case the aggregate amount per share
to which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event under clause (x) of the preceding sentence shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of common stock outstanding immediately after such event and the
denominator of which is the number of shares of common stock that were
outstanding immediately prior to such event.
Neither the consolidation of nor merging of the Corporation with or into
any other corporation or corporations, nor the sale or other transfer of all or
substantially all of the assets of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this Section 6.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
--------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of common stock are exchanged for or changed into other stock or
securities, cash and/or any other property,
7-A
<PAGE>
then in any such case the shares of Series A Preferred Stock shall at the same
time be similarly exchanged or changed in an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to 1,000 times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of common stock
is changed or exchanged, plus accrued and unpaid dividends, if any, payable with
respect to the Series X Preferred Stock. In the event the Corporation shall at
any time after the Rights Declaration Date (i) declare or pay any dividend on
shares of common stock payable in shares of common stock, or (ii) effect a
subdivision or combination or consolidation of the outstanding shares of common
stock (by reclassification or otherwise than by payment of a dividend in shares
of common stock) into a greater or lesser number of shares of common stock, then
in each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series A Preferred Stock shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of common stock outstanding immediately after such event and the
denominator of which is the number of shares of common stock that were
outstanding immediately prior to such event.
Section 8. Redemption. The shares of Series A Preferred Stock shall not
----------
be redeemable; provided, however, that the foregoing shall not limit the ability
-------- -------
of the Corporation to purchase or otherwise deal in such shares to the extent
otherwise permitted hereby and by law.
Section 9. Ranking. Unless otherwise provided in the Certificate of
-------
Incorporation or a Certificate of Vote of Directors Establishing a Class of
Stock relating to a subsequently-designated series of preferred stock of the
Corporation, the Series A Preferred Stock shall rank junior to any other series
of the Corporation's preferred stock subsequently issued, as to the payment of
dividends and the distribution of assets on liquidation, dissolution or winding
up and shall rank senior to the common stock.
Section 10. Amendment. The Certificate of Incorporation and this
---------
Certificate of Vote of Directors shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series X Preferred Stock so as to affect them adversely without the affirmative
vote of the holders of two-thirds or more of the outstanding shares of Series X
Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Shares of Series X Preferred Stock may be
-----------------
issued in whole shares or in any fraction of a share that is one one-thousandth
(1/1,000th) of a share or any integral multiple of such fraction, which shall
entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of shares of Series X Preferred
Stock. In lieu of fractional shares, the Corporation may elect to make a cash
payment as provided in the Rights Agreement for fractions of a share other than
one one-thousandth (1/1,000th) of a share or any integral multiple thereof.
8-A
<PAGE>
I, William J. Wedge, Senior Vice President and Secretary of the Corporation,
do make this certificate, hereby declaring and certifying that this is my act
and deed on behalf of the Corporation this 13th day of June, 1997.
BOSTON PROPERTIES, INC.
By: _______________________________
William J. Wedge, Senior Vice
President and Secretary
<PAGE>
EXHIBIT 4.3
TEMPORARY CERTIFICATE: EXCHANGEABLE FOR DEFINITIVE ENGRAVED
CERTIFICATE WHEN READY FOR DELIVERY
COMMON STOCK COMMON STOCK
- ------------------ ------------------
| | BOSTON PROPERTIES, INC. | |
- ------------------ ------------------
$0.01 PAR VALUE $0.01 PAR VALUE
Incorporated under the laws of the State of Delaware CUSIP 101121 10 1
TRANSFERABLE IN THE CITIES OF BOSTON, MA OR NEW YORK, NY SEE REVERSE FOR
CERTAIN DEFINITIONS
AND RESTRICTIONS
-------------------------------------------------------------
| THIS CERTIFIES THAT |
| |
| |
| |
| |
| IS THE OWNER OF |
-------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
BOSTON PROPERTIES, INC. transferable on the books of the Corporation by the
holder hereof in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are issued and shall be subject to all of the provisions of the
Certificate of Incorporation and By-Laws of the Corporation, each as from time
to time amended, to all of which the holder by acceptance hereof assents. This
Certificate is not valid until countersigned and registered by the Transfer
Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
DATED:
[SEAL OF BOSTON PROPERTIES, INC.]
/s/ David G. Gaw /s/ Edward H. Linde
TREASURER PRESIDENT
Countersigned and Registered:
BankBoston, N.A.
By /s/ Mary Penzic Transfer Agent
and Registrar
Authorized Signature
<PAGE>
BOSTON PROPERTIES, INC.
The shares of Boston Properties, Inc. (the "Corporation") represented by
this certificate are subject to restrictions set forth in the Corporation's
Certificate of Incorporation which prohibit in general (a) any Person (other
than a Related Party or a Look-Through Entity) from Beneficially Owning shares
of Equity Stock in excess of the Ownership Limit, (b) any L-Related Party from
Beneficially Owning shares of Equity Stock which, when aggregated with the
shares of Equity Stock Beneficially Owned by all other L-Related Parties, are in
excess of the Related Party Limit, (c) any Z-Related Party from Beneficially
Owning shares of Equity Stock which, when aggregated with the shares of Equity
Stock Beneficially Owned by all other Z-Related Parties, are in excess of the
Related Party Limit, (d) any Look-Through Entity from Beneficially Owning shares
of Equity Stock in excess of the Look-Through Ownership Limit and (e) any Person
from acquiring or maintaining any ownership interest in the stock of the
Corporation that is inconsistent with (i) the requirements of the Code
pertaining to real estate investment trusts or (ii) the Certificate of
Incorporation of the Corporation, and the holder of this certificate by his
acceptance hereof consents to be bound by such restrictions. Capitalized terms
used in this paragraph and not defined herein are defined in the Corporation's
Certificate of Incorporation.
The Corporation with furnish without charge, to each stockholder who so
requests, a copy of the relevant provisions of the Certificate of Incorporation
and By-laws of the Corporation, a copy of the provisions setting forth the
designations, preferences, privileges and rights of each class of stock or
series thereof that the Corporation is authorized to issue and the
qualifications, limitations and restrictions of such preferences and/or rights.
Any such request may be addressed to the Secretary of the Corporation or to the
transfer agent named on the face hereof.
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in a Shareholder Rights Agreement between Boston Properties,
Inc. and BankBoston, N.A., as Rights Agent, dated as of June 16, 1997, as
amended, restated, renewed or extended from time to time (the "Rights
Agreement"), the terms of which are hereby incorporated herein by reference and
a copy of which is on file at the principal offices of Boston Properties, Inc.
and the stock transfer administration office of the Rights Agent. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. Boston Properties, Inc. may redeem the Rights at a redemption price
of $0.001 per Right, subject to adjustment, under the terms of the Rights
Agreement. Boston Properties, Inc. will mail to the holder of this certificate a
copy of the Rights Agreement, as in effect on the date of mailing, without
charge promptly after receipt of a written request therefor. Under certain
circumstances, Rights issued to or held by Acquiring Persons or any Affiliates
or Associates thereof (as defined in the Rights Agreement), and any subsequent
holder of such Rights, may become null and void. The Rights shall not be
exercisable, and shall be void so long as held, by a holder in any jurisdiction
where the requisite qualification to the issuance to such holder, or the
exercise by such holder, of the Rights in such jurisdiction shall not have been
obtained or be obtainable.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as through they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT_______Custodian_______
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to
Minors Act
JT TEN - as joint tenants with right _______________________
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above list.
For value received,___________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAXPAYER IDENTIFYING NUMBER OF ASSIGNEE
[______________________________________]________________________________________
________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF
ASSIGNEE.
________________________________________________________________________________
_________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________Attorney
to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises
Dated:________________
Signature(s)____________________ _____________________
Signature Guaranteed by:
NOTICE: The signature(s) to this assignment
must correspond with the name as written upon
the face of the Certificate, in every
particular, without alteration or enlargement
_________________________ or any change whatever.
<PAGE>
EXHIBIT 5.1
June 12, 1997
Boston Properties, Inc.
8 Arlington Street
Boston, Massachusetts 02116
Gentlemen:
We have acted as counsel to Boston Properties, Inc., a Delaware
corporation (the "Company"), in connection with the offer and sale by the
Company of up to 36,110,000 shares of common stock, par value $.01 per share
("Common Stock"), of the Company (the "Shares"). The Shares include an
overallotment option of up to 4,710,000 shares of Common Stock. This opinion is
being delivered in connection with the Company's Registration Statement on Form
S-11 (No. 33-25279) (the "Registration Statement") relating to the registration
of the offering and sale of the Shares under the Securities Act of 1933, as
amended. Pursuant to that certain United States purchase agreement between the
Company and the underwriters named below (the "U.S. Purchase Agreement"), up to
28,888,000 of the Shares (including an overallotment option of up to 3,768,000
shares of Common Stock) will be offered by the several United States
underwriters (the "U.S. Underwriters") represented by Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Goldman, Sachs & Co., Bear, Stearns & Co. Inc.,
Morgan Stanley & Co. Incorporated, PaineWebber Incorporated, Prudential
Securities Incorporated, and Smith Barney Inc. Pursuant to that certain
international purchase agreement between the Company and the underwriters named
below (together with the U.S. Purchase Agreement, the "Purchase Agreements"), up
to 7,222,000 of the Shares (including an overallotment option of up to 942,000
shares of Common Stock) will be offered by the several international
underwriters (together with the U.S. Underwriters, the "Underwriters")
represented by Merrill Lynch International, Goldman Sachs International, Bear,
Stearns International Limited, Morgan Stanley & Co. International Limited,
PaineWebber International (UK) Ltd., Prudential-Bache Securities (U.K.) Inc.,
and Smith Barney Inc.
As the basis for the opinion hereinafter expressed, we have examined such
statutes, regulations, corporate records and documents, certificates of public
officials and other instruments as we have deemed necessary or advisable for the
purposes of this opinion. In such examination, we have assumed the authenticity
of all documents submitted to us as
<PAGE>
originals and the conformity with the original documents of all documents
submitted to us as copies.
Based on the foregoing and on such legal considerations as we deem
relevant, we are of the opinion that the Shares to be sold by the Company to the
Underwriters as described in the Registration Statement have been duly
authorized and, upon delivery of such Shares and payment therefor in accordance
with the Purchase Agreements, will be validly issued, fully paid and non-
assessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the heading "Legal
Matters" in the Registration Statement.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
Goodwin, Procter & Hoar LLP
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF GOODWIN, PROCTER & HOAR LLP APPEARS HERE]
June 12, 1997
Boston Properties, Inc.
8 Arlington Street
Boston, MA 02116
Ladies and Gentlemen:
We have acted as counsel to Boston Properties, Inc., a Delaware corporation
(the "Company"), in connection with the preparation of a registration statement
(the "Registration Statement") filed with the Securities and Exchange Commission
on April 16, 1997 on Form S-11 (No. 333-25279), as amended through the date
hereof, with respect to the offering and sale (the "Offering") of up to
31,400,000 shares of common stock, par value $.01 per share ("Common Stock") of
the Company, and the Company's contribution of substantially all of the net
proceeds of the Offering to Boston Properties, Limited Partnership, a Delaware
limited partnership organized on April 8, 1997 (the "Operating Partnership"), in
exchange for a general partnership interest and a limited partnership interest
therein. You have requested our opinion on certain federal income tax matters in
connection with the Offering.
In connection with the completion of the Offering, (i) pursuant to one or
more options, contribution or merger agreements, certain partnerships (each a
"Property Partnership") that currently own properties that will be owned,
directly or indirectly, by the Company (each a "Property" and collectively the
"Properties") will contribute their Properties to the Operating Partnership, or
will merge with and into the Operating Partnership, in exchange for OP Units and
the assumption of debt, and the partners of each such Property Partnership will
receive OP Units either directly as merger consideration or as a distribution
from one or more of the Property Partnerships; (ii) direct and indirect interest
in other Property Partnerships will be contributed to the Operating Partnership
in exchange for OP Units; (iii) the Company through the Operating Partnership
will contribute substantially all of its greater Washington, D.C. property
management business to Boston Properties Management, Inc. (the "Management
Company"), a Delaware corporation organized on June 10, 1997. The Operating
Partnership owns a 1% voting interest representing a 95% economic interest in
the Management Company. The remaining voting and economic interest are held by
Mortimer B. Zuckerman and Edward H. Linde, officers and directors of the
Management Company; (iv) the other management and development operations
<PAGE>
Boston Properties, Inc.
June 12, 1997
Page 2
of the Company will be contributed directly to the Operating Partnership; and
(v) the Operating Partnership will enter into a participating lease with ZL
Hotel LLC, a Delaware limited liability company organized on June 10, 1997
formed to be the lessee of the Company's hotel Properties. Mortimer B. Zuckerman
and Edward H. Linde, shareholders of the Company will be the sole member
managers of the ZL Hotel LLC and own a 9.8% economic interest in ZL Hotel LLC.
ZL Hotel Corp., a pre-existing Delaware corporation will own the remaining
economic interest in ZL Hotel LLC and one or more public charities will own all
of the capital stock of ZL Hotel Corp.
References herein to the Subsidiaries includes (i) the Operating
Partnership; (ii) the Management Company; (iii) Boston Properties LLC, a
Delaware limited liability company formed on June 10, 1997, of which the Company
is a 1% member and the Operating Partnership is a 99% member manager,
established to own general partnership interests in various New York, D.C. and
Maryland Property Partnerships the limited partner interest in which will be
held by the Operating Partnership; (iv) BP Lex LLC, a Delaware limited liability
company formed on June 10, 1997, to manage one of the New York Properties and in
which a 99.9% membership interest will be held by the Operating Partnership and
a .1% member-manager interest will be held, in the aggregate, by Mortimer B.
Zuckerman and Edward H. Linde; and (v) the Property Partnerships in which
interests will be contributed to the Operating Partnership in exchange for OP
Units in connection with the Offering.
Capitalized terms not defined herein shall have the same meaning as in the
Registration Statement.
In rendering the following opinions, we have examined the Amended and
Restated Certificate of Incorporation (the "Articles") and Bylaws of the
Company, and such other records, certificates and documents as we have deemed
necessary or appropriate for purposes of rendering the opinion set forth herein
(collectively, the "Documents"). We have reviewed the proposed investment
activities, operations and governance of the Company and its Subsidiaries. We
have relied upon representations of duly appointed officers of the Company and
the Operating Partnership (including without limitation, representations
contained in a letter dated as of this date (the "Officer's Certificate")),
principally relating to the Company's organization and operations. We assume
that each such representation is and will be true, correct and complete and that
all representations that speak in the future, or to the intention, or to the
best of the belief and knowledge of any person(s) or party(ies) are and will be
true, correct and complete as if made without such qualification. Nothing has
come to our attention which would cause us to believe that any of such
representations are untrue, incorrect or incomplete. We assume that the Company
will be operated in accordance with the applicable laws and the terms and
conditions
<PAGE>
Boston Properties, Inc.
June 12, 1997
Page 3
of applicable documents. We have also reviewed the Registration Statement,
including the prospectus (the "Prospectus") contained as part of the
Registration Statement, the form of Amended and Restated Agreement of Limited
Partnership of the Operating Partnership to be executed as of the date of the
closing of the Offering, among the Company as the general partner and several
limited partners; the participating leases with respect to the hotel properties
entered into between the Operating Partnership as lessor and ZL Hotel LC as
lessee, and certain other leases as we have deemed appropriate. In addition, we
have relied upon certain additional facts and assumptions described below.
In rendering the opinion set forth herein, we have assumed (i) the
genuineness of all signatures on documents we have examined, (ii) the
authenticity of all documents submitted to us as originals, (iii) the conformity
to the original documents of all documents submitted to us as copies, (iv) the
conformity of final documents to all documents submitted to us as drafts, (v)
the authority and capacity of the individual or individuals who executed any
such documents on behalf of any person, (vi) the accuracy and completeness of
all records made available to us, and (vii) the factual accuracy of all
representations, warranties and other statements made by all parties. In
addition, we assume that all interests in the Operating Partnership will be
issued in a transaction (or transactions) that are not required to be registered
under the Securities Act of 1933 and that no interest in the Operating
Partnership offered for sale outside the United States would have been required
to be registered under the Securities Act of 1933 if such interest had been
offered for sale within the United States. We have further assumed that during
its short 1997 taxable year ending December 31, 1997 and subsequent taxable
years, the Company will operate in such a manner that will make the
representations contained in the Officer's Certificate true for all such years,
and that the Company and its Subsidiaries will not make any amendments to its
organizational documents after the date of this opinion that would affect the
Company's qualification as a real estate investment trust for any taxable year.
In addition, we have assumed that the Company will make an election to be
taxable as a real estate investment trust pursuant to the Internal Revenue Code
of 1986, as amended (the "Code") with its properly and timely filed federal
income tax return for its taxable year ending December 1997. For purposes of
our opinion, we have made no independent investigation of the facts contained in
the documents and assumptions set forth above, the representations set forth in
the Officer's Certificate, or the Registration Statement. No facts have come to
our attention, however, that would cause us to question the accuracy and
completeness of such facts or documents in a material way.
The discussion and conclusion set forth below are based upon the Code, the
Income Tax Regulations and Procedure and Administration Regulations promulgated
thereunder and existing administrative and judicial interpretation thereof, all
of which are subject to change. No assurance can therefore be given that the
federal income tax consequences described below will
<PAGE>
Boston Properties, Inc.
June 12, 1997
Page 4
not be altered in the future. Based on the documents and assumptions set forth
above, the representations set forth in the Officer's Certificate and the
discussion in the Prospectus under the caption "Federal Income Tax
Considerations" (which is incorporated herein by reference), we are of the
opinion that
(1) Commencing with the Company's initial taxable year ending December 31,
1997, the Company has been organized in conformity with the requirements for
qualification as a real estate investment trust under the Code, and its proposed
method of operation, including the lease of the Hotel Properties and the Garage
Properties, will enable it to meet the requirements for qualification as a "real
estate investment trust" under the Code provided that the Company files a proper
election to be taxed as a real estate investment trust with its timely filed
federal income tax return for the taxable year ending December 31, 1997 and
continues to meet the applicable asset composition, source of income,
shareholder diversification, distribution, record keeping and other requirements
of the Code necessary for a corporation to qualify as a real estate investment
trust, and
(2) The information in the Registration Statement under the caption
"Federal Income Tax Considerations" to the extent that it constitutes matters of
law or legal conclusions, have been reviewed by us and is correct in all
material respects, and our opinion set forth in such discussion is confirmed.
We will not review on a continuing basis the Company's compliance with the
documents or assumptions set forth above, or the representations set forth in
the Officer's Certificate. Accordingly, no assurance can be given that the
actual results of the Company's operations for any given taxable year will
satisfy the requirements for qualification and taxation as a real estate
investment trust under the Code. The ability of the Company to continue to meet
the requirements for qualification and taxation as a real estate investment
trust will be dependent upon the Company's ability to continue to meet in each
year the applicable asset composition, source of income, shareholder
diversification, distribution, record keeping and other requirements of the Code
necessary for a corporation to qualify as a real estate investment trust. The
foregoing opinions are limited to the federal income tax matters addressed
herein, and no other opinions are rendered with respect to other federal tax
matters or to any issues arising out of the tax laws of any state or locality.
We express no opinion with respect to the transactions described herein other
than those expressly set forth herein. You should recognize that our opinion is
not binding on the IRS and that the IRS may disagree with the opinions contained
herein. Although we believe that our opinion will be sustained if challenged,
there is no guarantee that this will be the case. Except as specifically
discussed above, the opinion expressed herein is based upon the laws that
currently exist. Consequently, future changes in the
<PAGE>
Boston Properties, Inc.
June 12, 1997
Page 5
law may cause the federal income tax treatment of the transactions herein to be
materially and adversely different from that described above.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the references to Goodwin, Procter &
Hoar LLP under the caption "Federal Income Tax Considerations" in the
Registration Statement. In giving this consent, we do not admit that we are in
the category of persons whose consent is required by Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations promulgated thereunder by
the Securities and Exchange Commission.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
Goodwin, Procter & Hoar LLP
<PAGE>
EXHIBIT 10.1
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
BOSTON PROPERTIES LIMITED PARTNERSHIP
__________, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE 1
DEFINED TERMS..................................................................... 2
ARTICLE 2
ORGANIZATIONAL MATTERS............................................................ 13
Section 2.1 Formation........................................................... 13
Section 2.2 Name................................................................ 13
Section 2.3 Registered Office and Agent; Principal Office....................... 14
Section 2.4 Power of Attorney................................................... 14
Section 2.5 Term................................................................ 15
ARTICLE 3
PURPOSE........................................................................... 16
Section 3.1 Purpose and Business................................................ 16
Section 3.2 Powers.............................................................. 16
ARTICLE 4
CAPITAL CONTRIBUTIONS............................................................. 17
Section 4.1 Capital Contributions of the Partners............................... 17
Section 4.2 Issuances of Additional Partnership Interests....................... 18
Section 4.3 Contribution of Proceeds of Issuance of REIT Shares................. 19
ARTICLE 5
DISTRIBUTIONS..................................................................... 19
Section 5.1 Requirement and Characterization of Distributions................... 19
Section 5.2 Amounts Withheld.................................................... 20
Section 5.3 Distributions Upon Liquidation...................................... 20
Section 5.4 Revisions to Reflect Issuance of Additional Partnership Interests... 20
ARTICLE 6
ALLOCATIONS....................................................................... 20
Section 6.1 Allocations For Capital Account Purposes............................ 20
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS............................................. 22
Section 7.1 Management.......................................................... 22
Section 7.2 Certificate of Limited Partnership.................................. 26
Section 7.3 Restrictions on General Partner Authority........................... 26
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
Section 7.4 Reimbursement of the General Partner and the Company;
DRIP's and Repurchase Programs................................... 27
Section 7.5 Outside Activities of the General Partner........................... 28
Section 7.6 Contracts with Affiliates........................................... 28
Section 7.7 Indemnification..................................................... 29
Section 7.8 Liability of the General Partner.................................... 31
Section 7.9 Other Matters Concerning the General Partner........................ 31
Section 7.10 Title to Partnership Assets......................................... 32
Section 7.11 Reliance by Third Parties........................................... 32
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS........................................ 33
Section 8.1 Limitation of Liability............................................. 33
Section 8.2 Management of Business.............................................. 33
Section 8.3 Outside Activities of Limited Partners.............................. 33
Section 8.4 Return of Capital................................................... 34
Section 8.5 Rights of Limited Partners Relating to the Partnership.............. 34
Section 8.6 Redemption Right.................................................... 35
Section 8.7 Consent of Certain Limited Partners................................. 36
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS............................................ 37
Section 9.1 Records and Accounting.............................................. 37
Section 9.2 Fiscal Year......................................................... 37
Section 9.3 Reports............................................................. 37
ARTICLE 10
TAX MATTERS....................................................................... 38
Section 10.1 Preparation of Tax Returns.......................................... 38
Section 10.2 Tax Elections....................................................... 38
Section 10.3 Tax Matters Partner................................................. 39
Section 10.4 Organizational Expenses............................................. 40
Section 10.5 Withholding......................................................... 40
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE 11
TRANSFERS AND WITHDRAWALS......................................................... 41
Section 11.1 Transfer............................................................ 41
Section 11.2 Transfer of the Company's General Partner Interest and
Limited Partner Interest; Extraordinary Transactions................ 42
Section 11.3 Limited Partners' Rights to Transfer................................ 44
Section 11.4 Substituted Limited Partners........................................ 45
Section 11.5 Assignees........................................................... 45
Section 11.6 General Provisions.................................................. 46
ARTICLE 12
ADMISSION OF PARTNERS............................................................. 47
Section 12.1 Admission of Successor General Partner.............................. 47
Section 12.2 Admission of Additional Limited Partners............................ 47
Section 12.3 Amendment of Agreement and Certificate of Limited Partnership....... 48
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION.......................................... 48
Section 13.1 Dissolution......................................................... 48
Section 13.2 Winding Up.......................................................... 49
Section 13.3 Compliance with Timing Requirements of Regulations.................. 51
Section 13.4 Deemed Distribution and Recontribution.............................. 52
Section 13.5 Rights of Limited Partners.......................................... 52
Section 13.6 Notice of Dissolution............................................... 52
Section 13.7 Termination of Partnership and Cancellation of
Certificate of Limited Partnership.................................. 52
Section 13.8 Reasonable Time for Winding-Up...................................... 53
Section 13.9 Waiver of Partition................................................. 53
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS...................................... 53
Section 14.1 Amendments.......................................................... 53
Section 14.2 Meetings of the Partners............................................ 55
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 15
GENERAL PROVISIONS................................................................ 56
Section 15.1 Addresses and Notice................................................ 56
Section 15.2 Titles and Captions................................................. 56
Section 15.3 Pronouns and Plurals................................................ 56
Section 15.4 Further Action...................................................... 56
Section 15.5 Binding Effect...................................................... 56
Section 15.6 Creditors........................................................... 56
Section 15.7 Waiver.............................................................. 57
Section 15.8 Counterparts........................................................ 57
Section 15.9 Applicable Law...................................................... 57
Section 15.10 Invalidity of Provisions............................................ 57
Section 15.11 Entire Agreement.................................................... 57
EXHIBITS
Exhibit A - Partners Contributions and Partnership Interests
Exhibit B - Capital Account Maintenance
Exhibit C - Special Allocation Rules
Exhibit D - Notice of Redemption
Exhibit E - Designated Properties and Protected Partners
</TABLE>
(iv)
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
BOSTON PROPERTIES LIMITED PARTNERSHIP
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF BOSTON
PROPERTIES LIMITED PARTNERSHIP (this "Agreement"), dated as of __________, 1997,
is entered into by and among Boston Properties, Inc., a Delaware corporation
(the "Company"), and the Persons (as defined below) whose names are set forth on
Exhibit A attached hereto (as it may be amended from time to time).
- ---------
WHEREAS, this Limited Partnership was formed on April 8, 1997 and an
original agreement of limited partnership was entered into between the Company,
as general partner, and Edward H. Linde, as limited partner;
WHEREAS, prior to the date hereof certain partnerships merged into the
Partnership and the partners of such partnerships ("Merging Partners") became
partners of this Partnership;
WHEREAS, the Company proposes to effect a public offering of its common
stock, to acquire and cause the Partnership to acquire direct and indirect
interests in certain office properties and other assets, to cause the
Partnership to enter into certain financing arrangements and to contribute the
remaining net proceeds from the public offering and the other assets of the
Company to the Partnership;
WHEREAS, the Partnership will issue Partnership Interests to the Company
and other persons, and additional Partnership Interests to the Merging Partners,
in accordance with the foregoing transactions;
WHEREAS, upon the completion of the foregoing transactions, the Partnership
shall return the original capital contributions made by the Company and Mr.
Linde and any ongoing interest in the Partnership of the Company and Mr. Linde
shall be based on their respective contributions as Merging Partners or as
contemplated below;
WHEREAS, as evidenced by their respective execution of this Agreement, the
Company and Mr. Linde hereby consent to the amendment and restatement of the
original agreement of limited partnership.
NOW, THEREFORE, BE IT RESOLVED, that for good and adequate consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1
<PAGE>
ARTICLE 1
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership Act, as it may
---
be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the Partnership as
--------------------------
a Limited Partner pursuant to Sections 4.2 and 12.2 hereof and who is shown as
such on the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for each
------------------------
Partner as of the end of each Partnership taxable year (i) increased by any
amounts which such Partner is obligated to restore pursuant to any provision of
this Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5);
and (ii) decreased by the items described in Regulations Sections 1.704-
1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6). The
foregoing definition of Adjusted Capital Account is intended to comply with the
provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner, the
--------------------------------
deficit balance, if any, in such Partner's Adjusted Capital Account as of the
end of the relevant Partnership taxable year.
"Adjusted Property" means any property, the Carrying Value of which has
-----------------
been adjusted pursuant to Exhibit B hereof. Once an Adjusted Property is deemed
---------
distributed by, and recontributed to, the Partnership for federal income tax
purposes upon a termination thereof pursuant to Section 708 of the Code, such
property shall thereafter constitute a Contributed Property until the Carrying
Value of such property is further adjusted pursuant to Exhibit B hereof.
---------
"Affiliate" means, with respect to any Person, (i) any Person directly or
---------
indirectly controlling, controlled by or under common control with such Person;
(ii) any Person owning or controlling ten percent (10%) or more of the
outstanding voting interests of such Person; (iii) any Person of which such
Person owns or controls ten percent (10%) or more of the voting interests; or
(iv) any officer, director, general partner or trustee of such Person or of any
Person referred to in clauses (i), (ii), and (iii) above. For purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
2
<PAGE>
"Agreed Value" means (i) in the case of any Contributed Property as of the
------------
time of its contribution to the Partnership, the 704(c) Value of such property,
reduced by any liabilities either assumed by the Partnership upon such
contribution or to which such property is subject when contributed, and (ii) in
the case of any property distributed to a Partner by the Partnership, the
Partnership's Carrying Value of such property at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner upon
such distribution or to which such property is subject at the time of
distribution as determined under Section 752 of the Code and the Regulations
thereunder. The aggregate Agreed Value of the Contributed Property contributed
or deemed contributed by each Partner as of the date hereof is as set forth in
Exhibit A.
- ---------
"Agreement" means this Amended and Restated Agreement of Limited
---------
Partnership, as it may be amended, supplemented or restated from time to time.
"Assignee" means a Person to whom one or more Partnership Units have been
--------
transferred in a manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights set forth in Section 11.5.
"Available Cash" means, with respect to any period for which such
--------------
calculation is being made, (i) the sum of:
(a) the Partnership's Net Income or Net Loss (as the case may be) for
such period (without regard to adjustments resulting from allocations
described in Sections 1.A through 1.E of Exhibit C);
---------
(b) Depreciation and all other noncash charges deducted in determining
Net Income or Net Loss for such period;
(c) the amount of any reduction in the reserves of the Partnership
referred to in clause (ii)(f) below (including, without limitation,
reductions resulting because the General Partner determines such amounts
are no longer necessary);
(d) the excess of proceeds from the sale, exchange, disposition, or
refinancing of Partnership property for such period over the gain
recognized from such sale, exchange, disposition, or refinancing during
such period (excluding Terminating Capital Transactions); and
(e) all other cash received by the Partnership for such period that
was not included in determining Net Income or Net Loss for such period;
(ii) less the sum of:
(a) all principal debt payments made by the Partnership during such
period;
3
<PAGE>
(b) capital expenditures made by the Partnership during such period;
(c) investments made by the Partnership during such period in any
entity (including loans made thereto) to the extent that such investments
are not otherwise described in clause (ii)(a) or (ii)(b);
(d) all other expenditures and payments not deducted in determining
Net Income or Net Loss for such period;
(e) any amount included in determining Net Income or Net Loss for such
period that was not received or disbursed by the Partnership during such
period;
(f) the amount of any increase in reserves during such period which
the General Partner determines to be necessary or appropriate in its sole
and absolute discretion; and
(g) the amount of any working capital accounts and other cash or
similar balances which the General Partner determines to be necessary or
appropriate, in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any cash
received or reductions in reserves, or take into account any disbursements made
or reserves established, after commencement of the dissolution and liquidation
of the Partnership.
"Book-Tax Disparities" means, with respect to any item of Contributed
--------------------
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all
of its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Exhibit B and the hypothetical balance of such Partner's Capital Account
---------
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"Business Day" means any day except a Saturday, Sunday or other day on
------------
which commercial banks in New York, New York or Boston, Massachusetts are
authorized or required by law to close.
"Capital Account" means the Capital Account maintained for a Partner
---------------
pursuant to Exhibit B hereof.
---------
"Capital Contribution" means, with respect to any Partner, any cash, cash
--------------------
equivalents or the Agreed Value of Contributed Property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Section
4.1, 4.2, or 4.3 hereof.
4
<PAGE>
"Carrying Value" means (i) with respect to a Contributed Property or
--------------
Adjusted Property, the 704(c) Value of such property, reduced (but not below
zero) by all Depreciation with respect to such Contributed Property or Adjusted
Property, as the case may be, charged to the Partners' Capital Accounts
following the contribution of or adjustment with respect to such Property; and
(ii) with respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of determination.
The Carrying Value of any property shall be adjusted from time to time in
accordance with Exhibit B hereof, and to reflect changes, additions or other
---------
adjustments to the Carrying Value for dispositions and acquisitions of
Partnership properties, as deemed appropriate by the General Partner.
"Cash Amount" means an amount of cash per Partnership Unit equal to the
-----------
Value on the Valuation Date of the REIT Shares Amount.
"Certificate of Incorporation" means the Certificate of Incorporation or
----------------------------
other organizational document governing the General Partner, as amended or
restated from time to time.
"Certificate of Limited Partnership" means the Certificate of Limited
----------------------------------
Partnership relating to the Partnership filed in the office of the Delaware
Secretary of State, as amended from time to time in accordance with the terms
hereof and the Act.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
----
from time to time, as interpreted by the applicable regulations thereunder. Any
reference herein to a specific section or sections of the Code shall be deemed
to include a reference to any corresponding provision of future law.
"Consent" means the consent or approval of a proposed action by a Partner
-------
given in accordance with Section 14.2 hereof.
"Consenting Partner" or "Consenting Partners" means Mortimer B. Zuckerman
------------------ -------------------
and Edward H. Linde.
"Contributed Property" means each property or other asset, in such form as
--------------------
may be permitted by the Act (but excluding cash), contributed or deemed
contributed to the Partnership (including deemed contributions to the
Partnership on termination and reconstitution thereof pursuant to Section 708 of
the Code). Once the Carrying Value of a Contributed Property is adjusted
pursuant to Exhibit B hereof, such property shall no longer constitute a
---------
Contributed Property for purposes of Exhibit B hereof, but shall be deemed an
---------
Adjusted Property for such purposes.
"Conversion Factor" means 1.0, provided that in the event that the Company
----------------- -------- ----
(i) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or
makes a
5
<PAGE>
distribution to all holders of its outstanding REIT Shares in REIT Shares; (ii)
subdivides its outstanding REIT Shares; or (iii) combines its outstanding REIT
Shares into a smaller number of REIT Shares, the Conversion Factor shall be
adjusted by multiplying the Conversion Factor by a fraction, the numerator of
which shall be the number of REIT Shares issued and outstanding on the record
date for such dividend, distribution, subdivision or combination (assuming for
such purpose that such dividend, distribution, subdivision or combination has
occurred as of such time), and the denominator of which shall be the actual
number of REIT Shares (determined without the above assumption) issued and
outstanding on the record date for such dividend, distribution, subdivision or
combination. Any adjustment to the Conversion Factor shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event (provided, however, if a Notice of
-------- -------
Redemption is given prior to such a record date and the Specified Redemption
Date is after such a record date, then the adjustment to the Conversion Factor
shall, with respect to such redeeming Partner, be retroactive to the date of
such Notice of Redemption). It is intended that adjustments to the Conversion
Factor are to be made in order to avoid unintended dilution or anti-dilution as
a result of transactions in which REIT Shares are issued, redeemed or exchanged
without a corresponding issuance, redemption or exchange of Partnership Units.
If, prior to a Specified Redemption Date, Rights (other than Rights issued
pursuant to an employee benefit plan or other compensation arrangement) were
issued and have expired, and such Rights were issued with an exercise price
that, together with the purchase price for such Rights, was below fair market
value in relation to the security or other property to be acquired upon the
exercise of such Rights, and such Rights were issued to all holders of
outstanding REIT shares or the General Partner cannot in good faith represent
that the issuance of such Rights benefitted the Limited Partners, then the
Conversion Factor applicable upon a Notice of Redemption shall be equitably
adjusted in a manner consistent with antidilution provisions in warrants and
other instruments in the case of such a below market issuance or exercise price.
A similar equitable adjustment to protect the value of Partnership Units shall
be made in all events if any Rights issued under a "Shareholder Rights Plan"
became exercisable and expired prior to a Specified Redemption Date.
"Depreciation" means, for each taxable year, an amount equal to the federal
------------
income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
-------- -------
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.
"Designated Property" or "Designated Properties" has the meanings set forth
------------------- ---------------------
in Section 8.7 hereof.
6
<PAGE>
"Effective Date" means the date of closing the initial public offering of
--------------
REIT Shares by the Company.
"Exempt Transaction" has the meaning set forth in Section 8.7 hereof.
------------------
"Extraordinary Transaction" shall mean, with respect to the Company, the
-------------------------
occurrence of one or more of the following events: (i) a merger (including a
triangular merger), consolidation or other combination with or into another
Person; (ii) the direct or indirect sale, lease, exchange or other transfer of
all or substantially all of its assets in one transaction or a series of
transactions; (iii) any reclassification, recapitalization or change of its
outstanding equity interests (other than a change in par value, or from par
value to no par value, or as a result of a split, dividend or similar
subdivision); (iv) any issuance of equity securities of the Company in exchange
for assets (other than an issuance of securities for cash or an issuance of
securities pursuant to an employee benefit plan); (v) any Change of Control (as
defined in the Company's Certificate of Incorporation) or (vi) the adoption of
any plan of liquidation or dissolution of the Company (whether or not in
compliance with the provisions of this Agreement).
"General Partner" means the Company, in its capacity as the general partner
---------------
of the Partnership, or its successors as general partner of the Partnership.
"General Partner Interest" means a Partnership Interest held by the General
------------------------
Partner, in its capacity as general partner. A General Partner Interest may be
expressed as a number of Partnership Units.
"IRS" means the Internal Revenue Service, which administers the internal
---
revenue laws of the United States.
"Immediate Family" means, with respect to any natural Person, such natural
----------------
Person's estate or heirs or current spouse, parents, parents-in-law, children,
siblings and grandchildren (in each case whether by adoption or not) and any
trust or estate, all of the beneficiaries of which consist of such Person or
such Person's spouse, parents, parents-in-law, children, siblings or
grandchildren.
"Incapacity" or "Incapacitated" means, (i) as to any individual Partner,
---------- -------------
death, total physical disability or entry by a court of competent jurisdiction
adjudicating him incompetent to manage his or her Person or estate; (ii) as to
any corporation which is a Partner, the filing of a certificate of dissolution,
or its equivalent, for the corporation or the revocation of its charter; (iii)
as to any partnership which is a Partner, the dissolution and commencement of
winding up of the partnership; (iv) as to any estate which is a Partner, the
distribution by the fiduciary of the estate's entire interest in the
Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this
definition, bankruptcy of a
7
<PAGE>
Partner shall be deemed to have occurred when (a) the Partner commences a
voluntary proceeding seeking liquidation, reorganization or other relief under
any bankruptcy, insolvency or other similar law now or hereafter in effect; (b)
the Partner is adjudged as bankrupt or insolvent, or a final and nonappealable
order for relief under any bankruptcy, insolvency or similar law now or
hereafter in effect has been entered against the Partner; (c) the Partner
executes and delivers a general assignment for the benefit of the Partner's
creditors; (d) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in clause (b) above; (e) the
Partner seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Partner or for all or any substantial part of the
Partner's properties; (f) any proceeding seeking liquidation, reorganization or
other relief of or against such Partner under any bankruptcy, insolvency or
other similar law now or hereafter in effect has not been dismissed within one
hundred twenty (120) days after the commencement thereof; (g) the appointment
without the Partner's consent or acquiescence of a trustee, receiver or
liquidator has not been vacated or stayed within ninety (90) days of such
appointment; or (h) an appointment referred to in clause (g) which has been
stayed is not vacated within ninety (90) days after the expiration of any such
stay.
"Indemnitee" means (i) any Person made a party to a proceeding by reason of
----------
(A) his status as the General Partner, or as a director or officer of the
Partnership or the General Partner, or (B) his or its liabilities, pursuant to a
loan guarantee or otherwise, for any indebtedness of the Partnership or any
Subsidiary of the Partnership (including, without limitation, any indebtedness
which the Partnership or any Subsidiary of the Partnership has assumed or taken
assets subject to); and (ii) such other Persons (including Affiliates of the
General Partner or the Partnership) as the General Partner may designate from
time to time (whether before or after the event giving rise to potential
liability), in its sole and absolute discretion.
"Limited Partner" means any Person (including the Company) named as a
---------------
Limited Partner in Exhibit A attached hereto, as such Exhibit may be amended
---------
from time to time, or any Substituted Limited Partner or Additional Limited
Partner, in such Person's capacity as a Limited Partner of the Partnership.
"Limited Partner Interest" means a Partnership Interest of a Limited
------------------------
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Partners and includes any and all benefits to which the holder
of such a Partnership Interest may be entitled, as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Limited Partner Interest may be expressed as a
number of Partnership Units.
"Limited Partner Recourse Debt Percentage" means with respect to certain of
----------------------------------------
the Limited Partners the percentage listed with respect to such Limited Partner
on the recourse debt level schedule attached hereto as Exhibit F.
8
<PAGE>
"Liquidating Event" has the meaning set forth in Section 13.1.
-----------------
"Liquidator" has the meaning set forth in Section 13.2.
----------
"Merging Partners" has the meaning set forth in the recitals.
----------------
"Net Income" means, for any taxable period, the excess, if any, of the
----------
Partnership's items of income and gain for such taxable period over the
Partnership's items of loss and deduction for such taxable period. The items
included in the calculation of Net Income shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B.
---------
"Net Loss" means, for any taxable period, the excess, if any, of the
--------
Partnership's items of loss and deduction for such taxable period over the
Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B.
---------
"Nonrecourse Built-in Gain" means, with respect to any Contributed
-------------------------
Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to Section 2.B of Exhibit C if such
---------
properties were disposed of in a taxable transaction in full satisfaction of
such liabilities and for no other consideration.
"Nonrecourse Deductions" has the meaning set forth in Regulations Section
----------------------
1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Partnership
taxable year shall be determined in accordance with the rules of Regulations
Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations Section
---------------------
1.752-1(a)(2).
"Notice of Redemption" means the Notice of Redemption substantially in the
--------------------
form of Exhibit D to this Agreement.
---------
"Partner" means a General Partner or a Limited Partner, and "Partners"
------- --------
means the General Partner and the Limited Partners collectively.
"Partner Minimum Gain" means an amount, with respect to each Partner
--------------------
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations Section
------------------------
1.704-2(b)(4).
9
<PAGE>
"Partner Nonrecourse Deductions" has the meaning set forth in Regulations
------------------------------
Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with
respect to a Partner Nonrecourse Debt for a Partnership taxable year shall be
determined in accordance with the rules of Regulations Section 1.704-2(i)(2).
"Partnership" means the limited partnership formed under the Act and
-----------
pursuant to this Agreement, as it may be amended and/or restated, and any
successor thereto.
"Partnership Interest" means an ownership interest in the Partnership
--------------------
representing a Capital Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. A Partnership Interest may be expressed as a number of
Partnership Units.
"Partnership Minimum Gain" has the meaning set forth in Regulations Section
------------------------
1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net
increase or decrease in a Partnership Minimum Gain, for a Partnership taxable
year shall be determined in accordance with the rules of Regulations Section
1.704-2(d).
"Partnership Record Date" means the record date established by the General
-----------------------
Partner for the distribution of Available Cash pursuant to Section 5.1 hereof,
which record date shall be the same as the record date established by the
Company for a distribution to its shareholders of some of all of its portion of
such distribution.
"Partnership Unit" or "Unit" means a fractional, undivided share of the
---------------- ----
Partnership Interests of all Partners issued pursuant to Sections 4.1, 4.2 and
4.3. The number of Partnership Units outstanding and the Percentage Interest in
the Partnership represented by such Units are set forth in Exhibit A attached
---------
hereto, as such Exhibit may be amended from time to time. The ownership of
Partnership Units shall be evidenced by such form of certificate for units as
the General Partner adopts from time to time unless the General Partner
determines that the Partnership Units shall be uncertificated securities.
"Partnership Year" means the fiscal year of the Partnership, which shall be
----------------
the calendar year.
"Percentage Interest" means, as to a Partner, its interest in the
-------------------
Partnership as determined by dividing the Partnership Units owned by such
Partner by the total number of Partnership Units then outstanding and as
specified in Exhibit A attached hereto, as such Exhibit may be amended from time
---------
to time.
"Person" means an individual or a corporation, partnership, trust,
------
unincorporated organization, association or other entity.
10
<PAGE>
"Recapture Income" means any gain recognized by the Partnership upon the
----------------
disposition of any property or asset of the Partnership, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Recourse Debt Amount" has the meaning set forth in Section 6.1B(2) hereof.
--------------------
"Redeeming Partner" has the meaning set forth in Section 8.6 hereof.
-----------------
"Redemption Right" shall have the meaning set forth in Section 8.6 hereof.
----------------
"Regulations" means the Income Tax Regulations promulgated under the Code,
-----------
as such regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
"REIT" means a real estate investment trust under Section 856 of the Code.
----
"REIT Share" shall mean a share of common stock, par value $.01 per share,
----------
of the Company.
"REIT Shares Amount" shall mean a number of REIT Shares equal to the
------------------
product of the number of Partnership Units offered for redemption by a Redeeming
Partner, multiplied by the Conversion Factor in effect on the date of receipt by
the General Partner of a Notice of Redemption, provided that in the event the
-------- ----
Company issues to all holders of REIT Shares rights, options, warrants or
convertible or exchangeable securities entitling the shareholders to subscribe
for or purchase REIT Shares, or any other securities or property (collectively,
"Rights"), and the Rights have not expired at the Specified Redemption Date,
then the REIT Shares Amount shall also include the Rights that were issuable to
a holder of the REIT Shares Amount of REIT Shares on the applicable record date
relating to the issuance of such Rights.
"Residual Gain" or "Residual Loss" means any item of gain or loss, as the
------------- -------------
case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate Book-Tax
---------
Disparities.
"Rights" shall have the meaning set forth in the definition of "REIT Shares
------
Amount."
"704(c) Value" of any Contributed Property means the fair market value of
------------
such property or other consideration at the time of contribution, as determined
by the General Partner using such reasonable method of valuation as it may
adopt; provided, however, that the 704(c) Value of any property deemed
-------- -------
contributed to the Partnership for federal income tax purposes upon termination
and reconstitution thereof pursuant to Section 708 of the Code shall
11
<PAGE>
be determined in accordance with Exhibit B hereof. Subject to Exhibit B hereof,
--------- ---------
the General Partner shall, in its sole and absolute discretion, use such method
as it deems reasonable and appropriate to allocate the aggregate of the 704(c)
Values of Contributed Properties in a single or integrated transaction among the
separate properties on a basis proportional to their respective fair market
values.
"Specified Redemption Date" means the tenth (10th) Business Day after
------------------------- ----
receipt by the Company of a Notice of Redemption; provided that no Specified
-------- ----
Redemption Date shall occur before that date that is fourteen (14) months after
the Effective Date, provided further that if the Company combines its
-------- -------
outstanding REIT Shares, no Specified Redemption Date shall occur after the
record date of such combination of REIT Shares and prior to the effective date
of such combination.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership or other entity of which a majority of (i) the voting power of the
voting equity securities; or (ii) the outstanding equity interests, is owned,
directly or indirectly, by such Person.
"Substituted Limited Partner" means a Person who is admitted as a Limited
---------------------------
Partner to the Partnership pursuant to Section 11.4.
"Successor Designated Property" has the meaning set forth in Section 8.7
-----------------------------
hereof.
"Terminating Capital Transaction" means any sale or other disposition of
-------------------------------
all or substantially all of the assets of the Partnership or a related series of
transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Partnership.
"Unrealized Gain" attributable to any item of Partnership property means,
---------------
as of any date of determination, the excess, if any, of (i) the fair market
value of such property (as determined under Exhibit B hereof) as of such date;
---------
over (ii) the Carrying Value of such property (prior to any adjustment to be
made pursuant to Exhibit B hereof) as of such date.
---------
"Unrealized Loss" attributable to any item of Partnership property means,
---------------
as of any date of determination, the excess, if any, of (i) the Carrying Value
of such property (prior to any adjustment to be made pursuant to Exhibit B
---------
hereof) as of such date; over (ii) the fair market value of such property (as
determined under Exhibit B hereof) as of such date.
---------
"Valuation Date" means the date of receipt by the General Partner of a
--------------
Notice of Redemption or, if such date is not a Business Day, the first Business
Day thereafter.
"Value" means, with respect to a REIT Share, the average of the daily
-----
market price for the ten (10) consecutive trading days immediately preceding the
Valuation Date. The market price for each such trading day shall be: (i) if the
REIT Shares are listed or admitted to trading
12
<PAGE>
on any securities exchange or the Nasdaq National Market System, the closing
price on such day, or if no such sale takes place on such day, the average of
the closing bid and asked prices on such day; (ii) if the REIT Shares are not
listed or admitted to trading on any securities exchange or the Nasdaq National
Market System, the last reported sale price on such day or, if no sale takes
place on such day, the average of the closing bid and asked prices on such day,
as reported by a reliable quotation source designated by the General Partner; or
(iii) if the REIT Shares are not listed or admitted to trading on any securities
exchange or the Nasdaq National Market System and no such last reported sale
price or closing bid and asked prices are available, the average of the reported
high bid and low asked prices on such day, as reported by a reliable quotation
source designated by the General Partner, or if there shall be no bid and asked
prices on such day, the average of the high bid and low asked prices, as so
reported, on the most recent day (not more than ten (10) days prior to the date
in question) for which prices have been so reported; provided that if there are
-------- ----
no bid and asked prices reported during the ten (10) days prior to the date in
question, the Value of the REIT Shares shall be determined by the General
Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate. In the
event the REIT Shares Amount includes Rights, then the Value of such Rights
shall be determined by the General Partner acting in good faith on the basis of
such quotations and other information as it considers, in its reasonable
judgment, appropriate, provided that the Value of any rights issued pursuant to
-------- ----
a "Shareholder Rights Plan" shall be deemed to have no value unless a
"triggering event" shall have occurred (i.e., if the Rights issued pursuant
----
thereto are no longer "attached" to the REIT Shares and are able to trade
independently).
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Formation
---------
The Partnership is a limited partnership organized pursuant to the
provisions of the Act. The Partners hereby agree to continue the Partnership
upon the terms and conditions set forth in this Agreement. Except as expressly
provided herein to the contrary, the rights and obligations of the Partners and
the administration and termination of the Partnership shall be governed by the
Act. The Partnership Interest of each Partner shall be personal property for
all purposes.
Section 2.2 Name
----
The name of the Partnership is Boston Properties Limited Partnership. The
Partnership's business may be conducted under any other name or names deemed
advisable by the General Partner, including the name of the General Partner or
any Affiliate thereof. The words "Limited Partnership," "L.P.," "Ltd." or
similar words or letters shall be included in the Partnership's name where
necessary for the purposes of complying with the laws of any
13
<PAGE>
jurisdiction that so requires. The General Partner in its sole and absolute
discretion may change the name of the Partnership at any time and from time to
time and shall notify the Limited Partners of such change in the next regular
communication to the Limited Partners.
Section 2.3 Registered Office and Agent; Principal Office
---------------------------------------------
The address of the registered office of the Partnership in the State of
Delaware and the name and address of the registered agent for service of process
on the Partnership in the State of Delaware is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The
principal office of the Partnership shall be 8 Arlington Street, Boston, MA
02116, or such other place as the General Partner may from time to time
designate by notice to the Limited Partners. The Partnership may maintain
offices at such other place or places within or outside the State of Delaware as
the General Partner deems advisable.
Section 2.4 Power of Attorney
-----------------
A. Each Limited Partner and each Assignee hereby constitutes and appoints
the General Partner, any Liquidator, and authorized officers and attorneys-in-
fact of each, and each of those acting singly, in each case with full power of
substitution, as its true and lawful agent and attorney-in-fact, with full power
and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (a) all certificates, documents and
other instruments (including, without limitation, this Agreement
and the Certificate of Limited Partnership and all amendments or
restatements thereof) that the General Partner or the Liquidator
deems appropriate or necessary to form, qualify or continue the
existence or qualification of the Partnership as a limited
partnership (or a partnership in which the Limited Partners have
limited liability) in the State of Delaware and in all other
jurisdictions in which the Partnership may or plans to conduct
business or own property; (b) all instruments that the General
Partner deems appropriate or necessary to reflect any amendment,
change, modification or restatement of this Agreement in
accordance with its terms; (c) all conveyances and other
instruments or documents that the General Partner or the
Liquidator deems appropriate or necessary to reflect the
dissolution and liquidation of the Partnership pursuant to the
terms of this Agreement, including, without limitation, a
certificate of cancellation; (d) all instruments relating to the
admission, withdrawal, removal or substitution of any Partner
pursuant to, or other events described in, Article 11, 12 or 13
hereof or the Capital Contribution of any Partner; and (e) all
certificates, documents and other instruments
14
<PAGE>
relating to the determination of the rights, preferences and
privileges of Partnership Interests; and
(2) execute, swear to, seal, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole and absolute discretion of
the General Partner or any Liquidator, to make, evidence, give,
confirm or ratify any vote, consent, approval, agreement or other
action which is made or given by the Partners hereunder or is
consistent with the terms of this agreement or appropriate or
necessary, in the sole discretion of the General Partner or any
Liquidator, to effectuate the terms or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
or any Liquidator to amend this Agreement except in accordance with Article 14
hereof or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, in recognition of the fact that each of
the Partners will be relying upon the power of the General Partner and any
Liquidator to act as contemplated by this Agreement in any filing or other
action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee and the
transfer of all or any portion of such Limited Partner's or Assignee's
Partnership Units and shall extend to such Limited Partner's or Assignee's
heirs, successors, assigns and personal representatives. Each such Limited
Partner or Assignee hereby agrees to be bound by any representation made by the
General Partner or any Liquidator, acting in good faith pursuant to such power
of attorney, and each such Limited Partner or Assignee hereby waives any and all
defenses which may be available to contest, negate or disaffirm the action of
the General Partner or any Liquidator, taken in good faith under such power of
attorney. Each Limited Partner or Assignee shall execute and deliver to the
General Partner or the Liquidator, within fifteen (15) days after receipt of the
General Partner's or Liquidator's request therefor, such further designation,
powers of attorney and other instruments as the General Partner or the
Liquidator, as the case may be, deems necessary to effectuate this Agreement and
the purposes of the Partnership.
Section 2.5 Term
----
The term of the Partnership commenced on April 8, 1997, the date on which
the Certificate of Limited Partnership was filed in the office of the Secretary
of State of the State of Delaware, and shall continue until December 31, 2095,
unless the Partnership is dissolved sooner pursuant to the provisions of Article
13 or as otherwise provided by law.
15
<PAGE>
ARTICLE 3
PURPOSE
Section 3.1 Purpose and Business
--------------------
The purpose and nature of the business to be conducted by the Partnership
is (i) to conduct any business that may be lawfully conducted by a limited
partnership organized pursuant to the Act; provided, however, that such business
-------- -------
shall be limited to and conducted in such a manner as to permit the Company at
all times to be classified as a REIT, unless the Company ceases to qualify as a
REIT for reasons other than the conduct of the business of the Partnership; (ii)
to enter into any partnership, joint venture, limited liability company or other
similar arrangement to engage in any of the foregoing or to own interests in any
entity engaged, directly or indirectly, in any of the foregoing; and (iii) to do
anything necessary or incidental to the foregoing. In connection with the
foregoing, and without limiting the Company's right, in its sole discretion, to
cease qualifying as a REIT, the Partners acknowledge the Company's current
status as a REIT inures to the benefit of all of the Partners and not solely the
General Partner. The General Partner shall also be empowered to do any and all
acts and things necessary or prudent to ensure that the Partnership will not be
classified as a "publicly traded partnership" for purposes of Section 7704 of
the Code, including but not limited to imposing restrictions on transfers and
restrictions on redemptions.
Section 3.2 Powers
------
The Partnership is empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance
and accomplishment of the purposes and business described herein and for the
protection and benefit of the Partnership, including, without limitation, full
power and authority, directly or through its ownership interest in other
entities, to enter into, perform and carry out contracts of any kind, borrow
money and issue evidences of indebtedness whether or not secured by mortgage,
deed of trust, pledge or other lien, acquire, own, manage, improve and develop
real property, and lease, sell, transfer and dispose of real property; provided,
--------
however, that the Partnership shall not take, or refrain from taking, any action
- --------
which, in the judgment of the General Partner, in its sole and absolute
discretion, (i) could adversely affect the ability of the Company to continue to
qualify as a REIT; (ii) could subject the Company to any additional taxes under
Section 857 or Section 4981 of the Code; or (iii) could violate any law or
regulation of any governmental body or agency having jurisdiction over the
Company or its securities, unless such action (or inaction) shall have been
specifically consented to by the General Partner in writing.
16
<PAGE>
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners
-------------------------------------
A. Initial Capital Contributions and Recapitalization of the Partnership
---------------------------------------------------------------------
on the Effective Date. The Company and Edward H. Linde previously made Capital
- ---------------------
Contributions to the Partnership upon its formation, which contributions shall
be returned to them on the Effective Date. On the Effective Date, the Company,
as General Partner and as a Limited Partner, Edward H. Linde, as a Limited
Partner, and the other Persons listed on Schedule A will make Capital
----------
Contributions to the Partnership as set forth therein (except that certain of
such Persons, as Merging Partners, were deemed to have made Capital
Contributions prior to the date hereof). On the Effective Date, the Partnership
shall be recapitalized, and the General Partner will complete Exhibit A to
---------
reflect the Capital Contributions made by each Partner, the Partnership Units
assigned to each Partner and the Percentage Interest in the Partnership
represented by such Partnership Units. The Capital Accounts of the Partners and
the Carrying Values of the Partnership's Assets shall be determined as of the
Effective Date pursuant to Section I.D of Exhibit B hereto to reflect the
---------
Capital Contributions made prior to and on the Effective Date.
B. General Partnership Interest. A number of Partnership Units held by
----------------------------
the Company equal to one percent (1%) of all outstanding Partnership Units shall
be deemed to be the General Partner Partnership Units and shall be the General
Partnership Interest. All other Partnership Units held by the Company shall be
deemed to be Limited Partnership Interests and shall be held by the General
Partner in its capacity as a Limited Partner in the Partnership.
C. Capital Contributions By Merger. To the extent the Partnership
-------------------------------
acquires any property by the merger of any other Person into the Partnership,
Persons who receive Partnership Interests in exchange for their interests in the
Person merging into the Partnership shall become Partners and shall be deemed to
have made Capital Contributions as provided in the applicable merger agreement
and as set forth in Exhibit A, as amended to reflect such deemed Capital
---------
Contributions.
D. No Obligation to Make Additional Capital Contributions. Each Partner
------------------------------------------------------
shall own the number of Partnership Units set forth for such Partner in Exhibit
-------
A and shall have a Percentage Interest in the Partnership as set forth in
- -
Exhibit A, which Percentage Interest shall be adjusted in Exhibit A from time to
- --------- ---------
time by the General Partner to the extent necessary to reflect accurately
redemptions, additional Capital Contributions, the issuance of additional
Partnership Units (pursuant to any merger or otherwise), or similar events
having an effect on any Partner's Percentage Interest. The number of
Partnership Units held by the General Partner, in its capacity as general
partner, (equal to one percent (1%) of all outstanding Partnership Units from
time to time) shall be deemed to be the General Partner Interest.
17
<PAGE>
Except as provided in Sections 4.2, 10.5 or elsewhere in this Agreement, the
Partners shall have no obligation to make any additional Capital Contributions
or loans to the Partnership.
Section 4.2 Issuances of Additional Partnership Interests
---------------------------------------------
A. The General Partner is hereby authorized to cause the Partnership from
time to time to issue to the Partners (including the General Partner and its
Affiliates) or other Persons (including, without limitation, in connection with
the contribution of property to the Partnership) additional Partnership Units or
other Partnership Interests in one or more classes, or one or more series of any
of such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties, including
rights, powers and duties senior to the Limited Partner Interests issued on the
Effective Date, all as shall be determined by the General Partner in its sole
and absolute discretion subject to Delaware law, including, without limitation,
(i) the allocations of items of Partnership income, gain, loss, deduction and
credit to each such class or series of Partnership Interests; (ii) the right of
each such class or series of Partnership Interests to share in Partnership
distributions; and (iii) the rights of each such class or series of Partnership
Interests upon dissolution and liquidation of the Partnership; provided that no
-------- ----
such additional Partnership Units or other Partnership Interests shall be issued
to the General Partner, unless either (a)(1) the additional Partnership
Interests are issued in connection with the grant, award or issuance of REIT
Shares or other equity interests by the Company, which REIT shares or other
equity interests have designations, preferences and other rights such that the
economic interests attributable to such REIT shares or other equity interests
are substantially similar to the designations, preferences and other rights of
the additional Partnership Interests issued to the General Partner in accordance
with this Section 4.2.A, and (2) the Company shall make a Capital Contribution
to the Partnership in an amount equal to the proceeds raised in connection with
such issuance, or (b) the additional Partnership Interests are issued to all
Partners in proportion to their respective Percentage Interests. In addition,
the Company may acquire Units from other Partners pursuant to this Agreement.
In the event that the Partnership issues Partnership Interests pursuant to this
Section 4.2.A, the General Partner shall make such revisions to this Agreement
(without any requirement of receiving approval of the Limited Partners)
including but not limited to the revisions described in Section 5.4, Section 6.1
and Section 8.6 hereof, as it deems necessary to reflect the issuance of such
additional Partnership Interests and the special rights, powers and duties
associated therewith. Unless specifically set forth otherwise by the General
Partner, any Partnership Interest issued after the Effective Date shall have the
same rights, powers and duties as the Partnership Interests issued on the
Effective Date.
B. From and after the date hereof, the Company shall not issue any
additional REIT Shares (other than REIT Shares issued pursuant to Section 8.6),
or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase REIT Shares (collectively "New
---
Securities") other than to all holders of REIT Shares unless (i) the General
- ----------
Partner shall cause the Partnership to issue to the Company, Partnership
Interests or rights, options, warrants or convertible or exchangeable securities
of the
18
<PAGE>
Partnership having designations, preferences and other rights, all such
that the economic interests are substantially similar to those of the New
Securities; and (ii) the Company contributes to the Partnership the proceeds
from the issuance of such New Securities and from the exercise of rights
contained in such New Securities. Without limiting the foregoing, the Company
is expressly authorized to issue New Securities for no tangible value or for
less than fair market value, and the General Partner is expressly authorized to
cause the Partnership to issue to the Company corresponding Partnership
Interests, so long as (x) the General Partner concludes in good faith that such
issuance is in the interests of the Company and the Partnership (for example,
and not by way of limitation, the issuance of REIT Shares and corresponding
Units pursuant to an employee stock purchase plan providing for employee grants
or purchases of REIT Shares or employee stock options that have an exercise
price that is less than the fair market value of the REIT Shares, either at the
time of issuance or at the time of exercise); and (y) the Company contributes
all proceeds, if any, from such issuance and exercise to the Partnership.
Section 4.3 Contribution of Proceeds of Issuance of REIT Shares
---------------------------------------------------
In connection with the initial public offering of REIT Shares by the
Company and any other issuance of New Securities pursuant to Section 4.2, the
Company shall contribute to the Partnership any proceeds (or a portion thereof)
raised in connection with such issuance; provided that if the proceeds actually
-------- ----
received by the Company are less than the gross proceeds of such issuance as a
result of any underwriter's discount or other expenses paid or incurred in
connection with such issuance, then the Company shall be deemed to have made a
Capital Contribution to the Partnership in the amount equal to the sum of the
net proceeds of such issuance plus the amount of such underwriter's discount and
other expenses paid by the Company (which discount and expense shall be treated
as an expense for the benefit of the Partnership for purposes of Section 7.4).
In the case of employee acquisitions of New Securities at a discount from fair
market value or for no value in connection with a grant of New Securities, the
amount of such discount representing compensation to the employee, as determined
by the General Partner, shall be treated as an expense of the issuance of such
New Securities.
ARTICLE 5
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions
-------------------------------------------------
The General Partner shall distribute at least quarterly an amount equal to
one hundred percent (100%) of Available Cash generated by the Partnership during
such quarter or shorter period to the Partners who are Partners on the
Partnership Record Date with respect to such quarter or shorter period in
accordance with their respective Percentage Interests on such Partnership Record
Date; provided that in no event may a Partner receive a distribution of
-------- ----
19
<PAGE>
Available Cash with respect to a Partnership Unit if such Partner is entitled to
receive a distribution out of such Available Cash with respect to a REIT Share
for which such Partnership Unit has been exchanged and such distribution shall
be made to the Company. The General Partner shall take such reasonable efforts,
as determined by it in its sole and absolute discretion and consistent with the
Company's qualification as a REIT, to distribute Available Cash (a) to the
Limited Partners so as to preclude any such distribution or portion thereof from
being treated as part of a sale of property to the Partnership by a Limited
Partner under Section 707 of the Code or the Regulations thereunder; provided
--------
that the General Partner and the Partnership shall not have liability to a
- ----
Limited Partner under any circumstances as a result of any distribution to a
Limited Partner being so treated and (b) to satisfy the requirements for
qualifying as a REIT under the Code. Unless otherwise expressly provided for
herein or in an agreement at the time a new class of Partnership Interests is
created in accordance with Article 4 hereof, no Partnership Interest shall be
entitled to a distribution in preference to any other Partnership Interest.
Section 5.2 Amounts Withheld
----------------
All amounts withheld pursuant to the Code or any provisions of any state or
local tax law and Section 10.5 hereof with respect to any allocation, payment or
distribution to the Partners or Assignees shall be treated as amounts
distributed to the Partners or Assignees pursuant to Section 5.1 for all
purposes under this Agreement.
Section 5.3 Distributions Upon Liquidation
------------------------------
Proceeds from a Terminating Capital Transaction and any other cash received
or reductions in reserves made after commencement of the liquidation of the
Partnership shall be distributed to the Partners in accordance with Section
13.2.
Section 5.4 Revisions to Reflect Issuance of Additional Partnership
-------------------------------------------------------
Interests
---------
In the event that the Partnership issues additional Partnership Interests
to the General Partner or any Additional Limited Partner pursuant to Article 4
hereof, the General Partner shall make such revisions to this Article 5 as it
deems necessary to reflect the issuance of such additional Partnership Interests
and any special rights, duties or powers with respect thereto.
ARTICLE 6
ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes
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For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction
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(computed in accordance with Exhibit B hereof) shall be allocated among the
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Partners in each taxable year (or portion thereof) as provided herein below.
A. Net Income shall be allocated (i) first, to the General Partner to the
extent that Net Losses previously allocated to the General Partner pursuant to
the last sentence of Section 6.1.B exceed Net Income previously allocated to the
General Partner pursuant to this clause (i) of Section 6.1.A; and (ii)
thereafter, Net Income shall be allocated to the Partners in accordance with
their respective Percentage Interests, provided however, gain on the sale of
property contributed as of the Effective Date with respect to which the General
Partner elects, the "traditional method with cumulative allocations" described
in Treasury Regulation Section 1.704-3(c)(3)(iii)(B) shall first be allocated to
solely to the Partners who contributed such Property, pro rata, in proportion to
their Percentage Interests, to the extent allocations to non-contributing
Partners of depreciation deductions with respect to such Contributed Property
have been limited by the so-called "ceiling rule".
B. After giving effect to the special allocations set forth in Section 1
of Exhibit C attached hereto, Net Losses shall be allocated to the Partners in
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the following order:
(1) First, to the Partners, in proportion to their Percentage Interest
until each Partner's Adjusted Capital Account balance has been reduced to
zero;
(2) Second, to the General Partner until the General Partner's
negative Adjusted Capital Account balance is equal to the excess, if any,
of the aggregate recourse liabilities of the Partnership over the aggregate
amount of recourse partnership debt (the "Recourse Debt Amount") set forth
on the recourse debt level schedule attached hereto as Exhibit F, as
appropriately amended from time to time;
(3) Third, to the Limited Partners listed on the recourse debt level
schedule attached hereto as Exhibit F, in proportion to each such Limited
Partner's Limited Partner Recourse Debt Percentage, until the sum of such
Limited Partners' negative Adjusted Capital Account balances equals the
Recourse Debt Amount; and
(4) Fourth, 100% to the General Partner.
C. The Partners agree that Nonrecourse Liabilities of the Partnership
shall be allocated among the Partners in accordance with the provisions of
Regulations Section 1.752-3, as modified by any guidance published by the
Internal Revenue Service, or otherwise reasonably interpreted.
D. Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall, to the extent possible, after taking
into account other required
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allocations of gain pursuant to Exhibit C, be characterized as Recapture
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Income in the same proportions and to the same extent as such Partners have been
allocated any deductions directly or indirectly giving rise to the treatment of
such gains as Recapture Income.
In the event that the Partnership issues additional Partnership Interests
to the General Partner, or any Additional Limited Partner pursuant to Article 4
hereof, the General Partner shall make such revisions to this Section 6.1 as it
determines are necessary to reflect the terms of the issuance of such additional
Partnership Interests, including making preferential allocations to certain
classes of Partnership Interests.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
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A. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Partnership are and shall
be exclusively vested in the General Partner, and no Limited Partner shall have
any right to participate in or exercise control or management power over the
business and affairs of the Partnership. The General Partner may not be removed
by the Limited Partners with or without cause. In addition to the powers now or
hereafter granted a general partner of a limited partnership under applicable
law or which are granted to the General Partner under any other provision of
this Agreement, the General Partner, subject to Section 7.3 hereof, shall have
full power and authority to do all things deemed necessary or desirable by it to
conduct the business of the Partnership, to exercise all powers set forth in
Section 3.2 hereof and to effectuate the purposes set forth in Section 3.1
hereof, including, without limitation:
(1) the making of any expenditures, the lending or borrowing of
money (including, without limitation, making prepayments on loans
and borrowing money to permit the Partnership to make
distributions to its Partners in such amounts as will permit the
Company (so long as the Company qualifies as a REIT) to avoid the
payment of any federal income tax (including, for this purpose,
any excise tax pursuant to Section 4981 of the Code) and to make
distributions to its shareholders in amounts sufficient to permit
the Company to maintain REIT status), the assumption or guarantee
of, or other contracting for, indebtedness and other liabilities,
the issuance of evidence of indebtedness (including the securing
of the same by deed, mortgage, deed of trust or other lien or
encumbrance on the Partnership's assets) and the incurring of any
obligations it deems necessary for the conduct of the activities
of the Partnership;
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(2) the making of tax, regulatory and other filings, or rendering
of periodic or other reports to governmental or other agencies
having jurisdiction over the business or assets of the
Partnership, the registration of any class of securities of the
Partnership under the Securities Exchange Act of 1934, as
amended, and the listing of any debt securities of the
Partnership on any exchange;
(3) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any assets of the Partnership
(including the exercise or grant of any conversion, option,
privilege, or subscription right or other right available in
connection with any assets at any time held by the Partnership)
or the merger or other combination of the Partnership with or
into another entity (all of the foregoing subject to any prior
approval only to the extent required by Section 7.3 hereof);
(4) the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with the
terms of this Agreement and on any terms it sees fit, including,
without limitation, the financing of the conduct of the
operations of the Company, the Partnership or any of the
Partnership's Subsidiaries, the lending of funds to other Persons
(including, without limitation, the Subsidiaries of the
Partnership and/or the Company) and the repayment of obligations
of the Partnership and its Subsidiaries and any other Person in
which it has an equity investment, and the making of capital
contributions to its Subsidiaries;
(5) the management, operation, leasing, landscaping, repair,
alteration, demolition or improvement of any real property or
improvements owned by the Partnership or any Subsidiary of the
Partnership;
(6) the negotiation, execution, and performance of any contracts,
conveyances or other instruments that the General Partner
considers useful or necessary to the conduct of the Partnership's
operations or the implementation of the General Partner's powers
under this Agreement, including contracting with contractors,
developers, consultants, accountants, legal counsel, other
professional advisors and other agents and the payment of their
expenses and compensation out of the Partnership's assets;
(7) the distribution of Partnership cash or other Partnership
assets in accordance with this Agreement;
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(8) holding, managing, investing and reinvesting cash and other
assets of the Partnership;
(9) the collection and receipt of revenues and income of the
Partnership;
(10) the establishment of one or more divisions of the
Partnership, the selection and dismissal of employees of the
Partnership (including, without limitation, employees having
titles such as "president," "vice president," "secretary" and
"treasurer" of the Partnership), and agents, outside attorneys,
accountants, consultants and contractors of the Partnership, and
the determination of their compensation and other terms of
employment or hiring;
(11) the maintenance of such insurance for the benefit of the
Partnership, the Partner and directors and officers thereof as it
deems necessary or appropriate;
(12) the formation of, or acquisition of an interest in, and the
contribution of property to, any further limited or general
partnerships, joint ventures or other relationships that it deems
desirable (including, without limitation, the acquisition of
interests in, and the contributions of property to, its
Subsidiaries and any other Person in which it has an equity
investment from time to time);
(13) the control of any matters affecting the rights and
obligations of the Partnership, including the settlement,
compromise, submission to arbitration or any other form of
dispute resolution, or abandonment of, any claim, cause of
action, liability, debt or damages, due or owing to or from the
Partnership, the commencement or defense of suits, legal
proceedings, administrative proceedings, arbitration or other
forms of dispute resolution, and the representation of the
Partnership in all suits or legal proceedings, administrative
proceedings, arbitrations or other forms of dispute resolution,
the incurring of legal expense, and the indemnification of any
Person against liabilities and contingencies to the extent
permitted by law;
(14) the undertaking of any action in connection with the
Partnership's direct or indirect investment in its Subsidiaries
or any other Person (including, without limitation, the
contribution or loan of funds by the Partnership to such
Persons);
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(15) the determination of the fair market value of any
Partnership property distributed in kind using such reasonable
method of valuation as the General Partner may adopt;
(16) the exercise, directly or indirectly, through any attorney-
in-fact acting under a general or limited power of attorney, of
any right, including the right to vote, appurtenant to any asset
or investment held by the Partnership;
(17) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of or in connection with
any Subsidiary of the Partnership or any other Person in which
the Partnership has a direct or indirect interest, or jointly
with any such Subsidiary or other Person;
(18) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of any Person in which the
Partnership does not have an interest pursuant to contractual or
other arrangements with such Person;
(19) the making, execution and delivery of any and all deeds,
leases, notes, mortgages, deeds of trust, security agreements,
conveyances, contracts, guarantees, warranties, indemnities,
waivers, releases or legal instruments or agreements in writing
necessary or appropriate, in the judgment of the General Partner,
for the accomplishment of any of the powers of the General
Partner enumerated in this Agreement; and
(20) the issuance of additional Partnership Units, as
appropriate, in connection with Capital Contributions by
Additional Limited Partners and additional Capital Contributions
by Partners pursuant to Article 4 hereof.
B. Each of the Limited Partners agrees that the General Partner is
authorized to execute, deliver and perform the above-mentioned agreements and
transactions on behalf of the Partnership without any further act, approval or
vote of the Partners, notwithstanding any other provision of this Agreement
(except as provided in Section 7.3 or Section 8.7), the Act or any applicable
law, rule or regulation, to the fullest extent permitted under the Act or other
applicable law, rule or regulation. The execution, delivery or performance by
the General Partner or the Partnership of any agreement authorized or permitted
under this Agreement shall not constitute a breach by the General Partner of any
duty that the General Partner may owe the Partnership or the Limited Partners or
any other Persons under this Agreement or of any duty stated or implied by law
or equity.
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C. At all times from and after the date hereof, the General Partner may
cause the Partnership to establish and maintain at any and all times working
capital accounts and other cash or similar balances in such amounts as the
General Partner, in its sole and absolute discretion, deems appropriate and
reasonable from time to time.
D. In exercising its authority under this Agreement, the General Partner
may, but shall be under no obligation to, take into account the tax consequences
to any Partner of any action taken by it. The General Partner and the
Partnership shall not have liability to a Limited Partner under any
circumstances, as a result of an income tax liability incurred by such Limited
Partner as a result of an action (or inaction) by the General Partner taken
pursuant to its authority under this Agreement and in accordance with the terms
of Section 7.3 and Section 8.7. The Limited Partners expressly acknowledge that
the General Partner is acting on behalf of the Partnership, the Company and the
Company's stockholders collectively. In the event of a conflict between the
interests of the stockholders of the Company on one hand and the Limited
Partners on the other, the General Partner shall endeavor in good faith to
resolve the conflict in a manner not adverse to either the stockholders of the
Company or the Limited Partners.
E. The General Partner agrees to cause the Partnership to use its
reasonable commercial efforts to cause its lenders to permit the Consenting
Partners or either of them individually to guarantee any indebtedness of the
Partnership (including additional indebtedness or substitute indebtedness
incurred after the Effective Date).
Section 7.2 Certificate of Limited Partnership
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The General Partner has previously filed the Certificate of Limited
Partnership with the Secretary of State of the State of Delaware as required by
the Act. The General Partner shall use all reasonable efforts to cause to be
filed such other certificates or documents as may be reasonable and necessary or
appropriate for the formation, continuation, qualification and operation of a
limited partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and any other state, or the District of
Columbia, in which the Partnership may elect to do business or own property. To
the extent that such action is determined by the General Partner to be
reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate of Limited Partnership and do
all of the things to maintain the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) under the laws
of the State of Delaware and each other state, or the District of Columbia, in
which the Partnership may elect to do business or own property. Subject to the
terms of Section 8.5.A(4) hereof, the General Partner shall not be required,
before or after filing, to deliver or mail a copy of the Certificate of Limited
Partnership or any amendment thereto to any Limited Partner.
Section 7.3 Restrictions on General Partner Authority. The General
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Partner may not take any action in contravention of an express prohibition or
limitation of this Agreement
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without the written Consent of Limited Partners holding a majority of the
Percentage Interests of the Limited Partners (including Limited Partner
Interests held by the Company), or such other percentage of the Limited Partners
as may be specifically provided for under a provision of this Agreement.
Section 7.4 Reimbursement of the General Partner and the Company; DRIP's
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and Repurchase Programs
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A. Except as provided in this Section 7.4 and elsewhere in this Agreement
(including the provisions of Articles 5 and 6 regarding distributions, payments,
and allocations to which it may be entitled), the General Partner shall not be
compensated for its services as general partner of the Partnership.
B. The General Partner shall be reimbursed on a monthly basis, or such
other basis as it may determine in its sole and absolute discretion, for all
expenses that it incurs relating to the ownership and operation of, or for the
benefit of, the Partnership (including, without limitation, (i) expenses
relating to the ownership of interests in and operation of the Partnership, (ii)
compensation of the Company's officers and employees including, without
limitation, payments under the General Partner's Stock Incentive Plans that
provides for stock units, or other phantom stock, pursuant to which employees of
the General Partner will receive payments based upon dividends on or the value
of REIT Shares, (iii) director fees and expenses and (iv) all costs and expenses
of being a public company, including costs of filings with the SEC, reports and
other distributions to its stockholders); provided that the amount of any such
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reimbursement shall be reduced by any interest earned by the General Partner
with respect to bank accounts or other instruments or accounts held by it on
behalf of the Partnership. The Partners acknowledge that all such expenses of
the General Partner are deemed to be for the benefit of the Partnership. Such
reimbursement shall be in addition to any reimbursement made as a result of
indemnification pursuant to Section 7.7 hereof.
C. As set forth in Section 4.3, the Company shall be treated as having
made a Capital Contribution in the amount of all expenses that it incurs
relating to the Company's initial public offering REIT of Shares.
D. In the event that the Company shall elect to purchase from its
shareholders REIT Shares for the purpose of delivering such REIT Shares to
satisfy an obligation under any dividend reinvestment program adopted by the
Company, any employee stock purchase plan adopted by the Company, or any similar
obligation or arrangement undertaken by the Company in the future or for the
purpose of retiring such REIT Shares, the purchase price paid by the Company for
such REIT Shares and any other expenses incurred by the Company in connection
with such purchase shall be considered expenses of the Partnership and shall be
advanced to the Company or reimbursed to the Company, subject to the condition
that: (i) if such REIT Shares subsequently are sold by the Company, the Company
shall pay to the Partnership any proceeds received by the Company for such REIT
Shares (which sales
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proceeds shall include the amount of dividends reinvested under any dividend
reinvestment or similar program provided that a transfer of REIT Shares for
Units pursuant to Section 8.6 would not be considered a sale for such purposes);
and (ii) if such REIT Shares are not retransferred by the Company within thirty
(30) days after the purchase thereof, or the Company otherwise determines not to
retransfer such REIT Shares, the Company, as General Partner, shall cause the
Partnership to redeem a number of Partnership Units held by the Company, as a
Limited Partner, equal to the product obtained by dividing the number of such
REIT Shares by the Conversion Factor (in which case such advancement or
reimbursement of expenses shall be treated as having been made as a distribution
in redemption of such number of Units held by the Company).
Section 7.5 Outside Activities of the General Partner
-----------------------------------------
The General Partner shall not directly or indirectly enter into or conduct
any business other than in connection with the ownership, acquisition and
disposition of Partnership Interests and the management of the business of the
Partnership, and such activities as are incidental thereto. The General Partner
and any Affiliates of the General Partner may acquire Limited Partner Interests
and shall be entitled to exercise all rights of a Limited Partner relating to
such Limited Partner Interests.
Section 7.6 Contracts with Affiliates
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A. The Partnership may lend or contribute funds or other assets to its
Subsidiaries or other Persons in which it has an equity investment and such
Persons may borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General Partner. The
foregoing authority shall not create any right or benefit in favor of any
Subsidiary or any other Person.
B. Except as provided in Section 7.5, the Partnership may transfer assets
to joint ventures, other partnerships, corporations or other business entities
in which it is or thereby becomes a participant upon such terms and subject to
such conditions consistent with this Agreement and applicable law as the General
Partner, in its sole and absolute discretion, believes are advisable.
C. Except as expressly permitted by this Agreement, neither the General
Partner nor any of its Affiliates shall sell, transfer or convey any property
to, or purchase any property from, the Partnership, directly or indirectly,
except pursuant to transactions that are determined by the General Partner in
good faith to be fair and reasonable.
D. The General Partner, in its sole and absolute discretion and without
the approval of the Limited Partners, may propose and adopt, on behalf of the
Partnership, employee benefit plans, stock option plans, and similar plans
funded by the Partnership for the benefit of employees of the General Partner,
the Partnership, Subsidiaries of the Partnership or any
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Affiliate of any of them in respect of services performed, directly or
indirectly, for the benefit of the Partnership, the General Partner, or any
Subsidiaries of the Partnership.
E. The General Partner is expressly authorized to enter into, in the name
and on behalf of the Partnership, a right of first opportunity arrangement and
other conflict avoidance agreements with various Affiliates of the Partnership
and the General Partner, on such terms as the General Partner, in its sole and
absolute discretion, believes are advisable.
Section 7.7 Indemnification
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A. To the fullest extent permitted by Delaware law, the Partnership shall
indemnify each Indemnitee from and against any and all losses, claims, damages,
liabilities, joint or several, expenses (including, without limitation,
attorneys fees and other legal fees and expenses), judgments, fines,
settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Partnership or the Company as set forth in
this Agreement, in which such Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise, unless it is established that: (i) the act or
omission of the Indemnitee was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) the Indemnitee actually received an improper
personal benefit in money, property or services; or (iii) in the case of any
criminal proceeding, the Indemnitee had reasonable cause to believe that the act
or omission was unlawful. Without limitation, the foregoing indemnity shall
extend to any liability of any Indemnitee, pursuant to a loan guaranty or
otherwise for any indebtedness of the Partnership or any Subsidiary of the
Partnership (including without limitation, any indebtedness which the
Partnership or any Subsidiary of the Partnership has assumed or taken subject
to), and the General Partner is hereby authorized and empowered, on behalf of
the Partnership, to enter into one or more indemnity agreements consistent with
the provisions of this Section 7.7 in favor of any Indemnitee having or
potentially having liability for any such indebtedness. The termination of any
proceeding by conviction of an Indemnitee or upon a plea of nolo contendere or
its equivalent by an Indemnitee, or an entry of an order of probation against an
Indemnitee prior to judgment, creates a rebuttable presumption that such
Indemnitee acted in a manner contrary to that specified in this Section 7.7.A.
Any indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Partnership, and neither the General Partner nor any Limited
Partner shall have any obligation to contribute to the capital of the
Partnership, or otherwise provide funds, to enable the Partnership to fund its
obligations under this Section 7.7.
B. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding shall be paid or reimbursed by the Partnership in advance of the
final disposition of the proceeding upon receipt by the Partnership of (i) a
written affirmation by the Indemnitee of the Indemnitee's good faith belief that
the standard of conduct necessary for indemnification by the Partnership as
authorized in Section 7.7.A. has been met, and (ii) a written undertaking by or
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on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
C. The indemnification provided by this Section 7.7 shall be in addition
to any other rights to which an Indemnitee or any other Person may be entitled
under any agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, and shall continue as to an Indemnitee who has ceased to serve in
such capacity unless otherwise provided in a written agreement pursuant to which
such Indemnitee is indemnified.
D. The Partnership may, but shall not be obligated to, purchase and
maintain insurance, on behalf of the Indemnitees and such other Persons as the
General Partner shall determine, against any liability that may be asserted
against or expenses that may be incurred by such Person in connection with the
Partnership's activities, regardless of whether the Partnership would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.
E. For purposes of this Section 7.7, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute fines
within the meaning of Section 7.7; and actions taken or omitted by the
Indemnitee with respect to an employee benefit plan in the performance of its
duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject any of the Partners to personal
liability by reason of the indemnification provisions set forth in this
Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.7 because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 7.7 or any provision hereof
shall be prospective only and shall not in any way affect the Partnership's
liability to any Indemnitee under this Section 7.7, as in effect immediately
prior to such amendment, modification, or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
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Section 7.8 Liability of the General Partner
--------------------------------
A. Notwithstanding anything to the contrary set forth in this Agreement,
the General Partner and its officers and directors shall not be liable for
monetary damages to the Partnership, any Partners or any Assignees for losses
sustained or liabilities incurred as a result of errors in judgment or of any
act or omission if the General Partner acted in good faith.
B. The Limited Partners expressly acknowledge that, as stated in Section
7.1.D, the General Partner is acting on behalf of the Partnership and the
shareholders of the Company collectively, that the General Partner is under no
obligation to consider the separate interests of the Limited Partners (except as
otherwise provided herein) in deciding whether to cause the Partnership to take
(or decline to take) any actions, and that the General Partner shall not be
liable for monetary damages for losses sustained, liabilities incurred, or
benefits not derived by Limited Partners in connection with such decisions,
provided that the General Partner has acted in good faith.
C. Subject to its obligations and duties as General Partner set forth in
Section 7.1.A hereof, the General Partner may exercise any of the powers granted
to it by this Agreement and perform any of the duties imposed upon it hereunder
either directly or by or through its agents. The General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by the General Partner in good faith.
D. Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the General Partner's and its officers' and directors' liability
to the Partnership and the Limited Partners under this Section 7.8 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
Section 7.9 Other Matters Concerning the General Partner
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A. The General Partner may rely and shall be protected in acting, or
refraining from acting, upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture, or other
paper or document believed by it in good faith to be genuine and to have been
signed or presented by the proper party or parties.
B. The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects, engineers,
environmental consultants and other consultants and advisers selected by it, and
any act taken or omitted to be taken in reliance upon the opinion of such
Persons as to matters which such General Partner reasonably believes to be
within such Person's professional or expert competence shall be conclusively
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presumed to have been done or omitted in good faith and in accordance with such
opinion.
C. The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers and duly appointed attorneys-in-fact. Each such attorney shall, to the
extent provided by the General Partner in the power of attorney, have full power
and authority to do and perform all and every act and duty which is permitted or
required to be done by the General Partner hereunder.
D. Notwithstanding any other provisions of this Agreement or the Act, any
action of the General Partner on behalf of the Partnership or any decision of
the General Partner to refrain from acting on behalf of the Partnership,
undertaken in the good faith belief that such action or omission is necessary or
advisable in order (i) to protect the ability of the Company to continue to
qualify as a REIT; or (ii) to avoid the Company incurring any taxes under
Section 857 or Section 4981 of the Code, is expressly authorized under this
Agreement and is deemed approved by all of the Limited Partners.
Section 7.10 Title to Partnership Assets
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Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner, individually or collectively, shall have any ownership
interest in such Partnership assets or any portion thereof. Title to any or all
of the Partnership assets may be held in the name of the Partnership, the
General Partner or one or more nominees, as the General Partner may determine,
including Affiliates of the General Partner. The General Partner hereby
declares and warrants that any Partnership assets for which legal title is held
in the name of the General Partner or any nominee or Affiliate of the General
Partner shall be held by the General Partner for the use and benefit of the
Partnership in accordance with the provisions of this Agreement; provided,
--------
however, that the General Partner shall use its best efforts to cause beneficial
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and record title to such assets to be vested in the Partnership as soon as
reasonably practicable if failure to so vest such title would have a material
adverse effect on the Partnership. All Partnership assets shall be recorded as
the property of the Partnership in its books and records, irrespective of the
name in which legal title to such Partnership assets is held.
Section 7.11 Reliance by Third Parties
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Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner has full power and authority, without consent or approval of any other
Partner or Person, to encumber, sell or otherwise use in any manner any and all
assets of the Partnership and to enter into any contracts on behalf of the
Partnership, and take any and all actions on behalf of the Partnership and such
Person shall be entitled to deal with the General Partner as if the General
Partner were the Partnership's sole party in interest, both legally and
beneficially. Each Limited Partner hereby waives any and all defenses or other
remedies which may be available against
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such Person to contest, negate or disaffirm any action of the General Partner in
connection with any such dealing. In no event shall any Person dealing with the
General Partner or its representatives be obligated to ascertain that the terms
of this Agreement have been complied with or to inquire into the necessity or
expedience of any act or action of the General Partner or its representatives.
Each and every certificate, document or other instrument executed on behalf of
the Partnership by the General Partner or its representatives shall be
conclusive evidence in favor of any and every Person relying thereon or claiming
thereunder that (i) at the time of the execution and delivery of such
certificate, document or instrument, this Agreement was in full force and
effect; (ii) the Person executing and delivering such certificate, document or
instrument was duly authorized and empowered to do so for and on behalf of the
Partnership; and (iii) such certificate, document or instrument was duly
executed and delivered in accordance with the terms and provisions of this
Agreement and is binding upon the Partnership.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability
-----------------------
The Limited Partners shall have no liability under this Agreement except as
expressly provided in this Agreement, including Section 10.5 hereof, or under
the Act.
Section 8.2 Management of Business
----------------------
No Limited Partner or Assignee (other than the General Partner, any of its
Affiliates or any officer, director, employee, agent or trustee of the General
Partner, the Partnership or any of their Affiliates, in their capacity as such)
shall take part in the operation, management or control (within the meaning of
the Act) of the Partnership's business, transact any business in the
Partnership's name or have the power to sign documents for or otherwise bind the
Partnership. The transaction of any such business by the General Partner, any
of its Affiliates or any officer, director, employee, partner, agent or trustee
of the General Partner, the Partnership or any of their Affiliates, in their
capacity as such, shall not affect, impair or eliminate the limitations on the
liability of the Limited Partners or Assignees under this Agreement.
Section 8.3 Outside Activities of Limited Partners
--------------------------------------
Subject to any agreements entered into pursuant to Section 7.6.E hereof and
any other agreements entered into by a Limited Partner or its Affiliates with
the Partnership or any of its Subsidiaries, any Limited Partner (other than the
Company) and any officer, director, employee, agent, trustee, Affiliate or
shareholder of any Limited Partner shall be entitled to and may have business
interests and engage in business activities in addition to those relating to
33
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the Partnership, including business interests and activities that are in direct
competition with the Partnership or that are enhanced by the activities of the
Partnership. Neither the Partnership nor any Partners shall have any rights by
virtue of this Agreement in any business ventures of any Limited Partner or
Assignee. None of the Limited Partners (other than the Company) nor any other
Person shall have any rights by virtue of this Agreement or the Partnership
relationship established hereby in any business ventures of any other Person and
such Person shall have no obligation pursuant to this Agreement to offer any
interest in any such business ventures to the Partnership, any Limited Partner
or any such other Person, even if such opportunity is of a character which, if
presented to the Partnership, any Limited Partner or such other Person, could be
taken by such Person.
Section 8.4 Return of Capital
-----------------
Except pursuant to the right of redemption set forth in Section 8.6, no
Limited Partner shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon termination of the Partnership as provided herein. Except to
the extent provided by Exhibit C hereof or as otherwise expressly provided in
---------
this Agreement, no Limited Partner or Assignee shall have priority over any
other Limited Partner or Assignee, either as to the return of Capital
Contributions or as to profits, losses or distributions.
Section 8.5 Rights of Limited Partners Relating to the Partnership
------------------------------------------------------
A. In addition to the other rights provided by this Agreement or by the
Act, and except as limited by Section 8.5.C hereof, each Limited Partner shall
have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon written demand with a
statement of the purpose of such demand and at such Limited Partner's own
expense (including such copying and administrative charges as the General
Partner may establish from time to time):
(1) to obtain a copy of the most recent annual and quarterly reports
filed with the Securities and Exchange Commission by the Company
pursuant to the Securities Exchange Act of 1934;
(2) to obtain a copy of the Partnership's federal, state and local
income tax returns for each Partnership Year;
(3) to obtain a current list of the name and last known business,
residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate of Limited
Partnership and all amendments thereto, together with executed
copies of all powers of attorney pursuant to which this Agreement,
the Certificate
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of Limited Partnership and all amendments thereto have been
executed; and
(5) to obtain true and full information regarding the amount of cash
and a description and statement of any other property or services
contributed by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a
Partner.
B. The Partnership shall notify each Limited Partner, upon request, of
the then current Conversion Factor and the REIT Shares Amount per Partnership
Unit and, with reasonable detail, how the same was determined.
C. Notwithstanding any other provision of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such period of time
as the General Partner determines in its sole and absolute discretion to be
reasonable, any information that (i) the General Partner reasonably believes to
be in the nature of trade secrets or other information, the disclosure of which
the General Partner in good faith believes is not in the best interests of the
Partnership or could damage the Partnership or its business; or (ii) the
Partnership is required by law or by agreements with an unaffiliated third party
to keep confidential.
Section 8.6 Redemption Right
----------------
A. Subject to Sections 8.6.B and 8.6.C hereof, on or after that date
which is fourteen (14) months after the Effective Date, each Limited Partner
(other than the Company) shall have the right (the "Redemption Right") to
----------------
require the Partnership to redeem on a Specified Redemption Date all or a
portion of the Partnership Units held by such Limited Partner at a redemption
price per Unit equal to and in the form of the Cash Amount to be paid by the
Partnership. The Redemption Right shall be exercised pursuant to a Notice of
Redemption delivered to the Partnership (with a copy to the Company) by the
Limited Partner who is exercising the redemption right (the "Redeeming
Partner"); provided, however, that the Partnership shall not be obligated to
-------- -------
satisfy such Redemption Right if the Company elects to purchase the Partnership
Units subject to the Notice of Redemption pursuant to Section 8.6.B. A Limited
Partner may not exercise the Redemption Right for less than one thousand (1,000)
Partnership Units or, if such Limited Partner holds less than one thousand
(1,000) Partnership Units, all of the Partnership Units held by such Partner.
The Redeeming Partner shall have no right, with respect to any Partnership Units
so redeemed, to receive any distributions paid on or after the Specified
Redemption Date. The Assignee of any Limited Partner may exercise the rights of
such Limited Partner pursuant to this Section 8.6, and such Limited Partner
shall be deemed to have assigned such rights to such Assignee and shall be bound
by the exercise of such rights by such Assignee. In connection with any
exercise of such rights by an Assignee on behalf of a Limited Partner, the Cash
Amount shall be paid by the Partnership directly to such Assignee and not to
such Limited Partner.
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B. Notwithstanding the provisions of Section 8.6.A, a Limited Partner
that exercises the Redemption Right shall be deemed to have offered to sell the
Partnership Units described in the Notice of Redemption to the Company, and the
Company will, at the direction of the Partnership as determined in the
Partnership's sole and absolute discretion and only if so directed, elect to
purchase directly and acquire such Partnership Units by paying to the Redeeming
Partner either the Cash Amount or the REIT Shares Amount, as elected by the
Company (in its sole and absolute discretion), on the Specified Redemption Date,
whereupon the Company shall acquire the Partnership Units offered for redemption
by the Redeeming Partner and shall be treated for all purposes of this Agreement
as the owner of such Partnership Units. If the Company shall elect to exercise
its right to purchase Partnership Units under this Section 8.6.B with respect to
a Notice of Redemption, it shall so notify the Redeeming Partner within five (5)
Business Days after the receipt by it of such Notice of Redemption. Unless the
Company (in its sole and absolute discretion) shall exercise its right to
purchase Partnership Units from the Redeeming Partner pursuant to this Section
8.6.B, the Company shall not have any obligation to the Redeeming Partner or the
Partnership with respect to the Redeeming Partner's exercise of the Redemption
Right. In the event the Company shall exercise its right to purchase
Partnership Units with respect to the exercise of a Redemption Right in the
manner described in the first sentence of this Section 8.6.B, the Partnership
shall have no obligation to pay any amount to the Redeeming Partner with respect
to such Redeeming Partner's exercise of such Redemption Right, and each of the
Redeeming Partner, the Partnership, and the Company shall treat the transaction
between the Company and the Redeeming Partner, for federal income tax purposes,
as a sale of the Redeeming Partner's Partnership Units to the Company. Each
Redeeming Partner agrees to execute such documents as the Company may reasonably
require in connection with the issuance of REIT Shares upon exercise of the
Redemption Right.
C. Notwithstanding the provisions of Section 8.6.A and Section 8.6.B, a
Partner shall not be entitled to exercise the Redemption Right pursuant to
Section 8.6.A if the delivery of REIT Shares to such Partner on the Specified
Redemption Date by the Company pursuant to Section 8.6.B (regardless of whether
or not the Company would in fact exercise its rights under Section 8.6.B) would
be prohibited under the Certificate of Incorporation of the Company.
D. In the event that the Partnership issues additional Partnership
Interests pursuant to Section 4.2.A hereof, the General Partner shall make such
revisions to this Section 8.6 as it determines are necessary to reflect the
issuance of such additional Partnership Interests.
Section 8.7 Consent of Certain Limited Partners
-----------------------------------
Each of the properties listed on Exhibit E hereto is referred to as a
---------
"Designated Property." At any time during the 10 year period following the
Effective Date, the Partnership may not sell or otherwise dispose of a
Designated Property or a Successor
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Designated Property (as hereinafter defined) in a transaction that causes gain
recognition under Section 752 (or any other section) of the Code for the
Consenting Partners without the consent of each of the Consenting Partners who
contributed such Designated Property. For purposes of this Section 8.7, the term
"Successor Designated Property" means a property acquired by the Partnership
upon the disposition of a Designated Property in a Section 1031 like kind
exchange or any other exchange transaction that does not result in gain
recognition. The provisions of this Section 8.7 shall not be applicable with
respect to any Consenting Partner if at any time such Consenting Partner
beneficially owns fewer than 30% of the number of Partnership Units owned by
such Consenting Partner following the closing of the initial public offering of
REIT Shares on the date hereof and the related formation transactions that
occurred simultaneously therewith.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting
----------------------
The General Partner shall keep or cause to be kept at the principal office
of the Partnership those records and documents required to be maintained by the
Act and other books and records deemed by the General Partner to be appropriate
with respect to the Partnership's business, including, without limitation, all
books and records necessary to provide to the Limited Partners any information,
lists and copies of documents required to be provided pursuant to Section 9.3
hereof. Any records maintained by or on behalf of the Partnership in the
regular course of its business may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, micrographics or any other information
storage device, provided that the records so maintained are convertible into
-------- ----
clearly legible written form within a reasonable period of time. The books of
the Partnership shall be maintained, for financial and tax reporting purposes,
on an accrual basis in accordance with generally accepted accounting principles,
or such other basis as the General Partner determines to be necessary or
appropriate.
Section 9.2 Fiscal Year
-----------
The fiscal year of the Partnership shall be the calendar year.
Section 9.3 Reports
-------
A. As soon as practicable, but in no event later than one hundred five
(105) days after the close of each Partnership Year, the General Partner shall
cause to be mailed to each Limited Partner as of the close of the Partnership
Year, an annual report containing financial statements of the Partnership, or of
the Company if such statements are prepared solely on a consolidated basis with
the Company, for such Partnership Year, presented in accordance with
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generally accepted accounting principles, such statements to be audited by a
nationally recognized firm of independent public accountants selected by the
General Partner.
B. As soon as practicable, but in no event later than one hundred five
(105) days after the close of each calendar quarter (except the last calendar
quarter of each year), the General Partner shall cause to be mailed to each
Limited Partner as of the last day of the calendar quarter, a report containing
unaudited financial statements of the Partnership, or of the Company, if such
statements are prepared solely on a consolidated basis with the Company, and
such other information as may be required by applicable law or regulation, or as
the General Partner determines to be appropriate.
ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns
--------------------------
The General Partner shall arrange for the preparation and timely filing of
all returns of Partnership income, gains, deductions, losses and other items
required of the Partnership for federal and state income tax purposes and shall
use all reasonable efforts to furnish, within ninety (90) days of the close of
each taxable year, the tax information reasonably required by Limited Partners
for federal and state income tax reporting purposes.
Section 10.2 Tax Elections
-------------
Except as otherwise provided herein, the General Partner shall, in its sole
and absolute discretion, determine whether to make any available election
pursuant to the Code. Notwithstanding the above, in making any such tax election
the General Partner shall take into account the tax consequences to the Limited
Partners resulting from any such election. The General Partner shall make such
tax elections on behalf of the Partnership as the Limited Partners holding a
majority of the Percentage Interests of the Limited Partners (excluding Limited
Partner Interests held by the Company) request, provided that the General
Partner believes that such election is not adverse to the interests of the
General Partner, including its interest in preserving its qualification as a
REIT under the Code. The General Partner intends that Section 704(c)
allocations with respect to property contributed as of the Effective Date shall
be made by the election of the so-called "traditional method" with curative
allocations limited solely to allocations of gain on sale of such contributed
property to the extent allocations of depreciation deductions with respect to
such contributed property to non-contributing Partners have been limited by the
so-called "ceiling rule", as described in Regulations Section 1.704-
3(c)(3)(iii)(B). The General Partner shall have the right to seek to revoke any
tax election it makes (including, without limitation, the election under Section
754 of the Code) upon the General Partner's determination, in its sole and
absolute discretion, that such revocation is in the best interests of the
Partners.
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Section 10.3 Tax Matters Partner
-------------------
A. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section 6230(e) of the
Code, upon receipt of notice from the IRS of the beginning of an administrative
proceeding with respect to the Partnership, the tax matters partner shall
furnish the IRS with the name, address, taxpayer identification number, and
profit interest of each of the Limited Partners and the Assignees; provided,
--------
however, that such information is provided to the Partnership by the Limited
- -------
Partners and the Assignees.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect to any
administrative or judicial proceedings for the adjustment of
Partnership items required to be taken into account by a Partner
for income tax purposes (such administrative proceedings being
referred to as a "tax audit" and such judicial proceedings being
referred to as "judicial review"), and in the settlement agreement
the tax matters partner may expressly state that such agreement
shall bind all Partners, except that such settlement agreement
shall not bind any Partner (i) who (within the time prescribed
pursuant to the Code and Regulations) files a statement with the
IRS providing that the tax matters partner shall not have the
authority to enter into a settlement agreement on behalf of such
Partner; or (ii) who is a "notice partner" (as defined in Section
6231(a)(8) of the Code) or a member of a "notice group" (as
defined in Section 6223(b)(2) of the Code);
(2) in the event that a notice of a final administrative adjustment at
the Partnership level of any item required to be taken into
account by a Partner for tax purposes (a "final adjustment") is
mailed to the tax matters partner, to seek judicial review of such
final adjustment, including the filing of a petition for
readjustment with the Tax Court or the filing of a complaint for
refund with the United States Claims Court or the District Court
of the United States for the district in which the Partnership's
principal place of business is located;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the IRS
and, if any part of such request is not allowed by the IRS, to
file an appropriate pleading (petition or complaint) for judicial
review with respect to such request;
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(5) to enter into an agreement with the IRS to extend the period for
assessing any tax which is attributable to any item required to be
taken account of by a Partner for tax purposes, or an item
affected by such item; and
(6) to take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial review
proceeding to the extent permitted by applicable law or
regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole and absolute discretion of the tax
matters partner and the provisions relating to indemnification of the General
Partner set forth in Section 7.7 of this Agreement shall be fully applicable to
the tax matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation for its
services. All third party costs and expenses incurred by the tax matters
partner in performing its duties as such (including legal and accounting fees
and expenses) shall be borne by the Partnership. Nothing herein shall be
construed to restrict the Partnership from engaging an accounting firm to assist
the tax matters partner in discharging its duties hereunder, so long as the
compensation paid by the Partnership for such services is reasonable.
Section 10.4 Organizational Expenses
-----------------------
The Partnership shall elect to deduct expenses, if any, incurred by it in
organizing the Partnership ratably over a sixty (60) month period as provided in
Section 709 of the Code.
Section 10.5 Withholding
-----------
Each Limited Partner hereby authorizes the Partnership to withhold from, or
pay on behalf of or with respect to, such Limited Partner any amount of federal,
state, local, or foreign taxes that the General Partner determines that the
Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Limited Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the Code. Any
amount paid on behalf of or with respect to a Limited Partner shall constitute a
loan by the Partnership to such Limited Partner, which loan shall be repaid by
such Limited Partner within fifteen (15) days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited
Partner; or (ii) the General Partner determines, in its sole and absolute
discretion, that such payment may be satisfied out of the available funds of the
Partnership which would, but for such payment, be distributed to the Limited
Partner. Any amounts withheld pursuant to the foregoing clauses (i) or (ii)
shall be treated as having been distributed to such Limited Partner. Each
Limited Partner hereby unconditionally and irrevocably grants to the Partnership
a
40
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security interest in such Limited Partner's Partnership Interest to secure
such Limited Partner's obligation to pay to the Partnership any amounts required
to be paid pursuant to this Section 10.5. In the event that a Limited Partner
fails to pay any amounts owed to the Partnership pursuant to this Section 10.5
when due, the General Partner may, in its sole and absolute discretion, elect to
make the payment to the Partnership on behalf of such defaulting Limited
Partner, and in such event shall be deemed to have loaned such amount to such
defaulting Limited Partner and shall succeed to all rights and remedies of the
Partnership as against such defaulting Limited Partner. Without limitation, in
such event the General Partner shall have the right to receive distributions
that would otherwise be distributable to such defaulting Limited Partner until
such time as such loan, together with all interest thereon, has been paid in
full, and any such distributions so received by the General Partner shall be
treated as having been distributed to the defaulting Limited Partner and
immediately paid by the defaulting Limited Partner to the General Partner in
repayment of such loan. Any amounts payable by a Limited Partner hereunder
shall bear interest at the lesser of (A) the base rate on corporate loans at
large United States money center commercial banks, as published from time to
time in The Wall Street Journal, plus four (4) percentage points, or (B) the
-----------------------
maximum lawful rate of interest on such obligation, such interest to accrue from
the date such amount is due (i.e., fifteen (15) days after demand) until such
----
amount is paid in full. Each Limited Partner shall take such actions as the
Partnership or the General Partner shall request in order to perfect or enforce
the security interest created hereunder.
ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
--------
A. The term "transfer," when used in this Article 11 with respect to a
Partnership Unit, shall be deemed to refer to a transaction by which the General
Partner purports to assign all or any part of its General Partner Interest to
another Person or by which a Limited Partner purports to assign all or any part
of its Limited Partner Interest to another Person, and includes a sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any
other disposition by operation of law or otherwise. The term "transfer" when
used in this Article 11 does not include any redemption of Partnership Interests
by the Partnership from a Limited Partner or any acquisition of Partnership
Units from a Limited Partner by the Company pursuant to Section 8.6. No part of
the interest of a Limited Partner shall be subject to the claims of any
creditor, any spouse for alimony or support, or to legal process, and may not be
voluntarily or involuntarily alienated or encumbered except as may be
specifically provided for in this Agreement or consented to by the General
Partner.
B. No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article 11.
Any transfer or
41
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purported transfer of a Partnership Interest not made in accordance with this
Article 11 shall be null and void.
Section 11.2 Transfer of the Company's General Partner Interest and
------------------------------------------------------
Limited Partner Interest; Extraordinary Transactions
----------------------------------------------------
A. The Company may not transfer any of its General Partner Interest or
withdraw as General Partner, or transfer any of its Limited Partner Interest, or
engage in an Extraordinary Transaction, except, in any such case, (i) if such
Extraordinary Transaction is, or such transfer or withdrawal is pursuant to an
Extraordinary Transaction that is, permitted under Section 11.2(B) or (ii) if
Limited Partners holding at least three-fourths of the Percentage Interests of
the Limited Partners (other than Limited Partner Interests held by the Company
or its Affiliates) consent to such transfer or withdrawal or Extraordinary
Transaction, or (iii) if such transfer is to an entity that is wholly-owned by
the Company and is a Qualified REIT Subsidiary under Section 856(i) of the Code.
B. The General Partner is permitted to engage in the following
Extraordinary Transactions without the approval or vote of the Limited Partners
except as provided in Section 11.2(C):
(i) an Extraordinary Transaction in connection with which all Limited
Partners either will receive, or will have the right to elect to
receive, for each Partnership Unit an amount of cash, securities,
or other property equal to the product of the REIT Shares Amount
and the greatest amount of cash, securities or other property paid
to a holder of one REIT Share in consideration of one REIT Share
pursuant to the terms of the Extraordinary Transaction;
provided that, if, in connection with the Extraordinary
-------- ----
Transaction, a purchase, tender or exchange offer shall have been
made to and accepted by the holders of the outstanding REIT
Shares, each holder of Partnership Units shall receive, or shall
have the right to elect to receive, the greatest amount of cash,
securities, or other property which such holder would have
received had it exercised its right to Redemption (as set forth in
Section 8.6) and received REIT Shares in exchange for its
Partnership Units immediately prior to the expiration of such
purchase, tender or exchange offer and had thereupon accepted such
purchase, tender or exchange offer and then such Extraordinary
Transaction shall have been consummated; and
(ii) a merger, or other combination of assets, with another entity if:
(w) immediately after such Extraordinary Transaction,
substantially all of the assets directly or indirectly owned by
the surviving entity, other than Partnership Units held by such
General Partner, are owned directly or indirectly by the
Partnership or another limited partnership or limited
42
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liability company which is the survivor of a merger, consolidation
or combination of assets with the Partnership (in each case, the
"Surviving Partnership"); (x) the Limited Partners own a
percentage interest of the Surviving Partnership based on the
relative fair market value of the net assets of the Partnership
(as determined pursuant to Section 11.2.E) and the other net
assets of the Surviving Partnership (as determined pursuant to
Section 11.2.E) immediately prior to the consummation of such
transaction; (y) the rights preferences and privileges of the
Limited Partners in the Surviving Partnership are at least as
favorable as those in effect immediately prior to the consummation
of such transaction and as those applicable to any other limited
partners or non-managing members of the Surviving Partnership; and
(z) such rights of the Limited Partners include the right to
exchange their interests in the Surviving Partnership for at least
one of: (a) the consideration available to such Limited Partners
pursuant to Section 11.2.B(i) or (b) if the ultimate controlling
person of the Surviving Partnership has publicly traded common
equity securities, such common equity securities, with an exchange
ratio based on the relative fair market value of such securities
(as determined pursuant to Section 11.2.E) and the REIT Shares.
C. The General Partner shall not consummate any Extraordinary Transaction
in connection with which it conducted a vote of its stockholders (a "Stockholder
Vote") unless the General Partner also conducts a vote of the Partners of the
Partnership (the "Partnership Vote") in which (i) the General Partner provides
the Partners with advance notice equal in time to the advance notice given in
the case of the Stockholder Vote, (ii) in connection with such advance notice
the General Partner provides the Partners with written materials describing the
proposed Extraordinary Transaction as well as the tax effect of the consummation
thereof on the Limited Partners, (iii) in such vote of the Partners, the General
Partner votes all Partnership Interests (General and Limited) held by it in
proportion to the manner in which all outstanding shares of capital stock of the
General Partner were voted at the Stockholder Meeting (such votes to be "For,"
"Against," "Abstain" and "Not Present"), and (iv) the total votes of the General
and Limited Partners voted "For," "Against," "Abstain" and "Not Present" would
be sufficient, if such vote were a vote by the Company of its stockholders, to
approve the Extraordinary Transaction. For purposes of the Partnership Vote,
each holder of a Partnership Interest shall be entitled to a number of votes
equal to the total votes such holder would have been entitled to at the
Stockholder Meeting had such holder presented its Partnership Interest for
redemption and such Partnership Interest had been acquired by the Company for
the REIT Shares Amount of REIT Shares prior to the record date therefor.
D. Without in any way limiting the exculpation from liability set forth
in Section 7.1.D and 7.8.B, in connection with any transaction permitted by
Section 11.2.B or Section 11.2.C hereof, the General Partner shall use its
commercially reasonable efforts to structure such Extraordinary Transaction to
avoid causing the Limited Partners to recognize gain for
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federal income tax purposes by virtue of the occurrence of or their
participation in such Extraordinary Transaction.
E. In connection with any transaction permitted by Section 11.2.B or
11.2.C, the relative fair market values shall be reasonably determined by the
General Partner as of the time of such transaction and, to the extent
applicable, shall be no less favorable to the Limited Partners than the relative
values reflected in the terms of such transaction.
Section 11.3 Limited Partners' Rights to Transfer
------------------------------------
A. Subject to the provisions of Sections 11.3.C, 11.3.D, 11.3.E, and
11.4, a Limited Partner (other than the Company) may transfer, with or without
the consent of the General Partner, all or any portion of its Partnership
Interest, or any of such Limited Partner's economic rights as a Limited Partner.
B. If a Limited Partner is subject to Incapacity, the executor,
administrator, trustee, committee, guardian, conservator or receiver of such
Limited Partner's estate shall have all of the rights of a Limited Partner, but
not more rights than those enjoyed by other Limited Partners, for the purpose of
settling or managing the estate and such power as the Incapacitated Limited
Partner possessed to transfer all or any part of his or its interest in the
Partnership. The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
C. The General Partner may prohibit any transfer by a Limited Partner of
its Partnership Units if, in the opinion of legal counsel to the Partnership,
such transfer would require filing of a registration statement under the
Securities Act of 1933 or would otherwise violate any federal or state
securities laws or regulations applicable to the Partnership or the Partnership
Units.
D. No transfer by a Limited Partner of its Partnership Units may be made
to any Person if (i) in the opinion of legal counsel for the Partnership, it
would result in the Partnership being treated as an association taxable as a
corporation; (ii) it is made within one year after the consummation of the
initial public offering of the Company; (iii) such transfer is effectuated
through an "established securities market" or a "secondary market (or the
substantial equivalent thereof)" with the meaning of Section 7704 of the Code;
(iv) such transfer would cause the Partnership to become, with respect to any
employee benefit plan subject to Title I of ERISA, a "party-in-interest" (as
defined in Section 3(14) of ERISA) or a "disqualified person" (as defined in
Section 4975(c) of the Code); (v) such transfer would, in the opinion of legal
counsel for the Partnership, cause any portion of the assets of the Partnership
to constitute assets of any employee benefit plan pursuant to Department of
Labor Regulations Section 2510.2-101; or (vi) such transfer would subject the
Partnership to be regulated under the Investment Company Act of 1940, the
Investment Advisors Act of 1940 or the Employee Retirement Income Security Act
of 1974, each as amended.
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E. No transfer of any Partnership Units may be made to a lender to the
Partnership or any Person who is related (within the meaning of Section 1.752-
4(b) of the Regulations) to any lender to the Partnership whose loan constitutes
a Nonrecourse Liability, without the consent of the General Partner, in its sole
and absolute discretion; provided that as a condition to such consent the lender
-------- ----
will be required to enter into an arrangement with the Partnership and the
General Partner to redeem for the Cash Amount any Partnership Units in which a
security interest is held simultaneously with the time at which such lender
would be deemed to be a partner in the Partnership for purposes of allocating
liabilities to such lender under Section 752 of the Code.
Section 11.4 Substituted Limited Partners
----------------------------
A. No Limited Partner shall have the right to substitute a transferee as
a Limited Partner in his place. The General Partner shall, however, have the
right to consent to the admission of a transferee of the interest of a Limited
Partner pursuant to this Section 11.4 as a Substituted Limited Partner, which
consent may be given or withheld by the General Partner in its sole and absolute
discretion. The General Partner's failure or refusal to permit a transferee of
any such interests to become a Substituted Limited Partner shall not give rise
to any cause of action against the Partnership or any Partner.
B. A transferee who has been admitted as a Substituted Limited Partner in
accordance with this Article 11 shall have all the rights and powers and be
subject to all the restrictions and liabilities of a Limited Partner under this
Agreement.
C. Upon the admission of a Substituted Limited Partner, the General
Partner shall amend Exhibit A to reflect the name, address, number of
---------
Partnership Units, and Percentage Interest of such Substituted Limited Partner
and to eliminate or adjust, if necessary, the name, address and interest of the
predecessor of such Substituted Limited Partner.
Section 11.5 Assignees
---------
If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee as a Substituted Limited
Partner, as described in Section 11.4, such transferee shall be considered an
Assignee for purposes of this Agreement. An Assignee shall be deemed to have
had assigned to it, and shall be entitled to receive distributions from the
Partnership and the share of Net Income, Net Losses, Recapture Income, and any
other items, gain, loss deduction and credit of the Partnership attributable to
the Partnership Units assigned to such transferee, but shall not be deemed to be
a holder of Partnership Units for any other purpose under this Agreement, and
shall not be entitled to vote such Partnership Units in any matter presented to
the Limited Partners for a vote (such Partnership Units being deemed to have
been voted on such matter in the same proportion as all other Partnership Units
held by Limited Partners are voted). In the event any such transferee desires
to make a further assignment of any such Partnership Units, such transferee
45
<PAGE>
shall be subject to all of the provisions of this Article 11 to the same extent
and in the same manner as any Limited Partner desiring to make an assignment of
Partnership Units.
Section 11.6 General Provisions
------------------
A. No Limited Partner may withdraw from the Partnership other than as a
result of a permitted transfer of all of such Limited Partner's Partnership
Units in accordance with this Article 11 or pursuant to redemption of all of its
Partnership Units under Section 8.6.
B. Any Limited Partner who shall transfer all of its Partnership Units in
a transfer permitted pursuant to this Article 11 shall cease to be a Limited
Partner upon the admission of all Assignees of such Partnership Units as
Substitute Limited Partners. Similarly, any Limited Partner who shall transfer
all of its Partnership Units pursuant to a redemption of all of its Partnership
Units under Section 8.6 shall cease to be a Limited Partner.
C. Transfers pursuant to this Article 11 may only be made on the first
day of a fiscal quarter of the Partnership, unless the General Partner otherwise
agrees.
D. If any Partnership Interest is transferred or assigned during any
quarterly segment of the Partnership's fiscal year in compliance with the
provisions of this Article 11 or redeemed or transferred pursuant to Section 8.6
on any day other than the first day of a Partnership Year, then Net Income, Net
Losses, each item thereof and all other items attributable to such interest for
such Partnership Year shall be divided and allocated between the transferor
Partner and the transferee Partner by taking into account their varying
interests during the Partnership Year in accordance with Section 706(d) of the
Code, using the interim closing of the books method. Solely for purposes of
making such allocations, each of such items for the calendar month in which the
transfer or assignment occurs shall be allocated to the transferee Partner, and
none of such items for the calendar month in which a redemption occurs shall be
allocated to the Redeeming Partner; provided, however, that the General Partner
-------- -------
may adopt such other conventions relating to allocations in connection with
transfers, assignments or redemptions as it determines are necessary or
appropriate. All distributions of Available Cash attributable to such
Partnership Unit with respect to which the Partnership Record Date is before the
date of such transfer, assignment, or redemption shall be made to the transferor
Partner or the Redeeming Partner, as the case may be, and in the case of a
transfer or assignment other than a redemption, all distributions of Available
Cash thereafter attributable to such Partnership Unit shall be made to the
transferee Partner.
46
<PAGE>
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner
--------------------------------------
A successor to all of the General Partner Interest pursuant to Section 11.2
hereof who is proposed to be admitted as a successor General Partner shall be
admitted to the Partnership as the General Partner, effective upon such
transfer. Any such transferee shall carry on the business of the Partnership
without dissolution. In each case, the admission shall be subject to the
successor General Partner executing and delivering to the Partnership an
acceptance of all of the terms and conditions of this Agreement and such other
documents or instruments as may be required to effect the admission. In the
case of such admission on any day other than the first day of a Partnership
Year, all items attributable to the General Partner Interest for such
Partnership Year shall be allocated between the transferring General Partner and
such successor as provided in Section 11.6.D hereof.
Section 12.2 Admission of Additional Limited Partners
----------------------------------------
A. After the admission to the Partnership of the initial Limited Partners
on the date hereof, a Person who makes a Capital Contribution to the Partnership
in accordance with this Agreement shall be admitted to the Partnership as an
Additional Limited Partner only upon furnishing to the General Partner (i)
evidence of acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement, including, without limitation, the power
of attorney granted in Section 2.4 hereof and (ii) such other documents or
instruments as may be required in the discretion of the General Partner in order
to effect such Person's admission as an Additional Limited Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no
Person shall be admitted as an Additional Limited Partner without the consent of
the General Partner, which consent may be given or withheld in the General
Partner's sole and absolute discretion. The admission of any Person as an
Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded on the books and records of the Partnership,
following the consent of the General Partner to such admission.
C. If any Additional Limited Partner is admitted to the Partnership on
any day other than the first day of a Partnership Year, then Net Income, Net
Losses, each item thereof and all other items allocable among Partners and
Assignees for such Partnership Year shall be allocated among such Additional
Limited Partner and all other Partners and Assignees by taking into account
their varying interests during the Partnership Year in accordance with Section
706(d) of the Code, using any convention permitted by law and selected by the
General Partner. Solely for purposes of making such allocations, each such item
for the calendar month in which an admission of any Additional Limited Partner
occurs shall be allocated among all of the Partners and Assignees, including
such Additional Limited Partner; provided,
--------
47
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however, that the General Partner may adopt such other conventions relating
- -------
to allocations to Additional Limited Partners as it determines are necessary or
appropriate. All distributions of Available Cash with respect to which the
Partnership Record Date is before the date of such admission shall be made
solely to Partners and Assignees, other than the Additional Limited Partner, and
all distributions of Available Cash thereafter shall be made to all of the
Partners and Assignees, including such Additional Limited Partner.
Section 12.3 Amendment of Agreement and Certificate of Limited
-------------------------------------------------
Partnership
- -----------
For the admission to the Partnership of any Partner, the General Partner
shall take all steps necessary and appropriate under the Act to amend the
records of the Partnership and, if necessary, to prepare as soon as practical an
amendment of this Agreement (including an amendment of Exhibit A) and, if
---------
required by law, shall prepare and file an amendment to the Certificate of
Limited Partnership and may for this purpose exercise the power of attorney
granted pursuant to Section 2.4 hereof.
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 Dissolution
-----------
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the withdrawal of the General Partner, any successor General Partner shall
continue the business of the Partnership. The Partnership shall dissolve, and
its affairs shall be wound up, only upon the first to occur of any of the
following ("Liquidating Events"):
A. the expiration of its term as provided in Section 2.5 hereof;
B. an event of withdrawal of the General Partner, as defined in the Act
(other than an event of bankruptcy), unless, within ninety (90) days after such
event of withdrawal a majority in interest of the remaining Partners agree in
writing to continue the business of the Partnership and to the appointment,
effective as of the date of withdrawal, of a successor General Partner;
C. from and after the date of this Agreement through December 31, 2055,
an election to dissolve the Partnership made by the General Partner with the
Consent of Partners holding eighty-five percent (85%) of the Percentage
Interests of the Limited Partners (including Limited Partner Interests held by
the Company);
48
<PAGE>
D. on or after January 1, 2056, an election to dissolve the Partnership
made by the General Partner, in its sole and absolute discretion;
E. entry of a decree of judicial dissolution of the Partnership pursuant
to the provisions of the Act;
F. the sale of all or substantially all of the assets and properties of
the Partnership; or
G. a final and non-appealable judgment is entered by a court of competent
jurisdiction ruling that the General Partner is bankrupt or insolvent, or a
final and non-appealable order for relief is entered by a court with appropriate
jurisdiction against the General Partner, in each case under any federal or
state bankruptcy or insolvency laws as now or hereafter in effect, unless prior
to the entry of such order or judgment all of the remaining Partners agree in
writing to continue the business of the Partnership and to the appointment,
effective as of a date prior to the date of such order or judgment, of a
substitute General Partner.
Section 13.2 Winding Up
----------
A. Upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Partners.
No Partner shall take any action that is inconsistent with, or not necessary to
or appropriate for, the winding up of the Partnership's business and affairs.
The General Partner, or, in the event there is no remaining General Partner, any
Person elected by a majority in interest of the Limited Partners (the General
Partner or such other Person being referred to herein as the "Liquidator"),
shall be responsible for overseeing the winding up and dissolution of the
Partnership and shall take full account of the Partnership's liabilities and
property and the Partnership property shall be liquidated as promptly as is
consistent with obtaining the fair value thereof, and the proceeds therefrom
(which may, to the extent determined by the General Partner, include shares of
common stock in the Company) shall be applied and distributed in the following
order:
(1) First, to the payment and discharge of all of the Partnership's
debts and liabilities to creditors other than the Partners;
(2) Second, to the payment and discharge of all of the Partnership's
debts and liabilities to the General Partner;
(3) Third, to the payment and discharge of all of the Partnership's
debts and liabilities to the other Partners; and
49
<PAGE>
(4) The balance, if any, to the General Partner and Limited Partners
in accordance with their Capital Accounts, after giving effect to
all contributions, distributions, and allocations for all periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2.A hereof which require
liquidation of the assets of the Partnership, but subject to the order of
priorities set forth therein, if prior to or upon dissolution of the Partnership
the Liquidator determines that an immediate sale of part or all of the
Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those necessary to satisfy
liabilities of the Partnership (including to those Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.2.A hereof, undivided interests in
such Partnership assets as the Liquidator deems not suitable for liquidation.
Any such distributions in kind shall be made only if, in the good faith judgment
of the Liquidator, such distributions in kind are in the best interest of the
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
C. In the discretion of the Liquidator, a pro rata portion of the
distributions that would otherwise be made to the General Partner and Limited
Partners pursuant to this Article 13 may be:
(1) distributed to a trust established for the benefit of the General
Partner and Limited Partners for the purposes of liquidating
Partnership assets, collecting amounts owed to the Partnership,
and paying any contingent or unforeseen liabilities or obligations
of the Partnership or the General Partner arising out of or in
connection with the Partnership. The assets of any such trust
shall be distributed to the General Partner and Limited Partners
from time to time, in the reasonable discretion of the Liquidator,
in the same proportions as the amount distributed to such trust by
the Partnership would otherwise have been distributed to the
General Partner and Limited Partners pursuant to this Agreement;
or
(2) withheld or escrowed to provide a reasonable reserve for
Partnership liabilities (contingent or otherwise) and to reflect
the unrealized portion of any installment obligations owed to the
Partnership, provided that such withheld or escrowed amounts shall
-------- ----
be distributed to the General
50
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Partner and Limited Partners in the manner and order of priority
set forth in Section 13.2.A as soon as practicable.
Section 13.3 Compliance with Timing Requirements of Regulations
--------------------------------------------------
In the event the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article 13 to the General Partner and Limited Partners who have positive
Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2).
If the General Partner has a deficit balance in his Capital Account (after
giving effect to all contributions, distributions and allocations for all Fiscal
Years or portions thereof, including the year during which such liquidation
occurs, the General Partner shall contribute to the capital of the Partnership
the amount necessary to restore such deficit balance to zero in compliance with
Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(3)). If any Limited Partner
-
has a deficit balance in its Capital Account (after giving effect to all
contributions, distributions and allocations for all Fiscal Years or portions
thereof, including the year during which such liquidation occurs), each such
Limited Partner shall be obligated to contribute cash to the capital of the
Partnership in an amount equal to the lesser of (i) the amount required to
increase its Capital Account as of such date to zero or (ii) such Limited
Partner's Limited Partner Recourse Debt Percentage multiplied by the Recourse
Debt Amount. Any such contribution required of a Partner hereunder shall be
made on or before the later of (i) the end of the Partnership Year in which the
interest of such Partner is liquidated or (ii) the ninetieth (90th) day
following the date of such liquidation. Notwithstanding any provision hereof to
the contrary, all amounts so contributed by a Limited Partner to the capital of
the Partnership shall, upon the liquidation of the Partnership under Article
XIII, be paid only to any then creditors of the Partnership, including Partners
that are Partnership creditors (in the order provided in Section 13.2 hereof),
and shall not be distributed to the other Partners then having positive balances
in their respective Capital Accounts.
After the death of a Limited Partner, the executor of the estate of such
Limited Partner may elect to reduce (or eliminate) the deficit Capital Account
restoration obligation of such Limited Partner pursuant to this Section 13.3.
Such election may be made by such executor by delivering to the General Partner
within two hundred seventy (270) days of the death of such Limited Partner a
written notice setting forth the maximum deficit balance in his Capital Account
that such executor agrees to restore under Section 13.3, if any. If such
executor does not make a timely election pursuant to this Section 13.3 (whether
or not the balance in his Capital Account is negative at such time), then such
Limited Partner's estate (and the beneficiaries thereof who receive distribution
of Partnership Interests therefrom) shall be deemed to have a deficit Capital
Account restoration obligation as set forth pursuant to the terms of Section
13.3. Any Limited Partner which is itself a partnership may likewise elect,
after the death of its respective partner, to reduce (or eliminate) its deficit
Capital Account restoration obligation pursuant to Section 13.3 by delivering a
similar written notice to the
51
<PAGE>
General Partner within the time period specified herein. Any such partnership
that does not make any such timely election shall similarly be deemed to have a
deficit Capital Account restoration obligation as set forth pursuant to the
terms of Section 13.3.
Section 13.4 Deemed Distribution and Recontribution
--------------------------------------
Notwithstanding any other provision of this Article 13, in the event the
Partnership is considered "liquidated" within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), but no Liquidating Event has occurred, the Partnership's
property shall not be liquidated, the Partnership's liabilities shall not be
paid or discharged, and the Partnership's affairs shall not be wound up.
Instead, for federal income tax purposes and for purposes of maintaining Capital
Accounts pursuant to Exhibit B hereto, the Partnership shall be deemed to have
---------
distributed the property in kind to the General Partner and Limited Partners,
who shall be deemed to have assumed and taken such property subject to all
Partnership liabilities, all in accordance with their respective Capital
Accounts. Immediately thereafter, the General Partner and Limited Partners
shall be deemed to have recontributed the Partnership property in kind to the
Partnership, which shall be deemed to have assumed and taken such property
subject to all such liabilities.
Section 13.5 Rights of Limited Partners
--------------------------
Except as otherwise provided in this Agreement, each Limited Partner shall
look solely to the assets of the Partnership for the return of its Capital
Contributions and shall have no right or power to demand or receive property
other than cash from the Partnership. Except as otherwise provided in this
Agreement, no Limited Partner shall have priority over any other Partner as to
the return of its Capital Contributions, distributions, or allocations.
Section 13.6 Notice of Dissolution
---------------------
In the event a Liquidating Event occurs or an event occurs that would, but
for the provisions of an election or objection by one or more Partners pursuant
to Section 13.1, result in a dissolution of the Partnership, the General Partner
shall, within thirty (30) days thereafter, provide written notice thereof to
each of the Partners.
Section 13.7 Termination of Partnership and Cancellation of Certificate
----------------------------------------------------------
of Limited Partnership
----------------------
Upon the completion of the liquidation of the Partnership's assets, as
provided in Section 13.2 hereof, the Partnership shall be terminated, a
certificate of cancellation shall be filed, and all qualifications of the
Partnership as a foreign limited partnership in jurisdictions other than the
State of Delaware shall be canceled and such other actions as may be necessary
to terminate the Partnership shall be taken.
52
<PAGE>
Section 13.8 Reasonable Time for Winding-Up
------------------------------
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 hereof, in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect between the Partners during the period of liquidation.
Section 13.9 Waiver of Partition
-------------------
Each Partner hereby waives any right to partition of the Partnership
property.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments
----------
A. Amendments to this Agreement may be proposed by the General Partner or
by any Limited Partners (other than the Company) holding twenty percent (20%) or
more of the Partnership Interests. Following such proposal, the General Partner
shall submit any proposed amendment to the Limited Partners. The General
Partner shall seek the written vote of the Partners on the proposed amendment or
shall call a meeting to vote thereon and to transact any other business that it
may deem appropriate. For purposes of obtaining a written vote, the General
Partner may require a response within a reasonable specified time, but not less
than fifteen (15) days, and failure to respond in such time period shall
constitute a vote which is consistent with the General Partner's recommendation
with respect to the proposal. Except as provided in Section 7.3.A, 7.3.B,
13.1.C, 14.1.B, 14.1.C or 14.1.D, a proposed amendment shall be adopted and be
effective as an amendment hereto if it is approved by the General Partner and it
receives the Consent of Partners holding a majority of the Percentage Interests
of the Limited Partners (including Limited Partner Interests held by the
Company); provided, that, an action shall become effective at such time as the
-------- ----
requisite consents are received even if prior to such specified time.
B. Notwithstanding Section 14.1.A, the General Partner shall have the
power, without the consent of the Limited Partners, to amend this Agreement as
may be required to facilitate or implement any of the following purposes:
(1) to add to the obligations of the General Partner or surrender any
right or power granted to the General Partner or any Affiliate of
the General Partner for the benefit of the Limited Partners;
(2) to reflect the admission, substitution, termination, or withdrawal
of Partners in accordance with this Agreement;
53
<PAGE>
(3) to set forth and reflect in the Agreement the designations,
rights, powers, duties, and preferences of the holders of any
additional Partnership Interests issued pursuant to Section 4.2.A
hereof;
(4) to reflect a change that is of an inconsequential nature and does
not adversely affect the Limited Partners in any material respect,
or to cure any ambiguity, correct or supplement any provision in
this Agreement not inconsistent with law or with other provisions,
or make other changes with respect to matters arising under this
Agreement that will not be inconsistent with law or with the
provisions of this Agreement; and
(5) to satisfy any requirements, conditions, or guidelines contained
in any order, directive, opinion, ruling or regulation of a
federal or state agency or contained in federal or state law.
The General Partner shall provide notice to the Limited Partners when any action
under this Section 14.1.B is taken.
C. Notwithstanding Section 14.1.A and 14.1.B hereof, this Agreement shall
not be amended without the Consent of each Partner adversely affected if such
amendment would (i) convert a Limited Partner's interest in the Partnership into
a General Partner Interest; (ii) modify the limited liability of a Limited
Partner in a manner adverse to such Limited Partner; (iii) alter rights of the
Partner (other than as a result of the issuance of Partnership Interests) to
receive distributions pursuant to Article 5 or Article 13 or the allocations
specified in Article 6 (except as permitted pursuant to Section 4.2 and Section
14.1.B(3) hereof); (iv) alter or modify the Redemption Right and REIT Shares
Amount as set forth in Sections 8.6 and 11.2.B, and the related definitions, in
a manner adverse to such Partner; (v) cause the termination of the Partnership
prior to the time set forth in Sections 2.5 or 13.1; or (vi) amend this Section
14.1.C. Further, no amendment may alter the restrictions on the General
Partner's authority set forth in Section 7.3.B without the Consent specified in
that section. In addition, Section 8.7 may only be amended as provided therein.
D. Notwithstanding Section 14.1.A or Section 14.1.B hereof, the General
Partner shall not (except in connection with amendments made to reflect the
issuance of additional Partnership Interests and the relative rights, powers and
duties incident thereto) amend Sections 4.2.A, 7.5, 7.6, 11.2 or 14.2 without
the Consent of Limited Partners holding a majority of the Percentage Interests
of the Limited Partners, excluding Limited Partner Interests held by the General
Partner.
54
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Section 14.2 Meetings of the Partners
------------------------
A. Meetings of the Partners may be called by the General Partner and
shall be called upon the receipt by the General Partner of a written request by
Limited Partners (other than the Company) holding twenty percent (20%) or more
of the Partnership Interests. The request shall state the nature of the
business to be transacted. Notice of any such meeting shall be given to all
Partners not less than seven (7) days nor more than thirty (30) days prior to
the date of such meeting. Partners may vote in person or by proxy at such
meeting. Whenever the vote or Consent of the Partners is permitted or required
under this Agreement, such vote or Consent may be given at a meeting of the
Partners or may be given in accordance with the procedure prescribed in Section
14.1.A hereof. Except as otherwise expressly provided in this Agreement, the
Consent of holders of a majority of the Percentage Interests held by Limited
Partners (including Limited Partnership Interests held by the Company) shall
control.
B. Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting forth the
action so taken is signed by a majority of the Percentage Interests of the
Partners (or such other percentage as is expressly required by this Agreement).
Such consent may be in one instrument or in several instruments, and shall have
the same force and effect as a vote of a majority of the Percentage Interests of
the Partners (or such other percentage as is expressly required by this
Agreement). Such consent shall be filed with the General Partner. An action so
taken shall be deemed to have been taken at a meeting held on the effective date
so certified.
C. Each Limited Partner may authorize any Person or Persons to act for
him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or participating
at a meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of twelve (12)
months from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the Limited Partner executing it,
such revocation to be effective upon the Partnership's receipt of written notice
of such revocation from the Limited Partner executing such proxy.
D. Each meeting of the Partners shall be conducted by the General Partner
or such other Person as the General Partner may appoint pursuant to such rules
for the conduct of the meeting as the General Partner or such other Person deems
appropriate. Without limitation, meetings of Partners may be conducted in the
same manner as meetings of the shareholders of the Company and may be held at
the same time, and as part of, meetings of the shareholders of the Company.
55
<PAGE>
ARTICLE 15
GENERAL PROVISIONS
Section 15.1 Addresses and Notice
--------------------
Any notice, demand, request or report required or permitted to be given or
made to a Partner or Assignee under this Agreement shall be in writing and shall
be deemed given or made when delivered in person or when sent by first class
United States mail or by other means of written communication to the Partner or
Assignee at the address set forth in Exhibit A or such other address of which
---------
the Partner shall notify the General Partner in writing.
Section 15.2 Titles and Captions
-------------------
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
Section 15.3 Pronouns and Plurals
--------------------
Whenever the context may require, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa.
Section 15.4 Further Action
--------------
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.5 Binding Effect
--------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 15.6 Creditors
---------
Other than as expressly set forth herein with respect to the Indemnities,
none of the provisions of this Agreement shall be for the benefit of, or shall
be enforceable by, any creditor of the Partnership.
56
<PAGE>
Section 15.7 Waiver
------
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
Section 15.8 Counterparts
------------
This Agreement may be executed in counterparts, all of which together shall
constitute one agreement binding on all of the parties hereto, notwithstanding
that all such parties are not signatories to the original or the same
counterpart. Each party shall become bound by this Agreement immediately upon
affixing its signature hereto.
Section 15.9 Applicable Law
--------------
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the principles
of conflicts of law.
Section 15.10 Invalidity of Provisions
------------------------
If any provision of this Agreement shall to any extent be held void or
unenforceable (as to duration, scope, activity, subject or otherwise) by a court
of competent jurisdiction, such provision shall be deemed to be modified so as
to constitute a provision conforming as nearly as possible to the original
provision while still remaining valid and enforceable. In such event, the
remainder of this Agreement (or the application of such provision to persons or
circumstances other than those in respect of which it is deemed to be void or
unenforceable) shall not be affected thereby. Each other provision of this
Agreement, unless specifically conditioned upon the voided aspect of such
provision, shall remain valid and enforceable to the fullest extent permitted by
law; any other provisions of this Agreement that are specifically conditioned on
the voided aspect of such invalid provision shall also be deemed to be modified
so as to constitute a provision conforming as nearly as possible to the original
provision while still remaining valid and enforceable to the fullest extent
permitted by law.
Section 15.11 Entire Agreement
----------------
This Agreement contains the entire understanding and agreement among the
Partners with respect to the subject matter hereof and supersedes the Prior
Agreement, any other prior written or oral understandings or agreements among
them with respect thereto.
57
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
BOSTON PROPERTIES, INC.
By: ____________________________________
Name:
Title:
58
<PAGE>
LIMITED PARTNER SIGNATURE PAGE
The undersigned, desiring to become one of the within named Limited
Partners of Boston Properties Limited Partnership, hereby becomes a party to the
Amended and Restated Agreement of Limited Partnership of Boston Properties
Limited Partnership by and among Boston Properties, Inc. and such Limited
Partners, dated as of ________, 1997. The undersigned agrees that this
signature page may be attached to any counterpart of said Agreement of Limited
Partnership.
Signature line for Limited Partner:
[NAME]
By: ________________________________________
Name:
Title:
Address of Limited Partner: __________________________________________
__________________________________________
59
<PAGE>
Exhibit A
---------
Partners Contributions and Partnership Interests
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Agreed Value
Cash of Percentage
Name and Address of Partnership Contributed Total
Partner Contribution Property Contribution Units Interest
______ ____________ ________ ____________ _____ ________
</TABLE>
A-1
<PAGE>
Exhibit B
---------
Capital Account Maintenance
1. Capital Accounts of the Partners
--------------------------------
A. The Partnership shall maintain for each Partner a separate Capital Account
in accordance with the rules of Regulations Section 1.704-1(b)(2)(iv). Such
Capital Account shall be increased by (i) the amount of all Capital
Contributions and any other deemed contributions made by such Partner to the
Partnership pursuant to this Agreement; and (ii) all items of Partnership income
and gain (including income and gain exempt from tax) computed in accordance with
Section 1.B hereof and allocated to such Partner pursuant to Section 6.1.A of
the Agreement and Exhibit C hereof, and decreased by (x) the amount of cash or
---------
Agreed Value of all actual and deemed distributions of cash or property made to
such Partner pursuant to this Agreement; and (y) all items of Partnership
deduction and loss computed in accordance with Section 1.B hereof and allocated
to such Partner pursuant to Section 6.1.B of the Agreement and Exhibit C hereof.
---------
B. For purposes of computing the amount of any item of income, gain, deduction
or loss to be reflected in the Partners' Capital Accounts, unless otherwise
specified in this Agreement, the determination, recognition and classification
of any such item shall be the same as its determination, recognition and
classification for federal income tax purposes determined in accordance with
Section 703(a) of the Code (for this purpose all items of income, gain, loss or
deduction required to be stated separately pursuant to Section 703(a)(1) of the
Code shall be included in taxable income or loss), with the following
adjustments:
(1) Except as otherwise provided in Regulations Section 1.704-
1(b)(2)(iv)(m), the computation of all items of income, gain, loss and
deduction shall be made without regard to any election under Section
754 of the Code which may be made by the Partnership, provided that the
amounts of any adjustments to the adjusted bases of the assets of the
Partnership made pursuant to Section 734 of the Code as a result of the
distribution of property by the Partnership to a Partner (to the extent
that such adjustments have not previously been reflected in the
Partners' Capital Accounts) shall be reflected in the Capital Accounts
of the Partners in the manner and subject to the limitations prescribed
in Regulations Section 1.704(b)(2)(iv)(m)(4).
(2) The computation of all items of income, gain, and deduction shall be
made without regard to the fact that items described in Sections
705(a)(1)(B) or 705(a)(2)(B) of the Code are not includable gross
income
B-1
<PAGE>
or are neither currently deductible nor capitalized for federal income
tax purposes.
(3) Any income, gain or loss attributable to the taxable disposition of any
Partnership property shall be determined as if the adjusted basis of
such property as of such date of disposition were equal in amount to
the Partnership's Carrying Value with respect to such property as of
such date.
(4) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such fiscal year.
(5) In the event the Carrying Value of any Partnership Asset is adjusted
pursuant to Section 1.D hereof, the amount of any such adjustment shall
be taken into account as gain or loss from the disposition of such
asset.
C. Generally, a transferee (including an Assignee) of a Partnership Unit shall
succeed to a pro rata portion of the Capital Account of the transferor;
provided, however, that, if the transfer causes a termination of the Partnership
- -------- -------
under Section 708(b)(1)(B) of the Code, the Partnership's properties shall be
deemed solely for federal income tax purposes, to have been distributed in
liquidation of the Partnership to the holders of Partnership Units (including
such transferee) and recontributed by such Persons in reconstitution of the
Partnership. In such event, the Carrying Values of the Partnership properties
shall be adjusted immediately prior to such deemed distribution pursuant to
Section 1.D(2) hereof. The Capital Accounts of such reconstituted Partnership
shall be maintained in accordance with the principles of this Exhibit B.
---------
D. (1) Consistent with the provisions of Regulations Section 1.704-
1(b)(2)(iv)(f), and as provided in Section 1.D(2), the Carrying Value
of all Partnership assets shall be adjusted upward or downward to
reflect any Unrealized Gain or Unrealized Loss attributable to such
Partnership property, as of the times of the adjustments provided in
Section 1.D(2) hereof, as if such Unrealized Gain or Unrealized Loss
had been recognized on an actual sale of each such property and
allocated pursuant to Section 6.1 of the Agreement.
(2) Such adjustments shall be made as of the following times: (a)
immediately prior to the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for more than a
de minimis Capital Contribution; (b) immediately prior to the
distribution by the Partnership to a Partner of more than a de minimis
amount of property as consideration for an interest in the Partnership;
B-2
<PAGE>
and (c) immediately prior to the liquidation of the Partnership
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g)
provided, however, that adjustments pursuant to clauses
-------- -------
(a) and (b) above shall be made only if the General Partner determines
that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Partners in the Partnership.
(3) In accordance with Regulations Section 1.704-1(b)(2)(iv)(e), the
Carrying Value of Partnership assets distributed in kind shall be
adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership property, as of the
time any such asset is distributed.
(4) In determining Unrealized Gain or Unrealized Loss for purposes of this
Exhibit B, the aggregate cash amount and fair market value of all
---------
Partnership assets (including cash or cash equivalents) shall be
determined by the General Partner using such reasonable method of
valuation as it may adopt, or in the case of a liquidating distribution
pursuant to Article 13 of the Agreement, shall be determined and
allocated by the Liquidator using such reasonable methods of valuation
as it may adopt. The General Partner, or the Liquidator, as the case
may be, shall allocate such aggregate value among the assets of the
Partnership (in such manner as it determines in its sole and absolute
discretion to arrive at a fair market value for individual properties).
E. The provisions of this Agreement (including this Exhibit B and other
---------
Exhibits to this Agreement) relating to the maintenance of Capital Accounts are
intended to comply with Regulations Section 1.704-1(b), and shall be interpreted
and applied in a manner consistent with such Regulations. In the event the
General Partner shall determine that it is prudent to modify (i) the manner in
which the Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed property or which are assumed by the Partnership, the
General Partner, or the Limited Partners) are computed; or (ii) the manner in
which items are allocated among the Partners for federal income tax purposes in
order to comply with such Regulations or to comply with Section 704(c) of the
Code, the General Partner may make such modification without regard to Article
14 of the Agreement, provided that it is not likely to have a material effect on
the amounts distributable to any Person pursuant to Article 13 of the Agreement
upon the dissolution of the Partnership. The General Partner also shall (i)
make any adjustments that are necessary or appropriate to maintain equality
between the Capital Accounts of the Partners and the amount of Partnership
capital reflected on the Partnership's balance sheet, as computed for book
purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q); and (ii)
make any appropriate modifications in the event unanticipated events might
otherwise cause this Agreement not to comply with Regulations Section
B-3
<PAGE>
1.704-1(b). In addition, the General Partner may adopt and employ such methods
and procedures for (i) the maintenance of book and tax capital accounts; (ii)
the determination and allocation of adjustments under Sections 704(c), 734 and
743 of the Code; (iii) the determination of Net Income, Net Loss, taxable loss
and items thereof under this Agreement and pursuant to the Code; (iv) the
adoption of reasonable conventions and methods for the valuation of assets and
the determination of tax basis; (v) the allocation of asset value and tax basis;
and (vi) conventions for the determination of cost recovery, depreciation and
amortization deductions, as it determines in its sole discretion are necessary
or appropriate to execute the provisions of this Agreement, to comply with
federal and state tax laws, and are in the best interest of the Partners.
2. No Interest
-----------
No interest shall be paid by the Partnership on Capital Contributions or on
balances in Partners' Capital Accounts.
3. No Withdrawal
-------------
No Partner shall be entitled to withdraw any part of his Capital Contribution
or his Capital Account or to receive any distribution from the Partnership,
except as provided in Articles 4, 5, 7 and 13 of the Agreement.
B-4
<PAGE>
Exhibit C
---------
Special Allocation Rules
1. Special Allocation Rules
------------------------
Notwithstanding any other provision of the Agreement or this Exhibit C, the
---------
following special allocations shall be made in the following order:
A. Minimum Gain Chargeback. Notwithstanding the provisions of Section 6.1 of
-----------------------
the Agreement or any other provisions of this Exhibit C, if there is a net
---------
decrease in Partnership Minimum Gain during any Partnership taxable year, each
Partner shall be specially allocated items of Partnership income and gain for
such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain, as determined
under Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704-2(f)(6). This
Section 1.A is intended to comply with the minimum gain chargeback requirements
in Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith. Solely for purposes of this Section 1.A, each Partner's Adjusted
Capital Account Deficit shall be determined prior to any other allocations
pursuant to Section 6.1 of Partner Minimum Gain during such Partnership taxable
year.
B. Partner Minimum Gain Chargeback. Notwithstanding any other provision of
-------------------------------
Section 6.1 of this Agreement or any other provisions of this Exhibit C (except
---------
Section 1.A hereof), if there is a net decrease in Partner Minimum Gain
attributable to a Partner Nonrecourse Debt during any Partnership taxable year,
each Partner who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.702-2(i)(5), shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in
accordance with Regulations Section 1.704-2(i)(4). This Section 1.B is intended
to comply with the minimum gain chargeback requirement in such Section of the
Regulations and shall be interpreted consistently therewith. Solely for
purposes of the Section 1.B, each Partner's Adjusted Capital Account Deficit
shall be determined prior to any other allocations pursuant to Section 6.1 of
the Agreement or this Exhibit with respect to such Partnership taxable year,
other than allocations pursuant to Section 1.A hereof.
C-1
<PAGE>
C. Qualified Income Offset. In the event any Partner unexpectedly receives
-----------------------
any adjustments, allocations or distributions described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6),
and after giving effect to the allocations required under Sections 1.A and 1.B
hereof such Partner has an Adjusted Capital Account Deficit, items of
Partnership income and gain (consisting of a pro rata portion of each item of
Partnership income, including gross income and gain for the Partnership taxable
year) shall be specially allocated to such Partner in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, its Adjusted
Capital Account Deficit created by such adjustments, allocations or
distributions as quickly as possible.
D. Nonrecourse Deductions. Nonrecourse Deductions for any Partnership taxable
----------------------
year shall be allocated to the Partners in accordance with their respective
Percentage Interests. If the General Partner determines in its good faith
discretion that the Partnership's Nonrecourse Deductions must be allocated in a
different ratio to satisfy the safe harbor requirements of the Regulations
promulgated under Section 704(b) of the Code, the General Partner is authorized,
upon notice to the Limited Partners, to revise the prescribed ratio to the
numerically closest ratio for such Partnership taxable year which would satisfy
such requirements.
E. Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for any
------------------------------
Partnership taxable year shall be specially allocated to the Partner who bears
the economic risk of loss with respect to the Partner Nonrecourse Debt to which
such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i).
F. Code Section 754 Adjustments. To the extent an adjustment to the adjusted
----------------------------
tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the
Code is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m), to be
taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis, and such item of gain or loss shall be specially allocated
to the Partners in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to such Section of the
Regulations.
G. Curative Allocations. The allocations set forth in Section 1.A through 1.F
--------------------
of this Exhibit C (the "Regulatory Allocations") are intended to comply with
---------
certain requirements of the Regulations under Section 704(b) of the Code. The
Regulatory Allocations may not be consistent with the manner in which the
Partners intend to divide Partnership distributions. Accordingly, the General
Partner is hereby authorized to divide other allocations of income, gain,
deduction and loss among the Partners so as to prevent the Regulatory
Allocations from distorting the manner in which Partnership distributions will
be divided among the Partners. In general, the Partners anticipate that, if
necessary, this will be accomplished by specially allocating other items of
income, gain, loss and deduction among the Partners so that the net amount of
the Regulatory Allocations and such special allocations to
C-2
<PAGE>
each person is zero. However, the General Partner will have discretion to
accomplish this result in any reasonable manner; provided, however, that no
-------- -------
allocation pursuant to this Section 1.G shall cause the Partnership to fail to
comply with the requirements of Regulations Sections 1.704-1(b)(2)(ii)(d), -2(e)
or -2(i).
2. Allocations for Tax Purposes
----------------------------
A. Except as otherwise provided in this Section 2, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Partners in the same manner as its correlative item of "book" income, gain,
loss or deduction is allocated pursuant to Section 6.1 of the Agreement and
Section 1 of this Exhibit C.
---------
B. In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss, and
deduction shall be allocated for federal income tax purposes among the Partners
as follows:
(1) (a) In the case of a Contributed Property, such items attributable
thereto shall be allocated among the Partners, consistent with
the principles of Section 704(c) of the Code and the Regulations
thereunder, to take into account the variation between the 704(c)
Value of such property and its adjusted basis at the time of
contribution; and
(b) any item of Residual Gain or Residual Loss attributable to a
Contributed Property shall be allocated among the Partners in the
same manner as its correlative item of "book" gain or loss is
allocated pursuant to Section 6.1 of the Agreement and Section 1
of this Exhibit C.
---------
(2) (a) In the case of an Adjusted Property, such items shall
(1) first, be allocated among the Partners in a manner consistent
with the principles of Section 704(c) of the Code and the
Regulations thereunder to take into account the Unrealized Gain
or Unrealized Loss attributable to such property and the
allocations thereof pursuant to Exhibit B; and
----------
(2) second, in the event such property was originally a Contributed
Property, be allocated among the Partners in a manner consistent
with Section 2.B(1) of this Exhibit C; and
---------
(b) any item of Residual Gain or Residual Loss attributable to an
Adjusted Property shall be allocated among the Partners in the
C-3
<PAGE>
same manner its correlative item of "book" gain or loss is
allocated pursuant to Section 6.1 of the Agreement and Section 1
of this Exhibit C.
---------
(3) all other items of income, gain, loss and deduction shall be allocated
among the Partners the same manner as their correlative item of "book"
gain or loss is allocated pursuant to Section 6.1 of the Agreement and
Section 1 of the Exhibit C.
---------
C. To the extent that the Treasury Regulations promulgated pursuant to Section
704(c) of the Code permit the Partnership to utilize alternative methods to
eliminate the disparities between the Carrying Value of property and its
adjusted basis, the General Partner shall have the authority to elect the method
to be used by the Partnership and such election shall be binding on all
Partners.
3. No Withdrawal
-------------
No Partner shall be entitled to withdraw any part of his Capital Contribution
or his Capital Account or to receive any distribution from the Partnership,
except as provided in Articles 4, 5, 8 and 13 of the Agreement.
C-4
<PAGE>
Exhibit D
---------
Notice of Redemption
The undersigned Limited Partner hereby irrevocably (i) redeems __________
Limited Partnership Units in Boston Properties Limited Partnership in accordance
with the terms of the Amended and Restated Agreement of Limited Partnership of
Boston Properties Limited Partnership and the Redemption Right referred to
therein; (ii) surrenders such Limited Partnership Units and all right, title and
interest therein; and (iii) directs that the Cash Amount or REIT Shares Amount
(as determined by the General Partner) deliverable upon exercise of the
Redemption Right be delivered to the address specified below, and if REIT Shares
are to be delivered, such REIT Shares be registered or placed in the name(s) and
at the address(es) specified below. The undersigned hereby, represents,
warrants, and certifies that the undersigned (a) has marketable and unencumbered
title to such Limited Partnership Units, free and clear of the rights or
interests of any other person or entity; (b) has the full right, power, and
authority to redeem and surrender such Limited Partnership Units as provided
herein; and (c) has obtained the consent or approval of all person or entities,
if any, having the right to consent or approve such redemption and surrender.
Dated:_________________________
Name of Limited Partner:____________________________________
Please Print
____________________________________
(Signature of Limited Partner)
____________________________________
(Street Address)
____________________________________
(City) (State) (Zip Code)
Signature Guaranteed by:
____________________________________
D-1
<PAGE>
If REIT Shares are to be issued, issue to:
Name:_________________________________
Please insert social security or identifying number:__________________
D-2
<PAGE>
Exhibit E
---------
Designated Properties and Consenting Partners
Designated Property Consenting Partners
- ------------------- -------------------
E-1
<PAGE>
Exhibit F
---------
Recourse Debt Level Schedule
Recourse Debt Recourse Debt
Name of Limited Partner Percentage Amount
- ----------------------- --------------- ---------------
Total ____________
E-2
<PAGE>
EXHIBIT 10.2
BOSTON PROPERTIES, INC.
1997 STOCK OPTION AND INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
----------------------------------------
The name of the plan is the Boston Properties, Inc. 1997 Stock Option and
Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and enable
the officers, employees, Independent Directors and other key persons of Boston
Properties, Inc. (the "Company"), and the employees and other key persons of
Boston Properties Limited Partnership (the "Operating Partnership") and the
Company's other Subsidiaries, upon whose judgment, initiative and efforts the
Company largely depends for the successful conduct of its business to acquire a
proprietary interest in the Company. It is anticipated that providing such
persons with a direct stake in the Company's welfare will assure a closer
identification of their interests with those of the Company, thereby stimulating
their efforts on the Company's behalf and strengthening their desire to remain
with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended from time to
time.
"Administrator" is defined in Section 2(a).
"Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Restricted Stock Awards, Deferred Stock Awards, Unrestricted Stock
Awards, Performance Share Awards, Dividend Equivalent Rights and Other Stock-
Based Awards.
"Board" means the Board of Directors of the Company as constituted from
time to time.
"Change of Control" is defined in Section 16.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor Code, and related rules, regulations and
interpretations.
"Committee" means the Committee of the Board referred to in Section 2.
"Company" means Boston Properties, Inc., a Delaware corporation, and any
successor thereto.
"Deferred Stock Award" means Awards granted pursuant to Section 7.
"Dividend Equivalent Right" means Awards granted pursuant to Section 10.
<PAGE>
"Effective Date" means the date on which the Plan is initially approved by
stockholders as set forth in Section 18.
"Fair Market Value" on any given date means the last reported sale price at
which Stock is traded on such date or, if no Stock is traded on such date, the
next preceding date on which Stock was traded, as reflected on the principal
stock exchange or, if applicable, any other national stock exchange on which the
Stock is traded or admitted to trading. Notwithstanding the foregoing, the Fair
Market Value on the first day of the Company's initial public offering of Stock
shall be the initial public offering price as set forth in the final prospectus
for the Company's initial public offering.
"Incentive Stock Option" means any Stock Option that qualifies as and is
designated in writing in the related Option agreement as constituting an
"incentive stock option" as defined in Section 422 of the Code.
"Independent Director" means a member of the Board who is not also an
employee of the Company or any Subsidiary.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Operating Partnership" means Boston Properties Limited Partnership, a
Delaware limited partnership, and any successor thereto.
"Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.
"Other Stock-Based Award" means Awards granted pursuant to Section 11.
"Performance Share Award" means Awards granted pursuant to Section 9.
"Restricted Stock Award" means Awards granted pursuant to Section 6.
"Stock" means the Common Stock, par value $.01 per share, of the Company,
subject to adjustments pursuant to Section 3.
"Subsidiary" means any corporation or other entity (other than the Company)
in any unbroken chain of corporations or other entities beginning with the
Company if each of the corporations or entities (other than the last corporation
or entity in the unbroken chain) owns stock or other interests possessing 50
percent or more of the economic interest or the total combined voting power of
all classes of stock or other interests in one of the other corporations or
entities in the chain.
"Unrestricted Stock Award" means any Award granted pursuant to Section 8.
2
<PAGE>
SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECTAND
---------------------------------------------------------
PARTICIPANTS AND DETERMINE AWARDS
---------------------------------
(a) Committee. The Plan shall be administered by either the Board or a
---------
committee of not less than two Independent Directors (in either case, the
"Administrator"). Each member of the Committee shall be a "non-employee
director" within the meaning of Rule 16b-3(b)(3)(i) promulgated under the Act,
or any successor definition under said rule. From and after the date the
Company becomes subject to Section 162(m) of the Code with respect to
compensation earned under this Plan, each member of the Committee shall also be
an "outside director" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.
(b) Powers of Administrator. The Administrator shall have the power and
-----------------------
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:
(i) to select the individuals to whom Awards may from time to time be
granted;
(ii) to determine the time or times of grant, and the extent, if any,
of Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock
Awards, Deferred Stock Awards, Unrestricted Stock Awards, Performance Share
Awards, Dividend Equivalent Rights and Other Stock-Based Awards, or any
combination of the foregoing, granted to any one or more participants;
(iii) to determine the number of shares of Stock to be covered by any
Award;
(iv) to determine and modify from time to time the terms and
conditions, including restrictions, not inconsistent with the terms of the
Plan, of any Award, which terms and conditions may differ among individual
Awards and participants, and to approve the form of written instruments
evidencing the Awards;
(v) to accelerate at any time the exercisability or vesting of all or
any portion of any Award;
(vi) subject to the provisions of Section 5(a)(iii), to extend at any
time the post-termination period in which Stock Options may be exercised;
(vii) to determine at any time whether, to what extent, and under what
circumstances Stock and other amounts payable with respect to an Award
shall be deferred either automatically or at the election of the
participant and whether and to what extent the Company shall pay or credit
amounts constituting deemed interest (at rates determined by the
Administrator) or dividends or deemed dividends on such deferrals; and
3
<PAGE>
(viii) at any time to adopt, alter and repeal such rules, guidelines
and practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in connection
with the Plan; and to otherwise supervise the administration of the Plan.
All decisions and interpretations of the Administrator shall be made in the
Administrator's sole and absolute discretion and shall be final and binding on
all persons, including the Company and Plan participants.
(c) Delegation of Authority to Grant Awards. The Administrator, in its
---------------------------------------
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Administrator's authority and duties with respect to Awards,
including the granting thereof, to individuals who are not subject to the
reporting and other provisions of Section 16 of the Act or "covered employees"
within the meaning of Section 162(m) of the Code. Any such delegation by the
Administrator shall include a limitation as to the amount of Awards that may be
awarded during the period of the delegation and shall contain guidelines as to
the determination of the exercise price of any Option, the conversion ratio or
price of other Awards and the vesting criteria. The Administrator may revoke or
amend the terms of a delegation at any time but such action shall not invalidate
any prior actions of the Administrator's delegate or delegates that were
consistent with the terms of the Plan.
SECTION3. STOCK ISSUABLE UNDER THE PLAN; RECAPITALIZATIONS; MERGERS; SUBSTITUTE
---------------------------------------------------------------------
AWARDS
------
(a) Stock Issuable. The maximum number of shares of Stock reserved and
--------------
available for issuance under the Plan shall be such aggregate number of shares
of Stock as does not exceed the sum of (i) 4,883,000 shares; plus (ii) as of
January 1, 1998, 9.5 percent of any net increase since the Company's initial
public offering in the total number of shares of Stock actually outstanding
(assuming all units of partnership interests in the Operating Partnership that
are subject to redemption rights are converted into Stock); plus (iii) as of
each January 1 thereafter, 9.5 percent of any net increase since the preceding
January 1 in the total number of shares of Stock actually outstanding (assuming
all units of partnership interests in the Operating Partnership that are subject
to redemption rights are converted into Stock). Notwithstanding the foregoing,
the maximum number of shares of Stock for which Incentive Stock Options may be
granted under the Plan shall not exceed 4,883,000 shares, reduced by the
aggregate number of shares subject to outstanding Awards granted under the Plan.
For purposes of this limitation, if any portion of an Award is forfeited,
cancelled, reacquired by the Company, satisfied without the issuance of Stock or
otherwise terminated, the shares of Stock underlying such portion of the Award
shall be added back to the shares of Stock available for issuance under the
Plan. Subject to such overall limitation, shares of Stock may be issued up to
such maximum number pursuant to any type or types of Award; provided, however,
that on and after the date the Company is first subject to the provisions of
Section 162(m) of the Code
4
<PAGE>
with respect to grants made or compensation earned under the Plan, Stock Options
with respect to no more than 1,500,000 shares of Stock may be granted to any one
individual participant during any one calendar year period. The shares available
for issuance under the Plan may be authorized but unissued shares of Stock or
shares of Stock reacquired by the Company.
(b) Recapitalizations. If, through or as a result of any merger,
-----------------
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, the outstanding shares of
Stock are increased or decreased or are exchanged for a different number or kind
of shares or other securities of the Company, or additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Stock or other securities, the
Administrator may make an appropriate or proportionate adjustment in (i) the
maximum number of shares reserved for issuance under the Plan, (ii) the number
of Stock Options that can be granted to any one individual participant, (iii)
the number and kind of shares or other securities subject to any then
outstanding Awards under the Plan, and (iv) the price for each share subject to
any then outstanding Stock Options under the Plan, without changing the
aggregate exercise price (i.e., the exercise price multiplied by the number of
Stock Options) as to which such Stock Options remain exercisable. The adjustment
by the Administrator shall be final, binding and conclusive. No fractional
shares of Stock shall be issued under the Plan resulting from any such
adjustment, but the Administrator in its discretion may make a cash payment in
lieu of fractional shares.
(c) Mergers. In contemplation of and subject to the consummation of a
-------
consolidation or merger or sale of all or substantially all of the assets of the
Company in which outstanding shares of Stock are exchanged for securities, cash
or other property of an unrelated corporation or business entity or in the event
of a liquidation of the Company (in each case, a "Transaction"), the Board, or
the board of directors of any corporation assuming the obligations of the
Company, may, in its discretion, take any one or more of the following actions,
as to outstanding Awards: (i) provide that such Awards shall be assumed or
equivalent awards shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof), and/or (ii) upon written notice to the
participants, provide that all Awards will terminate immediately prior to the
consummation of the Transaction. In the event that, pursuant to clause (ii)
above, Awards will terminate immediately prior to the consummation of the
Transaction, all vested Awards, other than Options, shall be fully settled in
cash or in kind at such appropriate consideration as determined by the
Administrator in its sole discretion after taking into account the consideration
payable per share of Stock pursuant to the business combination (the "Merger
Price") and all Stock Options shall be fully settled, in cash or in kind, in an
amount equal to the difference between (A) the Merger Price times the number of
shares of Stock subject to such outstanding Stock Options (to the extent then
exercisable at prices not in excess of the Merger Price) and (B) the aggregate
exercise price of all such outstanding Stock Options; provided, however, that
each participant shall be permitted, within a specified period determined by the
Administrator prior to the consummation of the Transaction, to exercise all
outstanding Stock Options, including those that are not then exercisable,
subject to the consummation of the Transaction.
5
<PAGE>
(d) Substitute Awards. The Administrator may grant Awards under the Plan
-----------------
in substitution for stock and stock based awards held by employees of another
corporation who become employees of the Company or a Subsidiary as the result of
a merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Administrator may direct that the
substitute awards be granted on such terms and conditions as the Administrator
considers appropriate in the circumstances.
SECTION 4. ELIGIBILITY
-----------
Participants in the Plan will be such full or part-time officers and other
employees, Independent Directors and key persons of the Company, the Operating
Partnership and the Company's other Subsidiaries who are responsible for or
contribute to the management, growth or profitability of the Company, the
Operating Partnership and the Company's other Subsidiaries as are selected from
time to time by the Administrator in its sole discretion.
SECTION 5. STOCK OPTIONS
-------------
Any Stock Option granted under the Plan shall be in such form as the
Administrator may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a "subsidiary corporation"
within the meaning of Section 424(f) of the Code. To the extent that any Option
does not qualify as an Incentive Stock Option, it shall be deemed a Non-
Qualified Stock Option.
No Incentive Stock Option shall be granted under the Plan after June 10,
2007.
(a) Stock Options Granted to Employees and Key Persons. The Administrator
--------------------------------------------------
in its discretion may grant Stock Options to eligible employees and key persons
of the Company or any Subsidiary. Stock Options granted pursuant to this
Section 5(a) shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
the Plan, as the Administrator shall deem desirable. If the Administrator so
determines, Stock Options may be granted in lieu of cash compensation at the
participant's election, subject to such terms and conditions as the
Administrator may establish, as well as in addition to other compensation.
(i) Exercise Price. The exercise price per share for the Stock
--------------
covered by a Stock Option granted pursuant to this Section 5(a) shall be
determined by the Administrator at the time of grant but shall not be less
than 100 percent of the Fair Market Value on the date of grant in the case
of Incentive Stock Options, and 25 percent of the Fair Market Value on the
date of grant, in the case of Non-Qualified Stock Options. If an employee
owns or is deemed to own (by reason of the attribution
6
<PAGE>
rules of Section 424(d) of the Code) more than 10 percent of the combined
voting power of all classes of stock of the Company or any parent or
subsidiary corporation and an Incentive Stock Option is granted to such
employee, the option price of such Incentive Stock Option shall be not less
than 110 percent of the Fair Market Value on the grant date.
(ii) Option Term. The term of each Stock Option shall be fixed by
-----------
the Administrator, but no Incentive Stock Option shall be exercisable more
than ten years after the date the option is granted. If an employee owns or
is deemed to own (by reason of the attribution rules of Section 424(d) of
the Code) more than 10 percent of the combined voting power of all classes
of stock of the Company or any parent or subsidiary corporation and an
Incentive Stock Option is granted to such employee, the term of such option
shall be no more than five years from the date of grant.
(iii) Exercisability; Rights of a Stockholder. Stock Options shall
---------------------------------------
become exercisable at such time or times, whether or not in installments,
as shall be determined by the Administrator at or after the grant date;
provided, however, that Stock Options granted in lieu of compensation shall
be exercisable in full as of the grant date unless the Administrator
otherwise provides in the Award agreement. The Administrator may at any
time accelerate the exercisability of all or any portion of any Stock
Option. An optionee shall have the rights of a stockholder only as to
shares acquired upon the exercise of a Stock Option and not as to
unexercised Stock Options.
(iv) Method of Exercise. Stock Options may be exercised in whole or
------------------
in part, by giving written notice of exercise to the Company, specifying
the number of shares to be purchased. Payment of the purchase price may be
made by one or more of the following methods to the extent provided in the
Option Award agreement:
(A) In cash, by certified or bank check or other instrument
acceptable to the Administrator;
(B) In the form of shares of Stock that are not then subject to
restrictions under any Company plan and that have been beneficially
owned by the optionee for at least six months, if permitted by the
Administrator in its discretion. Such surrendered shares shall be
valued at Fair Market Value on the exercise date;
(C) By the optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable
to the Company to pay the purchase price; provided that in the event
the optionee chooses to pay the purchase price as so provided, the
optionee and the broker shall comply with such procedures and enter
into such agreements of indemnity and other
7
<PAGE>
agreements as the Administrator shall prescribe as a condition of such
payment procedure; or
(D) By the optionee delivering to the Company a promissory note
if the Administrator has expressly authorized the loan of funds to the
optionee for the purpose of enabling or assisting the optionee to
effect the exercise of his Stock Option; provided that at least so
much of the exercise price as represents the par value of the Stock
shall be paid other than with a promissory note.
Payment instruments will be received subject to collection. The delivery
of certificates representing the shares of Stock to be purchased pursuant
to the exercise of a Stock Option will be contingent upon receipt from the
optionee (or a purchaser acting in his stead in accordance with the
provisions of the Stock Option) by the Company of the full purchase price
for such shares and the fulfillment of any other requirements contained in
the Stock Option or applicable provisions of laws.
(v) Annual Limit on Incentive Stock Options. To the extent required
---------------------------------------
for "incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
shares of Stock with respect to which Incentive Stock Options granted under
this Plan and any other plan of the Company or its parent and subsidiary
corporations become exercisable for the first time by an optionee during
any calendar year shall not exceed $100,000. To the extent that any Stock
Option exceeds this limit, it shall constitute a Non-Qualified Stock
Option.
(b) Reload Options. At the discretion of the Administrator and subject to
--------------
such restrictions, terms and conditions as the Administrator may establish,
Options granted under the Plan may include a "reload" feature pursuant to which
an optionee exercising an option by the delivery of a number of shares of Stock
in accordance with Section 5(a)(iv)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with such other terms as
the Administrator may provide) to purchase that number of shares of Stock equal
to the number delivered to exercise the original Option with an Option term
equal to the remainder of the original Option term unless the Administrator
otherwise determines in the Award agreement for the original Option grant.
(c) Stock Options Granted to Independent Directors.
----------------------------------------------
(i) Automatic Grant of Options.
--------------------------
(A) Each person who is an Independent Director on the effective
date of the Company's initial public offering shall be granted on such date
a Non-Qualified Stock Option to acquire 10,000 shares of Stock. The
exercise price per share for the Stock covered by such Non-Qualified Stock
Option shall
8
<PAGE>
be the initial public offering price as set forth in the final prospectus
for the Company's initial public offering.
(B) Each Independent Director who is first elected to serve as a
Director after the effective date of the Company's initial public offering
shall be granted, on the fifth business day after his election, a Non-
Qualified Stock Option to acquire 10,000 shares of Stock.
(C) Each Independent Director who is serving as Director of the
Company on the fifth business day after each annual meeting of
shareholders, beginning with the 1998 annual meeting, shall automatically
be granted on such day a Non-Qualified Stock Option to acquire 5,000 shares
of Stock.
(D) The exercise price per share for the Stock covered by a Stock
Option granted under this Section 5(c)(i)(B) and (C) shall be equal to the
Fair Market Value of the Stock on the date the Stock Option is granted.
(E) The Board, in its discretion, may grant additional Non-
Qualified Stock Options to Independent Directors. Any such grant may vary
among individual Independent Directors.
(ii) Exercise; Termination.
---------------------
(A) Unless otherwise determined by the Administrator, an Option
granted under Section 5(c)(i)(A), (B) or (C) shall be exercisable with
respect to 50 percent of the underlying shares on the first
anniversary of the grant date and shall be exercisable with respect to
all of the underlying shares on the second anniversary of the grant
date. An Option granted under Section 5(c)(i)(E) shall be subject to
such vesting and exercisability provisions as the Board may provide at
the time of grant. An Option issued under this Section 5(c) shall not
be exercisable after the expiration of ten years from the date of
grant.
(B) Options granted under this Section 5(c) may be exercised only
by written notice to the Company specifying the number of shares to be
purchased. Payment of the full purchase price of the shares to be
purchased may be made by one or more of the methods specified in
Section 5(a)(iv). An optionee shall have the rights of a stockholder
only as to shares acquired upon the exercise of a Stock Option and not
as to unexercised Stock Options.
(d) Non-transferability of Options. No Stock Option shall be transferable
------------------------------
by the optionee otherwise than by will or by the laws of descent and
distribution and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee. Notwithstanding the foregoing, the
Administrator, in its sole discretion, may provide in the Award agreement
regarding a given Option that the optionee may transfer, without consideration
for the transfer,
9
<PAGE>
his Non-Qualified Stock Options to members of his family, to trusts for the
benefit of such family members, or to partnerships in which such family members
are the only partners, provided that the transferee agrees in writing with the
Company to be bound by all of the terms and conditions of this Plan and the
applicable option agreement.
(e) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement, or subject to Section 14 below, in writing after
the Award agreement is issued, an optionee's rights in all Stock Options shall
automatically terminate upon the participant's termination of employment (or
cessation of business relationship) with the Company and its Subsidiaries for
any reason.
SECTION 6. RESTRICTED STOCK AWARDS
-----------------------
(a) Nature of Restricted Stock Awards. A Restricted Stock Award is an
---------------------------------
Award entitling the recipient to acquire, at par value or such other higher
purchase price determined by the Administrator, shares of Stock subject to such
restrictions and conditions as the Administrator may determine at the time of
grant ("Restricted Stock"). Conditions may be based on continuing employment
(or other business relationship) and/or achievement of pre-established
performance goals and objectives. The grant of a Restricted Stock Award is
contingent on the participant executing the Restricted Stock Award agreement.
The terms and conditions of each such agreement shall be determined by the
Administrator, and such terms and conditions may differ among individual Awards
and participants.
(b) Rights as a Stockholder. Upon execution of the Restricted Stock Award
-----------------------
agreement and paying any applicable purchase price, a participant shall have the
rights of a stockholder with respect to the voting of the Restricted Stock,
subject to such terms and conditions as may be contained in the Restricted Stock
Award agreement. Unless the Administrator shall otherwise determine,
certificates evidencing the Restricted Stock shall remain in the possession of
the Company until such Restricted Stock is vested as provided in Section 6(d)
below, and the participant shall be required, as a condition of the grant, to
deliver to the Company a stock power endorsed in blank.
(c) Restrictions. Restricted Stock may not be sold, assigned, transferred,
------------
pledged or otherwise encumbered or disposed of except as specifically provided
herein or in the Restricted Stock Award agreement. If a participant's
employment (or other business relationship) with the Company and its
Subsidiaries terminates for any reason, the Company shall have the right to
repurchase Restricted Stock that has not vested at the time of termination at
its original purchase price, from the participant or the participant's legal
representative.
(d) Vesting of Restricted Stock. The Administrator at the time of grant
---------------------------
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the non-
transferability of the Restricted Stock and the Company's right of repurchase or
forfeiture shall lapse. Subsequent to such date or dates and/or the attainment
of such pre-established performance goals, objectives and other
10
<PAGE>
conditions, the shares on which all restrictions have lapsed shall no longer be
Restricted Stock and shall be deemed "vested." Except as may otherwise be
provided by the Administrator either in the Award agreement or, subject to
Section 14 below, in writing after the Award agreement is issued, a
participant's rights in any shares of Restricted Stock that have not vested
shall automatically terminate upon the participant's termination of employment
(or other business relationship) with the Company and its Subsidiaries and such
shares shall be subject to the Company's right of repurchase as provided in
Section 6(c) above.
(e) Waiver, Deferral and Reinvestment of Dividends. The Restricted Stock
----------------------------------------------
Award agreement may require or permit the immediate payment, waiver, deferral or
reinvestment (in the form of additional Restricted Stock) of dividends paid on
the Restricted Stock.
SECTION 7. DEFERRED STOCK AWARDS
---------------------
(a) Nature of Deferred Stock Awards. A Deferred Stock Award is an Award
-------------------------------
of phantom stock units to a participant, subject to restrictions and conditions
as the Administrator may determine at the time of grant. Conditions may be
based on continuing employment (or other business relationship) and/or
achievement of pre-established performance goals and objectives. The grant of a
Deferred Stock Award is contingent on the participant executing the Deferred
Stock Award agreement. The terms and conditions of each such agreement shall be
determined by the Administrator, and such terms and conditions may differ among
individual Awards and participants. At the end of the deferral period, the
Deferred Stock Award, to the extent vested, shall be paid to the participant in
the form of shares of Stock.
(b) Election to Receive Deferred Stock Awards in Lieu of Compensation. The
-----------------------------------------------------------------
Administrator may, in its sole discretion, permit a participant to elect to
receive a portion of the cash compensation or Restricted Stock Award otherwise
due to such participant in the form of a Deferred Stock Award. Any such
election shall be made in writing and shall be delivered to the Company no later
than the date specified by the Administrator and in accordance with rules and
procedures established by the Administrator. The Administrator shall have the
sole right to determine whether and under what circumstances to permit such
elections and to impose such limitations and other terms and conditions thereon
as the Administrator deems appropriate.
(c) Rights as a Stockholder. During the deferral period, a participant
-----------------------
shall have no rights as a stockholder; provided, however, that the participant
may be credited with Dividend Equivalent Rights with respect to the phantom
stock units underlying his Deferred Stock Award, subject to such terms and
conditions as the Administrator may determine.
(d) Restrictions. A Deferred Stock Award may not be sold, assigned,
------------
transferred, pledged or otherwise encumbered or disposed of during the deferral
period.
(e) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement or, subject to Section 14 below, in writing after
the Award agreement
11
<PAGE>
is issued, a participant's right in all Deferred Stock Awards that have not
vested shall automatically terminate upon the participant's termination of
employment (or cessation of business relationship) with the Company and its
Subsidiaries for any reason.
SECTION 8. UNRESTRICTED STOCK AWARDS
-------------------------
Grant or Sale of Unrestricted Stock. The Administrator may, in its sole
-----------------------------------
discretion, grant (or sell at par value or such other higher purchase price
determined by the Administrator) an Unrestricted Stock Award to any participant
pursuant to which such participant may receive shares of Stock free of any
restrictions ("Unrestricted Stock") under the Plan. Unrestricted Stock Awards
may be granted or sold as described in the preceding sentence in respect of past
services or other valid consideration, or in lieu of any cash compensation due
to such participant.
SECTION 9. PERFORMANCE SHARE AWARDS
------------------------
(a) Nature of Performance Share Awards. A Performance Share Award is an
----------------------------------
Award entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Administrator may make Performance Share
Awards independent of or in connection with the granting of any other Award
under the Plan. The Administrator in its sole discretion shall determine
whether and to whom Performance Share Awards shall be made, the performance
goals applicable under each such Award, the periods during which performance is
to be measured, and all other limitations and conditions applicable to the
awarded Performance Shares; provided, however, that the Administrator may rely
on the performance goals and other standards applicable to other performance
unit plans of the Company in setting the standards for Performance Share Awards
under the Plan.
(b) Rights as a Stockholder. A participant receiving a Performance Share
-----------------------
Award shall have the rights of a stockholder only as to shares actually received
by the participant under the Plan and not with respect to shares subject to the
Award but not actually received by the participant. A participant shall be
entitled to receive a stock certificate evidencing the acquisition of shares of
Stock under a Performance Share Award only upon satisfaction of all conditions
specified in the written instrument evidencing the Performance Share Award (or
in a performance plan adopted by the Administrator).
(c) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement or, subject to Section 14 below, in writing after
the Award agreement is issued, a participant's rights in all Performance Share
Awards shall automatically terminate upon the participant's termination of
employment (or cessation of business relationship) with the Company and its
Subsidiaries for any reason.
(d) Acceleration, Waiver, Etc. At any time prior to the participant's
-------------------------
termination of employment (or other business relationship) by the Company and
its Subsidiaries, the
12
<PAGE>
Administrator may in its sole discretion accelerate, waive or, subject to
Section 14, amend any or all of the goals, restrictions or conditions imposed
under any Performance Share Award.
SECTION 10. DIVIDEND EQUIVALENT RIGHTS
--------------------------
(a) Dividend Equivalent Rights. A Dividend Equivalent Right is an Award
--------------------------
entitling the recipient to receive credits based on cash dividends that would
have been paid on the shares of Stock specified in the Dividend Equivalent Right
(or other award to which it relates) if such shares had been issued to and held
by the recipient. A Dividend Equivalent Right may be granted hereunder to any
participant as a component of another Award or as a freestanding award. The
terms and conditions of Dividend Equivalent Rights shall be specified in the
grant. Dividend equivalents credited to the holder of a Dividend Equivalent
Right may be paid currently or may be deemed to be reinvested in additional
shares of Stock, which may thereafter accrue additional equivalents. Any such
reinvestment shall be at Fair Market Value on the date of reinvestment.
Dividend Equivalent Rights may be settled in cash or shares of Stock or a
combination thereof, in a single installment or installments. A Dividend
Equivalent Right granted as a component of another Award may provide that such
Dividend Equivalent Right shall be settled upon exercise, settlement, or payment
of, or lapse of restrictions on, such other award, and that such Dividend
Equivalent Right shall expire or be forfeited or annulled under the same
conditions as such other award. A Dividend Equivalent Right granted as a
component of another Award may also contain terms and conditions different from
such other award.
(b) Interest Equivalents. Any Award under this Plan that is settled in
--------------------
whole or in part in cash on a deferred basis may provide in the grant for
interest equivalents to be credited with respect to such cash payment. Interest
equivalents may be compounded and shall be paid upon such terms and conditions
as may be specified by the grant.
(c) Termination. Except as may otherwise be provided by the Administrator
-----------
either in the Award agreement or, subject to Section 14 below, in writing after
the Award agreement is issued, a participant's rights in all Dividend Equivalent
Rights or interest equivalents shall automatically terminate upon the
participant's termination of employment (or cessation of business relationship)
with the Company and its Subsidiaries for any reason.
SECTION 11. OTHER STOCK-BASED AWARDS
------------------------
(a) Nature of Other Stock-Based Awards. An Other Stock-Based Award
----------------------------------
includes other Awards of Stock and other Awards that are valued in whole or in
part by reference to, or are otherwise based on, Stock, including without
limitation, convertible preferred stock, convertible debentures, exchangeable
securities and Awards valued by reference to book value or subsidiary
performance. An Other Stock-Based Award may be granted to any participant
either along side or in addition to or in tandem with Stock Options, Restricted
Stock or Deferred Stock granted under the Plan and/or cash awards made outside
of the Plan. Stock (including securities convertible into Stock) issued on a
bonus basis under this Section 11 may
13
<PAGE>
be issued for no cash consideration. Stock (including securities convertible
into Stock) purchased with a purchase right awarded under this Section 11 shall
be priced at at least 25 percent of the Fair Market Value of the Stock on the
date of grant. The grant of an Other Stock-Based Award may be subject to
restrictions and conditions as the Administrator may determine at the time of
grant, including conditions based on continuing employment (or other business
relationship) and/or achievement of pre-established performance goals and
objectives. The grant of an Other Stock-Based Award is contingent on the
participant executing the Award agreement. The terms and conditions of each such
agreement shall be determined by the Administrator, and such terms and
conditions may differ among individual Awards and participants.
(b) Rights as a Stockholder. Until such time as an Other Stock-Based Award
-----------------------
is actually paid out in shares of Stock, a participant shall have no rights as a
holder of Stock.
(c) Restrictions. An Other Stock-Based Award may not be sold, assigned,
------------
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the Award agreement.
(d) Termination. Except as may otherwise be provided by the Administrator
-----------
in the Award agreement or, subject to Section 14 below, in writing after the
Award agreement is issued, a participant's right in his Other Stock-Based Awards
that have not vested shall automatically terminate upon the participant's
termination of employment (or cessation of business relationship) with the
Company and its Subsidiaries for any reason.
SECTION 12. TAX WITHHOLDING
---------------
(a) Payment by Participant. Each participant shall, no later than the date
----------------------
as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Administrator regarding payment of, any Federal, state, or
local taxes of any kind required by law to be withheld with respect to such
income. The Company and its Subsidiaries shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment of any kind otherwise
due to the participant. The Company's obligation to deliver stock certificates
to any participant is subject to and conditioned on tax obligations being
satisfied by the participant.
(b) Payment in Stock. Subject to approval by the Administrator, a
----------------
participant may elect to have such tax withholding obligation satisfied, in
whole or in part, by (i) authorizing the Company to withhold from shares of
Stock to be issued pursuant to any Award a number of shares with an aggregate
Fair Market Value (as of the date the withholding is effected) that would
satisfy the withholding amount due, or (ii) transferring to the Company shares
of Stock owned by the participant with an aggregate Fair Market Value (as of the
date the withholding is effected) that would satisfy the withholding amount due.
14
<PAGE>
SECTION 13. TRANSFER, LEAVE OF ABSENCE, ETC.
-------------------------------
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another; or
(b) an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee's right to re-
employment is guaranteed either by a statute or by contract or under the written
policy pursuant to which the leave of absence was granted or if the
Administrator otherwise so provides in writing.
SECTION 14. AMENDMENTS AND TERMINATION
--------------------------
The Board may, at any time, amend or discontinue the Plan and the
Administrator may, at any time, amend or cancel any outstanding Award for the
purpose of satisfying changes in law or for any other lawful purpose, but no
such action shall adversely affect rights under any outstanding Award without
the holder's written consent. The Administrator may provide substitute Awards
at the same or reduced exercise or purchase price or with no exercise or
purchase price in a manner not inconsistent with the terms of the Plan, but such
price, if any, must satisfy the requirements which would apply to the substitute
or amended Award if it were then initially granted under this Plan, but no such
action shall adversely affect rights under any outstanding Award without the
holder's written consent. If and to the extent determined by the Administrator
to be required by the Code to ensure that Incentive Stock Options granted under
the Plan are qualified under Section 422 of the Code or ensure that compensation
earned under Stock Options granted under the Plan qualifies as performance-based
compensation under Section 162(m) of the Code, if and to the extent intended to
so qualify, Plan amendments shall be subject to approval by the Company
stockholders entitled to vote at a meeting of stockholders. Nothing in this
Section 14 shall limit the Board's authority to take any action permitted
pursuant to Section 3(c).
SECTION 15. STATUS OF PLAN
--------------
Unless the Administrator shall otherwise expressly determine in writing,
with respect to the portion of any Award which has not been exercised and any
payments in cash, Stock or other consideration not received by a participant, a
participant shall have no rights greater than those of a general creditor of the
Company. In its sole discretion, the Administrator may authorize the creation
of trusts or other arrangements to meet the Company's obligations to deliver
Stock or make payments with respect to Awards hereunder, provided that the
existence of such trusts or other arrangements is consistent with the foregoing
sentence.
15
<PAGE>
SECTION 16. CHANGE OF CONTROL PROVISIONS
----------------------------
(a) Upon the occurrence of a Change of Control as defined in this Section
16, each Award shall be subject to such terms, if any, with respect to a Change
of Control as have been provided by the Administrator either in the Award
agreement or, subject to Section 14 above, in writing after the Award agreement
is issued.
(b) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Act (other than the Company, any of its Subsidiaries, Mortimer B.
Zuckerman, Edward H. Linde, any "affiliate" or "associate" (as such terms
are defined in Rule 12b-2 under the Act) of Mortimer B. Zuckerman or Edward
H. Linde, or any trustee, fiduciary or other person or entity holding
securities under any employee benefit plan or trust of the Company or any
of its Subsidiaries), together with all "affiliates" and "associates" (as
such terms are defined in Rule 12b-2 under the Act) of such person, shall
become the "beneficial owner" (as such term is defined in Rule 13d-3 under
the Act), directly or indirectly, of securities of the Company representing
25 percent or more of the combined voting power of the Company's then
outstanding securities having the right to vote in an election of the
Company's Board of Directors ("Voting Securities") (other than as a result
of an acquisition of securities directly from the Company); provided that
for purposes of determining the "beneficial ownership" (as such term is
defined in Rule 13d-3 under the Act) of any "group" of which Mortimer B.
Zuckerman, Edward H. Linde or any of their affiliates or associates is a
member (each such entity or individual, a "Related Party"), there shall not
be attributed to the "beneficial ownership" (as such term is defined in
Rule 13d-3 under the Act) of such group any shares beneficially owned by
any Related Party; or
(ii) persons who, as of the effective date of the Company's initial
public offering of Stock, constitute the Company's Board of Directors (the
"Incumbent Directors") cease for any reason, including, without limitation,
as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board, provided that
any person becoming a director of the Company subsequent to such date shall
be considered an Incumbent Director if such person's election was approved
by or such person was nominated for election by either (A) a vote of at
least two-thirds of the Incumbent Directors or (B) a vote of at least a
majority of the Incumbent Directors who are members of a nominating
committee comprised, in the majority, of Incumbent Directors; or
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company where the stockholders of the
Company, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, "beneficially own" (as such
term is defined in Rule 13d-3 under the Act), directly or
16
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indirectly, shares representing in the aggregate 60 percent or more of the
voting shares of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation, if any),
(B) any sale, lease, exchange or other transfer to an unrelated party (in
one transaction or a series of transactions contemplated or arranged by any
party as a single plan) of all or substantially all of the assets of the
Company or (C) any plan or proposal for the liquidation or dissolution of
the Company.
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
have occurred for purposes of the foregoing clause (i) solely as the result of
an acquisition of securities by the Company which, by reducing the number of
shares of Voting Securities outstanding, increases the proportionate number of
shares of Voting Securities beneficially owned by any person (as defined in the
foregoing clause (i)) to 25 percent or more of the combined voting power of all
then outstanding Voting Securities; provided, however, that if such person shall
-------- -------
thereafter become the beneficial owner of any additional shares of Voting
Securities (other than pursuant to a stock split, stock dividend, or similar
transaction or as a result of an acquisition of securities directly from the
Company), then a "Change of Control" shall be deemed to have occurred for
purposes of the foregoing clause (i).
SECTION 17. GENERAL PROVISIONS
------------------
(a) No Distribution; Compliance with Legal Requirements. The Administrator
---------------------------------------------------
may require each person acquiring Stock pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Administrator may require the placing of
such stop-orders and restrictive legends on certificates for Stock and Awards as
it deems appropriate.
(b) Delivery of Stock Certificates. Stock certificates to be delivered to
------------------------------
participants under this Plan shall be deemed delivered for all purposes when the
Company or a stock transfer agent of the Company shall have mailed such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.
(c) Other Compensation Arrangements; No Employment Rights. Nothing
-----------------------------------------------------
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards shall not confer upon any employee any right to
continued employment with the Company or any Subsidiary and shall not interfere
in any way with the right of the Company or any Subsidiary to terminate the
employment of any of its employees at any time.
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(d) Trading Policy Restrictions. Option exercises and other Awards under
---------------------------
the Plan shall be subject to such Company insider-trading-policy-related
restrictions, terms and conditions as may be established by the Administrator,
or in accordance with policies set by the Administrator, from time to time.
SECTION 18. EFFECTIVE DATE OF PLAN
----------------------
This Plan shall become effective upon approval by the holders of a majority
of the votes cast at a meeting of stockholders at which a quorum is present or
by a unanimous written consent of stockholders. Subject to such approval by the
stockholders and to the requirement that no Stock may be issued hereunder prior
to such approval, Stock Options and other Awards may be granted hereunder on and
after adoption of this Plan by the Board.
SECTION 19. GOVERNING LAW
-------------
This Plan and all Awards and actions taken thereunder shall be governed by,
and construed in accordance with, the laws of the State of Delaware, applied
without regard to conflict of law principles.
DATE APPROVED BY BOARD OF DIRECTORS: June 11, 1997
DATE APPROVED BY STOCKHOLDERS: June 11, 1997
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EXHIBIT 10.5
FORM OF EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") made as of the ___ day of June,
1997 by and between ______________ residing at _______________, ______________,
_______ (hereinafter referred to as "Employee") and Boston Properties, Inc., a
Delaware corporation, with a principal place of business at 8 Arlington Street,
Boston, Massachusetts 02116 (hereinafter referred to as the "Company").
1. TERM. The term of this Agreement shall commence on the closing of the
initial public offering (the "IPO") of the Company's common stock and shall
terminate on the third anniversary of the closing of the IPO (the "Term"). The
Term shall be extended automatically for additional one-year periods (each a
"Renewal Term"), unless notice that this Agreement will not be extended is given
by either party to the other not less than thirty (30) days prior to the
expiration of the Term (as extended by any Renewal Term). (The period of
Employee's employment hereunder within the Term (as extended by any Renewal
Term) is herein referred to as the "Employment Period").
2. EMPLOYMENT/DUTIES.
(a) During the Employment Period, Employee shall be employed in the
business of the Company and its affiliates. Employee shall serve as an officer
of the Company with the title _______________________ and, upon the reasonable
request of the Board of Directors of the Company, as director and/or officer of
any of its affiliates. Employee's duties and authority shall be commensurate
with his title and position with the Company.
(b) Employee agrees to his employment as described in this Paragraph
2 and agrees to devote substantially all of his working time and efforts to the
performance of his duties hereunder, except as otherwise approved by the Board
of Directors. Notwithstanding the foregoing, nothing herein shall be interpreted
to preclude Employee from (i) engaging in Minority Interest Passive Investments
(as defined below), including Minority Interest Passive Investments in, or
relating to the ownership, development, operation, management, or leasing of,
commercial real estate properties, or (ii) participating as an officer or
director of, or advisor to, any charitable or other tax exempt organization;
PROVIDED that such activities and related duties and pursuits do not restrict
Employee's ability to fulfill his obligations as an officer and employee of the
Company as set forth herein.
Engaging in a "MINORITY INTEREST PASSIVE INVESTMENT" means acquiring,
holding, and exercising the voting rights associated with an investment made
through (i) the purchase of securities (including partnership interests) that
represent a non-controlling,
<PAGE>
minority interest in an entity or (ii) the lending of money, in either case with
the purpose or intent of obtaining a return on such investment but without
management by Employee of the property or business to which such investment
directly or indirectly relates and without any business or strategic
consultation by Employee with such entity.
3. COMPENSATION.
(a) BASE SALARY. The Company shall pay Employee an annual salary of
______________________________ during the Employment Period ("Base Salary").
Base Salary shall be payable in accordance with the Company's normal business
practices (including tax withholding), but in no event less frequently than
monthly. Employee's Base Salary shall be reviewed no less frequently than
annually by the Company and may be increased but not decreased during the
Employment Period.
(b) BONUSES. Commencing on the first annual compensation
determination date established by the Company during the Employment Period and
on each such date thereafter, the Company shall review the performance of the
Company and of Employee during the prior year, and the Company may provide
Employee with additional compensation as a bonus if the Board of Directors, or
any compensation committee thereof, in its discretion, determines that
Employee's contribution to the Company warrants such additional payment and the
Company's anticipated financial performance for the present period permits such
payment.
4. BENEFITS.
(a) MEDICAL/DENTAL INSURANCE. During the Employment Period, Employee
shall be entitled to participate in any and all medical and dental insurance
plans as in effect from time to time for senior executives of the Company and
based on Employee's Base Salary. Such participation shall be subject to (i) the
terms of the applicable plan documents, (ii) generally applicable policies of
the Company, and (iii) the discretion of the Board of Directors of the Company
or any administrative or other committee provided for in, or contemplated by,
such plan.
(b) LIFE INSURANCE/DISABILITY INSURANCE. During the Employment
Period, the Company shall provide Employee with such life and/or disability
insurance as the Company may from time to time make available to senior
executives of the Company.
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(c) EXPENSES. The Company shall promptly reimburse Employee for all
reasonable business expenses incurred by Employee during the Employment Period
in accordance with the practices of the Company for senior executives of the
Company, as in effect from time to time.
(d) VACATION. During the Employment Period, Employee shall receive
paid vacation annually in accordance with terms determined for such Employee by
the Company, but in no event shall Employee receive less than four weeks of paid
vacation per year.
(e) STOCK OPTIONS. During the Employment Period, Employee shall be
entitled to stock options in an amount to be determined by the Board of
Directors, or any compensation committee thereof, in its discretion under the
Boston Properties, Inc. 1997 Stock Option and Incentive Plan (the "Stock Option
Plan").
(f) AUTOMOBILE. During the Employment Period, the Company shall
provide Employee with a reasonable automobile allowance, such amount to be
determined in the Company's sole discretion and to be paid to Employee no less
frequently than monthly.
(g) OTHER BENEFITS. During the Employment Period, the Company shall
provide to Employee such other benefits, including the right to participate in
such retirement or pension plans, as are made generally available to employees
of the Company from time to time. Such participation shall be subject to (i) the
terms of the applicable plan documents, (ii) generally applicable policies of
the Company, and (iii) the discretion of the Board of Directors of the Company
or any administrative or other committee provided for in, or contemplated by,
such plan.
5. INDEMNIFICATION. To the full extent permitted by law and subject to
the Company's Certificate of Incorporation and Bylaws, the Company shall
indemnify Employee with respect to any actions commenced against Employee in his
capacity as a director or officer or former director or officer of the Company,
or any affiliate thereof for which he may serve in such capacity, and the
Company shall advance on a timely basis any expenses incurred in defending such
actions. The obligation to indemnify hereunder shall survive the termination of
this Agreement. The Company agrees to use its best efforts to secure and
maintain directors' and officers' liability insurance with respect to Employee.
6. COMPANY AUTHORITY/POLICIES. Employee agrees to observe and comply with
the rules and regulations of the Company as adopted by its Board of Directors
respecting the performance of his duties and to carry out and perform orders,
directions and policies communicated to him from time to time by the Board of
Directors.
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<PAGE>
7. RECORDS/NONDISCLOSURE/COMPANY POLICIES.
(a) GENERAL. All records, financial statements and similar documents
obtained, reviewed or compiled by Employee in the course of the performance by
him of services for the Company, whether or not confidential information or
trade secrets, shall be the exclusive property of the Company. Employee shall
have no rights in such documents upon any termination of this Agreement.
(b) CONFIDENTIAL INFORMATION. Employee will not disclose to any
person or entity (except as required by applicable law, the rules of the New
York Stock Exchange, or otherwise in connection with the performance of his
duties and responsibilities hereunder), or use for his own benefit or gain, any
confidential information of the Company obtained by him incident to his
employment with the Company. Employee shall take all reasonable steps to
safeguard any confidential information and to protect such confidential
information against disclosure, misuse, loss, or theft. The term "CONFIDENTIAL
INFORMATION" includes, without limitation, financial information, business
plans, prospects, and opportunities which have been discussed or considered by
the management of the Company, but does not include any information which has
become part of the public domain by means other than Employee's non-observance
of his obligations hereunder.
This Paragraph 7 shall survive the termination of this Agreement.
8. TERMINATION/SEVERANCE.
(a) GENERAL.
(i) AT WILL EMPLOYMENT. Employee's employment hereunder is "at
will" and, therefore, may be terminated at any time, with or without cause, at
the option of the Company, subject only to the severance obligations under this
Paragraph 8.
(ii) NOTICE OF TERMINATION. Except for termination as specified
in Subparagraph 8(b), any termination of Employee's employment by the Company or
any such termination by Employee shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a "NOTICE
OF TERMINATION" shall mean a notice which shall indicate the specific
termination provision hereunder relied upon by the terminating party.
(iii) DATE OF TERMINATION. "DATE OF TERMINATION" shall mean: (A)
if Employee's employment is terminated by his death, the date of his death; (B)
if Employee's employment is terminated on account of disability under
Subparagraph 8(c), the date on which Notice of Termination is given; (C) if
Employee's employment is terminated by the Company under Subparagraph 8(d),
thirty (30) days after the date on which a Notice of Termination is given; (D)
if Employee's employment is terminated by the Company under
4
<PAGE>
Subparagraph 8(e)(i), ninety (90) days after the date on which a Notice of
Termination is given; and (E) if Employee's employment is terminated by Employee
under Subparagraph 8(e)(ii) or 8(f), thirty (30) days after the date on which a
Notice of Termination is given.
(b) DEATH. Employee's employment hereunder shall terminate upon his
death. If Employee's employment terminates by reason of his death, the Company
shall, within ninety (90) days of death, pay in a lump sum amount to such person
as Employee shall designate in a notice filed with the Company or, if no such
person is designated, to Employee's estate, Employee's accrued and unpaid Base
Salary to his date of death, plus his accrued and unpaid bonus under Paragraph
3. All unvested stock options and stock-based grants shall immediately vest in
Employee's estate or other legal representatives and become exercisable or
nonforfeitable, and Employee's estate or other legal representatives shall have
one (1) year from the Date of Termination, or remaining option term, if earlier,
to exercise the stock options. For a period of one (1) year following the Date
of Termination, the Company shall pay such health insurance premiums as may be
necessary to allow Employee's spouse and dependents to receive health insurance
coverage substantially similar to the coverage they received prior to the Date
of Termination. In addition to the foregoing, any payments to which Employee's
spouse, beneficiaries, or estate may be entitled under any employee benefit plan
shall also be paid in accordance with the terms of such plan or arrangement.
Such payments, in the aggregate, shall fully discharge the Company's obligations
hereunder.
(c) DISABILITY. If, as a result of Employee's incapacity due to
physical or mental illness, Employee shall have been absent from his duties
hereunder on a full-time basis for one hundred eighty (180) calendar days in the
aggregate in any twelve (12) month period, the Company may terminate Employee's
employment hereunder. During any period that Employee fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness,
Employee shall continue to receive his accrued and unpaid Base Salary and
accrued and unpaid bonus under Paragraph 3, until Employee's employment is
terminated due to disability in accordance with this Subparagraph (c) or until
Employee terminates his employment in accordance with Subparagraph (e)(ii) or
(f), if earlier. All unvested stock options and stock-based grants shall
immediately vest and become exercisable or nonforfeitable, and Employee shall
have one (1) year from the Date of Termination, or remaining option term, if
earlier, to exercise the stock options. For a period of one (1) year following
the Date of Termination, the Company shall pay such health insurance premiums as
may be necessary to allow Employee, Employee's spouse and dependents to receive
health insurance coverage substantially similar to the coverage they received
prior to the Date of Termination. In addition to the foregoing, any payments to
which Employee may be entitled under any employee benefit plan shall also be
paid in accordance with the terms of such plan or arrangement. Such payments, in
the aggregate, shall fully discharge the Company's obligations hereunder.
5
<PAGE>
(d) TERMINATION BY THE COMPANY FOR CAUSE.
(i) At any time during the Employment Period, the Company may
terminate Employee's employment hereunder for Cause. "CAUSE" shall mean: (A)
gross negligence or willful misconduct by Employee in connection with the
performance of his material duties hereunder; (B) a breach by Employee of any of
his material duties hereunder (for reasons other than physical or mental
illness) and the failure of Employee to cure such breach within thirty (30) days
after written notice thereof by the Company; (C) conduct by Employee against the
material best interests of the Company or a material act of common law fraud
against the Company or its affiliates or employees; or (D) conviction of
Employee of a felony and such conviction has a material adverse affect on the
interests or reputation of the Company.
(ii) If Employee's employment is terminated by the Company for
Cause, then the Company shall, through the Date of Termination, pay Employee his
accrued and unpaid Base Salary. Thereafter, the Company shall have no further
obligations to Employee except as otherwise provided hereunder; PROVIDED that
any such termination shall not adversely affect or alter Employee's rights under
any employee benefit plan of the Company in which Employee, at the Date of
Termination, has a vested interest, unless otherwise provided in such employee
benefit plan or any agreement or other instrument attendant thereto.
Notwithstanding the foregoing and in addition to whatever other rights or
remedies the Company may have at law or in equity, all stock options and other
stock-based grants held by Employee, whether vested or unvested as of the Date
of Termination, shall immediately expire on the Date of Termination if
Employee's employment is terminated by the Company for Cause.
(e) TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY EMPLOYEE FOR GOOD
REASON.
(i) At any time during the Employment Period, the Company may
terminate Employee's employment hereunder without Cause if such termination is
approved by the Board of Directors. Any termination by the Company of Employee's
employment hereunder which does not (A) constitute a termination for Cause under
Subparagraph (d)(i), (B) result from the death or disability of the Employee
under Subparagraph (b) or (c), or (C) result from the expiration of the Term (as
extended by any Renewal Term), shall be deemed a termination without Cause.
(ii) At any time during the Employment Period, Employee may
terminate his employment hereunder for Good Reason. "GOOD REASON" shall mean:
(A) a substantial adverse change, not consented to by Employee, in the nature or
scope of Employee's responsibilities, authorities, powers, functions, or duties
under this Agreement or (B) a breach by the Company of any of its material
obligations hereunder and the failure of the Company to cure such breach within
thirty (30) days after written notice thereof by Employee.
6
<PAGE>
(iii) If Employee's employment is terminated during the
Employment Period by the Company without Cause or if Employee terminates his
employment during the Employment Period for Good Reason, then the Company shall,
through the Date of Termination, pay Employee his accrued and unpaid Base Salary
and his accrued and unpaid bonus under Paragraph 3. In addition, subject to
signing by Employee of a general release of claims in a form and manner
satisfactory to the Company,
(A) the Company shall pay Employee an amount (the
"Severance Amount") equal to the sum of (x) his Base Salary under Subparagraph
3(a) payable for the period in which the noncompetition provision of Paragraph 9
is in effect or would have been in effect but for the last subparagraph of
Paragraph 9 (the "Noncompetition Period") and (y) the amount of his cash bonus,
if any, received in respect of the immediately preceding year under Subparagraph
3(b) multiplied by the number of full and fractional calendar years during the
Noncompetition Period. Notwithstanding the foregoing, in the event the Company,
in its sole discretion, elects to waive the noncompetition provision of
Paragraph 9, the Company shall not be obligated to pay or continue to pay a
Severance Amount in excess of the sum of (xx) Employee's annual Base Salary
under Subparagraph 3(a) and (yy) the amount of his cash bonus, if any, received
in respect of the immediately preceding year under Subparagraph 3(b). The
Severance Amount shall be paid in monthly installments over a 12-month period,
or if longer, the Noncompetition Period; and
(B) Employee shall receive all rights and benefits
granted or in effect with respect to Employee under the Stock Option Plan and
agreements with Employee pursuant thereto. The vesting and exercise of any stock
options and the forfeitability of any stock-based grants held by Employee shall
be governed by the terms of the Stock Option Plan and the related agreements
between Employee and the Company.
(f) VOLUNTARY TERMINATION BY EMPLOYEE. At any time during the
Employment Period, Employee may terminate his employment hereunder for any
reason, including, but not limited to, Good Reason in accordance with
Subparagraph (e)(ii). If Employee's employment is terminated by Employee other
than for Good Reason, then the Company shall, through the Date of Termination,
pay Employee his accrued and unpaid Base Salary. Thereafter, the Company shall
have no further obligations to Employee except as otherwise expressly provided
hereunder; PROVIDED any such termination shall not adversely affect or alter
Employee's rights under any employee benefit plan of the Company in which
Employee, at the Date of Termination, has a vested interest, unless otherwise
provided in such employee benefit plan or any agreement or other instrument
attendant thereto.
(g) NO MITIGATION. Without regard to the reason for the termination
of Employee's employment hereunder, Employee shall be under no obligation to
mitigate damages with respect to such termination under any circumstances and in
the event Employee
7
<PAGE>
is employed or receives income from any other source, there shall be no offset
against the amounts due from the Company hereunder.
9. NONCOMPETITION. Because Employee's services to the Company are special
and because Employee has access to the Company's confidential information,
Employee covenants and agrees that during the Employment Period and until the
later of (i) the end of the Term and (ii) the end of a one-year period following
the termination of Employee's employment with the Company for any reason,
Employee shall not, without the prior written consent of the Company (which
shall be authorized by approval of the Board of Directors of the Company,
including the approval of a majority of the independent Directors of the
Company), directly or indirectly:
(a) engage, participate or assist in, either individually or as an
owner, partner, employee, consultant, director, officer, trustee, or agent of
any business that engages or attempts to engage in, directly or indirectly, the
acquisition, development, construction, operation, management, or leasing of any
commercial real estate property in any of the Company's Markets (as hereinafter
defined) at the time of Employee's termination of employment;
(b) intentionally interfere with, disrupt or attempt to disrupt the
relationship, contractual or otherwise, between the Company or its affiliates
and any tenant, supplier, contractor, lender, employee, or governmental agency
or authority; or
(c) call upon, compete for, solicit, divert, or take away, or attempt
to divert or take away any of the tenants or employees of the Company or its
affiliates, either for himself or for any other business, operation,
corporation, partnership, association, agency, or other person or entity.
"Market" as used herein means an area covering a 25 mile radius around (x)
any property or land owned by the Company, under development by the Company or
with respect to which the Company has an agreement or option to acquire a
property, development or land or (y) any property or development for which the
Company provides third party development or management services; PROVIDED that
for any such property, development or land located in New York City, no such
radial area shall extend beyond New York City.
This Paragraph 9 shall not be interpreted to prevent Employee from engaging
in Minority Interest Passive Investments or any other activity permitted under
Subparagraph 2(b). This Paragraph 9 shall survive the termination of this
Agreement.
Notwithstanding anything to the contrary herein, the noncompetition
provision of this
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Paragraph 9 shall not apply if Employee's employment terminates after a Change
of Control. For this purpose a "Change of Control" shall be deemed to occur if
persons who, as of the effective date of the Company's IPO, constitute the
Company's Board of Directors (the "Incumbent Directors") cease for any reason,
including, without limitation, as a result of a tender offer, proxy contest,
merger or similar transaction, to constitute at least a majority of the Board,
provided that any person becoming a director of the Company subsequent to such
date whose election was approved by a vote of at least two-thirds of the
Incumbent Directors or whose nomination for election was approved by a
nominating committee comprised of Incumbent Directors shall, for purposes of
this Agreement, be considered an Incumbent Director.
10. CONFLICTING AGREEMENTS. Employee hereby represents and warrants that
the execution of this Agreement and the performance of his obligations hereunder
will not breach or be in conflict with any other agreement to which he is a
party or is bound, and that he is not now subject to any covenants against
competition or similar covenants which would affect the performance of his
obligations hereunder.
11. NOTICES. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice for the parties are as shown above, or as subsequently modified by
written notice.
12. MISCELLANEOUS. This Agreement (i) constitutes the entire agreement
between the parties concerning the subjects hereof and supersedes any and all
prior agreements or understandings, (ii) may not be assigned by Employee without
the prior written consent of the Company, and (iii) may be assigned by the
Company and shall be binding upon, and inure to the benefit of, the Company's
successors and assigns. Headings herein are for convenience of reference only
and shall not define, limit or interpret the contents hereof.
13. AMENDMENT. This Agreement may be amended, modified or supplemented by
the mutual consent of the parties in writing, but no oral amendment,
modification or supplement shall be effective.
14. ARBITRATION; OTHER DISPUTES. Any dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively by arbitration
in Boston, Massachusetts, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered in any court
having jurisdiction. Notwithstanding the above, the Company shall be entitled to
seek a restraining order or injunction in any court of competent jurisdiction to
prevent any continuation of any violation of Paragraph 7 or 9 hereof.
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In the event that the Company terminates Employee's employment for Cause under
Subparagraph 8(d)(i) and Employee contends that Cause did not exist, then the
Company's only obligation shall be to submit such claim to arbitration and the
only issue before the arbitrator will be whether Employee was in fact terminated
for Cause. If the arbitrator determines that Employee was not terminated for
Cause by the Company, then the only remedies that the arbitrator may award are
(i) the Severance Amount specified in Subparagraph 8(e)(iii)(A), (ii) the costs
of arbitration, (iii) Employee's attorneys' fees, and (iv) the acceleration of
Employee's stock options in accordance with Subparagraph 8(e)(iii)(B). If the
arbitrator finds that Employee was terminated for Cause, the arbitrator will be
without authority to award Employee anything, and the parties will each be
responsible for their own attorneys' fees, and they will divide the costs of
arbitration equally. Furthermore, should a dispute occur concerning Employee's
mental or physical capacity as described in Subparagraph 8(c), a doctor selected
by Employee and a doctor selected by the Company shall be entitled to examine
Employee. If the opinion of the Company's doctor and Employee's doctor conflict,
the Company's doctor and Employee's doctor shall together agree upon a third
doctor, whose opinion shall be binding. This Paragraph 14 shall survive the
termination of this Agreement.
15. LITIGATION AND REGULATORY COOPERATION. During and after Employee's
employment, Employee shall reasonably cooperate with the Company in the defense
or prosecution of any claims or actions now in existence or which may be brought
in the future against or on behalf of the Company which relate to events or
occurrences that transpired while Employee was employed by the Company; PROVIDED
that such cooperation shall not materially and adversely affect Employee or
expose Employee to an increased probability of civil or criminal litigation.
Employee's cooperation in connection with such claims or actions shall include,
without limitation, being available to meet with counsel to prepare for
discovery or trial and to act as a witness on behalf of the Company at mutually
convenient times. During and after Employee's employment, Employee also shall
cooperate fully with the Company in connection with any investigation or review
of any federal, state or local regulatory authority as any such investigation or
review relates to events or occurrences that transpired while Employee was
employed by the Company. The Company shall also provide Employee with
compensation on an hourly basis calculated at his final base compensation rate
for requested litigation and regulatory cooperation that occurs after his
termination of employment, and reimburse Employee for all costs and expenses
incurred in connection with his performance under this Paragraph 15, including,
without limitation, reasonable attorneys' fees and costs.
16. EFFECTIVENESS. This Agreement is conditioned and shall become
effective only upon the completion of the IPO.
17. SEVERABILITY. If any provision of this Agreement shall to any extent
be held void or unenforceable (as to duration, scope, activity, subject or
otherwise) by a court of competent jurisdiction, such provision shall be deemed
to be modified so as to constitute a
10
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provision conforming as nearly as possible to the original provision while still
remaining valid and enforceable. In such event, the remainder of this Agreement
(or the application of such provision to persons or circumstances other than
those in respect of which it is deemed to be void or unenforceable) shall not be
affected thereby. Each other provision of this Agreement, unless specifically
conditioned on the voided aspect of such provision, shall remain valid and
enforceable to the fullest extent permitted by law; any other provisions of this
Agreement that are specifically conditioned on the voided aspect of such invalid
provision shall also be deemed to be modified so as to constitute a provision
conforming as nearly as possible to the original provision while still remaining
valid and enforceable to the fullest extent permitted by law.
18. GOVERNING LAW. This Agreement shall be construed and regulated in all
respects under the laws of the State of Delaware.
IN WITNESS WHEREOF, this Agreement is entered into as of the date and year
first above written.
BOSTON PROPERTIES, INC.
By:
Name: David G. Gaw
Title: Chief Financial Officer
_________________________________
May 23, 1997
11
<PAGE>
EXHIBIT 10.6
INDEMNIFICATION AGREEMENT
-------------------------
This Indemnification Agreement ("Agreement") is made as of this ___ day of
___, 1997 by and between Boston Properties, Inc., a Delaware corporation (the
"Company"), Boston Properties Limited Partnership, a Delaware limited
partnership (the "Operating Partnership"), Boston Properties Management, Inc., a
Delaware corporation (the "Development and Management Company," and, together
with the Company and the Operating Partnership, "Indemnitors") and
-------
("Indemnitee").
WHEREAS, Indemnitors desire to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as directors and/or
executive officers of one or more of such Indemnitors; and
WHEREAS, Indemnitors recognize Indemnitee's need for protection against
personal liability, and in order to assure Indemnitee's continued service to one
or more of such Indemnitors, Indemnitors wish to provide in this Agreement for
the indemnification of and the advancing of expenses to Indemnitee.
NOW, THEREFORE, Indemnitors and Indemnitee hereby agree as follows:
1. Indemnification.
---------------
(a) Third-Party Proceedings. Indemnitors shall indemnify Indemnitee
-----------------------
to the full extent permitted now or hereafter by applicable law, as from time to
time amended, subject to the exceptions provided in Section 8 of this Agreement.
Without limiting the foregoing but subject to the provisions of this Agreement,
Indemnitors shall indemnify Indemnitee if Indemnitee is or was a party or is
threatened to be made a party to any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of Indemnitors) by reason of Indemnitee's past,
present or future service as a director or executive officer of any Indemnitor,
or, at any such Indemnitor's request, of another enterprise or entity in which
any Indemnitor had, directly or indirectly, an interest at the time of such
service, against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement (if such settlement is approved in advance by
Indemnitors, which approval shall not be unreasonably withheld) actually and
reasonably incurred by Indemnitee in connection with investigating, preparing
for, defending or settling such action or proceeding. Indemnitors hereby agree
to indemnify Indemnitee's spouse (whether by statute or at common law and
without regard to the location of the governing jurisdiction) and children
(including by way of adoption) as express third-party beneficiaries hereunder to
the same extent and subject to the same limitations applicable to Indemnitee
hereunder for claims arising out of the status of such person as a spouse or
child of Indemnitee, including claims seeking damages from marital property
(including community property) or property held by Indemnitee
<PAGE>
and such spouse or property transferred to such spouse or child. The
indemnification provided under this Agreement may not be amended, modified or
limited in a manner adverse to the rights of Indemnitee without the consent of
Indemnitee, and Indemnitee shall be deemed to be serving in his capacity as an
officer and/or director of any Indemnitor in reliance on the terms of this
Agreement.
(b) Proceedings By or in the Right of Indemnitors. Subject to the
---------------------------------------------
provisions of this Agreement, Indemnitors shall indemnify Indemnitee if
Indemnitee was or is a party or is threatened to be made a party to any
threatened, pending or completed action or proceeding by or in the right of
Indemnitors or any subsidiary of Indemnitors to procure a judgment in its favor
by reason of Indemnitee's past, present or future service as a director or
officer of any Indemnitor, or, at any such Indemnitor's request, of another
enterprise or entity in which any Indemnitor had, directly or indirectly, an
interest at the time of such service, against expenses (including attorneys'
fees) and, to the fullest extent permitted by law, amounts paid in settlement,
in each case to the extent actually and reasonably incurred by Indemnitee in
connection with investigating, preparing for, defending or settling such action
or proceeding.
2. Expenses; Indemnification Procedure.
-----------------------------------
(a) Advancement of Expenses. Indemnitors shall advance all expenses
-----------------------
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action or proceeding referenced in Section
1(a) or (b) hereof (but not amounts actually paid in settlement of any such
action or proceeding). Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined, in
accordance with Section 2(c), that Indemnitee is not entitled to be indemnified
by Indemnitors as authorized hereby. The advances to be made hereunder shall be
paid by Indemnitors to Indemnitee within twenty (20) days following delivery of
a written request therefor by Indemnitee to Indemnitors.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to his right to be indemnified under this Agreement, give
Indemnitors notice in writing as soon as practicable of any claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Such notice shall contain the written affirmation of Indemnitee that
the standard of conduct necessary for indemnification hereunder has been
satisfied. Notice to any Indemnitor shall be directed to the President and
Chief Operating Officer of the Company in the manner provided in Section 13
hereof. Indemnitee shall give each Indemnitor such information and cooperation
as it may reasonably require and as shall be within Indemnitee's power. A delay
in giving notice under this Section 2(b) shall invalidate the Indemnitee's right
to indemnity under this Agreement only to the extent that such delay prejudices
the defense of the claim or the availability to Indemnitors of insurance
coverage for such claim.
2
<PAGE>
(c) Procedure. Any indemnification provided for in Section 1 shall be
---------
made no later than forty-five (45) days after receipt of the written request of
Indemnitee. If a claim under this Agreement, under any statute, or under,
respectively, any provision of the Company's Certificate of Incorporation or
Bylaws, the Operating Partnership's Agreement of Limited Partnership, or the
Development and Management Company's Certificate of Incorporation or Bylaws,
providing for indemnification, is not paid in full by the applicable Indemnitor
within forty-five (45) days after a written request for payment thereof that
complies with the requirements of this Agreement has first been received by such
Indemnitor, Indemnitee may, but need not, at any time thereafter bring an action
against such Indemnitor to recover the unpaid amount of the claim and, subject
to Section 12 of this Agreement, Indemnitee shall also be entitled to be paid
for the expenses (including attorneys' fees) of bringing such action. It shall
be a defense to any such action (other than an action brought to enforce a claim
for expenses incurred in connection with any action or proceeding in advance of
its final disposition) that Indemnitee has not met the standards of conduct that
made it permissible under applicable law for such Indemnitor to indemnify
Indemnitee for the amount claimed, but Indemnitee shall be entitled to receive
interim payments of expenses pursuant to Subsection 2(a) unless and until such
defense may be finally adjudicated by court order or judgment from which no
further right of appeal exists. It is the parties' intention that if such
Indemnitor contests Indemnitee's right to indemnification, the question of
Indemnitee's right to indemnification shall be for the court to decide, and
neither the failure of such Indemnitor (including its Board of Directors or
general partner, as applicable, any committee or subgroup of the Board of
Directors, independent legal counsel or its equity holders) to have made a
determination that indemnification of Indemnitee is proper in the circumstances
because Indemnitee has met the applicable standard of conduct required by
applicable law, nor an actual determination by such Indemnitor (including its
Board of Directors or general partner, as applicable, any committee or subgroup
of the Board of Directors, independent legal counsel or its equity holders) that
Indemnitee has not met such applicable standard of conduct, shall create a
presumption that Indemnitee has or has not met the applicable standard of
conduct.
(d) Notice to Insurers. If, at the time of the receipt of a notice of
------------------
a claim pursuant to Section 2(b) hereof, Indemnitors have directors' and
officers' liability insurance in effect, Indemnitors shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. Indemnitors shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event Indemnitors shall be obligated
--------------------
under Section 2(a) hereof to pay the expenses of any proceeding against
Indemnitee, Indemnitors, unless Indemnitee determines that a conflict of
interest exists between the Indemnitee and Indemnitors with respect to a
particular claim, shall be entitled to assume the defense of such proceeding,
with counsel approved by Indemnitee, which approval shall not be unreasonably
withheld, upon the delivery to Indemnitee of written notice of its election so
to do. After
3
<PAGE>
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel by Indemnitors, Indemnitors will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently incurred by
Indemnitee with respect to the same proceeding; provided that (i) Indemnitee
--------
shall have the right to employ his own separate counsel in any such proceeding
in addition to or in place of any counsel retained by Indemnitors on behalf of
Indemnitee at Indemnitee's expense, and (ii) if (A) the employment of counsel by
Indemnitee has been previously authorized by Indemnitors, (B) Indemnitee shall
have concluded that there may be a conflict of interest between Indemnitors and
Indemnitee in the conduct of any such defense, or (C) Indemnitors shall not, in
fact, have employed counsel to assume the defense of such proceeding, then the
fees and expenses of Indemnitee's counsel shall be at the expense of
Indemnitors.
3. Nonexclusivity of Indemnification Rights. The indemnification
----------------------------------------
provided by this Agreement shall not be deemed exclusive of any rights to which
Indemnitee may be entitled under the Company's Certificate of Incorporation or
Bylaws, the Operating Partnership's Agreement of Limited Partnership, the
Development and Management Company's Certificate of Incorporation or Bylaws, any
agreement, any vote of equity holders or disinterested Directors, applicable
law, or otherwise, both as to action in Indemnitee's official capacity and as to
action in another capacity while holding such office.
4. Partial Indemnification. If Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by Indemnitors for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any civil
or criminal action or proceeding, but not, however, for the total amount
thereof, Indemnitors shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.
5. Mutual Acknowledgment. Both Indemnitors and Indemnitee acknowledge
---------------------
that in certain instances, federal law or applicable public policy may prohibit
Indemnitors from indemnifying their respective directors and officers under this
Agreement or otherwise. Indemnitee understands and acknowledges that Indemnitors
have undertaken and may be required in the future to undertake with the
Securities and Exchange Commission to submit the question of indemnification to
a court in certain circumstances for a determination of Indemnitors' right under
public policy to indemnify Indemnitee.
6. Directors' and Officers' Liability Insurance. The Company currently
--------------------------------------------
intends to obtain and maintain a policy or policies of insurance with reputable
insurance companies providing the directors and officers of the Company with
coverage for losses from wrongful acts, or to ensure the Company's performance
of its indemnification obligations under this Agreement, subject to its good
faith determination from time to time whether or not it is practicable for the
Company to obtain or maintain such insurance. Among other considerations, the
Company will weigh the costs of obtaining such insurance coverage against the
protection afforded by such coverage. In all policies of directors' and
officers' liability
4
<PAGE>
insurance, Indemnitee shall be named as an insured in such a manner as to
provide Indemnitee the same rights and benefits as are accorded to the most
favorably insured of the Company's directors. Notwithstanding the foregoing, the
Company shall have no obligation to obtain or maintain such insurance if the
Company determines in good faith that such insurance is not reasonably
available, if the premium costs for such insurance are disproportionate to the
amount of coverage provided, if the coverage provided by such insurance is
limited by exclusions so as to provide an insufficient benefit, or if Indemnitee
is covered by similar insurance maintained by a subsidiary or parent of the
Company.
7. Severability. Nothing in this Agreement is intended to require or
------------
shall be construed as requiring Indemnitors to do or fail to do any act in
violation of applicable law. Indemnitors' inability, pursuant to court order, to
perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 7. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then Indemnitors shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
8. Exceptions. Any other provision herein to the contrary
----------
notwithstanding, Indemnitors shall not be obligated pursuant to the terms of
this Agreement to indemnify Indemnitee in the following circumstances:
(a) Excluded Acts. Each Indemnitor shall not be obligated to
-------------
indemnify Indemnitee for any acts or omissions or transactions from which a
person serving in Indemnitee's capacity with respect to such Indemnitor may not
be relieved of liability under the jurisdiction of such Indemnitor's
organization;
(b) Claims Initiated by Indemnitee. Indemnitors shall not be
------------------------------
obligated to indemnify or advance expenses to Indemnitee with respect to
proceedings or claims initiated or brought voluntarily by Indemnitee and not by
way of defense, except with respect to proceedings brought to establish or
enforce a right to indemnification under this Agreement or any other statute or
law in accordance with Section 1(b) hereof, but such indemnification or
advancement of expenses may be provided by any Indemnitor in specific cases if
such Indemnitor's Board of Directors or general partner, as applicable, has
approved the initiation or bringing of such suit;
(c) Insured Claims. Indemnitors shall not be obligated to indemnify
--------------
Indemnitee for expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) to the extent that Indemnitee has otherwise actually
received payment, or payments have been made on behalf of Indemnitee, with
respect to such expense or liability (under any insurance policy, provision of
the Company's Certificate of Incorporation or Bylaws, the Operating
5
<PAGE>
Partnership's Agreement of Limited Partnership, the Development and Management
Company's Certificate of Incorporation or Bylaws, or otherwise) of amounts
otherwise indemnifiable hereunder; or
(d) Claims Under Section 16(b). Indemnitors shall not be obligated to
--------------------------
indemnify Indemnitee for expenses and the payment of profits arising from the
purchase and sale by Indemnitee of securities in violation of Section 16(b) of
the Securities Exchange Act of 1934, as amended, or any similar successor
statute.
9. Construction of Certain Phrases.
-------------------------------
(a) For purposes of this Agreement, references to "Indemnitors" shall
-----------
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees, or agents, so that if
Indemnitee is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee, or agent of another corporation, partnership,
joint venture, trust, or other enterprise, Indemnitee shall stand in the same
position under the provisions of this Agreement with respect to the resulting or
surviving corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "another enterprise"
------------------
or "other enterprises" shall include employee benefit plans; references to
-----------------
"fines" shall include any excise taxes assessed on Indemnitee with respect to an
- ------
employee benefit plan; and references to "serving at the request of Indemnitors"
-------------------------------------
shall include any service as a director, officer, employee or agent of
Indemnitors which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries.
10. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original and all of which
together shall constitute a single agreement.
11. Successors and Assigns. This Agreement shall be binding upon
----------------------
Indemnitors and their respective successors and assigns, and shall inure to the
benefit of Indemnitee and Indemnitee's estate, heirs, legal representatives and
assigns.
12. Attorneys' Fees. In the event that any action is instituted by
---------------
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent
6
<PAGE>
jurisdiction determines that each of the material assertions made by Indemnitee
as a basis for such action were not made in good faith or were frivolous. In the
event of an action instituted by or in the name of Indemnitors under this
Agreement or to enforce or interpret any of the terms of this Agreement,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee in defense of such action
(including with respect to Indemnitee's counterclaims and cross-claims made in
such action), unless as a part of such action the court determines that each of
Indemnitee's material defenses to such action were made in bad faith or were
frivolous.
13. Notice. All notices, requests, demands and other communications
------
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to any party are as shown on the signature page of this Agreement, or as
subsequently modified by written notice.
14. Choice of Law. This Agreement shall be governed by and its
-------------
provisions construed in accordance with the laws of the State of Delaware as
applied to contracts between Delaware residents entered into and to be performed
entirely within the State of Delaware.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BOSTON PROPERTIES, INC.
By:__________________________________
Name:
Title:
Address:
8 Arlington Street
Boston, MA 02116
BOSTON PROPERTIES LIMITED
PARTNERSHIP
By: Boston Properties, Inc.,
as General Partner
By:________________________________
Name:
Title:
Address:
8 Arlington Street
Boston, MA 02116
BOSTON PROPERTIES MANAGEMENT, INC.
By:________________________________
Name:
Title:
Address:
8 Arlington Street
Boston, MA 02116
8
<PAGE>
AGREED TO AND ACCEPTED:
INDEMNITEE:
- ---------------------------------------------
________
Address:
9
<PAGE>
EXHIBIT 10.16
LOAN MODIFICATION AGREEMENT
THIS LOAN MODIFICATION AGREEMENT is entered into as of the ____ day of
April, 1997 (this "Amendment"), by and between LEXREAL ASSOCIATES, a New York
---------
general partnership ("Borrower") and MITSUI SEIMEI AMERICA CORPORATION, a New
--------
York corporation ("Lender").
------
R E C I T A L S:
WHEREAS, Lender and Borrower entered into that certain Loan Agreement,
dated April 6, 1990 (as amended by that certain First Amendment to Loan
Agreement, dated as of July 19, 1990, by and between Lender and Borrower, the
"Loan Agreement"), pursuant to which Lender agreed to make a loan to Borrower in
--------------
the aggregate principal sum of Four Hundred Ten Million Dollars ($410,000,000)
(the "Loan"). All capitalized terms used herein and not otherwise defined shall
----
have the meanings given such terms in the Loan Agreement.
WHEREAS, on July 19, 1990, in connection with the Loan, Borrower executed
and delivered to Lender various other loan documents, including, without
limitation, (i) that certain Amended and Restated Promissory Note in the
original principal sum of Two Hundred Sixty-Seven Million Dollars ($267,000,000)
(the "Initial Note"), (ii) that certain Supplemental Note, in the original
------------
principal sum of One Hundred Forty-Three Million Dollars ($143,000,000) (the
"Supplemental Note"), (iii) that certain Amended and Restated Mortgage and
-----------------
Security Agreement, made by and between Borrower and Lender, encumbering the
Project (the "Initial Mortgage"), (iv) that certain Amended and Restated
----------------
Supplemental Mortgage and Security Agreement, made by and between Borrower and
Lender, encumbering the Project (the
<PAGE>
"Supplemental Mortgage"), and (v) that certain Option Agreement (the "Option
--------------------- ------
Agreement"), by and among Lender, Borrower, 599 Lexington Avenue Associates
- ---------
Limited Partnership ("599 Lex"), 599 Lexington Corp. ("Lexcorp") and Linlex,
------- -------
Incorporated ("Linlex").
------
WHEREAS, Borrower and certain Affiliates of Borrower desire to form a real
estate investment trust (the "REIT") and to offer for sale to the public shares
----
of such REIT in an initial public offering (the "IPO"), and, in connection with
---
the IPO, to make a partial prepayment of the Loan and to transfer 99% of its
partnership interests to a Delaware limited partnership (the "Operating
Partnership") and 1% of its partnership interests to an Affiliate of the
Operating Partnership in exchange for Operating Partnership Units ("OPUs") in
the Operating Partnership. On the date of consummation of the IPO, the REIT
shall become the sole general partner of the Operating Partnership and shall
control (but not wholly-own) the Operating Partnership through its ownership of
OPUs in the Operating Partnership. Upon such transfer of partnership interests
in the Borrower, the Borrower intends to convert its status from a New York
general partnership to a New York limited partnership in which the Operating
Partnership's interest in the Borrower will be held as a limited partner.
WHEREAS, the Loan Documents prohibit any prepayment of the Loan or the
transfer of interests in Borrower to the Operating Partnership and/or any
Affiliate of such Operating Partnership.
WHEREAS, in consideration of the amendments contemplated hereby, Lender is
willing to accept a partial prepayment of the Loan and to modify the Loan
Documents to
2
<PAGE>
permit the partnership transfers described in these Recitals (such partnership
transfers being hereinafter referred to as the "Partner Transfers").
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Lender and Borrower hereby agree as
follows:
1. Partner Transfers and Partial Prepayment.
----------------------------------------
(a) Despite provisions to the contrary contained in the Loan Agreement
and other Loan Documents, but subject in all respects to the Borrower's
compliance with the terms and conditions of this Agreement, Lender hereby agrees
to permit and consents to the Partner Transfers heretofore described in the
Recitals, and agrees to accept a partial prepayment of the Loan, in the manner
hereinafter described, in the principal amount of One Hundred Eighty Five
Million Dollars ($185,000,000), plus accrued and unpaid interest and the Premium
described in (c) below, provided that, upon consummation of the IPO, the Project
is included among the portfolio of properties owned directly or indirectly by
the Operating Partnership.
(b) Notwithstanding any provision of the Loan Agreement, including,
without limitation Paragraph 3.3(c) thereof, or of any other Loan Document to
the contrary, Borrower may, subject to and in accordance with the terms hereof,
prepay the Supplemental Note in full and make a partial prepayment of the
Initial Note so long as such prepayment occurs on or before October 1, 1997 (the
"Outside Date").
------------
(c) Simultaneously with the consummation of the IPO, Borrower shall
(i) make a principal prepayment with respect to the Initial Note in the amount
of Forty-Two
3
<PAGE>
Million Dollars ($42,000,000) plus all accrued and unpaid Interest and late
charges through and including the Closing Date, (ii) make a prepayment in full
of all amounts due under the Supplemental Note, and (iii) pay to Lender a
prepayment premium (the "Premium") equal to Five Million Five Hundred Fifty
-------
Thousand Dollars ($5,550,000). The amounts described in (i) through (iii) shall
hereinafter collectively be referred to as the "Prepayment."
(d) Borrower shall provide Lender at least 15 days prior notice as to
the anticipated date that the IPO will be consummated and the Prepayment will be
made. Borrower shall give Lender at least three business days prior notice as
to the final date (the "Closing Date") that the IPO will be consummated and the
Prepayment will be made. The Closing Date must occur on or before the Outside
Date.
2. Conditions to Prepayment.
------------------------
(a) Borrower shall make, and Lender shall accept, the Prepayment as
provided in Section 1 hereof, upon consummation of the IPO on or before the
---------
Outside Date. The consummation of the IPO and the Prepayment shall occur
simultaneously.
(b) Lender shall not be required to accept the Prepayment if, on
the Closing Date:
(i) there shall exist an uncured Event of Default by Borrower
under this Agreement or the Loan Documents; or
(ii) there shall be pending any proceeding by or against Borrower
under the bankruptcy laws of the United States.
4
<PAGE>
Lender shall have the right, in its sole discretion, to waive
satisfaction of any condition set forth in this Section 2.
---------
3. Closing Deliveries. At the closing of the Prepayment (the "Closing"),
-------------------
the following shall occur:
(a) Borrower shall deliver to Lender the following:
(i) an amount equal to the Prepayment in immediately
available funds by wire transfer in accordance with instructions provided by
Lender no later than one business day before the Closing Date, and receipt shall
have been confirmed by Lender;
(ii) original counterparts, signed on behalf of Borrower and
all parties other than Lender, of (A) the Amended and Restated Loan Agreement
in the form of Exhibit 1 attached hereto and made a party hereof (the "Amended
---------
and Restated Loan Agreement"), (B) the Amended and Restated Option Agreement
in the form of Exhibit 2 attached hereto and made a part hereof (the "Amended
---------
and Restated Option Agreement"), (C) the First Amendment to Mortgage in the form
of Exhibit 3 attached hereto and made a part hereof (the "Mortgage Amendment"),
---------
(D) the First Amendment to Management Agreement in the form of Exhibit 4
---------
attached hereto and made a part hereof (the "Management Agreement Amendment"),
(E) the Collateral Assignment of Partnership Interest in the form of Exhibit 5
---------
attached hereto and made a part hereof, together with UCC-1 financing statements
from the assignors thereunder (the "Collateral Assignment"), (F) the First
Amendment to Amended and Restated Promissory Note in the form of Exhibit 6
---------
attached hereto and made a part hereof (the "Note Amendment"), and (G) the First
Amendment to the Collateral Assignment of Rents and
5
<PAGE>
Leases in the form of Exhibit 7 attached hereto and made a part hereof (the
"Assignment Amendment"), which documents shall become effective on the Closing
Date;
(iii) a certificate from an authorized Partner of Borrower
certifying to Lender that all conditions set forth in Section 2 hereof have
---------
been satisfied in full (or will be satisfied in full simultaneously with
the Closing);
(iv) evidence reasonably satisfactory to Lender that all actions
contemplated by this Agreement have been approved by all necessary partnership
action of Borrower, together with a copy of the Amended and Restated Agreement
of Limited Partnership of Borrower which Amended and Restated Agreement shall be
substantively identical to the Partnership Agreement, other than for changes
necessary as a result of the Partner Transfers and the conversion to a limited
partnership;
(v) evidence of payment of all fees and costs for which Borrower
is obligated pursuant to the provisions of Section 5 hereof.
---------
(b) Lender shall deliver to Borrower the following:
(i) original counterparts of the Amended and Restated Loan
Agreement, Amended and Restated Option Agreement, Collateral Assignment,
Mortgage Amendment, Note Amendment, and Assignment Amendment, signed on behalf
of Lender, together with evidence reasonably satisfactory to Borrower that all
actions contemplated by this Agreement have been approved and authorized by all
necessary corporate action of Lender;
(ii) the original Supplemental Note marked "canceled," together
with a satisfaction of the Supplemental Mortgage and a release of that certain
unrecorded Collateral
6
<PAGE>
Assignment of Leases, Rents and Profits, dated July 19, 1990, and executed in
connection with the Supplemental Mortgage.
All actions to be taken pursuant to this Section 3 shall be deemed taken
---------
simultaneously and no action shall be deemed taken until all are taken in their
entirety.
4. Initial Note. Borrower and Lender agree that upon the partial
------------
prepayment of the Initial Note in accordance with the provisions of Section 1
---------
hereof, the outstanding principal amount of the Initial Note shall be Two
Hundred Twenty-Five Million Dollars ($225,000,000). From and after the Closing
Date, interest on such principal amount outstanding shall be payable as provided
in the Initial Note, as amended by the Note Amendment, at the annual rate of
seven percent (7%). Upon receipt by Lender of the Prepayment, there shall be
affixed to the Initial Note by the Lender a legend reflecting the partial
principal repayment in the sum of Forty-Two Million Dollars ($42,000,000) and
that, as of the date of the Closing Date, the then outstanding principal amount
of the Initial Note is Two Hundred Twenty-Five Million Dollars ($225,000,000).
5. Representations and Warranties.
------------------------------
(a) Borrower represents and warrants to Lender as follows:
(i) Formation, Qualification and Powers. Borrower is a general
-----------------------------------
partnership duly formed and validly existing under the laws of the State of New
York. Associates, Lex and Linlex are the only partners of Borrower owning,
respectively, 99.9%, .05% and .05% general partnership interests in the
Borrower. Borrower has all requisite power and authority to conduct its
business, to own, subject to the provisions of the Loan
7
<PAGE>
Documents, lease, mortgage and transfer its properties, and to execute, deliver
and perform all of its obligations hereunder. The sole business of Borrower is
the ownership and operation of the Project.
(ii) Authority and Compliance with Instruments and Government
--------------------------------------------------------
Regulations. The execution, delivery and performance by Borrower of this
- -----------
Agreement has been duly authorized by all necessary action and does not and will
not on the Closing Date:
(A) require any consent or approval not heretofore obtained
of any Person;
(B) violate any provision of the Partnership Agreement or
any Partner's charter documents of formation and organization;
(C) result in or require the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest, claim, charge, right
of others, or other encumbrance of any nature, other than under the Loan
Documents, upon or with respect to the Collateral;
(D) to Borrower's knowledge, violate any provision of any
Law, order, writ, judgment, injunction, decree, determination or award
applicable to Borrower; or
(E) result in a breach or constitute a default under, cause
or permit the acceleration of any obligation owed under, or require any consent
under, any indenture or loan or credit agreement or any other agreement, lease
or instrument to which Borrower is a party or by which Borrower or any of the
Collateral is bound or affected;
8
<PAGE>
and to the Borrower's knowledge, there does not exist a default by Borrower
under any Law, order, writ, judgment, injunction, decree, determination, award,
indenture, agreement, lease or instrument described in subparagraphs (D) and (E)
above where such default would have a material adverse effect on the ability of
Borrower to perform its obligations under this Agreement or which would
otherwise be materially adverse to the interests of the Lender with respect to
the Prepayment.
(iii) No Governmental Approvals Required. No authorization,
----------------------------------
consent, approval, order, license, exemption from, or filing, registration or
qualification with, any Governmental Agency is required to authorize, or is
otherwise required in connection with, the execution, delivery and performance
by Borrower of this Agreement.
(iv) Binding Obligations. To Borrower's knowledge, and in
-------------------
reliance upon the advice of its legal counsel, this Agreement is the legal,
valid and binding obligation of Borrower.
(v) Compliance with Laws. To Borrower's knowledge, Borrower
--------------------
is in compliance in all material respects with all Laws applicable to its
business and has obtained all authorizations, consents, approvals, orders,
licenses, permits and exemptions from, and has accomplished all filings,
registrations or qualifications with, any Governmental Agency necessary for the
transaction of its business.
(vi) Litigation. There are no actions, suits or proceedings
----------
pending or, to Borrower's knowledge, overtly threatened against or affecting
Borrower or any Partner
9
<PAGE>
before any Governmental Agency which would have a material adverse effect upon
Borrower's ability to perform its obligations under this Agreement.
(vii) Misrepresentations. To Borrower's knowledge, no
------------------
information furnished in writing to Lender in connection with the execution and
delivery of this Agreement contains any material misstatement of fact or omits
to state a material fact or any fact necessary to make the statements contained
therein not materially misleading as of the date given.
(b) Lender represents and warrants to Borrower as follows:
(i) Formation, Qualification and Powers. Lender is a
-----------------------------------
corporation duly formed and validly existing under the laws of the state of its
formation. Lender has all requisite power and authority to conduct its business,
to own, lease, mortgage and transfer its properties, and to execute, deliver and
perform all of its obligations under this Agreement.
(ii) Authority and Compliance with Instruments. The execution,
-----------------------------------------
delivery and performance by Lender of this Agreement has been duly authorized by
all necessary corporate action and does not and on the Closing Date will not:
(A) require any consent or approval not heretofore obtained
of any Person; provided, however, that it shall not be a breach of this
representation and warranty if, but only if, the failure to obtain any consent
or approval does not (i) result in or cause the Closing to be delayed or
postponed to a date subsequent to the Closing Date, nor (ii) prevent Lender from
performing its obligations hereunder on the Closing Date;
(B) violate any provision of the Lender's documents of
formation and organization;
10
<PAGE>
(C) result in or require the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest, claim, charge, right
of others or other encumbrance of any nature upon or with respect to any
property now owned or leased or hereafter acquired by Lender;
(D) to its knowledge, violate any provision of any Law,
order, writ, judgment, injunction, decree, determination or award
having applicability to Lender; or
(E) result in a breach of or constitute a default under,
cause or permit the acceleration of any obligation owed under, or require any
consent under, any indenture, loan or credit agreement or any other agreement,
lease or instrument to which Lender is a party or by which Lender or any
property of Lender is bound or affected; and to its knowledge, Lender is not in
default in respect under any Law, order, writ, judgment, injunction, decree,
determination, award, indenture, agreement, lease or instrument described in
subparagraphs (D) and (E) above, where such default would have a material
adverse effect on the ability of Lender to perform its obligations under this
Agreement.
(iii) Binding Obligations. To its knowledge, and in reliance
-------------------
upon the advice of its legal counsel, this Agreement is a legal, valid and
binding obligation of Lender. The representations and warranties made herein
shall be true and correct on the date hereof and on the Closing Date.
6. Fees and Costs. In consideration of Lender's agreements set forth
--------------
herein, Borrower agrees to pay any and all reasonable costs and expenses
incurred by Lender in connection with the negotiation, execution and delivery of
this Agreement and the acceptance
11
<PAGE>
of the Prepayment. Such costs and expenses shall include, but not be limited to,
attorneys' fees and costs of Lender's counsel, fees and costs of accountants and
other advisors, the investment advisory fee (the "JLW Fee") payable to Jones
-------
Lang Wootton USA ("JLW") pursuant to a separate letter agreement among
---
Borrower, Lender and JLW, any and all applicable title insurance costs, transfer
and recording taxes or fees due and payable in connection with this Agreement
and the actions contemplated hereby. Borrower acknowledges and agrees that the
sums due hereunder shall be payable by Borrower upon presentation of invoices
therefor and, with the exception of the JLW Fee, shall be due and payable
whether or not the Prepayment is made. The provisions of this Section shall
survive termination or expiration of this Agreement.
7. Failure to Make Prepayment. If Borrower fails to make the Prepayment
--------------------------
because the IPO (of shares of the REIT which includes among its portfolio of
properties the Project) does not occur prior to the Outside Date, the parties
agree that, on and after the Outside Date, neither party shall have any further
rights or obligations hereunder (other than obligations expressly stated to
survive this Agreement), this Agreement shall be null and void and the terms and
conditions of the Loan Documents shall continue to govern the Loan. The parties
agree that, unless Prepayment is made in strict accordance with this Agreement,
Borrower shall have no right to transfer any interest in the Partnership or the
Project to the Operating Partnership, the REIT or otherwise except as expressly
provided in the Loan Agreement, and any such transfer shall constitute an Event
of Default. Except as specifically modified hereby, the terms and conditions of
the Loan Documents are hereby ratified and confirmed.
12
<PAGE>
8. Default by Borrower. This Agreement shall be deemed a Loan Document,
-------------------
and any default by Borrower hereunder, including without limitation, any
transfer of any interest in the Partnership, the Project or any interest therein
other than as expressly permitted by the Loan Documents, or a failure to make
the Prepayment upon consummation of the IPO which includes among its portfolio
of properties the ownership, directly or indirectly, of the Project, shall
constitute an Event of Default under the Loan Agreement.
9. Default by Lender. Upon Lender's failure to accept the Prepayment
-----------------
made in strict accordance with the terms of this Agreement and permit the
Partner Transfers in accordance with the terms of this Agreement, Borrower shall
have all remedies available at law and in equity, including without limitation,
the right to seek specific performance of Lender's obligation to accept the
Prepayment, to permit the Partner Transfers of partnership interests in the
Borrower hereinabove described in the Recitals, and all other Lender's
obligations on its part required to be performed under this Agreement at the
Closing.
10. Confidentiality. The parties hereto agree that the matters set forth
---------------
herein are strictly confidential and each agrees, on behalf of itself, its
officers, directors, shareholders and Affiliates, to keep the existence and
contents of this Agreement in confidence, except for disclosure (a) to its
accountants, attorneys and other advisors (collectively, its "Authorized
----------
Representatives") with a need to know, so long as such Authorized
- ---------------
Representatives agree to be bound by the provisions of this Section 10, and (b)
----------
by Borrower, in connection with the IPO as required by law, rule or regulation;
provided that any disclosure including the identity of
13
<PAGE>
Lender shall require the prior written consent of Lender (which consent shall
not be unreasonably withheld), and (c) by Lender, if required by any
Governmental Agency.
11. Governing Law. This Agreement shall be governed by, and construed and
-------------
enforced in accordance with, the laws of the State of New York applicable to
agreements intended to be wholly performed within the State of New York.
12. Severability. Any provision of this Agreement that is held to be
------------
inoperative, unenforceable or invalid as to any party or in any jurisdiction
shall, as to that party or jurisdiction, be inoperative, unenforceable or
invalid without affecting the remaining provisions or the operation,
enforceability or validity of that provision as to any other party or in any
other jurisdiction, and to this end the provisions of this Agreement are
declared to be severable. Notwithstanding anything to the contrary contained in
the preceding sentence, the rights and obligations of the Borrower and Lender
respecting the Prepayment and Partner Transfers shall not be severable; that is
to say, the partial prepayment of the Loan is expressly conditioned upon the
ability of the Borrower to effect the Partner Transfers, and, concomitantly, the
Partner Transfers may not be effected if for any reason the Prepayment is
determined to be unenforceable.
13. Time of the Essence. Time is of the essence with respect to the
-------------------
parties' obligations under this Agreement.
14. Consent to Jurisdiction; Waiver of Trial by Jury. Borrower and Lender
------------------------------------------------
irrevocably and unconditionally (a) agree that any suit, action or other legal
proceeding arising out of this Agreement may be brought in the courts of record
of the State of New York or the
14
<PAGE>
courts of the United States located in the State of New York; (b) consent to the
jurisdiction of each such court in any such suit, action or proceeding; and (c)
waive any objection which they may have to the laying of venue of any such suit,
action or proceeding in any of such courts.
IN ANY ACTION HEREUNDER, EACH OF BORROWER AND LENDER WAIVES THE RIGHT TO
DEMAND TRIAL BY JURY.
15. Successors and Assigns. This Amendment shall be binding upon Lender
----------------------
and Borrower and their respective successors and assigns.
16. Counterparts. This Agreement may be signed in counterparts, all of
-------------
which taken together shall constitute one original.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and sealed this
Amendment as of the day and year first above written.
BORROWER:
LEXREAL ASSOCIATES, a New York general
partnership
By: 599 LEXINGTON AVENUE ASSOCIATES
LIMITED PARTNERSHIP, a Massachusetts
limited partnership, Managing General Partner
By: 599 LEXINGTON AVENUE GENERAL
ASSOCIATES, Managing General Partner
By:______________________________________
Mortimer B. Zuckerman, General Partner
By: EHL 1984 LIMITED PARTNERSHIP,
General Partner
By:______________________________________
Edward H. Linde, General Partner
By: 599 LEXINGTON CORP., a Delaware corporation,
General Partner
By:___________________________________________
Mortimer B. Zuckerman, President
By: LINLEX, INCORPORATED, a New York
corporation, General Partner
By:___________________________________________
Mortimer B. Zuckerman, President
16
<PAGE>
LENDER:
MITSUI SEIMEI AMERICA CORPORATION,
a New York corporation
By:____________________________________________
Shinjiro Goto, President
17
<PAGE>
EXHIBIT 1
AMENDED AND RESTATED
LOAN AGREEMENT
BETWEEN
LEXREAL ASSOCIATES LIMITED PARTNERSHIP
AND
MITSUI SEIMEI AMERICA CORPORATION
DATED AS OF _______________, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I- DEFINITIONS, ACCOUNTING TERMS AND EXHIBITS............................ 2
1.1 Defined Terms......................................................... 2
1.2 Use of Defined Terms.................................................. 8
1.3 Accounting Terms...................................................... 8
1.4 Exhibits.............................................................. 8
ARTICLE II-Intentionally Deleted................................................. 9
ARTICLE III- THE LOAN............................................................ 9
3.1 Amount of the Loan.................................................... 9
3.2 Interest.............................................................. 9
3.3 Payments.............................................................. 9
3.5 Collateral............................................................ 9
ARTICLE IV- INTENTIONALLY DELETED................................................ 10
ARTICLE V- REPRESENTATIONS AND WARRANTIES BY BORROWER............................ 10
5.1 Formation, Qualification and Powers of Borrower....................... 10
5.2 Authority and Compliance with Instruments and Government Regulations.. 10
5.3 No Governmental Approvals Required.................................... 11
5.4 Binding Obligations................................................... 11
5.5 Financial Statements.................................................. 11
5.6 No Material Adverse Change............................................ 11
5.7 Tax Liability......................................................... 11
5.8 Compliance with Laws.................................................. 11
5.9 Litigation............................................................ 12
5.10 Title to Property..................................................... 12
5.11 Pension Plan.......................................................... 12
5.12 Insurance............................................................. 12
5.13 Misrepresentations.................................................... 12
5.14 Environmental......................................................... 12
5.15 Leases................................................................ 13
5.16 Development Rights.................................................... 13
5.17 Management Agreement.................................................. 13
ARTICLE VI- AFFIRMATIVE AND NEGATIVE COVENANTS................................... 13
6.1 Compliance with Laws and Other Requirements........................... 13
6.2 Annual Operating Budget............................................... 13
6.3 Protection Against Liens and Claims................................... 14
6.4 Sale or Other Encumbrances............................................ 14
6.5 Removal of Personalty................................................. 14
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
6.6 Payment of Taxes, Assessments and Charges............................. 15
6.7 Insurance............................................................. 15
6.8 Books and Records..................................................... 15
6.9 Entry and Inspection.................................................. 16
6.10 Reporting Requirements................................................ 16
6.11 Leases................................................................ 17
6.12 Management of Property................................................ 19
6.13 Preservation of Existence............................................. 19
6.14 Amendment of Partnership Agreement.................................... 20
6.15 Change in Nature of Business.......................................... 20
6.16 Operation and Maintenance of Project.................................. 20
6.17 Environmental......................................................... 20
6.18 Indebtedness.......................................................... 21
6.21 Future Tenant Estoppels............................................... 21
ARTICLE VII- EVENTS OF DEFAULT AND REMEDIES UPON DEFAULT......................... 21
7.1 Events of Default..................................................... 21
7.2 Remedies upon Default................................................. 23
7.3 Cumulative Remedies; No Waiver........................................ 24
7.4 Late Charge........................................................... 25
ARTICLE VIII- INTENTIONALLY DELETED.............................................. 25
ARTICLE IX- MISCELLANEOUS........................................................ 25
9.1 Performance by Lender................................................. 25
9.4 Nonliability of Lender................................................ 25
9.3 Consents.............................................................. 26
9.4 No Third Parties Benefited............................................ 27
9.5 Indemnity............................................................. 27
9.6 Brokerage............................................................. 28
9.7 Binding Effect: Assignment............................................ 28
9.8 Execution in Counterparts............................................. 28
9.9 Amendments; Consents.................................................. 28
9.10 Costs and Expenses.................................................... 28
9.11 Survival of Representations and Warranties............................ 29
9.12 Notices............................................................... 29
9.13 Further Assurances.................................................... 30
9.14 Governing Law......................................................... 30
9.15 Severability of Provisions............................................ 30
9.17 Integration........................................................... 30
9.18 Captions.............................................................. 31
9.19 No Agency, Partnership or Joint Venture............................... 31
9.20 Usury Savings Clause.................................................. 31
9.21 Time of the Essence................................................... 31
9.22 Construction.......................................................... 31
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
9.23 Limitation on Recourse................................................ 31
9.24 Lender Estoppel Certificates; Discharges.............................. 32
9.25 Consent to Jurisdiction; Waiver of Trial by Jury...................... 33
9.26 Amended Loan Documents................................................ 33
</TABLE>
EXHIBITS
EXHIBIT A Form of Estoppel Certificate
EXHIBIT B Permitted Exceptions
EXHIBIT C Intentionally Omitted
EXHIBIT D Property Description
EXHIBIT E Major Leases
EXHIBIT F Form of Subordination, Non-Disturbance and Attornment Agreement
EXHIBIT G Schedule of Leases
EXHIBIT H Leasing Parameters
EXHIBIT I Amended and Restated Option Agreement
(iii)
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT
This Amended and Restated Loan Agreement (this "Agreement"), dated and
--------
effective as of _______________, 1997, is entered into by and between MITSUI
SEIMEI AMERICA CORPORATION, a corporation organized and existing under the laws
of the State of New York ("Lender") and LEXREAL ASSOCIATES LIMITED PARTNERSHIP,
------
a limited partnership organized and existing under the laws of the State of New
York, being the successor to Lexreal Associates, a New York general partnership;
and the term "Borrower", when referenced in this Agreement as a Loan Party to
Loan Documents executed prior to the effective date hereof, shall mean Lexreal
Associates, a New York general partnership, which has been converted to the New
York limited partnership identified herein as Lexreal Associates Limited
Partnership.
RECITALS
WHEREAS, on April 6, 1990, Borrower and Lender entered into that certain
Loan Agreement (as amended by that certain First Amendment to Loan Agreement,
dated as of July 19, 1990, by and between Borrower and Lender, the "Loan
----
Agreement"), pursuant to which Lender made a loan to Borrower in the original
- ---------
aggregate principal sum of Four Hundred Ten Million Dollars ($410,000,000) (the
"Loan").
----
WHEREAS, on July 19, 1990, in connection with the Loan, Borrower executed
and delivered to Lender various other loan documents, including, without
limitation, (i) that certain Amended and Restated Promissory Note in the
original principal sum of Two Hundred Sixty-Seven Million Dollars
($267,000,000), made by and between Borrower and Lender (the "Initial Note"),
------------
(ii) that certain Supplemental Note, in the original principal sum of One
Hundred Forty-Three Million Dollars ($143,000,000) (the "Supplemental Note"),
-----------------
(iii) that certain Amended and Restated Mortgage and Security Agreement, made by
and between Borrower and Lender (the "Initial Mortgage"), encumbering the
----------------
Project and (iv) that certain Amended and Restated Supplemental Mortgage and
Security Agreement, made by and between Borrower and Lender (the "Supplemental
------------
Mortgage"), encumbering the Project.
- --------
WHEREAS, on July 19, 1990, also in connection with the Loan, Borrower,
Lender, 599 Lexington Avenue Associates Limited Partnership ("599 Lex"), 599
-------
Lexington Corp. ("Lexcorp") and Linlex, Incorporated ("Linlex") entered into
------- ------
that certain Option Agreement (the "Option Agreement"), which granted to Lender
----------------
an exclusive and irrevocable option to purchase a general partnership interest
in the Partnership in accordance with the terms thereof.
WHEREAS, on April 14, 1997, Borrower and Lender entered into a Loan
Modification Agreement (the "Loan Modification Agreement"), which contemplated a
---------------------------
partial prepayment of the Loan and a transfer of a 99% limited partnership
interest in Borrower to Boston Properties Limited Partnership, a Delaware
limited partnership ("BPLP") and a 1% general partnership interest in Borrower
----
to Boston Properties L.L.C., a limited liability company organized under the
laws of Delaware ("BPLLC") in exchange for partnership units in BPLP ("OPUs")
----- ----
subject to and in accordance with the terms of the Loan Modification Agreement;
<PAGE>
WHEREAS, contemporaneously herewith, Borrower and certain Affiliates
(hereinafter defined) thereof are forming a real estate investment trust known
as Boston Properties, Inc. (the "REIT") and are offering for sale to the public
----
shares of such REIT in an initial public offering (the "IPO"), and, in
---
connection with the IPO, are making a partial prepayment of the Loan and are
transferring the partnership interests to BPLP and BPLLC in exchange for OPUs,
as contemplated by the Loan Modification Agreement.
WHEREAS, contemporaneously herewith, the REIT is becoming the sole general
partner of BPLP and is acquiring Control (but not 100% ownership) of BPLP
through its ownership of OPUs, and upon such transfer of its partnership
interest in Borrower, Borrower is converting its status from a New York general
partnership to a New York limited partnership in which BPLP's interest in
Borrower will be held as a limited partner, as contemplated by and permitted
under the Loan Modification Agreement.
WHEREAS, as contemplated by the Loan Modification Agreement, Borrower and
Lender hereby amend and restate the Loan Agreement as of the date hereof as
follows:
ARTICLE I - DEFINITIONS, ACCOUNTING TERMS AND EXHIBITS
--------- ------------------------------------------
1.1 Defined Terms. As used in this Agreement, the following terms shall
-------------
have the meanings set forth respectively after each: .
"Affiliate" means (a) any Partner, or (b) any other Person (as hereinafter
---------
defined) (i) which directly or indirectly through one or more intermediaries
Controls, or is Controlled by, or is under common Control with, Borrower or any
Partner, or (ii) twenty-five percent (25%) or more of the voting securities or
equity interests of which are held beneficially or of record by Borrower or any
Partner.
"Agreement" means this Amended and Restated Loan Agreement, as the same may
---------
be amended from time to time.
"Annual Operating Budget" means a budget of all projected revenues and
-----------------------
expenses of the Project.
"Assignment of Leases" means that certain Collateral Assignment of Leases
--------------------
and Rents, dated as of July 19, 1990, made by Borrower for the benefit of
Lender, and recorded in the public records of New York County in Reel 1712, Page
280.
"Banking Day" means any day other than a day on which banks located in New
-----------
York City, New York or Tokyo, Japan are authorized or required by law to close.
"Borrower's knowledge" means any state of facts of which any of the
--------------------
following have notice or actual knowledge: (a) Borrower, (b) Borrower's
Partners, (c) the general partners,
2
<PAGE>
members, officers or directors of such Partners, (d) the members, officers or
employees of the management company retained by Borrower to manage the Project
who are charged with the responsibility for on-site management of the Project,
or (e) the persons employed by such management company to whom such on-site
managers report.
"BP Lex LLC" means BP Lex L.L.C., a Delaware limited liability company.
----------
"BPLLC" means Boston Properties L.L.C., a Delaware limited liability
-----
company.
"BPLP" means Boston Properties Limited Partnership, a Delaware limited
----
partnership.
"Collateral" means, collectively, all property on or in which Borrower
----------
has granted to Lender a lien or security interest pursuant to the Security
Documents.
"Collateral Assignment of Partnership Interests" means the Collateral
----------------------------------------------
Assignment of Partnership Interests, dated as of the date hereof, made by BPLP
and BPLLC for the benefit of Lender.
"Control" means the possession, directly or indirectly, of the power to
-------
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities or equity interests, by contract, by family
relationship or otherwise.
"Environmental Activity" means any use, storage, release, threatened
----------------------
release, emission, remediation, discharge, generation, processing, abatement,
removal or disposition of any Hazardous Materials from, under, into or on the
Project or any handling, transportation or treatment of Hazardous Materials
arranged by or on behalf of Borrower and relating to the Project.
"Environmental Damages" means all claims, judgments, damages, losses,
---------------------
penalties, fines, liabilities (including strict liability), encumbrances, liens,
costs and expenses of investigation and defense of any claim, whether or not
such is ultimately defeated, and of any settlement of judgment, of whatever kind
or nature, contingent or otherwise, matured or unmatured, foreseeable or
unforeseeable, including without limitation reasonable attorneys' fees and
disbursements and consultants' fees, any of which are incurred at any time as a
result of (a) the existence of Hazardous Materials (i) upon or beneath the
Project, or (ii) migrating or threatening to migrate to or from the Project, or
(b) an Environmental Activity violating any Law pertaining to the Project
regardless of whether the existence of such Hazardous Materials or the violation
of Law arose prior to the present ownership or operation of the Project, and
including, without limitation:
(a) damages for personal injury, or injury to property or natural
resources occurring upon the Project, foreseeable or unforeseeable, including,
without limitation, lost profits, consequential damages, the cost of demolition
and rebuilding of any improvements on real property, interest and penalties
including but not limited to claims brought by or on behalf of employees of
Borrower, with respect to which Borrower waives, for the benefit of Lender
3
<PAGE>
only, any immunity to which it may be entitled under any industrial or worker's
compensation Laws;
(b) diminution in the value of the Project, and damages for the loss
of or restriction on the use of or adverse impact on the marketing of rentable
or usable space or of any amenity of the Project; and
(c) "reasonable fees incurred for the services of attorneys,
engineers, consultants, contractors, experts, laboratories and all other costs
incurred in connection with the investigation or remediation of such Hazardous
Materials or violation of Law including, but not limited to, the preparation of
any feasibility studies or reports or the performance of any cleanup, remedial,
removal, abatement, containment, closure, restoration or monitoring work
required by any federal, state or local Governmental Agency or political
subdivision, or reasonably necessary to make full economic use of the Project or
any other property or otherwise expended in connection with such conditions, and
including without limitation any reasonable attorneys' fees, costs and expenses
incurred in enforcing the Initial Mortgage or collecting any sums due hereunder.
"Estoppel Certificate(s)" means a Tenant Estoppel substantially in the form
-----------------------
attached hereto as Exhibit A.
---------
"Event of Default" means the occurrence of any one of those events so
----------------
designated in Section 7.1.
"Flood Hazard Area" means an area which has been designated as a special
-----------------
flood hazard area or subject to comparable risks by the Federal Emergency
Management Agency or any successor to such agency.
"Governmental Agency" means (a) any government, municipality or political
-------------------
subdivision thereof, (b) any governmental or quasi-governmental agency,
authority, board, bureau, commission, department, instrumentality or public
body, (c) any court, administrative tribunal or public utility, or (d) any
central bank or comparable authority, any of which, pursuant to applicable Law,
have authority to exercise jurisdiction over any Loan Party or the Project, or
whose consent or approval is required as a prerequisite to (x) the use,
operation or occupancy of the Project, or (y) the performance of any act or
obligation or the observance of any agreement, provision or condition herein
contained.
"Hazardous Materials" means (a) hazardous materials, hazardous wastes, and
-------------------
hazardous substances as those terms are defined in the following statutes and
their implementing regulations: the Hazardous Materials Transportation Act, 49
U.S.C. (S) 1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
-- ---
(S) 6901 et seq., the Comprehensive Environmental Response, Compensation and
-- ---
Liability Act, as amended by the Superfund Amendments and Reauthorization Act,
42 U.S.C. (S) 9601 et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et seq., the
-- --- -- ---
Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq., the Clean Air Act, 42
-- ---
U.S.C. (S) 7401 et seq., (b) petroleum, including crude oil and
-- ---
4
<PAGE>
any fractions thereof, (c) natural gas, synthetic gas, and any mixtures thereof,
(d) asbestos and/or any material which contains 1% or more, by weight, of any
hydrated mineral silicate, including but not limited to chrysotile, amosite,
crocidolite, tremolite, anthophylite and/or actionlite, whether friable or non-
friable, (e) PCBs, or PCB-containing materials or fluids, and (f) any additional
substance or material which at such time is classified or considered to be
hazardous or toxic under any federal, New York or any other Law applicable to
the Project. Notwithstanding anything to the contrary contained in this
definition of Hazardous Materials, no material shall be deemed to be a Hazardous
Material if such Hazardous Material is contained in legally permissible
containers in legally permissible amounts.
"Improvements" means the buildings, structures or other improvements
------------
located on the Property, generally consisting of an office and retail building
containing two (2) stories below grade and fifty (50) stories above grade
(including three (3) mechanical stories) and containing approximately one
million (1,000,000) rentable square feet.
"Initial Mortgage" means that certain Amended and Restated Mortgage and
----------------
Security Agreement dated as of July 19, 1990, by and between Lender and
Borrower, recorded in the public records of New York County in Reel 1712, Page
680, as amended by that certain First Amendment to Amended and Restated
Mortgage, by and between Lender and Borrower, dated as of the date hereof,
securing the Initial Note, as the same may be further amended from time to time.
"Initial Note" means that certain Amended and Restated Note, dated July 19,
------------
1990, in the original principal sum of Two Hundred Sixty-Seven Million Dollars
($267,000,000) made by Borrower to the order of Lender, as amended by that
certain First Amendment to Amended and Restated Promissory Note, by and between
Lender and Borrower, dated as of the date hereof, as the same may be further
amended from time to time.
"Interest" means all interest payable pursuant to this Agreement and the
--------
Initial Note.
"Involuntary Rate" means three percent (3%) per annum in excess of' the
----------------
Prime Rate, but in no event in excess of the maximum rate allowed by applicable
Law.
"Laws" means, collectively, all federal, state and local laws, rules,
----
regulations, ordinances, and codes, all opinions of the New York State Court of
Appeals and the requirements of any insurance companies, applicable to the
Project and/or any Loan Party.
"Lease" means any lease, rental contract, occupancy agreement, license or
-----
other written or oral arrangement (a) with respect to which Borrower is the
lessor or grantor, or has succeeded to the interest of such lessor or grantor,
and (b) pursuant to which any Person uses, possesses or occupies or has the
right to use, possess or occupy all or any part of the Project, a schedule of
which is attached hereto as Exhibit G.
---------
"Leased Space" means, with respect to any Lease, that portion of the
------------
Property and Improvements covered thereby.
5
<PAGE>
"Leasing Parameters" means the guidelines for proposed Leases, set forth in
------------------
Exhibit H hereto, which have been approved by Lender as of the date hereof or
- ---------
from time to time in accordance with Section 6.11(a)(vii) hereof.
"Loan" means that certain loan made by Lender to Borrower in the current
----
outstanding principal amount of Two Hundred Twenty-Five Million Dollars
($225,000,000), as evidenced by the Initial Note and the Loan Documents.
"Loan Documents" means, collectively, this Agreement, the Initial Mortgage,
--------------
the Initial Note, the Loan Modification Agreement and the Security Documents.
"Loan Modification Agreement" means that certain Loan Modification
---------------------------
Agreement, dated as of April 14, 1997, by and between Borrower and Lender.
"Loan Party" means any of Borrower or any Partner.
----------
"Lock-Up Agreement" means that certain Registration Rights and Lock-Up
------------------
Agreement of even date herewith, by and between the REIT and certain
shareholders of the REIT or partners of BPLP, including but not limited to
Edward H. Linde and Mortimer B. Zuckerman, as amended.
"Major Lease" means those Leases of the Project for more than fifty
-----------
thousand (50,000) square feet, including but not limited to those set forth on
Exhibit E hereto and those entered into after the date hereof in accordance with
- ---------
Section 6.11. For purposes hereof, all Leases with a particular Tenant, and all
agreements adding space to any Lease, shall be aggregated in determining whether
or not a Lease constitutes a Major Lease.
"Majority Partners" means those Partners at any time collectively owning at
-----------------
least 50.1% of the partnership interests in Borrower.
"Management Agreement" means the management agreement between Borrower
--------------------
and Boston Properties, a Massachusetts business trust, dated as of January 1,
1990, the manager's interest in which has been assigned to BP Lex LLC and as
such agreement has been amended on the date hereof.
"Maturity Date" means, subject to the terms of Section 8.1 of this
-------------
Agreement and Sections 5.01(l), 5.02, 6.03, 8.02 and 9.01 of the Restated
Option Agreement, July 19, 2005.
"Obligations" means all obligations of Borrower of every nature under the
-----------
Loan Documents.
"Partners" means the partners of Borrower which, as of the date hereof, are
--------
BPLP and BPLLC, and their successors and assigns to the extent such successors
and assigns are Permitted Transferees.
6
<PAGE>
"Partnership Agreement" means the Partnership Agreement of the Borrower
---------------------
dated as of December 21, 1983, as amended on April 6, 1990 and as further
amended and restated on the date hereof.
"Permitted Exceptions" means the matters identified in Exhibit B hereto and
-------------------- ---------
any other matter approved in writing by Lender as a Permitted Exception.
"Permitted Transferee" means (A) a Person (i) in which Edward H. Linde
--------------------
("EHL") and/or Mortimer B. Zuckerman ("MBZ"), or their respective heirs
--- ---
devisees or personal representatives (which heirs and devisees are spouses,
parents, siblings, nieces, nephews or lineal descendants of EHL or MBZ,
respectively), have an indirect or direct ownership interest of at least fifty-
one percent (51%) in the aggregate, (ii) which Controls the Borrower, (iii)
which Controls (by itself or through an Affiliate) the day-to-day operations and
management of the Project, and (iv) which has the right to make all significant
economic and management decisions on behalf of Borrower without the need for the
vote, approval or consent of any other Person other than a Permitted Transferee,
or (B) the REIT, or (C) a Person (i) in which the REIT has an indirect or direct
ownership interest of at least fifty-one percent (51%) in the aggregate, (ii)
which is Controlled by the REIT, (iii) which Controls (by itself or through an
Affiliate) the day-to-day operations and management of the Project, and (iv)
which has the right to make all significant economic and management decisions on
behalf of Borrower without the need for the vote, approval or consent of any
other Person other than a Permitted Transferee.
"Person" means any natural person, corporation, firm, trust, partnership,
------
association, Governmental Agency or other entity, whether acting in an
individual, fiduciary or other capacity.
"Personal Property" means all of Borrower's right, title and interest,
-----------------
whether now existing or hereafter acquired, in and to all furniture,
furnishings, fixtures, machinery, equipment, inventory and other personal
property of every kind, tangible or intangible, now or hereafter located at,
upon or about the Project and used or to be used in connection with or related
or arising with respect to the Project, including but not limited to art work in
public places and all other property described in the Initial Mortgage.
"Prime Rate" means the rate of interest publicly announced by Citibank,
----------
N.A. in New York, New York from time to time as its prime, reference or base
rate.
"Project" means the Property, Personal Property and Improvements.
-------
"Property" means the real property described in Exhibit D hereto, together
-------- ---------
with all easements, rights, privileges and appurtenances (including any air or
development rights) thereto.
"REIT" means Boston Properties, Inc., a Delaware corporation.
----
7
<PAGE>
"Restated Option Agreement" means that certain Amended and Restated
-------------------------
Option Agreement to be entered into by and among Borrower, the Partners and
Lender, in form and substance identical to Exhibit I hereto.
---------
"Security Documents" means, collectively, the Initial Mortgage, the
------------------
Assignment of Leases, the Collateral Assignment of Partnership Interests, and
any other mortgage, deed of trust, security agreement or assignment executed to
secure Borrower's obligations under the Loan.
"Statement of Operations" means a report of revenues and expenses of
-----------------------
Borrower in a form reasonably acceptable to Lender, certified by the general
partner of Borrower.
"Tenant" means any tenant, lessee, licensee or other Person having a
------
right to use, possess or occupy all or any part of the Project pursuant to a
Lease.
"Tenant Estoppel" means, as to any Lease, an estoppel agreement
---------------
substantially in the form attached hereto as Exhibit A.
---------
"Title Companies" means, collectively, Ticor Title Guarantee Insurance
---------------
Company, Chicago Title Insurance Company and Lawyers Title Insurance
Corporation, as Co-Insurers.
"Title Policy" means the mortgagee's policy of title insurance issued
------------
by the Title Companies, dated July 19, 1990, and insuring the lien of the
Initial Mortgage covering the Property.
"Transit Agreement" means that certain Agreement dated as of February
-----------------
6, 1984 between Borrower and the New York County Transit Authority recorded in
the office of the New York County Register at Reel 782, Page 533, as the same
has been amended.
1.2 Use of Defined Terms. Any defined term used in the plural shall refer
--------------------
to all members of the relevant class, and any defined term used in the singular
shall refer to any number of the members of the relevant class. Any reference
to any of the Loan Documents or any exhibits thereto and any other instruments,
documents and agreements shall include such Loan Documents, exhibits and other
instruments, documents and agreements as originally executed or existing or as
the same may from time to time be restated, supplemented, modified or amended.
1.3 Accounting Terms. All accounting terms not specifically defined in
----------------
this Agreement shall be construed in conformity with, and all financial data
required to be submitted by this Agreement shall be prepared in conformity with,
generally accepted accounting principles customarily used in the real estate
industry, applied on a consistent basis.
1.4 Exhibits. All exhibits to this Agreement, either as now existing or
--------
as the same may from time to time be supplemented, modified or amended, are
incorporated herein by this reference.
8
<PAGE>
ARTICLE II - INTENTIONALLY DELETED
----------
ARTICLE III - THE LOAN
----------------------
3.1 Amount of the Loan. The outstanding principal balance under the Loan
------------------
as of the date hereof is Two Hundred Twenty-Five Million Dollars ($225,000,000).
3.2 Interest. Interest shall be computed on the basis of a year of 365
--------
days and the actual number of days elapsed and shall be payable on the unpaid
principal balance hereof outstanding from time to time from the date hereof
until payment in full at the rate of interest set forth in the Initial Note.
3.3 Payments.
--------
(a) The obligation of Borrower to repay the Loan is evidenced by the
Initial Note. The principal balance of the Initial Note, together with all
accrued and unpaid Interest and all other Obligations not otherwise paid prior
to the Maturity Date, shall be due and payable on the Maturity Date.
(b) Interest accruing on the Initial Note is payable quarterly in
arrears on the first day of each March, June, September and December during the
term of the Loan unless any such day is not a Banking Day, in which event
Interest shall be paid on the next Banking Day immediately following such date.
(c) All payments on the Initial Note shall be applied first to
Interest then due. Except during the period of any extension of the Maturity
Date specifically provided for herein or in the Restated Option Agreement,
Borrower shall have no right to repay all or any portion of the principal sum of
the Loan prior to the Maturity Date.
(d) Borrower shall make each payment hereunder in U.S. dollars, by
federal wire transfer of immediately available funds so as to be received by
Lender not later than 2:00 P.M. (New York City time) on the day when due,
pursuant to wiring instructions furnished in writing from time to time by
Lender.
3.4 Collateral.
----------
(a) Nature of Collateral. The indebtedness evidenced by the Initial
--------------------
Note, together with all other Obligations, shall be secured by the Collateral
set forth in the Security Documents.
(b) Release of Collateral. Unless expressly provided for in this
---------------------
Agreement or in any other Loan Document or Lender shall otherwise consent in
writing, none of the Collateral shall be released until (i) the Initial Note has
been paid in full and canceled, (ii) all other monetary Obligations then due
have been paid and performed in full, and (iii) all other
9
<PAGE>
Obligations have been satisfied or bonded or otherwise secured to the reasonable
satisfaction of Lender.
ARTICLE IV - INTENTIONALLY DELETED
----------
ARTICLE V - REPRESENTATIONS AND WARRANTIES BY BORROWER
------------------------------------------------------
As a material inducement to Lender's entry into this Agreement, Borrower
makes the following representations and warranties to the Lender as of the date
hereof. Lender agrees that, absent fraud by Borrower, Lender's sole remedy for
breach of a representation made as of the date hereof shall be limited to
termination of this Agreement and the Loan Modification Agreement and
termination of Lender's obligation to complete the transactions contemplated by
the Loan Modification Agreement.
5.1 Formation, Qualification and Powers of Borrower. Borrower is a
-----------------------------------------------
limited partnership duly formed and validly existing under the laws of the State
of New York. BPLP and BPLLC are the only partners of Borrower owning,
respectively, a 99% limited partnership interest and a 1% general partnership
interest in the Borrower. Borrower has all requisite power and authority to
conduct its business, to own, lease, mortgage and transfer its properties, and
to execute and deliver, and perform all of the Obligations. The sole business
of Borrower is the ownership and operation of the Project.
5.2 Authority and Compliance with Instruments and Government Regulations.
--------------------------------------------------------------------
The execution, delivery and performance by Borrower of each Loan Document to
which it is or will be a party have been duly authorized by all necessary action
and do not:
(a) require any consent or approval not heretofore obtained of any
Person;
(b) violate any provision of the Partnership Agreement or any
Partner's charter documents of formation and organization;
(c) result in or require the creation or imposition of any mortgage,
deed of trust, pledge, lien, security interest, claim, charge, right of others
or other encumbrance of any nature, other than under the Loan Documents, upon or
with respect to the Collateral;
(d) to Borrower's knowledge, violate any provision of any Law, order,
writ, judgment, injunction, decree, determination or award; or
(e) result in a breach of or constitute a default under, cause or
permit the acceleration of any obligation owed under, or require any consent
under, any indenture or loan or credit agreement or any other agreement
(including but not limited to the Transit Agreement), lease or instrument to
which Borrower is a party or by which Borrower or any of the Collateral is bound
or affected;
10
<PAGE>
and, to Borrower's knowledge, there does not exist a default by Borrower under
any Law, order, writ, judgment, injunction, decree, determination, award,
indenture, agreement, lease or instrument described in subparagraphs (d) and (e)
of this Section 5.2 where such default would have a material adverse effect on
the ability of Borrower to perform its obligations under the Loan Documents or
which would otherwise be materially adverse to the interests of the Lender with
respect to the Loan.
5.3 No Governmental Approvals Required. No authorization, consent,
----------------------------------
approval, order, license, exemption from, or filing, registration or
qualification with, any Governmental Agency is required to authorize, or is
otherwise required in connection with:
(a) the execution, delivery and performance by Borrower of any Loan
Document; or
(b) the creation of the liens, security interests or other charges or
encumbrances described in the Security Documents;
except that filing and/or recording will be required to perfect the Lender's
interest under the Security Documents.
5.4 Binding Obligations. To Borrower's knowledge, and in reliance upon
-------------------
the advice of its legal counsel, this Agreement is the legal, valid and binding
obligation of Borrower.
5.5 Financial Statements. Borrower has furnished to Lender a copy of its
--------------------
financial statement dated December 31, 1996 relating to its financial condition,
and such financial statement presents fairly its financial position as of the
date thereof.
5.6 No Material Adverse Change. There has been no material adverse change
--------------------------
in the projected financial condition of Borrower since the date of the financial
statement described in Section 5.5; since that date Borrower has not entered
into any material transaction not disclosed in such financial statement;
Borrower has no material liabilities or material contingent liabilities not
reflected or disclosed in such financial statement; there are no mortgages,
deeds of trust, pledges, liens, security interests, claims, charges, rights of
others or encumbrances (including liens or retained security titles of
conditional vendors) of any nature whatsoever on any property of Borrower, ether
than the Permitted Exceptions, and no material indebtedness not disclosed in
such financial statement.
5.7 Tax Liability. Each Loan Party has filed all applicable tax returns
-------------
required by Law to be filed and (unless otherwise specifically disclosed in
writing by Borrower to Lender) has paid all taxes shown thereon to be due and
all property taxes due and payable, including interest and penalties, if any.
5.8 Compliance with Laws. To Borrower's knowledge, Borrower is in
--------------------
compliance in all material respects with all Laws applicable to its business and
with all covenants,
11
<PAGE>
conditions and restrictions contained in documents constituting Permitted
Exceptions, and has obtained all authorizations, consents, approvals, orders,
licenses, permits and exemptions from, and has accomplished all filings,
registrations or qualifications with, any Governmental Agency necessary for the
transaction of its business.
5.9 Litigation. There are no actions, suits or proceedings pending or, to
----------
Borrower's knowledge, overtly threatened against or affecting Borrower or any
Partner before any Governmental Agency which would have a material adverse
effect upon Borrower's ability to perform its obligations under the Loan
Documents.
5.10 Title to Property. In reliance upon the Title Policy, Borrower has
-----------------
good and marketable title to the Project and there are no mortgages, liens,
pledges or other encumbrances of any character on the Project, other than the
Permitted Exceptions.
5.11 Pension Plan. Borrower does not maintain or contribute to any
------------
employee pension benefit plan.
5.12 Insurance. Borrower has paid all premiums necessary to maintain all
---------
insurance policies currently in effect with respect to the Project.
5.13 Misrepresentations. To Borrower's knowledge, no information, exhibit
------------------
or report furnished in writing by any Loan Party to Lender in connection with
the execution and delivery of the Loan Documents contains any material
misstatement of fact or omits to state a material fact or any fact necessary to
make the statements contained therein not materially misleading as of the date
given. All representations set forth in the other Loan Documents are true and
correct in all material respects.
5.14 Environmental. (a) Borrower has not engaged in any Environmental
-------------
Activity nor, to Borrower's knowledge, has any Environmental Activity otherwise
occurred, in either case, in violation of any applicable Law; (b) no
investigations, inquiries, orders, hearings, actions or other proceedings by or
before any Governmental Agency that have not been disclosed to Lender in writing
are pending or, to Borrower's knowledge, overtly threatened in connection with
any Environmental Activity or alleged Environmental Activity; (c) to Borrower's
knowledge, there are no Hazardous Materials present in, on or under the Project
the nature, amount or concentration of which would entitle any Governmental
Agency to undertake or require the owner or operator of the Project to undertake
removal or remediation of such Hazardous Materials; (d) to Borrower's knowledge,
the use of the Project for office and retail (or retail service) purposes (as
distinct from the manner of such use) will not result in any Environmental
Activity in violation of any applicable Law; and (e) to Borrower's knowledge,
there is not constructed, placed, deposited, stored, disposed of nor located on
the Project any polychlorinated biphenyls (PCBs) or transformers, capacitors,
ballasts, or other equipment which contains dielectric fluid containing PCBs, or
any asbestos or any insulating material containing urea formaldehyde. No
underground treatment or storage tanks, or water, gas or oil wells are located
on the Project, the use and maintenance of which do not comply with applicable
Law.
12
<PAGE>
5.15 Leases. (a) Borrower is the holder of the landlord's interest under
------
all Leases; (b) Borrower has not, except in connection with the Initial
Mortgage, executed any prior assignment of the Leases or of its right, title and
interest therein or the rents to accrue thereunder, that affects the Leases as
of the date hereof; (c) Borrower has not accepted rent under any of the Leases
for any period subsequent to the current period for which rent has already
become due and payable (other than the first month's rent and security
deposits); (d) except as may have been otherwise disclosed to Lender in writing,
there is no default in the payment of rent and, to Borrower's knowledge, no
material non-monetary default under any Lease which has existed for a period of
more than one (1) month; (e) Borrower has not executed or granted any
modification or amendment whatsoever of any Lease, either orally or in writing,
except for modifications or amendments heretofore furnished to Lender or as
described in any Estoppel Certificate executed with respect to a Lease and
delivered to Lender; (f) each Lease identified in Exhibit G hereto is in full
---------
force and effect according to the terms and: conditions thereof as contained in
the copies thereof heretofore furnished to Lender; and (g) the schedule of
Leases attached as Exhibit G is a true, correct and complete schedule of all
---------
Leases.
5.16 Development Rights. Borrower has not sold, conveyed, assigned or
------------------
otherwise transferred or agreed to sell, convey or otherwise transfer any
development, air or floor-area-ratio rights with respect to the Property and
Improvements, except as may be set forth in any instrument constituting a
Permitted Exception.
5.17 Management Agreement. Except for the Management Agreement, a true,
--------------------
correct and fully executed copy of which has been delivered to Lender, there
exists no contract, agreement or understanding of any nature pursuant to which
Borrower or any party has been engaged to manage or operate the Project.
ARTICLE VI - AFFIRMATIVE AND NEGATIVE COVENANTS
-----------------------------------------------
From the date hereof until payment of the Initial Note in full and
performance of all Obligations of Borrower, unless Lender shall otherwise
consent in writing:
6.1 Compliance with Laws and Other Requirements. Borrower shall comply in
-------------------------------------------
all material respects with (a) all conditions, covenants and restrictions as are
contained in the Permitted Exceptions, (b) all Leases, and (c) all applicable
Laws relating to the Project; provided, however, that Borrower may defer
-------- -------
compliance so long as Borrower shall be contesting the validity or applicability
thereof pursuant to Section 3.8 of the Initial Mortgage. Borrower shall obtain
all necessary approvals, consents, licenses and permits of any Governmental
Agency, including without limitation those set forth in Section 5.8 hereof.
6.2 Annual Operating Budget. No later than thirty (30) days prior to the
-----------------------
expiration of each calendar year throughout the term of the Loan, Borrower shall
submit to Lender for its information an Annual Operating Budget for the
succeeding year. The submission of an
13
<PAGE>
Annual Operating Budget shall be solely for informational purposes and Lender
shall have no right to approve such Annual Operating Budget.
6.3 Protection Against Liens and Claims. Borrower agrees to pay when due
-----------------------------------
all claims for labor performed and materials furnished to the Project unless
Borrower is contesting the same in compliance with Section 3.8 of the Initial
Mortgage.
6.4 Sale or Other Encumbrances.
--------------------------
(a) Borrower represents and agrees that, unless Lender otherwise
consents in writing, no junior lien of any nature against all or any portion of
the Project shall be given, permitted or suffered by Borrower, including without
limitation any assignment of rents or proceeds from the Project. Lender's
consent pursuant to this Section 6.4(a) may be withheld or denied in Lender's
sole and unfettered discretion for any reason or no reason (it being understood
that Lender currently foresees no circumstances in which it would grant its
consent).
(b) Because Lender has found Borrower's particular expertise to be an
important element in Lender's decision to enter into this Agreement, and because
Lender continues to rely upon such expertise to ensure the satisfactory
operation of the Project, Borrower agrees that, unless Lender otherwise consents
in writing, Borrower will not sell, transfer or convey, directly or indirectly,
or permit to be sold, transferred or conveyed, directly or indirectly, at any
time, by agreement for sale or in any other manner, directly or indirectly, any
portion of the Project or Borrower's interest therein or in the Loan Documents.
In furtherance of the foregoing and without limitation thereto, and except as
otherwise specifically permitted by this Agreement, no Partner shall sell,
convey, transfer or encumber, directly or indirectly, or permit to be sold,
conveyed, transferred or encumbered, directly or indirectly, its interest in
Borrower without the prior written consent of Lender. Lender's consent pursuant
to this Section 6.4(b) may be withheld or denied in Lender's sole and unfettered
discretion for any reason or no reason (it being understood that Lender
currently foresees no circumstances in which it would grant its consent).
Notwithstanding the foregoing, transfers of partnership interests in Borrower
(subject to the lien of the Collateral Assignment of Partnership Interests) may
be made to Permitted Transferees. Borrower shall comply with all provisions in
Section 5.4 of the Initial Mortgage with respect to such transfers to Permitted
Transferees. Moreover, except as set forth in the Lock-Up Agreement, none of the
provisions of this Section 6.4(b) (or like provisions provided elsewhere in this
Agreement) shall be read, interpreted or construed as prohibiting the sale,
transfer, encumbering or other disposition of ownership interests held by any
Person in a Partner of the Borrower so long as from and after the date of such
sale, transfer, encumbrance or other disposition, Borrower is under common
Control with the REIT.
6.5 Removal of Personalty. Except as otherwise provided in the Initial
---------------------
Mortgage, Borrower shall not:
14
<PAGE>
(a) install in or otherwise use in connection with the Project any
materials, equipment or fixtures under any security agreement or similar
agreement however denominated whereby the right is reserved or accrued to anyone
to remove or repossess any such items or whereby any person other than Lender
reserves or acquires a lien upon such items; provided, however, that Borrower
-------- -------
may lease Operating Equipment (as defined in the Initial Mortgage) so long as
Borrower furnishes Lender with a true and correct copy of each such lease and
that such lease shall include an agreement from the lessor thereunder to the
effect that the lease may (in the event of a foreclosure or sale of the Project
according to the terms of the Initial Mortgage) be assumed by Lender or its
successor in interest at the same rental charges and under the same terms and
conditions as are then contained in such lease;
(b) remove or permit the removal of any fixtures or personalty located
on the Property or used in connection with the Project, except for (i) obsolete
fixtures or personalty, (ii) fixtures or personalty of Tenants under Leases
which grant such Tenants removal rights, and (iii) fixtures and personalty
removed in connection with the alteration, remodeling or demolition of Tenant
improvements with respect to the re-leasing of any portion of the Project,
unless actually replaced by an article of equal or greater suitability and
value, owned by Borrower free and clear of any lien or security interest other
than the Security Documents or leases of Operating Equipment in accordance with
subparagraph (a) above; or
(c) without the consent of Lender, permit the storage of any Personal
Property at any location other than the Property except for Personal Property
stored in a bonded warehouse facility (the location of which has been provided
to Lender in writing), segregated and separately identified to the Project, and
insured to the reasonable satisfaction of Lender.
6.6 Payment of Taxes, Assessments and Charges. Borrower shall pay, prior
-----------------------------------------
to delinquency, all taxes, assessments, charges and levies imposed by any
Governmental Agency which are or may become a lien affecting the Project or any
part thereof; except that Borrower shall not be required to pay and discharge
any tax, assessment, charge or levy that is being actively contested in good
faith by appropriate proceedings, in accordance with Section 3.8 of the Initial
Mortgage. Borrower shall not consent to any special tax that affects or may
affect any of the Project.
6.7 Insurance. Borrower shall procure and maintain the policies of
---------
insurance described in the Initial Mortgage.
6.8 Books and Records. Borrower shall (a) maintain full and complete
-----------------
books of account and other records reflecting the results of its operations in
accordance with generally accepted accounting principles customarily used in the
real estate industry applied on a consistent basis, and (b) permit Lender and
its agents, from time to time during normal business hours upon not less than
two (2) Banking Days' prior written notice, to inspect and copy all of such
books and records at the offices of Borrower in Boston, Massachusetts or New
York, New York, including without limitation any books and records pertaining to
the Project.
15
<PAGE>
6.9 Entry and Inspection. Lender and its agents shall, upon not less than
--------------------
two (2) Banking Days' prior written notice, during normal business hours, and
subject to the Tenants' rights under the Leases, have the right of entry and
free access to the Property and the right to inspect all work done, labor
performed, and materials furnished in and about the Project.
6.10 Reporting Requirements. Borrower shall cause to be delivered to
----------------------
Lender, in form and detail reasonably satisfactory to Lender:
(a) as soon as practicable and in any event within five (5) days of
Borrower's learning thereof, notice of:
(i) any litigation affecting or relating to (A) Borrower, or
(B) the Project;
(ii) any dispute involving any Governmental Agency relating to
the Project, the adverse determination of which might materially adversely
affect the Project;
(iii) any threat or commencement of proceedings in condemnation
or eminent domain relating to the Project;
(iv) any Event of Default or event which, with the giving of
notice and/or the passage of time or both, could become an Event of Default,
together with a written statement setting forth the nature of the Event of
Default and the action Borrower proposes to take with respect thereto; and
(v) any default of any Tenant pursuant to the terms of a Major
Lease.
(b) as soon as available and in any event within one hundred twenty
(120) days after the end of each fiscal year, (i) a statement of financial
position, including capital account and change in financial position of each
Partner and (ii) a statement of financial position of Borrower as of the end of
such fiscal year, and the related Statements of Operations, capital accounts and
changes in financial position for such fiscal year, all with accompanying notes
and schedules, in sufficient detail to enable Lender to determine the financial
condition of Borrower and the Project, and stating in comparative form the
figures as of the end of such fiscal year and for the previous fiscal year,
which statements shall be unaudited, prepared in accordance with generally
accepted accounting principles customarily used in the real estate industry
consistently applied and certified by BPLLC or the managing member of BP Lex
LLC, so long as BP Lex LLC is the manager of the Project under the Management
Agreement;
(c) as soon as available and in any event (i) within sixty (60) days
after the end of each calendar quarter, a Statement of Operations and (ii)
within forty-five (45) days after the end of each calendar quarter, a report as
to the status of leasing of the Project including leasing schedules and reports,
executed copies of any Leases entered into during such quarter, a rent roll for
the Project, a list of all Leases then pending or the subject of negotiation
16
<PAGE>
by Borrower and such other leasing information as Lender shall reasonably
request with respect to the Leases and the Project;
(d) not later than thirty (30) days prior to the end of each calendar
year, the Annual Operating Budget for the Project;
(e) such other information relating to the Loan Parties or the
Project as Lender may reasonably request from time to time;
(f) Lender shall have the right, at its sole cost and expense, to
have audited financial statements of Borrower prepared by a major accounting
firm selected by Lender, with respect to any fiscal year during the term of the
Loan. If such audited financial statements show net income which deviates by
more than five percent (5%) from that shown in Borrower's unaudited financial
statements for such fiscal year, then Borrower shall reimburse Lender for the
accounting fees and expenses reasonably incurred in connection with the audit.
6.11 Leases.
------
(a) With respect to the Leases, Borrower hereby agrees as follows:
(i) Subject to the obligation of Lender to execute and deliver
subordination, non-disturbance and attornment agreements in accordance with
Section 6.11(b), any Lease hereafter entered into shall expressly provide that
it is absolutely subject and subordinate to the liens of the Initial Mortgage,
and that at Lender's option exercised by notice to any Tenant thereunder, such
Lease shall be made superior to the lien of the Initial Mortgage. Each Lease
shall also provide that, in the event of the enforcement by the Lender of the
remedies provided for by Law or by the Initial Mortgage, the Tenant thereunder
will, at the option and upon request of any Person succeeding to the interest of
the Borrower as a result of such enforcement, automatically become the Tenant of
such successor in interest, without change in the terms or other provisions of
such Lease; provided, however, that such successor in interest shall not (A) be
-------- -------
liable for any default (as defined in such Lease), act or omission of Borrower
as landlord under the Lease, (B) be subject to any offset not expressly provided
for in the Lease which shall have accrued prior to the time at which such person
succeeded to Borrower's interest, or (C) be bound by any payment of rent or
additional rent for more than one (1) month in advance, except (to the extent
such security has been turned over to such successor in interest) prepayment in
the nature of security for the performance by the Tenant of its obligations
under its Lease. Each Lease shall also provide that, upon request by such
successor in interest, such Tenant shall execute and deliver an instrument or
instruments confirming such attornment. Reference is hereby made to Section 291-
f of the Real Property Law of the State of New York for the purpose of obtaining
for Lender the benefits of such section in connection with the Initial Mortgage.
(ii) Any agreement to pay leasing commissions in respect of the
Leases shall provide that the obligation to pay such commissions shall not be
enforceable
17
<PAGE>
against any party other than the party who entered into such agreement, and that
such agreement shall be subordinate to the Initial Mortgage.
(iii) Borrower agrees not to collect rent for more than one (1)
month in advance, except (A) upon the execution of a new Lease by the parties
thereto, provided that such advance rent in excess of one (1) month's rent is
applied to the rents at the beginning of the term of such Lease; and (B) as a
security deposit to be applicable either against the rent due at the end of the
term of the Lease or in respect of damage to the Leased Space, or to be refunded
upon the expiration of the term thereof.
(iv) Borrower shall not, without providing Lender with ten (10)
days' notice:
(A) cancel, serve any notice of cancellation, terminate,
or accept a surrender or suffer or permit any cancellation, termination or
surrender of any Lease;
(B) modify any Lease having an unexpired term of more than
two (2) years, so as to reduce the term thereof or the rent payable thereunder
or to change any renewal provisions therein contained; or
(C) commence any summary proceeding or other action to
recover possession of any Leased Space, other than a proceeding brought in good
faith by reason of a default of any Tenant, provided that no adjudication in
such proceeding that the same was brought by Borrower in bad faith shall be
conclusive evidence as between Borrower and Lender that the proceeding was not
brought in good faith.
(v) Borrower shall not, without Lender's prior written
consent, which consent shall not be unreasonably withheld, enter into any Lease
other than a Lease (i) with a Tenant approved by Lender and (ii) which conforms
to the Leasing Parameters. Borrower shall submit to Lender, promptly upon
commencing negotiations with a prospective Tenant, the name of the Tenant and
all information available to Borrower concerning the Tenant's business
operations and financial condition. If Lender fails to object to such Tenant
within four (4) Banking Days following receipt of such information, the Tenant
shall be deemed to have been approved. With respect to Leases which do not
conform to the Leasing Parameters, Borrower shall deliver a term sheet or other
instrument identifying the essential economic terms of the leasing transaction,
including fixed rent, escalations, term, renewal and expansion options, tenant
improvement allowances or work letter and any other concessions. If the Tenant
has not yet been approved, then the submission shall include the information
described above reasonably necessary to obtain Lender's approval thereof. If
Lender fails to object to such leasing terms, or any revisions thereof which may
subsequently be submitted for approval (and, if not theretofore approved, such
Tenant), within four (4) Banking Days from receipt of such documentation then
the same shall be deemed to have been approved.
(vi) Borrower shall not, without Lender's prior written
consent, which consent shall not be unreasonably withheld, cancel, terminate or
amend any Major
18
<PAGE>
Lease; consent to assignment of or subletting under any Major Lease (unless such
consent is required to be given by the landlord in accordance with the express
terms of such Lease), or commence any summary proceeding or other action to
recover possession of any space leased pursuant to a Major Lease. If Lender has
not responded to Borrower's request for approval of any of the foregoing within
ten (10) Banking Days following receipt thereof, Lender's prior approval shall
be deemed to have been granted.
(vii) Every six (6) months during the term hereof, Borrower
shall deliver to Lender its proposed Leasing Parameters for space which is, or
is anticipated to become, vacant during the succeeding six (6) months. If Lender
fails to approve such Leasing Parameters (which approval shall not be
unreasonably withheld) within twenty (20) Banking Days from receipt thereof,
then the same shall be deemed approved.
(viii) Borrower shall deliver Estoppel Certificates to Lender
with respect to Leases as required by Section 6.19.
(ix) Borrower shall duly and punctually perform and observe all
of the terms, covenants and conditions of all Leases required to be performed
and observed by it as landlord thereunder.
(b) Within ten (10) Banking Days after receipt of Borrower's written
request, Lender shall (i) execute and deliver a subordination, non-disturbance
and attornment agreement in the form attached hereto as Exhibit F, for each
---------
Lease entered into subsequent to the date hereof pursuant to Section 6.11(a)(v)
above or (ii) if the agreement is not in the form of Exhibit F, provide comments
---------
with respect to the proposed form. Borrower shall pay, upon presentation of
invoices therefor, Lender's actual, reasonable out-of-pocket costs incurred in
connection with any such agreements. Notwithstanding the previous sentence,
Borrower shall not be liable for such out-of-pocket costs if such agreement is
presented to Lender and is executed in the form of Exhibit F (unmodified) and,
---------
when presented to Lender, is accompanied by a letter from Borrower or Borrower's
counsel certifying that such agreement is in the form of Exhibit F (unmodified).
---------
6.12 Management of Property. Borrower shall not enter into any new
----------------------
agreement providing for the management, leasing or operation of the Project or
any termination, amendment, modification or supplement to the Management
Agreement without the prior written consent of Lender. For purposes of the
foregoing, as of the date hereof, the Management Agreement is deemed approved by
Lender.
6.13 Preservation of Existence. Borrower shall preserve and maintain its
-------------------------
existence and its licenses, rights, franchises and privileges in the State of
New York and all authorizations, consents, approvals, orders, licenses, permits
or exemptions from, or registrations or qualifications with, any Governmental
Agency that are necessary for the transaction of its business, except that the
failure to preserve and maintain any particular license, right, franchise,
privilege, authorization, consent, approval, order, permit, exemption,
19
<PAGE>
registration or qualification that is not material to the business or financial
condition of Borrower will not constitute a violation of this covenant.
Notwithstanding the foregoing provisions of this Section 6.13, Borrower may, as
permitted by the provisions of Section 6.4(b), make transfers to Permitted
Transferees. The termination, liquidation or dissolution, or the sale,
purchase, transfer or other disposition of the partnership interests held by the
partners of the Borrower shall not violate the provisions of this Agreement or
any other of the Loan Documents so long as, (i) immediately thereafter, the
Borrower is reconstituted pursuant to the provisions of the Partnership
Agreement or applicable Law (ii) such transactions do not vitiate or alter in
any respect the rights and interests of Lender under the Loan Documents and the
Restated Option Agreement (and the newly constituted Borrower shall execute and
deliver to Lender such documents as Lender may reasonably deem necessary to
confirm the same), and (iii) all of the partners in the reconstituted
Partnership are Partners or Permitted Transferees.
6.14 Amendment of Partnership Agreement. Except as specifically provided
----------------------------------
in the Restated Option Agreement, Borrower shall not permit the amendment of the
Partnership Agreement in any manner without the prior written consent of Lender.
Notwithstanding the provisions of the foregoing sentence, amendments of the
Partnership Agreement necessitated by transfers (a) of partnership interests in
the Borrower to Permitted Transferees or (b) resulting from disposition of
partnership interests pursuant to the last sentence of Section 6.13 shall not
require the prior written consent of Lender.
6.15 Change in Nature of Business. Borrower shall not engage in any
----------------------------
business other than as set forth in the Partnership Agreement as of the date
hereof.
6.16 Operation and Maintenance of Project. Borrower shall (a) use its best
------------------------------------
efforts to keep the Property and the Improvements fully leased in a manner
consistent with the highest commercial use thereof and at prevailing rates, (b)
enter into appropriate Leases, service contracts and maintenance or operating
agreements and (c) make all necessary and customary capital improvements,
repairs, replacements, additions, renovations or refurbishing of or to the
Project to maintain it as a first-class office building as further provided in
the Initial Mortgage. Borrower shall incur and pay or cause to be paid all
costs, expenses and charges necessary or appropriate to comply with the
requirements of this Section 6.16.
6.17 Environmental. Borrower shall establish and maintain a procedure to
-------------
monitor any Environmental Activity so as to ensure the compliance of such
Environmental Activity with all applicable Laws and shall deliver to Lender,
promptly following the discovery of such event by Borrower, notice of any event,
the occurrence of which would render any of the representations contained in
Section 5.14 inaccurate in any respect if made at the time of such discovery.
If the monitoring required by this Section 6.17 reveals any Environmental
Activity which would require remedial action either under applicable Law or good
business practice followed by prudent owners of projects similar to the Project,
Borrower shall promptly commence all such remedial action and complete the same
as soon as is reasonably possible.
20
<PAGE>
6.18 Indebtedness. Borrower shall not have outstanding at any time any
------------
indebtedness which exceeds Twenty-Five Million Dollars ($25,000,000), whether
from third parties or Affiliates.
6.19 Future Tenant Estoppels. Upon (a) the occurrence of an Event of
-----------------------
Default, or (b) one other occasion during the term of the Loan, Borrower shall,
within forty-five (45) days following request by Lender, deliver to Lender an
Estoppel Certificate with respect to any Major Lease and shall use all
reasonable efforts to deliver to Lender such Estoppel Certificates with respect
to any or all of the Leases as requested by Lender. Each Estoppel Certificate
delivered to Lender pursuant to this Section 6.19 shall be executed by Borrower
and each other party to the appropriate Lease. If Borrower is unable to deliver
any such Estoppel Certificate to Lender because, despite Borrower's reasonable
efforts, the Tenant from whom it has been requested has not delivered it to
Borrower, Borrower shall deliver to Lender an Estoppel Certificate signed by
Borrower and shall deliver to Lender an Estoppel Certificate signed by Tenant
within two (2) Banking Days of Borrower's receipt thereof.
ARTICLE VII - EVENTS OF DEFAULT AND REMEDIES UPON DEFAULT
---------------------------------------------------------
7.1 Events of Default. The occurrence of any one or more of the following
-----------------
shall constitute an Event of Default hereunder:
(a) Borrower shall fail to pay (i) any payment of principal of the
Initial Note when due or (ii) any installment of Interest on the Initial Note
when due; provided, however, that Borrower shall have, in any period of four (4)
-------- -------
consecutive quarters during the term of the Loan, an aggregate of five (5) days'
grace for payments of interest on the Initial Note (it being understood that if
Borrower does not utilize all five (5) days in any such four-quarter period, no
unused days may be carried over into the next four-quarter period), or (iii) any
other amount owing under this Agreement or the other Loan Documents and such
failure to pay such other amount shall remain unremedied for five (5) Banking
Days after written demand therefor shall have been made by Lender.
Notwithstanding the foregoing, if Borrower's failure to make any payment timely
is attributable to force majeure, such as computer failure in the federal wire
----- -------
transfer system, then Borrower shall have a grace period of five (5) days in
which to cure such failure. Such force majeure grace period shall be separate
-------------
from, and shall not be charged against, the other grace periods provided above;
or
(b) Borrower or any Loan Party shall fail to perform or observe any
other term, covenant or agreement contained in any of the Loan Documents on its
part to be performed or observed (other than the failure to make a payment
described in Section 7.l(a)) and any such failure shall remain unremedied after
notice from Lender and the expiration of the grace period provided in such Loan
Documents or, if no such grace period is provided, thirty (30) days after
written notice thereof shall have been given to Borrower by Lender or, if such
failure is of such a nature that it cannot be completely remedied within the
grace period provided in such Loan Document or, if applicable, within said
thirty (30) day period, if Borrower shall not (i) promptly upon Lender's
giving of notice of such failure, advise Lender
21
<PAGE>
in writing of the specific measures Borrower intends to institute to remedy such
failure, (ii) promptly institute and thereafter diligently pursue all such
measures necessary to remedy the same, and (iii) effect such remedy within a
reasonable period of time after the date of the giving of said notice by Lender;
or
(c) any representation or warranty in any Loan Document or in any
certificate, agreement, instrument or other document made or delivered pursuant
to or in connection with any Loan Document proves to have been incorrect in any
material respect when made; or
(d) Borrower is dissolved and is not immediately reconstituted in
accordance with the last sentence of Section 6.13 above, or is liquidated or all
or substantially all of the assets of Borrower are sold or otherwise transferred
without Lender's prior written consent; or
(e) Borrower or any of its Partners files a petition for relief under
the Bankruptcy Reform Act of 1978, as amended, or any other present or future
federal or state insolvency, bankruptcy or similar Law (all of the foregoing
hereinafter collectively called "applicable Bankruptcy Law") or admits its
insolvency, or files an answer admitting the jurisdiction of the court and the
material allegations of any involuntary petition pursuant to applicable
Bankruptcy Law or an involuntary petition for relief is filed against Borrower
or any of its Partners under any applicable Bankruptcy Law and such petition,
writ of attachment or similar process is not released, bonded or dismissed
within ninety (90) days after such filing, entry or levy thereof unless such
writ of attachment or similar process is stayed and is being contested by
Borrower or any such Partner in good faith by appropriate proceedings, or an
order for relief naming Borrower or such Partner is entered under any applicable
Bankruptcy Law, or any composition, rearrangement, extension, reorganization or
other relief of debtors now or hereafter existing is requested or consented to
by Borrower or any of its Partners; or
(f) Borrower or any Partner becomes insolvent, or makes a transfer
constituting a fraud against Borrower's or such Partner's creditors, or makes an
assignment for the benefit of creditors, or admits in writing its inability to
pay its debts as they become due; or
(g) a receiver, trustee or custodian is appointed for, or takes
possession of, all or substantially all of the assets of Borrower, any Partner
or the Project, either in a proceeding brought by or against Borrower or such
Partner, and such appointment is not discharged or such possession is not
terminated within sixty (60) days after the effective date thereof or Borrower
or such Partner consents to or acquiesces in such appointment or possession; or
(h) except as otherwise expressly provided for in this Agreement,
Borrower ceases to be Controlled by the Person or Persons who Control Borrower
as of the date of this Agreement; or
22
<PAGE>
(i) except as otherwise expressly provided for in this Agreement, any
Partner ceases to be Controlled by the Person or Persons who Control such
Partner as of the date of this Agreement; or
(j) if, except for (x) the transfers expressly permitted by this
Agreement, (y) the disposition of Operating Equipment pursuant to Section 3.7 of
the Initial Mortgage or (z) the leasing of space pursuant to any Lease in
accordance with the terms hereof, any of the following occurs without the prior
written consent of Lender (which consent may be withheld for any reason or no
reason): (i) Borrower sells, exchanges, assigns (including, without limitation,
an assignment in liquidation, winding up or dissolution of Borrower), transfers,
conveys or otherwise disposes of all or any part of the Project or any interest
therein; or (ii) any Partner sells, exchanges, assigns (including, without
limitation, an assignment in liquidation, winding up or dissolution of
Borrower), transfers, conveys or otherwise disposes of all or any part of its
interest in Borrower; or (iii) the title to the Project, or any interest
therein, is vested in any other party, in any manner whatsoever, by operation of
Law, including, without limitation, merger, consolidation or reorganization, or
otherwise; or
(k) any Loan Party assigns any rights or interests under any Loan
Document without the prior written consent of Lender, other than the transfers
expressly permitted hereby; or
(l) an Event of Default under the Restated Option Agreement occurs;
or
(m) BP Lex LLC is Manager under the Management Agreement and BP Lex
LLC is not Controlled by EHL and/or MBZ; provided, however, that the death or
incapacity of MBZ or EHL shall not constitute an Event of Default so long as
after such death or incapacity, BP Lex LLC is Controlled by the REIT or BPLP; or
(n) either EHL or MBZ sells, transfers or otherwise disposes of OPUs
or shares of common stock in the REIT in contravention of the Lock-Up Agreement.
7.2 Remedies upon Default.
---------------------
(a) Upon the occurrence of any Event of Default, Lender may, at its
option, do any or all of the following:
(i) declare the principal of all amounts owing under the Initial
Note, this Agreement and the other Loan Documents, including all obligations
secured by the Security Documents, together with Interest thereon, to be
forthwith due and payable, regardless of any other specified maturity or due
date, without further notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor, or other notices or demands of any
kind or character, and without the necessity of prior recourse to any security;
provided, however, that the acceleration provided by this subsection (i) shall
- -------- -------
be automatic with no action by Lender required upon the occurrence of an Event
of Default pursuant to Section 7.1(e);
23
<PAGE>
(ii) if the Event of Default may be cured by payment of money,
Lender shall have the right (but not the obligation) to make such payment;
provided that (A) the making of such payment by Lender shall not be deemed to
cure such Event of Default, and the same shall not be so cured unless and until
Borrower shall have reimbursed Lender for such payment, and (B) if Lender
advances its own funds for such purposes, such funds shall be secured advances
under the Initial Note and shall be secured by the Security Documents,
notwithstanding that such advances may cause the total amount advanced hereunder
to exceed the face amount of the Initial Note or the amount committed to be
advanced pursuant to this Agreement, and Borrower shall within five (5) Banking
Days of demand reimburse Lender therefor with interest at the Involuntary Rate,
from the date of such advance until the date of reimbursement; and
(iii) without further notice to or demand upon Borrower, which
are expressly waived by Borrower, exercise any and all of its rights and
remedies under the Loan Documents and such other rights and remedies as are
provided by Law or equity, including but not limited to the right to take
possession of and foreclose on any security, and exercise any other rights with
respect to any security, whether under the Security Documents or any other
agreement or as provided by Law, all in such order and in such manner as Lender
in its sole discretion may determine.
(b) The order and manner in which Lender's rights and remedies are to
be exercised shall be determined by Lender in its sole discretion. Regardless of
how Lender may treat the payments for the purpose of its own accounting, for the
purpose of computing Borrower's obligations hereunder and under the Initial
Note, the payments shall be applied first, to the reasonable out-of-pocket costs
-----
and expenses (including reasonable attorneys' fees and disbursements) of Lender;
second, to the payment of accrued and unpaid Interest on the Initial Note to and
- ------
including the date of such application; third, to the payment of the unpaid
-----
principal of the Initial Note; and fourth, to the payment of all other amounts
------
(including fees) then owing to Lender under the Loan Documents. No application
of the payments will cure any Event of Default or prevent acceleration or
continued acceleration of amounts payable under the Loan Documents, or prevent
the exercise or continued exercise of rights or remedies of Lender hereunder,
under any of the Security Documents or under Law.
(c) Upon the occurrence of an Event of Default, Borrower shall
deliver to Lender promptly upon demand all security deposits, operating reserves
and other deposits, reserves and sums held by Borrower in connection with the
Project and the Leases together with a written accounting thereof.
7.3 Cumulative Remedies; No Waiver. All remedies of Lender provided for
------------------------------
herein are cumulative and shall be in addition to any and all other rights and
remedies provided in the other Loan Documents or provided by Law from time to
time. The exercise of any right or remedy by Lender under the Loan Documents
shall not in any way constitute a cure or waiver of any default hereunder or
under any of the other Loan Documents, nor invalidate any notice of default or
any act done pursuant to any such notice, nor prejudice Lender in the exercise
of any rights hereunder or under the other Loan Documents. No waiver by Lender
of any default
24
<PAGE>
by Borrower hereunder shall be implied from any omission or delay by Lender to
take action on account of such default if such default persists or is repeated.
Any waiver of any covenant, term or condition contained in any of the Loan
Documents must be in writing. Any such express written waiver shall not be
construed as a waiver of any subsequent breach of the same covenant, term or
condition, nor shall it affect any default other than the default expressly made
the subject of the waiver. Any such express waiver shall be operative only for
the time and to the extent therein stated. The consent or approval by Lender to
or of any act by Borrower requiring further consent or approval shall not be
deemed to waive or render unnecessary consent or approval to or of any
subsequent act.
7.4 Late Charge. If any payment of principal, Interest or other
-----------
Obligation is not paid when due because of the application of any grace or
notice periods, and if the Involuntary Rate is not in effect with respect to
such non-payment, then Lender may collect a "late charge" equal to interest on
such delinquent payment at the Prime Rate from the date due until paid, to
reimburse Lender for its lost investment income and for its administrative costs
in connection with such delinquent payment.
ARTICLE VIII - INTENTIONALLY DELETED
------------
ARTICLE IX - MISCELLANEOUS
--------------------------
9.1 Performance by Lender. Borrower agrees that, upon the occurrence of a
---------------------
default under this Agreement with respect to the failure of Borrower to perform
any act or to take any action which Borrower is required to perform or take
hereunder, or to pay any money which Borrower is required to pay hereunder, the
Lender may, but shall not be obligated to, perform or cause to be performed on
Borrower's behalf, such act or take such action or pay such money, and any
reasonable out-of-pocket expenses so incurred and any money so paid by Lender
(including but not limited to reasonable attorneys' fees and disbursements)
shall be due and payable by Borrower within five (5) Banking Days after notice
from Lender, and Lender, upon making such payment, shall be subrogated to all of
the rights of the Person receiving such payment. Notwithstanding the foregoing,
Lender shall not have the right to perform on Borrower's behalf unless an Event
of Default has occurred and is continuing or in Lender's reasonable judgment
such performance is necessary to avoid civil or criminal penalties or to protect
life or property. Any amounts due and owing by Borrower to the Lender pursuant
to this Section 9.1 shall bear interest from the date of expenditure until paid
at the Involuntary Rate and shall be a part of the indebtedness secured by the
Initial Mortgage.
9.2 Nonliability of Lender. Borrower acknowledges and agrees that:
----------------------
(a) any inspections of the Project made by or through Lender are for
purposes of administration of the Loan only and Borrower is not entitled to rely
upon the same with respect to the quality, adequacy or suitability of materials
or workmanship or otherwise; Borrower shall make its own determination of the
quality of the Improvements;
25
<PAGE>
(b) by accepting or approving anything required to be observed,
performed, fulfilled or given to Lender pursuant to the Loan Documents,
including any certificate, statement of profit and loss or other financial
statement, survey, appraisal, lease or insurance policy, Lender shall not be
deemed to have warranted or represented the sufficiency, legality, effectiveness
or legal effect of the same, or of any term, provision or condition thereof, and
such acceptance or approval thereof shall not constitute a warranty or
representation to anyone with respect thereto by Lender;
(c) Lender owes no duty of care to protect Borrower against
negligent, faulty, inadequate or defective building or construction;
(d) The relationship of Borrower and Lender under the Loan Documents
is, and shall at all times remain, solely that of borrower and lender, and
Lender does not undertake or assume any responsibility or duty to Borrower or to
any other Person with respect to the Collateral or the Loan, except as expressly
provided in the Loan Documents; and notwithstanding any other provision of the
Loan Documents: (i) Lender is not, and shall not be construed as, a partner,
joint venturer, alter ego, manager, controlling person or other business
associate or participant of any kind of Borrower or the Partners and Lender does
not intend to assume such status; (ii) Lender shall not be liable for any debts,
expenses or losses incurred or sustained by Borrower; (iii) Lender does not
intend ever to assume any responsibility to any Person for the quality,
suitability, safety or condition of the Project; and (iv) Lender shall not be
deemed responsible for or a participant in any acts, omissions or decisions of
Borrower or the Partners; and
(e) Lender shall not be directly or indirectly liable or responsible
for any loss, claim, cause of action, liability, indebtedness, damage or injury
of any kind or character to any Person or property arising from any construction
on, or occupancy or use of, the Project, or any portion thereof, including
without limitation any loss, claim, cause of action, liability, indebtedness,
damage or injury caused by, or arising from: (i) any defect in any building,
structure, grading, fill, landscaping or other improvements thereon or in any
on-site or off-site improvement or other facility therein or thereon; (ii) any
act or omission of Borrower, the Partners or any of Borrower's agents,
employees, independent contractors, licensees or invitees; (iii) any accident in
or on the Property and Improvements or any fire, flood or other casualty or
hazard thereon; (iv) the failure of Borrower, any of Borrower's licensees,
employees, invitees, agents, independent contractors or other representatives to
maintain the Property and Improvements in a safe condition; and (v) any nuisance
made or suffered on any part of the Property and Improvements.
9.3 Consents. Except as otherwise expressly provided herein, whenever in
--------
Lender's or Borrower's judgment, as the case may be, consent or approval is
required for any matter, or Lender or Borrower shall have an option or election
hereunder, such judgment, the decisions as to whether to consent to or approve
the same or the exercise of such option or election shall be in the sole
discretion of Lender or Borrower, as applicable. If, where this Agreement
requires Lender or Borrower, as the case may be, to be reasonable in granting
such consent or approval, Borrower or Lender shall request such consent or
approval and Lender or Borrower,
26
<PAGE>
as the case may be, shall unreasonably withhold or delay granting same,
Borrower's or Lender's sole remedy shall be to seek specific performance of such
consent or approval, it being agreed by Lender and Borrower that neither party
shall be entitled to damages as a result of the other party's failure to grant
any consent or approval hereunder.
9.4 No Third Parties Benefited. This Agreement is made for the purpose of
--------------------------
defining and setting forth certain obligations, rights and duties of Borrower
and Lender in connection with the Loan. It is made for the sole protection of
Borrower and Lender, and, subject to the provisions of Section 9.7, Borrower's
and Lender's successors and assigns. No other Person shall have any rights of
any nature hereunder or by reason hereof.
9.5 Indemnity. Borrower hereby indemnifies and agrees to save and hold
---------
harmless Lender from any and all liabilities, claims, causes of action (whether
legal, equitable or administrative), judgments, court costs and legal or other
out-of-pocket costs or expenses, including reasonable attorneys' fees and
disbursements (collectively "Claims") which Lender may suffer or incur as a
------
consequence of: (a) any action or proceeding to which Lender is made a party by
reason of Lender's holding of an interest in the Collateral, including, without
limitation, any action by a shareholder of the REIT, (b) any accident, injury to
or death of persons or loss of or damage to property occurring on or about the
Project occurring prior to Lender's gaining possession and assuming control
thereof, (c) any use, non-use or condition of the Project made or existing prior
to Lender's gaining possession and assuming control thereof, (d) any failure on
the part of the Borrower to perform or comply with any of the terms of this
Agreement or the Loan Documents, (e) the performance of any labor or services or
the furnishing of any materials or other property in respect of the Project
prior to the Lender's gaining possession and assuming control thereof, or (f)
the failure of any surviving representation or warranty made pursuant to this
Agreement or in any of the other Loan Documents to have been true and correct
when made in any material respect; provided, however, Borrower shall have no
-------- -------
obligation to indemnify Lender for any such Claims arising by reason of any
intentional tort, willful misconduct or gross negligence of Lender. If any
action, suit or proceeding is brought against Lender for which indemnity is
being sought by Lender against Borrower, (i) Lender shall give prompt notice to
Borrower in reasonable detail of any such action, suit or proceeding, (ii)
Borrower may, at Borrower's expense, resist and defend such action, suit or
proceeding by counsel designated by Borrower and approved by Lender (which
approval shall not be unreasonably withheld or delayed) or by counsel appointed
by Borrower's insurance carrier, and (iii) if Borrower elects to defend such
action, suit or proceeding, Lender shall not compromise or settle any such
action, suit or proceeding in respect of any such Claims without the prior
consent in writing of Borrower (which consent shall be not be unreasonably
withheld or delayed), unless Lender waives its right to the foregoing
indemnification. Except as otherwise specifically provided herein, any amounts
payable to Lender under this Section 9.7 which are not paid within five (5)
Banking Days after written demand and presentation of bills therefor by Lender
(the "Payment Date") shall bear interest (x) if Lender has actually paid such
------------
amounts, at the Prime Rate from the date of demand through the Payment Date, and
(y) whether or not Lender has actually paid such amounts, at the Involuntary
Rate from the Payment Date to the date of payment by Borrower.
27
<PAGE>
9.6 Brokerage. Borrower and Lender each represent to the other, that it
---------
has not dealt with any broker or finder in connection with the Loan except for
Jones Lang Wootton USA ("JLW") and that no commission, brokerage fee or similar
---
charge is or will be payable in connection with the Loan, except to JLW, which
fee Borrower agrees will be paid by Borrower pursuant to a separate agreement.
Borrower and Lender shall each indemnify, save and hold harmless the other from
any and all claims arising as a result of the inaccuracy of the representation
provided in this Section 9.6.
9.7 Binding Effect: Assignment. This Agreement shall be binding upon and
--------------------------
inure to the benefit of Borrower and Lender and their respective successors and
assigns, provided that except as permitted by the provisions of this Agreement
and the other Loan Documents, Borrower may not assign its rights or interest
under this Agreement or any of the other Loan Documents without the prior
written consent of Lender. Lender shall have the right, in its sole and absolute
discretion, to transfer, assign or sell in its entirety all of its rights and
interests in and under the Restated Option Agreement, Initial Note, this
Agreement and the other Loan Documents without the prior consent of or notice to
Borrower; provided, however, that Lender agrees to give Borrower notice of any
such transfer, assignment or sale within 30 days after the completion thereof.
9.8 Execution in Counterparts. This Agreement and any other Loan Document
-------------------------
may be executed in any number of counterparts and any party hereto or thereto
may execute any counterpart, each of which when executed and delivered will be
deemed to be an original and all of which counterparts of this Agreement or any
other Loan Document, as the case may be, taken together will be deemed to be but
one and the same instrument.
9.9 Amendments; Consents. No amendment, modification, supplement,
--------------------
termination or waiver of any provision of this Agreement or any of the other
Loan Documents, and no consent to any departure by Borrower therefrom, may in
any event be effective unless in writing signed by Lender, and then only in the
specific instance and for the specific purpose given.
9.10 Costs and Expenses. Borrower shall pay to Lender:
------------------
(a) the reasonable out-of-pocket costs and expenses of Lender in
connection with any modification of any Loan Document or in connection with the
enforcement (following the occurrence and during the continuance of an Event of
Default) of this Agreement and any other Loan Document and any litigation or
dispute with respect thereto (including any proceedings pursuant to applicable
Bankruptcy Law), including without limitation the reasonable fees and out-of-
pocket disbursements of any legal counsel, independent public accountants and
other outside experts retained by Lender; and
(b) all reasonable out-of-pocket costs and expenses, fees, taxes,
premiums and other charges relating or arising with respect to the Loan
Documents or any transactions contemplated thereby or the compliance with any of
the terms and conditions thereof, including
28
<PAGE>
but not limited to recording fees, filing fees, release or reconveyance fees and
title insurance premiums.
All sums paid or expended by Lender under the terms of this Agreement and the
other Loan Documents shall be considered to be a part of the Loan. Any amounts
payable to Lender under this Section 9.10 which are not paid within five (5)
Banking Days after demand therefor by Lender (the "Due Date"), shall bear
--------
interest at the Involuntary Rate from the Due Date until paid.
9.11 Survival of Representations and Warranties. Except as otherwise
------------------------------------------
expressly provided or limited in this Agreement or in any of the other Loan
Documents, the representations and warranties of Borrower contained herein and
all representations and warranties of any Loan Party contained in the other Loan
Documents shall survive the making of the Loan until it is paid in full;
provided, however, that the representation and warranty set forth in Section
- -------- -------
5.17 of the Initial Mortgage shall survive for the period expressly provided in
the Initial Mortgage.
9.12 Notices. Any notice, request, demand or other communication required
-------
or permitted hereunder or under the Initial Note or under the Loan Documents
shall be given in writing by delivering the same in person to the intended
addressee; by first class registered or certified mail, postage prepaid, return
receipt requested; or by air courier, sent to the intended addressee at the
address or addresses set forth below, or to such different address as the
addressee shall have designated by written notice sent in accordance herewith.
To Borrower:
Lexreal Associates Limited Partnership
c/o Boston Properties, Inc.
8 Arlington Street
Boston, Massachusetts 02116-3495
Attention: President
Copy to:
Bingham, Dana & Gould LLP
150 Federal Street, 23rd Floor
Boston, Massachusetts 02110
Attention: Peter Van, Esq.
To Lender:
Mitsui Seimei America Corporation
200 Park Avenue
16th Floor
New York, New York 10166
29
<PAGE>
Attention: President
Copy to:
Jones Lang Wootton USA
101 East 52nd Street
New York, New York 10022
Attention: R. Gary Barth
Copy to:
Gibson Dunn & Crutcher LLP
200 Park Avenue
47th Floor
New York, New York 10166
Attention: Kimmarie Sinatra, Esq.
Each such notice shall be deemed to have been given as of the date of receipt in
the case of personal delivery or air courier delivery or, in the case of
mailing, as of the date of first attempted delivery at the address provided
herein.
9.13 Further Assurances. Borrower shall, at its sole expense and without
------------------
expense to Lender, do such further acts and execute and deliver such further
documents as Lender from time to time may reasonably require solely for the
purpose of assuring and confirming unto Lender (a) the rights hereby created or
intended now or hereafter so to be created by any of the Loan Documents, or (b)
the validity of any security interest or lien granted hereby.
9.14 Governing Law. This Agreement shall be governed by, and construed and
-------------
enforced in accordance with, the laws of the State of New York applicable to
agreements intended to be wholly performed within the State of New York.
9.15 Severability of Provisions. Any provision of this Agreement that is
--------------------------
held to be inoperative, unenforceable or invalid as to any party or in any
jurisdiction shall, as to that party or jurisdiction, be inoperative,
unenforceable or invalid without affecting the remaining provisions or the
operation, enforceability or validity of that provision as to any other party or
in any other jurisdiction, and to this end the provisions of this Agreement are
declared to be severable.
[NO SECTION 9.16, SHOULD THESE BE RENUMBERED?]
9.17 Integration. This Agreement, together with the other Loan Documents,
-----------
comprises the complete and integrated agreement of the parties on the subject
matter hereof and supersedes all prior agreements, written or oral, on the
subject matter hereof. The Loan Documents were drafted with the joint
participation of Borrower and Lender and shall be construed neither against nor
in favor of either.
30
<PAGE>
9.18 Captions. The captions and headings hereof are for convenience of
--------
reference only and shall not be construed to define, limit, describe or
otherwise affect the scope or intent of this Agreement.
9.19 No Agency, Partnership or Joint Venture. Lender is not the agent or
---------------------------------------
representative of Borrower, and Borrower is not the agent or representative of
Lender. Lender and Borrower intend and agree that the relationship created by
this Agreement is and shall be solely that of lender and borrower. Nothing
herein shall be construed to create a partnership or joint venture between
Lender and Borrower.
9.20 Usury Savings Clause. All agreements in this Agreement and in the
--------------------
other Loan Documents are expressly limited so that in no contingency or event
whatsoever, whether by reason of advancement or acceleration of maturity of the
Obligations, or otherwise, shall the amount paid or agreed to be paid hereunder
for the use, forbearance or detention of money exceed the highest lawful rate
permitted under applicable usury Laws. If, from any circumstance whatsoever,
fulfillment of any provision of the Loan Documents, at the time performance of
such provision shall be due, shall involve transcending the limit of validity
prescribed by applicable Law, then, ipso facto, the obligation to be fulfilled
shall be reduced to the limit of such validity and if, from any circumstance
whatsoever, Lender shall ever receive as interest an amount which would exceed
the highest lawful rate, the receipt of such excess shall be deemed a mistake
and shall be canceled automatically or, if theretofore paid, such excess shall
be credited against the principal amount of the Obligations to which the same
may lawfully be credited (without premium or fee), and any portion of such
excess not capable of being so credited shall be rebated to Borrower.
9.21 Time of the Essence. Time is of the essence with respect to Lender's
-------------------
and Borrower's obligations under this Agreement.
9.22 Construction. As used in this Agreement, the masculine shall include
------------
the feminine and neuter, the singular shall include the plural and the plural
shall include the singular, as the context may require.
9.23 Limitation on Recourse. The recourse of Lender under this Agreement
----------------------
and under the other Loan Documents shall be limited to (a) the Collateral, (b)
subject to the terms of the applicable Loan Documents (including, without
limitation, the rights of Borrower to apply insurance proceeds or condemnation
awards as provided therein), any sums held by Lender pursuant to the Loan
Documents and any insurance proceeds or condemnation awards paid or payable to
Borrower with respect to the Collateral, (c) any proceeds of the sale or other
conversion of any portion of the Collateral not permitted by the Loan Documents
or this Agreement, and (d) the rents, issues and profits of the Collateral and
all other revenues arising therefrom thereafter coming due or held by Borrower.
Neither Borrower nor any of the Partners thereof, nor any of the members or
partners of the Partners, nor any of the partners, officers, shareholders,
principals, directors or agents of any of the foregoing shall have any personal
liability for or on account of any non-payment of the Loan or any amounts that
may become due under any of the Loan Documents or otherwise in connection with
the Loan, or
31
<PAGE>
for any non-performance of any of the Obligations under this Agreement to be
performed by Borrower, or for any breach of any covenant, representation or
warranty made by Borrower under this Agreement or by any Loan Party under any
other of the Loan Documents. Except as herein expressly provided otherwise in
clauses (i), (ii) and (iii) of the immediately succeeding sentence, the Lender,
for itself and its successors, endorsees, participants and assigns, hereby
waives any right to enforce collection of any money judgment against any assets
(other than the Collateral, including without limitation the items specified in
clauses (a), (b), (c) and (d) above) of the Borrower, any of the Partners
thereof, any of the members or partners of the Partners, or any of the partners,
officers, shareholders, principals, directors or agents of any of the foregoing.
The foregoing notwithstanding, Lender shall have the right to proceed against or
recover from Borrower (but not from the Partners) for damages suffered or
incurred by Lender and directly attributable to (i) any claim for damages by
Lender against Borrower arising out of the actions of Borrower in failing to
cause the Loan as evidenced by the Initial Note to be used for the purposes
provided in this Agreement, or in misapplying any insurance proceeds or
condemnation awards with respect to the Collateral (but only to the extent of
the proceeds and/or awards so misapplied), (ii) any claim or cause of action by
Lender for fraud on the part of the Borrower, or (iii) any claim or cause of
action by Lender for failure of Borrower to pay any income tax or other
impositions attributable to Borrower, to the extent such failure results in the
creation of liens on any portion of the Project which would be prior to the lien
of the Initial Mortgage. Nothing contained in this Section 9.23 shall (x) be
deemed to be a release or impairment of the indebtedness evidenced by the
Initial Note or the lien of the Initial Mortgage or the other Loan Documents
upon the Collateral, or (y) preclude Lender from foreclosing on the Initial
Mortgage or, except as otherwise expressly stated in this Section 9.23, from
enforcing any of the other rights of Lender or (z) be deemed to release or
otherwise affect the obligations of any Person other than Borrower, any of the
Partners, any of the members or partners of the Partners, or any of the
officers, shareholders, principals, directors or agents of any of the foregoing,
under any Loan Document executed by such Person.
9.24 Lender Estoppel Certificates; Discharges. If Lender has not exercised
----------------------------------------
its option pursuant to the Restated Option Agreement, within ten (10) Banking
Days after request by Borrower, but no earlier than sixty (60) days prior to the
Maturity Date, Lender shall deliver to Borrower an estoppel certificate, duly
executed and acknowledged by Lender, stating the outstanding principal amount of
the Loan and whether there exists any Event of Default (or knowledge of any
event which, with notice or the passage of time or both, will become an Event of
Default if not cured) under any of the Loan Documents. If Borrower shall pay,
in full, the Loan, Interest and other charges due and payable under the Initial
Note and other Loan Documents in accordance with the terms thereof, Lender shall
promptly execute and deliver to Borrower such discharges, assignments or
satisfactions as Borrower may reasonably request and shall accommodate Borrower
by appearing at the closing of such assignment, discharge or satisfaction or
make such other arrangement with respect thereto mutually satisfactory to Lender
and Borrower, provided that Borrower shall pay, upon presentation of invoices
therefor, Lender's actual, reasonable out-of-pocket costs with respect thereto.
Nothing set forth in this Section 9.24 shall imply that the Loan is prepayable,
in whole or in part, prior to the Maturity Date.
32
<PAGE>
9.25 Consent to Jurisdiction; Waiver of Trial by Jury. Borrower
------------------------------------------------
irrevocably and unconditionally (a) agrees that any suit, action or other legal
proceeding arising out of this Agreement may be brought in the courts of record
of the State of New York or the courts of the United States located in the State
of New York; (b) consents to the jurisdiction of each such court in any such
suit, action or proceeding; and (c) waives any objection which it may have to
the laying of venue of any such suit, action or proceeding in any of such
courts. In any action hereunder, each of Borrower and Lender waives the right
to demand a trial by jury.
9.26 Amended Loan Documents. From and after the date hereof, all
----------------------
references in the Initial Note, the Initial Mortgage or any of the other Loan
Documents to the Loan Agreement shall be deemed to be a reference to this
Agreement, and all references in the Restated Option Agreement, the Initial
Note, the Initial Mortgage, or any of the other Loan Documents to the Loan
Documents shall be deemed to be a reference to the Loan Documents, as amended
hereby.
[SIGNATURES ON NEXT PAGE]
33
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of this
_____ day of _______________, 1997.
BORROWER:
LEXREAL ASSOCIATES LIMITED
PARTNERSHIP, a New York limited partnership
By: BOSTON PROPERTIES, LLC, a Delaware
limited liability company, General Partner
By: BOSTON PROPERTIES LIMITED
PARTNERSHIP, a Delaware limited
partnership, Managing Member
By: BOSTON PROPERTIES, INC.,
a Delaware corporation,
General Partner
By:___________________________
Name:
Title:
By: BOSTON PROPERTIES LIMITED
PARTNERSHIP, a Delaware limited
partnership, Limited Partner
By: BOSTON PROPERTIES, INC.,
a Delaware corporation, General
Partner
By: ____________________________
Name:
Title:
LENDER:
MITSUI SEIMEI AMERICA CORPORATION, a
New York corporation
By:_____________________________________
Name: Shinjiro Goto
Title: President
34
<PAGE>
================================================================================
EXHIBIT 2
AMENDED AND RESTATED OPTION AGREEMENT
AMONG
BOSTON PROPERTIES LIMITED PARTNERSHIP and BOSTON PROPERTIES L.L.C.,
collectively Optionors,
and
LEXREAL ASSOCIATES LIMITED PARTNERSHIP,
and
MITSUI SEIMEI AMERICA CORPORATION, Optionee
Dated as of ___________________ __, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Article 1 Definitions..................................................... 3
Article 2 Grant of Option................................................. 10
2.01. Option...................................................... 10
2.02. Exercise of Option.......................................... 10
Article 3 Representations and Warranties.................................. 10
3.01. Representations and Warranties of Optionors................. 10
3.02. Representations and Warranties of Optionee.................. 12
Article 4 Covenants of Optionors, the Partnership and Optionee............ 13
4.01. Discharge of Liens.......................................... 13
4.02. Transfer Taxes.............................................. 14
4.03. Operating Covenant.......................................... 14
4.04. Budgets..................................................... 14
4.05. Maintenance................................................. 14
4.06. Restrictions on Transfers of Partnership Interests.......... 14
4.07. No Clogging................................................. 14
4.08. Waiver of Defense........................................... 15
Article 5 Deliveries Prior to Maturity Date............................... 15
5.01. Pre-Exercise Deliveries..................................... 15
5.02. Budget...................................................... 17
Article 6 Closing; Conditions and Deliveries Precedent to Closing......... 17
6.01 Closing..................................................... 17
6.02. Optionors' Deliveries....................................... 18
6.03. Optionee's Conditions Precedent to Closing.................. 20
6.04 Optionee's Deliveries....................................... 22
6.05 Disposition of Amended Initial Note......................... 22
Article 7 Closing Adjustments; Closing Costs.............................. 23
7.01. Closing Adjustments......................................... 23
7.02. Closing Costs............................................... 25
Article 8 Events of Default; Remedies Upon Default........................ 25
8.02. Remedies upon Default....................................... 25
8.03. Events Accelerating Exercise of the Option and Closing...... 26
8.04. Intervening Governmental Action............................. 26
8.05. Waiver; No Election......................................... 27
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
Article 9 Miscellaneous Provisions........................................ 27
9.02. Casualty or Condemnation.................................... 28
9.03. Banking Day Extension....................................... 28
9.04. Confidentiality............................................. 28
9.05. Brokerage................................................... 29
9.06. Binding Effect; Assignment.................................. 29
9.07. Execution in Counterparts................................... 29
9.08. Amendments; Consents........................................ 29
9.09. Non-Waiver of Remedies...................................... 29
9.10. Survival.................................................... 29
9.11. Notices..................................................... 30
9.12. Governing Law............................................... 31
9.13. Severability of Provisions.................................. 31
9.14. Integration................................................. 31
9.15. Captions.................................................... 31
9.16. No Agency, Partnership or Joint Venture..................... 31
9.17. Time of the Essence......................................... 31
9.18. Construction................................................ 31
9.19. Estoppel Certificates....................................... 32
9.20. Consent to Jurisdiction; Waiver of Trial by Jury............ 32
9.21. Certificates of Optionors................................... 32
</TABLE>
EXHIBITS
- --------
Exhibit A Legal Description of Property
Exhibit B Permitted Exceptions
Exhibit C Form of Assignment of Partnership Interest
Exhibit D Form of Amended and Restated Partnership Agreement
(ii)
<PAGE>
AMENDED AND RESTATED OPTION AGREEMENT
-------------------------------------
This Amended and Restated Option Agreement (this "Agreement") is made as of
---------
this _________ day of ______________, 1997 by and among BOSTON PROPERTIES
LIMITED PARTNERSHIP, a Delaware limited partnership ("BPLP"), BOSTON PROPERTIES
----
L.L.C., a Delaware limited liability company ("BPLLC"), (BPLP and BPLLC are
-----
together with their successors and assigns, to the extent such successors and
assigns are each Permitted Transferees, each referred to hereinafter as
"Optionor" and collectively as "Optionors"), LEXREAL ASSOCIATES LIMITED
- --------- ---------
PARTNERSHIP, a New York limited partnership, being the successor to Lexreal
Associates, a New York general partnership (the "Partnership"), each of BPLP,
-----------
BPLLC and the Partnership having an address at c/o Boston Properties, Inc., 8
Arlington Street, Boston, Massachusetts and MITSUI SEIMEI AMERICA CORPORATION, a
corporation organized and existing under the laws of the State of New York,
having its principal office at 200 Park Avenue, 16th Floor, New York, New York
("Optionee");
--------
W I T N E S W E T H:
-------------------
WHEREAS, the Partnership is owner of the Project (as hereinafter defined);
WHEREAS, the Partnership and Optionee entered into that certain Loan
Agreement, dated April 6, 1990 (as amended by that certain First Amendment to
Loan Agreement, dated as of July 19, 1990, by and between the Partnership and
Optionee, the "Loan Agreement"), pursuant to which Optionee made a loan to the
--------------
Partnership in the original aggregate principal sum of Four Hundred Ten Million
Dollars ($410,000,000) (the "Loan").
----
WHEREAS, on July 19, 1990, in connection with the Loan, the Partnership
executed and delivered to Optionee various other loan documents, including,
without limitation, (i) that certain Amended and Restated Promissory Note in the
original principal sum of Two Hundred Sixty-Seven Million Dollars
($267,000,000), made by and between the Partnership and Optionee (the "Initial
-------
Note"), (ii) that certain Supplemental Note, in the original principal sum of
- ----
One Hundred Forty-Three Million Dollars ($143,000,000) (the "Supplemental
------------
Note"), (iii) that certain Amended and Restated Mortgage and Security Agreement,
made by and between the Partnership and Optionee (the "Initial Mortgage"),
----------------
encumbering the Project, and (iv) that certain Amended and Restated Supplemental
Mortgage and Security Agreement, made by and between the Partnership and
Optionee (the "Supplemental Mortgage"), encumbering the Project.
---------------------
WHEREAS, on July 19, 1990, also in connection with the Loan, Borrower,
Optionee, 599 Lexington Avenue Associates Limited Partnership ("599 Lex"), 599
-------
Lexington Corp. ("Lexcorp") and Linlex, Incorporated ("Linlex") entered into
------- ------
that certain Option Agreement (the "Option Agreement"), which granted to
----------------
Optionee an exclusive and irrevocable option to purchase a 49.9% general
partnership interest in the Partnership in accordance with the terms thereof.
WHEREAS, on April 14, 1997, the Partnership and Optionee entered into a
Loan Modification Agreement (the "Loan Modification Agreement"), which
---------------------------
contemplated a partial
<PAGE>
prepayment of the Loan and a transfer of a 99% limited partnership interest in
the Partnership to BPLP and a 1% general partnership interest in the Partnership
to BPLLC in exchange for partnership units in BPLP ("OPUs") subject to and in
----
accordance with the terms of the Loan Modification Agreement;
WHEREAS, contemporaneously herewith, the Partnership and certain Affiliates
(hereinafter defined) of the Partnership are forming a real estate investment
trust known as Boston Properties, Inc. (the "REIT") and are offering for sale to
----
the public shares of such REIT in an initial public offering (the "IPO"), and,
---
in connection with the IPO, are making a partial prepayment of the Loan, and 599
Lex, Lexcorp and Linlex are transferring their partnership interests to BPLP and
BPLLC in exchange for OPUs, as contemplated by the Loan Modification Agreement.
WHEREAS, contemporaneously herewith, the REIT is becoming the sole general
partner of BPLP and is acquiring Control (but not 100% ownership) of BPLP
through its ownership of OPUs, and upon such transfer of its partnership
interest in the Partnership, the Partnership is converting its status from a New
York general partnership to a New York limited partnership in which BPLP's
interest in the Partnership will be held as a limited partner, as contemplated
by and permitted under the Loan Modification Agreement.
WHEREAS, contemporaneously herewith, the Partnership and Optionee are
entering into an Amended and Restated Loan Agreement, the terms of which, from
this day forward shall supersede the terms of the Loan Agreement. (All
capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in such Amended and Restated Loan Agreement.)
WHEREAS, Optionors, as partners of the Partnership, are receiving a
material benefit as a result of Optionee's completion of the transactions
contemplated by and permitted under the Loan Modification Agreement, and in
accordance with the terms of the Loan Modification Agreement, have agreed to
amend and restate the Option Agreement as set forth below.
WHEREAS, Optionee desires to acquire from Optionors, and Optionors desire
to grant to Optionee, an exclusive and irrevocable option to purchase a thirty-
three and one third percent (33-1/3) limited partnership interest in the
Partnership (the "33-1/3% Partnership Interest"). If Optionee exercises the
Option granted hereby, (a) Optionors will assign, transfer and set over to
Optionee the 33-1/3% Partnership Interest by executing and delivering to
Optionee an Assignment of Partnership Interest in the form attached hereto as
Exhibit C, (b) the Existing Partnership Agreement, as hereinafter defined, will
- ---------
(subject to the further provisions of this Agreement) be amended and restated
pursuant to the First Amended and Restated Agreement of Limited Partnership to
be entered into among Optionee and Optionors in the form attached hereto as
Exhibit D (such form, as it may be amended from time to time, hereinafter
- ---------
referred to as the "Amended and Restated Partnership Agreement"), and (c)
Optionee will pay to Optionors the Purchase Price (as hereinafter defined), all
upon and subject to the terms and conditions hereof.
2
<PAGE>
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of the premises contained herein and other
good and valuable consideration, including the Optionee's agreement to amend and
modify the Loan and thereby benefiting the Optionors, the receipt and
sufficiency of which are hereby acknowledged, Optionors, Optionee and the
Partnership hereby agree as follows:
ARTICLE 1 DEFINITIONS
-----------
The following terms when used in this Agreement shall have the respective
meanings set forth below. All capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to them in the Amended Loan
Agreement (hereinafter defined):
Amended and Restated Partnership Agreement means that certain First Amended
------------------------------------------
and Restated Partnership Agreement to be entered into among Optionee and
Optionors in the form attached hereto as Exhibit D.
----------
Amended Initial Mortgage means that certain Amended and Restated Mortgage
------------------------
and Security Agreement, dated as of July 19, 1990, by and between the
Partnership and Optionee and encumbering the Project, as amended by that certain
First Amendment to Amended and Restated Mortgage, dated as of the date hereof,
by and between the Partnership and Optionee.
Amended Initial Note means that certain Amended and Restated Promissory
--------------------
Note, dated as of July 19, 1990, in the original principal amount of Two Hundred
Sixty-Seven Million Dollars ($267,000,000), as amended by that certain First
Amendment to Amended and Restated Promissory Note, dated as of the date hereof,
by and between the Partnership and Optionee.
Affiliate means (a) any Partner, or (b) any other Person (as hereinafter
---------
defined) (i) which directly or indirectly through one or more intermediaries
Controls, or is Controlled by, or is under common Control with, any Optionor or
the Partnership, or (ii) twenty-five percent (25%) or more of the voting
securities or equity interests of which are held beneficially or of record by
any Optionor or the Partnership.
Assignment of Partnership Interests means that certain Assignment of
-----------------------------------
Partnership Interests to be executed by the Optionors in the form attached
hereto as Exhibit C.
----------
Banking Day means any day other than a day on which banks located in New
-----------
York City, New York or Tokyo, Japan are authorized or required by law to close.
Brokerage Agreements is defined in Section 5.01(d).
--------------------
3
<PAGE>
Brokerage Commission Certificate means a certificate executed by an
--------------------------------
Optionor certifying that as of the date of such certificate neither the
Partnership nor any Optionor on behalf of the Partnership has entered into any
Brokerage Agreement which provides for the payment of any Brokerage Commissions
on or after the Closing Date, except as set forth in (a) the Brokerage
Commission Schedule, with respect to the certificate delivered pursuant to
5.01(d) or (b) the Updated Brokerage Commission Schedule, with respect to the
certificate delivered pursuant to Section 6.02(a)(iv).
Brokerage Commission Schedule is defined in Section 5.01(d).
-----------------------------
Brokerage Commissions is defined in Section 5.01(d).
---------------------
Certificate of No Other Partners means a certificate executed by each of
--------------------------------
the Optionors certifying as of the Closing Date that (a) Optionors own, both
legally and beneficially, 100% of the partnership interests in the Partnership,
(b) no Person has any right or option to become a partner or obtain any interest
in the Partnership, except for a right or option which (i) has been consented to
in writing by Optionee in its sole and unfettered discretion or (ii) does not
affect the interest in the Partnership to be acquired by Optionee and is held by
a Permitted Transferee, and (c) there are no liens on any of the Optionors'
partnership interests in the Partnership, except those in favor of Optionee.
Closing is defined in Section 6.01.
-------
Closing Certificate means a certificate executed by each of the Optionors
-------------------
certifying that, as of the Closing Date, there has been no material adverse
change from the facts set forth in each of the Closing Financial Statements,
Updated Brokerage Commission Schedule, Updated Insurance Policy Schedule,
Updated Litigation Schedule, Updated Other Agreements Schedule, Updated Service
Contract Schedule and Lease Certificate, each as delivered on the Pre-Closing
Delivery Date.
Closing Date is defined in Section 6.01.
------------
Closing Financial Statements is defined in Section 6.02(a).
----------------------------
Collateral Assignment means the Collateral Assignment of Partnership
---------------------
Interests, of even date herewith, between Optionee and Optionors, as the same
may be amended from time to time.
Condemnation Certificate means a certificate executed by each of the
------------------------
Optionors certifying as of the date of such certificate that except as disclosed
in such certificate there is no pending, or to such Optionor's knowledge,
overtly threatened, condemnation, expropriation, eminent domain or similar
proceeding affecting all or any portion of the Project, and neither the
Partnership nor any Optionor has received any written notice from any condemning
authority of any of the same.
4
<PAGE>
Control means the possession, directly or indirectly, of the power to cause
-------
the direction of the management and policies of a Person, whether through the
ownership of voting securities or equity interests, by contract, by family
relationship or otherwise.
CPI Increase means, when used to qualify a fixed dollar amount set forth
------------
herein, such fixed dollar amount as increased by an adjustment. The base for
computing the adjustment is the United States Bureau of Labor Statistics,
Consumer Price Index for All Urban Consumers (CPI-U), New York City, all items
(Base year 1982-1984-100) ("Index"), which is in effect as of the date hereof
-----
("Initial Index"). The Index published most immediately preceding the
- ---------------
adjustment date in question ("Extension Index") is to be used in determining the
---------------
amount of the adjustment. If the Extension Index has increased over the Initial
Index, the fixed dollar amount in question shall be set by multiplying such
amount by a fraction, the numerator of which is the Extension Index and the
denominator of which is the Initial Index. If the Index is changed so that the
base year differs from that in effect as of the date hereof, the Index shall be
converted in accordance with the conversion factor published by the United
States Department of Labor, Bureau of Labor Statistics. If the Index is
discontinued or revised hereafter, such other government index or computation
with which it is replaced shall be used in order to obtain substantially the
same result as would be obtained if the Index had not been discontinued or
revised.
Delivery Date means the date on which documents and certificates are
-------------
delivered to Optionee pursuant to Section 5.01.
Documentary Stamp Tax Law means Article 31 of the Tax Law of the State of
-------------------------
New York or any successor replacement Law, and the regulations promulgated
thereunder, as amended from time to time.
Event of Default is defined in Section 8.01.
----------------
Exercise Date is defined in Section 2.02.
-------------
Exercise Notice is defined in Section 2.02.
---------------
Existing Partnership Agreement means the Partnership Agreement of the
------------------------------
Partnership dated as of December 21, 1983, originally entered into by and among
599 Lex, Lexcorp and Linlex, as amended on July 19, 1990, converted to a New
York limited partnership on ___________, 1997 (the "Conversion Date") and
amended and restated on the Conversion Date to admit Optionors as the partners
of the Partnership in substitution for 599 Lex, Lexcorp and Linlex, a true and
correct copy of which has been delivered to Optionee, as the same may be amended
and supplemented from time to time in accordance with the terms of this
Agreement.
Financial Condition Certificate means a certificate executed by an Optionor
-------------------------------
accompanying the Financial Statements and the Closing Financial Statements,
certifying that as of the date of such certificate the Financial Statements and
Closing Financial Statements, as the
5
<PAGE>
case may be, (a)(i) were prepared in accordance with generally accepted
accounting principles customarily used in the real estate industry consistently
applied, and (ii) fairly present the Partnership's financial condition as of the
date of the Financial Statements or the Closing Financial Statements, as the
case may be (except as disclosed in such certificate); and (b) except as
disclosed in such certificate, there has been no material adverse change in the
financial condition of the Partnership from the date of the last audited
Financial Statement of the Partnership delivered to Optionee.
Financial Statements means the financial statements of the Partnership,
--------------------
prepared in accordance with generally accepted accounting principles customarily
used in the real estate industry, including a balance sheet and the related
statements of income and of cash flows and all accompanying notes.
Gross Adjustment Amount is defined in Section 7.01(a).
-----------------------
Improvements means the buildings, structures or other improvements located
------------
on the Property, generally consisting of an office and retail building of two
(2) stories below grade and fifty (50) stories above grade (including three (3)
mechanical floors) containing approximately One Million (1,000,000) rentable
square feet.
Insurance Certificate means a certificate executed by each Optionor
---------------------
certifying that the Insurance Policies Schedule lists all insurance policies
affording coverage with respect to the Project as of the date of delivery
thereof (or with respect to the certificate delivered pursuant to Section
6.02(a) (vi), that the Updated Insurance Policies Schedule lists all insurance
policies affording coverage with respect to the Project as of the Closing
Date), and the information contained therein is accurate in all material
respects as of the date thereof.
Insurance Policies Schedule is defined in Section 5.01(f).
---------------------------
Intervening Governmental Actions is defined in Section 8.03.
--------------------------------
IRS means the Internal Revenue Service or any successor agency.
---
Laws means, collectively, all federal, state and local laws, rules,
----
regulations, ordinances, and codes, all opinions of the New York State Court of
Appeals and the requirements of any insurance companies applicable to the
Project.
Lease(s) means any lease, rental contract, occupancy agreement, license or
-------
other written or oral arrangement (a) with respect to which the Partnership is
the lessor or grantor, or has succeeded to the interest of such lessor or
grantor, and (b) pursuant to which any Person uses, possesses or occupies or has
the right to use, possess or occupy all or any part of the Project.
6
<PAGE>
Lease Certificate means a certificate executed by each of the Optionors
-----------------
certifying:
(a) that attached to such certificate is a true and complete copy of
all Leases and all amendments thereof and all guaranties of the Tenants'
obligations thereunder;
(b) that except as otherwise set forth in such certificate, as of the
date of such certificate:
(i) each of the Leases is in full force and effect;
(ii) the Partnership has not given any Tenant any written
notice of default under any Lease which has not been cured;
(iii) the Partnership has not received from any Tenant any
written notice of material default under any Lease which has not been
cured;
(iv) no Tenant is more than one (1) month in arrears in the
payment of rent under its Lease;
(v) no Tenant has paid rent for more than one (1) month in
advance (other than prepayments made in accordance with the terms of such
Tenant's Lease);
(vi) the Partnership has not assigned any of the rents payable
under the Leases except pursuant to the Loan Documents;
(vii) no material action or proceeding instituted against the
Partnership by any Tenant is presently pending in a court;
(viii) there are no take-back Leases, take-over Leases or
concession agreements pursuant to which the Partnership is obligated; and
(iv) there are no security deposits.
(c) if such certificate is delivered pursuant to Section 6.02(c), all
rents and other charges payable under the Leases which are then due and payable
have been paid.
Litigation Certificate means a certificate executed by each of the
----------------------
Optionors certifying that as of the date of such certificate, except as set
forth in such certificate, there are no judgments, litigation or proceedings
(zoning or otherwise) pending (and to the knowledge of the Optionors, none is
overtly threatened) against the Partnership or the interests of Optionors in the
Partnership, the Project or the transaction contemplated by this Agreement
(collectively, "Litigation").
----------
Litigation Schedule is defined in Section 5.01(h).
-------------------
7
<PAGE>
Management Agreement means a management agreement by and between the
--------------------
Partnership and a manager (which manager may be an Affiliate of Optionors), to
be effective as of the Closing Date, and which meets the requirements of Section
5.01(1).
Miscellaneous Certificate of Optionee means a certificate from a Person
-------------------------------------
authorized to bind Optionee certifying that as of the Closing Date the
representations and warranties set forth in Section 3.02 are true and correct in
all material respects.
Miscellaneous Certificate of Optionors means a certificate executed by each
--------------------------------------
of the Optionors certifying that (a) as of the Closing Date the representations
and warranties set forth in Section 3.01 are true and correct in all material
respects and (b) all representations and warranties of the Partnership and
Optionors contained in this Agreement or contained in any other certificate or
instrument furnished to Optionee pursuant to Article 5 hereof were true and
correct in all material respects when made.
Option is defined in Section 2.01.
------
Optionee's Knowledge means any state of facts of which the officers,
--------------------
directors and employees (but only such employees as are directly involved with
the operation and management of Optionee's interest in the Project) of Optionee
have actual knowledge or notice.
Optionors' Knowledge means any state of facts of which any of the following
--------------------
have actual knowledge or notice: (a) the Partnership, (b) Optionors, (c) the
members, managers, general partners, officers and directors of Optionors, (d)
the members, managers, officers or employees of the management company retained
by the Partnership to manage the Project who are charged with the responsibility
for on-site management of the Project, or (e) the persons employed by the
management company to whom such on-site managers report.
Other Agreements Certificate means a certificate executed by each of the
----------------------------
Optionors certifying that as of the date of said certificate, there are no Other
Agreements, except as set forth in (a) the Other Agreements Schedule, with
respect to the certificate delivered pursuant to Section 5.01(e) or (b) the
Updated Other Agreements Schedule, with respect to the certificate delivered
pursuant to Section 6.02(a)(v).
Other Agreements is defined in Section 5.01(e).
----------------
Other Agreements Schedule is defined in Section 5.01(e).
-------------------------
Permitted Exceptions means those matters set forth in Exhibit B hereto.
-------------------- ---------
Permitted Transferee means (A) a Person (i) in which Edward H. Linde
--------------------
("EHL") and/or Mortimer B. Zuckerman ("MBZ"), or their respective heirs,
---- ---
devisees, or personal representatives (which heirs and devisees are spouses,
parents, siblings, nieces, nephews or lineal descendants of EHL or MBZ
respectively), have an indirect or direct ownership interest
8
<PAGE>
of at least fifty-one percent (51%) in the aggregate, (ii) which Controls the
Partnership, (iii) which Controls (by itself or through an Affiliate) the
day-to-day operations and management of the Project, and (iv) which has the
right to make all significant economic and management decisions on behalf of the
Partnership without the need for the vote, approval or consent of any other
Person other than a Permitted Transferee, or (B) the REIT, or (C) a Person (i)
in which the REIT has an indirect or direct ownership interest of at least
fifty-one percent (51%), (ii) which is Controlled by the REIT, (iii) which
Controls (by itself or through an Affiliate) the day to day operations and
management of the Project, and (iv) which has the right to make all significant
economic and management decisions on behalf of the Partnership without the need
for the vote, approval or consent of any other Person other than a Permitted
Transferee.
Person means any natural person, corporation, firm, trust, partnership,
------
association, Governmental Agency or other entity, whether acting in an
individual, fiduciary or other capacity.
Pre-Closing Delivery Date means the date which is thirty (30) days prior to
-------------------------
the Closing Date.
Project means the Property, Personal Property and Improvements.
-------
Property means the real property described in Exhibit A hereto, together
-------- ---------
with all easements, rights, privileges and appurtenances (including any air or
development rights) thereto.
Purchase Price is defined in Section 2.01.
--------------
Rental Amounts is defined in Section 7.0l(a)(vii).
--------------
Restated Partnership means the limited partnership to be formed by
--------------------
Optionors and Optionee pursuant to the Amended and Restated Partnership
Agreement.
Service Contract Certificate means a certificate executed by each of the
----------------------------
Optionors certifying that (a) as of the date of such certificate all Service
Contracts in existence were set forth in the Service Contract Schedule or the
Updated Service Contract Schedule, as the case may be, and (b) true copies of
the Service Contracts have been delivered to Optionee and initialed by an
Optionor, and the same have not been modified or amended, except as shown in
such documents.
Service Contract Schedule is defined in Section 5.01(b).
-------------------------
Service Contracts is defined in Section 5.01(b).
-----------------
Tax Election Certificate is defined in Section 5.01(k).
------------------------
Taxes is defined in Section 7.0l(a)(i).
-----
9
<PAGE>
Tenant(s) means any tenant, lessee, licensee or other Person having a right
--------
to use, possess or occupy all or any part of the Project pursuant to a Lease.
Transfer Tax Law means chapter 21 of Title 11 of the New York City
----------------
Administrative Code and any successor replacement Law, and the regulations
promulgated thereunder, as amended from time to time.
Triggering Events is defined in Section 8.03.
-----------------
Updated Brokerage Commission Schedule is defined in Section 6.02(a)(iv).
-------------------------------------
Updated Insurance Policies Schedule is defined in Section 6.02(a)(vi).
-----------------------------------
Updated Litigation Schedule is defined in Section 6.02(a) (viii).
---------------------------
Updated Other Agreements Schedule is defined in Section 6.02(a)(v).
---------------------------------
Updated Service Contract Schedule is defined in Section 6.02(a)(ii).
---------------------------------
ARTICLE 2
GRANT OF OPTION
---------------
2.01. Option. In consideration of the premises contained herein, the
------
receipt and sufficiency of which are hereby acknowledged, Optionors hereby grant
and sell to Optionee and Optionee hereby purchases an irrevocable and exclusive
option (the "Option") to acquire on the Closing Date the 33-1/3% Partnership
------
Interest for an aggregate consideration of Two Hundred Twenty-Five Million
Dollars ($225,000,000) (the "Purchase Price"), all in accordance with the
--------------
provisions of this Agreement. The Purchase Price shall be payable by Optionee
either in cash or in the form of an assignment to Optionors (or their designee)
of the Amended Initial Note which equals the Purchase Price. The election as to
the form of payment of the Purchase Price shall be determined by Optionors and
Optionee in good faith.
2.02. Exercise of Option. Except as provided in Section 8.03, Optionee
-------------------
shall give written notice to Optionors of its election to exercise the Option on
a date which is no earlier than twenty-four (24) months and no later than twelve
(12) months prior to the Maturity Date (such notice is hereinafter referred to
as the "Exercise Notice," and the date on which Optionee gives the Exercise
---------------
Notice is hereinafter referred to as the "Exercise Date"). In the event
-------------
Optionee fails timely to exercise the Option, this Agreement shall become null
and void and neither party shall have any rights or obligations hereunder.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
------------------------------
3.01. Representations and Warranties of Optionors. In order to induce
-------------------------------------------
Optionee to execute this Agreement, each Optionor hereby represents and warrants
to Optionee as of the date hereof and, except as may otherwise be disclosed in
the Miscellaneous Certificate of Optionors, shall represent and warrant as of
the Closing Date as follows:
10
<PAGE>
(a) Formation, Qualification and Powers of Optionors. Each Optionor
------------------------------------------------
is duly formed and validly existing under the laws of the state of its
formation. The Optionors are the only partners of the Partnership. Each Optionor
has all requisite power and authority to conduct its business, to own, lease,
mortgage and transfer its properties, and to execute and deliver, and perform
all of its obligations pursuant to this Agreement. Except as provided in this
Agreement, no Person has any right or option to become a partner or obtain any
interest in the Partnership.
(b) Authority and Compliance with Instruments and Government
--------------------------------------------------------
Regulations. The execution, delivery and performance by each Optionor of this
- -----------
Agreement has been duly authorized by all necessary action and does not and will
not:
(i) require any consent or approval not heretofore obtained
of any Person;
(ii) violate any provision of the Existing Partnership
Agreement or any of Optionor's documents of formation and organization;
(iii) result in or require the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest, claim, charge, right
of others or other encumbrance of any nature, other than under the Loan
Documents, upon or with respect to the Project;
(iv) to its knowledge, violate any provision of any Law,
order, writ, judgment, injunction, decree, determination or award applicable to
such Optionor; or
(v) result in a breach of or constitute a default under,
cause or permit the acceleration of any obligation owed under, or require any
consent under, any indenture or loan or credit agreement or any other agreement,
lease or instrument to which such Optionor is a party or by which such Optionor,
the Project or any other property of such Optionor is bound or affected;
and to the knowledge of Optionors there does not exist a default under any Law,
order, writ, judgment, injunction, decree, determination, award, indenture,
agreement, lease or instrument described in subsections (iv) and (v) of this
Section 3.01(b) where such default would have a material adverse effect on the
ability of such Optionor to perform its obligations under this Agreement or
which would otherwise be materially adverse to the interests of Optionee with
respect to this Agreement.
(c) No Governmental Approvals Required. No authorization, consent,
----------------------------------
approval, order, license, exemption from, or filing, registration or
qualification with, any Governmental Agency is required to authorize, or is
otherwise required in connection with, the execution, delivery and performance
by any Optionor of this Agreement.
11
<PAGE>
(d) Binding Obligations. To its knowledge, and in reliance upon the
-------------------
advice of its legal counsel, this Agreement is a legal, valid and binding
obligation.
(e) Compliance with Laws. To its knowledge, each Optionor is in
--------------------
compliance in all material respects with all Laws applicable to its business and
has obtained all authorizations, consents, approvals, orders, licenses, permits
and exemptions from, and has accomplished all filings, registrations or
qualifications with, any Governmental Agency required thereby or otherwise
necessary for the transaction of its business.
(f) Litigation. There are no actions, suits or proceedings pending
----------
or, to any Optionor's knowledge, overtly threatened against or affecting such
Optionor which would materially adversely affect such Optionor's ability to
perform its obligations hereunder.
(g) Misrepresentations. To its knowledge, no information, exhibit or
------------------
report furnished in writing by any Optionor to Optionee in connection with the
execution and delivery of this Agreement contains any material misstatement of
fact or fails to state a material fact or any fact necessary to make the
statements contained herein not materially misleading as of the date given.
3.02. Representations and Warranties of Optionee. In order to induce
------------------------------------------
Optionors and the Partnership to execute this Agreement, Optionee hereby
represents and warrants to Optionors and to the Partnership on the date hereof
and shall represent and warrant on the Closing Date as follows:
(a) Formation, Qualification and Powers of Optionee. Optionee is a
-----------------------------------------------
corporation duly formed and validly existing under the laws of the state of its
formation. Optionee has all requisite power and authority to conduct its
business, to own, lease, mortgage and transfer its properties, and to execute
and deliver, and perform all of its obligations under this Agreement.
(b) Authority and Compliance with Instruments and Government
--------------------------------------------------------
Regulations. The execution, delivery and performance by Optionee of this
- -----------
Agreement has been duly authorized by all necessary action and does not and will
not:
(i) require any consent or approval not heretofore obtained of
any Person, provided, however, that it shall not be a breach of this
representation and warranty if Lender is able to and does perform its
obligations hereunder despite a failure to obtain any consent or approval;
(ii) violate any provision of the Optionee's documents of
formation and organization;
(iii) result in or require the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest, claim, charge, right
of others or other
12
<PAGE>
encumbrance of any nature, upon or with respect to any property now owned or
leased or hereafter acquired by Optionee;
(iv) to its knowledge, violate any provision of any Law, order,
writ, judgment, injunction, decree, determination or award having applicability
to Optionee; or
(v) result in a breach of or constitute a default under, cause
or permit the acceleration of any obligation owed under, or require any consent
under, any indenture or loan or credit agreement or any other agreement, lease
or instrument to which Optionee is a party or by which Optionee or any property
of Optionee is bound or affected;
and to its knowledge Optionee is not in default in any respect under any Law,
order, writ, judgment, injunction, decree, determination, award, indenture,
agreement, lease or instrument described in subsections (iv) and (v) of this
Section 3.02(b) where such default would have a material adverse effect on the
ability of Optionee to perform its obligations under this Agreement or which
would otherwise be materially adverse to the interests of Optionors with respect
to this Agreement.
(c) No Governmental Approvals Required. No authorization, consent,
----------------------------------
approval, order, license, exemption from, or filing, registration or
qualification with, any Governmental Agency (each, a "Consent") is or will be
-------
required which has not or will not be obtained to authorize, or is otherwise
required in connection with the execution, delivery and performance by Optionee
of this Agreement, provided, however, that it shall not be a breach of this
representation and warranty if Lender is able to and does perform its
obligations hereunder despite a failure to obtain any consent or approval.
(d) Compliance with Laws. To its knowledge, Optionee is in
--------------------
compliance in all material respects with all Laws applicable to its business and
has obtained all authorizations, consents, approvals, orders, licenses, permits
and exemptions from, and has accomplished all filings, registrations or
qualifications with, any Governmental Agency required thereby or otherwise
necessary for the transaction of its business.
(e) Litigation. There are no actions, suits or proceedings pending
----------
or, to Optionee's knowledge, overtly threatened against or affecting Optionee
which would materially adversely affect Optionee's ability to perform its
obligations hereunder.
ARTICLE 4
COVENANTS OF OPTIONORS, THE PARTNERSHIP AND OPTIONEE
----------------------------------------------------
4.01. Discharge of Liens. At or prior to the Closing Date, Optionors
------------------
shall cause to be discharged of record (a) any mortgage or other security
interest affecting the Project or any partnership interest in the Partnership,
individually or on behalf of the Partnership (other than the Permitted
Exceptions or security interests in favor of Optionee or mortgages or other
security interests otherwise permitted under the Loan Documents or the Amended
and Restated Partnership Agreement (as if the same had been duly executed and
exchanged)) and (b) any
13
<PAGE>
other liens affecting the Project or any partnership interest in the Partnership
to be acquired by Optionee (other than the Permitted Exceptions).
4.02. Transfer Taxes. If Optionee exercises the Option, Optionors and
--------------
Optionee shall each comply timely with the requirements, if any, of the Transfer
Tax Law in such manner as to avoid any postponement of the Closing.
4.03. Operating Covenant. From the date hereof through the Closing Date
------------------
(or such earlier date on which this Agreement shall terminate), Optionors shall
operate the Project in a reasonably prudent manner in accordance with the terms
and conditions of the Loan Documents.
4.04. Budgets. Commencing with the fiscal year of the Partnership next
--------
succeeding the date hereof and ending on the Closing Date (or such earlier date
on which this Agreement terminates), Optionors shall submit to Optionee at least
thirty (30) days prior to the commencement of such fiscal year a pro forma
budget for the operation and maintenance of the Project during the next
succeeding fiscal year setting forth in reasonable detail the projected revenues
and expenses for the Project for such period. Such budgets shall be solely for
informational purposes and Optionee shall not have any right of approval with
respect to the matters set forth therein.
4.05. Maintenance. From the date hereof through the Closing Date (or such
-----------
earlier date on which this Agreement shall terminate), Optionors shall cause the
Partnership to maintain the Improvements and Personal Property (and shall make
all necessary repairs and replacements thereto) such that, subject to ordinary
wear and tear, condemnation and casualty, on the Closing Date the Improvements
and Personal Property shall be in substantially the condition which would
reasonably be expected of a first-class New York City office and retail building
of comparable age and quality.
4.06. Restrictions on Transfers of Partnership Interests. From the date
--------------------------------------------------
hereof through the Closing Date, Optionors shall not transfer or assign their
partnership interests in the Partnership except to Permitted Transferees in
accordance with Section 5.4 of the Amended Initial Mortgage. Any purported
transfer or assignment prohibited by this Section 4.06 shall be void ab initio
-- ------
and shall be of no effect except that the same shall constitute a default under
this Agreement.
4.07. No Clogging. The Partnership, Optionors and Optionee have conferred
-----------
with their respective counsel regarding the doctrine of "clogging of the equity
of redemption" and understand that such doctrine may be applied in certain cases
to prevent enforcement of options granted to secured lenders. The Partnership,
Optionors and Optionee acknowledge and agree, to the maximum extent permitted by
Law, that the rights set forth in this Agreement are not intended to be a clog
or a fettering of the Partnership's or Optionors' interest in the Property, or a
granting of a collateral advantage or further restraint on the Partnership's or
Optionors' equity of redemption, or a contract for the forfeiture of the
Property subject to a lien in satisfaction of the obligations under the Loan
Documents. The Partnership, Optionors and
14
<PAGE>
Optionee acknowledge and agree that they are not entitled to have the rights
set forth in this Agreement terminated or extinguished except as specifically
set forth and permitted herein.
4.08. Waiver of Defense. To the maximum extent permitted by Law, the
-----------------
Partnership, Optionors and Optionee hereby irrevocably waive any and all
defenses (equitable or otherwise), counterclaims or causes of action on grounds
that the provisions of this Agreement and the Loan Documents "clog" the equity
of redemption of the Partnership or Optionors in the Property, fetter the
Property or otherwise grant a collateral advantage which otherwise might be
available to them as a basis for avoiding performance, or preventing enforcement
against them, of any of their obligations hereunder.
ARTICLE 5
DELIVERIES PRIOR TO MATURITY DATE
---------------------------------
5.01. Pre-Exercise Deliveries. Optionors shall deliver or cause to be
-----------------------
delivered to Optionee not earlier than nineteen (19) months nor later than
eighteen (18) months prior to the Maturity Date (provided, however, that upon
the occurrence of an Intervening Governmental Action at any time prior to July
19, 2003, the Delivery Date shall be twenty-four (24) months prior to the
Maturity Date) the following:
(a) Financial Statements. The audited Financial Statements of the
--------------------
Partnership for its two (2) fiscal years immediately preceding the Delivery Date
thereof, together with unaudited Financial Statements for the period between the
close of the most recent fiscal year and the Delivery Date. If the audited
Financial Statements for the immediately preceding fiscal year are not
available, Optionors shall deliver unaudited Financial Statements for such
immediately preceding fiscal year and, no later than ninety (90) days following
the end of the Partnership's fiscal year, shall deliver audited Financial
Statements for such immediately preceding fiscal year, together with a Financial
Condition Certificate dated as of the Delivery Date.
(b) Service Contracts. (i) A schedule (the "Service Contract
----------------- ----------------
Schedule") of all service, maintenance, supply and management contracts
- --------
affecting the Project or entered into by the Partnership providing for payments
in excess of Twenty Five Thousand Dollars ($25,000) (as adjusted from the date
hereof by CPI Increases) per annum in existence as of the date of delivery
thereof ("Service Contracts"), (ii) true and complete copies of all Service
-----------------
Contracts as shown on the Service Contract Schedule initialed by an Optionor,
and (iii) the Service Contract Certificate dated as of the Delivery Date.
(c) Leases; Condemnation. The Lease Certificate and Condemnation
--------------------
Certificate, each dated as of the Delivery Date.
(d) Brokerage Commissions. (i) A schedule (the "Brokerage Commission
--------------------- --------------------
Schedule") of all brokerage commissions and finder's fees payable by the
- --------
Partnership on or after the Closing Date ("Brokerage Commissions") with respect
---------------------
to the current or any renewal terms or any expansion options under any Lease,
(ii) true and complete copies of all agreements (the "Brokerage Agreements")
--------------------
governing the payment of all Brokerage
15
<PAGE>
Commissions initialed by an Optionor, and (iii) the Brokerage Commission
Certificate dated as of the Delivery Date.
(e) Other Agreements. (i) A schedule (the "Other Agreements
---------------- ----------------
Schedule") of all agreements requiring aggregate payments by the Partnership in
excess of Twenty Five Thousand Dollars ($25,000) (as adjusted from the date
hereof by CPI Increases), other than Permitted Exceptions, Leases, Brokerage
Agreements and Service Contracts, which bind or obligate the Partnership, which
are in existence as of the Delivery Date and which contain obligations to be
performed by the Partnership on or after the Closing Date (the "Other
-----
Agreements"), (ii) true and complete copies of the Other Agreements as shown on
- ----------
the Other Agreements Schedule initialed by an Optionor, and (iii) the Other
Agreements Certificate dated as of the Delivery Date.
(f) Insurance. (i) A schedule (the "Insurance Policies Schedule") of
--------- ---------------------------
all insurance policies affording coverage with respect to the Project or any
portion thereof in existence as of the Delivery Date, and (ii) the Insurance
Certificate dated as of the Delivery Date.
(g) Permits. True and complete copies of all temporary or permanent
-------
certificates of occupancy held, and all other permits required by Law or
obtained, in connection with the operation and use of the Project.
(h) Litigation. (i) A schedule (the "Litigation Schedule") of
---------- -------------------
Litigation pending as of the Delivery Date, (ii) a brief description of the
claims made in such Litigation, and (iii) the Litigation Certificate dated as of
the Delivery Date.
(i) Plans and Specifications. Optionors will make available for
------------------------
Optionee's inspection copies of the plans and specifications for the Project or
any portion thereof which the Partnership, Optionors or its managing agent may
have in their possession and which have not previously been delivered to
Optionee.
(j) Cash Flow Projection. A projection of cash flow for the Project
--------------------
for the ten (10) year period commencing on the Delivery Date.
(k) Tax Election Certificate. A certificate (a "Tax Election
------------------------ ------------
Certificate") from an Optionor setting forth any material federal income tax
- -----------
elections made by the Optionors or the Partnership which would be binding upon
Optionee in its capacity as partner in the Restated Partnership.
(1) Management Agreement. Optionors shall deliver to Optionee for
--------------------
approval a form of Management Agreement proposed to be entered into by the
Partnership with a management company which may be an Affiliate of either
Optionor. The Management Agreement shall (i) be in a form customarily used in
the real estate industry in New York City for projects comparable in age, size
and quality to the Project by a prudent institutional owner when entering into a
management agreement with its developer/partner for management, and
16
<PAGE>
(ii) provide for a management fee not to exceed the greater of (A) one percent
(1%) of the gross revenues of the Project, and (B) an amount demonstrated to
Optionee's satisfaction to be the market rate at the time payable to management
companies which provide management services only (as opposed to those which
provide, in addition thereto, leasing agent services, for example) for buildings
located in New York, New York, comparable in size, age and quality to the
Project. Optionee shall have the right to object to any provision of the
proposed Management Agreement and the parties shall use their reasonable efforts
to resolve all disagreements prior to the Closing Date. If, on the Closing Date,
objections to the proposed Management Agreement remain unresolved, then the
Optionee may elect in writing to terminate this Agreement in which event neither
party shall have any further right or obligation hereunder and the Maturity Date
shall be extended for a period of one hundred twenty (120) days during which
120-day period the Partnership shall have the right to prepay the Loan without
premium or penalty upon twenty (20) Banking Days' prior notice to Optionee.
(m) Additional Deliveries. All additional deliveries that are
---------------------
customarily provided in connection with transactions of a similar nature as of
the Exercise Date, as Optionee or its counsel may reasonably request.
5.02. Budget. At least seventy-five (75) days prior to the Closing Date,
------
Optionors shall deliver to Optionee for approval the proposed budget described
in Section 6.4(a) of the Amended and Restated Partnership Agreement. Optionee
shall have the right to object to any item(s) in the budget in accordance with
the procedure set forth in Section 6.4(b) of the Amended and Restated
Partnership Agreement, except that if the unresolved objection relates to an
aggregate amount equal to or in excess of One Million Dollars ($l,000,000),
Optionee shall have the right to terminate this Agreement by written notice to
Optionors. Upon such termination by Optionee, neither party shall have any
further right or obligation hereunder and the Maturity Date of the Loan shall be
extended for a period of one hundred twenty (120) days during which 120-day
period the Partnership shall have the right to prepay the Loan without premium
or penalty upon twenty (20) Banking Days' prior notice to Optionee. If the
unresolved objection relates to an amount less than One Million Dollars
($1,000,000), the decision of Optionors shall prevail.
ARTICLE 6 CLOSING; CONDITIONS AND DELIVERIES PRECEDENT TO CLOSING
-------------------------------------------------------
6.01. Closing. If Optionee exercises the Option, the closing (the
-------
"Closing") pursuant to this Agreement shall occur on a date (the "Closing
------- -------
Date") acceptable to all of the parties hereto, but in no event later than (a)
- ----
the Maturity Date, or (b) if, but only if, an Intervening Governmental Action
occurs subsequent to the Exercise Date, on a date which is twelve (12) months
after the occurrence of such Intervening Governmental Action, subject to
adjournment, extension or acceleration as provided herein, provided all of the
conditions precedent to Closing have occurred or have been waived by the party
entitled to make such waiver. The Closing shall be held at the offices of
Gibson, Dunn & Crutcher LLP, 200 Park Avenue, New York, New York 10166
commencing at 10 a.m. on the Closing Date or at such other office in New York
City as the parties shall agree. Any party shall have the right to adjourn the
Closing for up to thirty (30) days for good cause due to circumstances beyond
its control. In
17
<PAGE>
no event, however, except for an extension pursuant to clause (b) above, shall
the Closing be delayed to a date more than thirty (30) days after the Maturity
Date.
6.02. Optionors' Deliveries. Optionee's obligation to consummate the
---------------------
Closing is expressly conditioned on Optionors delivering or causing to be
delivered to Optionee the items and documents described below (any one or more
of which may be waived, in whole or in part, by Optionee in writing in
Optionee's sole discretion):
(a) on the Pre-Closing Delivery Date, the items described in (i)
through (ix) below:
(i) Financial Statements. The audited Financial Statements of
--------------------
the Partnership for the three (3) fiscal years immediately preceding the Closing
Date, together with unaudited Financial Statements for the period between the
close of the most recent fiscal year and the Pre-Closing Delivery Date (to the
extent the same have not been previously delivered to Optionee), or if the
audited Financial Statements for the immediately preceding fiscal year are not
available, Optionors shall deliver unaudited Financial Statements for such
immediately preceding fiscal year. The Financial Statements to be delivered to
Optionee pursuant to this Section 6.02(a)(i) or that would have been so
delivered if not previously delivered to Optionee are hereinafter collectively
referred to as the "Closing Financial Statements"), together with the Financial
----------------------------
Condition Certificate dated as of the Pre-Closing Delivery Date.
(ii) Service Contracts. (A) A schedule of all Service
-----------------
Contracts in existence as of the Pre-Closing Delivery Date (the "Updated Service
---------------
Contract Schedule"), (B) true and complete copies of all Service Contracts as
- -----------------
shown on the Updated Service Contract Schedule not previously delivered pursuant
to Section 5.01(b), initialed by an Optionor, (C) the Service Contracts
Certificate dated as of the Pre-Closing Delivery Date, and (D) a certificate
from an Optionor certifying that there are no Service Contracts with Affiliates
other than Service Contracts that were approved in writing by Optionee.
(iii) Leases. (A) A Lease Certificate dated as of the
------
Pre-Closing Delivery Date, and (B) a certificate from an Optionor certifying
that there are no Leases with Affiliates other than Leases that were approved in
writing by Optionee.
(iv) Brokerage Commissions. (A) A schedule of all Brokerage
---------------------
Commissions payable on or after the Pre-Closing Delivery Date with respect to
Leases in existence on the Pre-Closing Delivery Date (the "Updated Brokerage
-----------------
Brokerage Commission Schedule"), (B) true and complete copies initialed by an
- -----------------------------
Optionor of all Brokerage Agreements in existence as of the Pre-Closing Delivery
Date and not previously delivered pursuant to Section 5.01(d), and (C) the
Brokerage Commissions Certificate dated as of the Pre-Closing Delivery Date.
(v) Other Agreements. (A) A schedule of all Other Agreements
----------------
in existence on the Pre-Closing Delivery Date which bind or obligate the
Partnership (the "Updated Other Agreements Schedule"), (B) true and complete
--------------------------------------
copies of the Other
18
<PAGE>
Agreements not previously delivered pursuant to Section 5.01(e), initialed by an
Optionor and (C) the Other Agreement Certificate dated as of the Pre-Closing
Delivery Date.
(vi) Insurance Policies. (A) A schedule of all insurance
------------------
policies in existence as of the Pre-Closing Delivery Date (the "Updated
-------
Insurance Policies Schedule"), and (B) the Insurance Certificate dated as of the
- ---------------------------
Pre-Closing Delivery Date.
(vii) Permits. True and complete copies of all temporary or
-------
permanent certificates of occupancy held, and all other permits required by Law
or obtained, in connection with the operation and use of the Project not
previously delivered pursuant to Section 5.01(g).
(viii) Litigation. (A) A schedule of all Litigation in
----------
existence as of the Pre-Closing Delivery Date (the "Updated Litigation
------------------
Schedule"), (B) a brief description of all Litigation as shown on the Updated
- --------
Litigation Schedule, and (C) the Litigation Certificate dated as of the Pre-
Closing Delivery Date.
(ix) Other Certificates. A Condemnation Certificate and an
------------------
update of the Tax Election Certificate, each dated as of the Pre-Closing
Delivery Date.
(b) On the Closing Date, the items described in (i) through (xii)
below:
(i) Amended and Restated Partnership Agreement. Six (6)
------------------------------------------
counterparts of the Amended and Restated Partnership Agreement executed by the
Optionors or, if applicable, such Persons as are Permitted Transferees.
(ii) Assignment of Partnership Interest. An Assignment of
----------------------------------
Partnership Interest sufficient to transfer the 33-1/3% Partnership Interest to
Optionee.
(iii) Repayment of Loan. Payment by wire transfer of
-----------------
immediately available funds to Optionee's account at such location as may be
designated by Optionee in writing at least three (3) Banking Days' prior to the
Closing Date, an amount equal to any outstanding amounts due and payable under
the Loan Documents LESS the amount of the Amended Initial Note if the Amended
Initial Note is being assigned to Optionors at Closing. If Optionee fails timely
to furnish wiring instructions, the Partnership shall make said payment by
certified or bank check payable to Optionee drawn on a bank which is a member of
the New York Clearing House or a successor thereto.
(iv) Organizational Matters of Optionors. Certified copies of
-----------------------------------
the organizational documents of each of the Optionors and such resolutions and
incumbency certificates as shall be reasonably required by Optionee or its
counsel in order to evidence the due authorization and execution of the
Assignment(s) of Partnership Interest and the Amended and Restated Partnership
Agreement by the Optionors or the Persons executing such documents in accordance
with this Agreement.
19
<PAGE>
(v) Opinion of Counsel. An opinion of counsel to each
------------------
Optionor opining on such matters as reasonably requested by Optionee or its
counsel, with such qualifications, if any, as shall then be customary or
appropriate under then applicable Law and practice for like opinions.
(vi) Good Standing Certificate. A Good Standing Certificate
-------------------------
from the Secretary of State of the state of formation with respect to each
Optionor which is a corporation, a limited partnership, or a limited liability
company.
(vii) Management Agreement. A copy of the Management Agreement
--------------------
certified as true and correct by an Optionor.
(viii) Release. If the Purchase Price is to be paid by
-------
assigning to Optionors the Amended Initial Note, a release executed by each
Optionor in favor of the Partnership releasing the Partnership from all
liability under the Amended Initial Note.
(ix) Closing Certificate. The Closing Certificate of
-------------------
Optionors dated as of the Closing Date.
(x) Title Matters. All documents and affidavits as may
-------------
reasonably be required by the title insurance company to enable such company to
issue any title insurance policy or endorsement (including, but not limited to,
a non-imputation endorsement) requested by Optionee in connection with the
Closing.
(xi) Other Certificates. The Certificate of No Other Partners,
------------------
Miscellaneous Certificate of Optionors, a Condemnation Certificate and an update
of the Tax Election Certificate, each dated as of the Closing Date.
(xii) Additional Deliveries. All other documents and
---------------------
instruments required to be delivered by the Partnership and Optionors pursuant
to the terms of this Agreement, together with any additional deliveries that are
customarily provided in connection with transactions of a similar nature as of
the Closing Date which Optionee or its counsel may reasonably request.
6.03. Optionee's Conditions Precedent to Closing. Optionee's obligation
------------------------------------------
to consummate the Closing is expressly conditioned on the satisfaction, at or
before Closing or on such earlier date as is specified in Section 8.03 below, of
each of the following conditions (any one or more of which may be waived in
writing, in whole or in part, by Optionee in Optionee's sole discretion):
(a) Title. Title to the Project shall be vested in the Partnership
-----
free and clear of all mortgages, liens, encumbrances, covenants, and any other
matters affecting title, other than the Permitted Exceptions.
20
<PAGE>
(b) Condemnation. There shall have occurred no taking of title to
------------
any portion of the Project by reason of any condemnation, expropriation, eminent
domain or similar proceedings of such a nature that the utility or economic
value of the Project is affected in any material way, nor shall any such
proceedings be pending, or to any Optionor's knowledge, overtly threatened
(except in the event of an accelerated Closing pursuant to Section 8.03(a)(ii)).
As an example, a taking by a public utility of a location for a utility line,
underground vault, or a taking by the municipality or other governmental
organization widening a street, changing a grade, or making a minor adjustment
in property lines, in each case not affecting rental payable by Tenants or the
income potential of the Project, shall not be deemed a taking of a material
nature affecting the utility or economic value of the Project.
(c) Casualty. In the event that the Project shall have been damaged
--------
or destroyed by fire or other casualty, such damage or destruction shall have
been fully restored to the standard existing prior to such damage or
destruction.
(d) Event of Default. No Event of Default shall exist hereunder.
----------------
(e) Material Adverse Change. There shall have been no material
-----------------------
adverse change between:
(i) The Brokerage Commission Schedule, Insurance Policies
Schedule, Litigation Schedule, Other Agreements Schedule and Service Contract
Schedule, delivered on the Delivery Date and the Updated Brokerage Commission
Schedule, Updated Insurance Policy Schedule, Updated Litigation Schedule,
Updated Other Agreements Schedule and Updated Service Contract Schedule
delivered on the Pre-Closing Delivery Date; or
(ii) The Financial Statements and the Closing Financial
Statements.
(f) Miscellaneous Certificate. The Miscellaneous Certificate of
-------------------------
Optionors shall indicate no exceptions or qualifications to the representations
and warranties set forth in Section 3.02, other than those which (i) reflect
changes permitted by the terms hereof or (ii) reflect facts or conditions as to
which there has been no material adverse change from the date hereof.
(g) Budget; Management Agreement. The parties shall have agreed upon
----------------------------
the budget described in Section 5.02 and the Management Agreement described in
Section 5.01(1).
If the conditions set forth in (e) and (f) are neither satisfied nor waived
Optionee may elect, in writing, to terminate this Agreement in which event
neither party shall have any further right or obligation hereunder and the
Maturity Date shall be extended for a period of one hundred twenty (120) days
during which 120-day period the Partnership shall have the right to prepay the
Loan without premium or penalty upon twenty (20) Banking Days prior notice to
Optionee.
21
<PAGE>
6.04 Optionee's Deliveries. Optionors' obligation to consummate the
---------------------
Closing is expressly conditioned on Optionee delivering or causing to be
delivered to Optionors on the Closing Date the items described in (a) through
(g) below (any one or more of which may be waived in writing, in whole or in
part, by Optionors in Optionors' sole discretion):
(a) Assignment. If the Purchase Price is paid by assignment of the
----------
Amended Initial Note, an assignment executed by Optionee assigning to Optionors
(or their designee) the Amended Initial Note equal to the Purchase Price,
together with such original Amended Initial Note endorsed without recourse by
Optionee to Optionors or their designee.
(b) Amended and Restated Partnership Agreement. Six (6)
------------------------------------------
counterparts of the Amended and Restated Partnership Agreement executed by
Optionee.
(c) Organizational Matters of Optionee. Certified copies of the
----------------------------------
organizational documents of Optionee, and such resolutions and incumbency
certificates as shall be reasonably required by Optionors or their counsel in
order to evidence the due authorization and execution by Optionee of the Amended
and Restated Partnership Agreement and, if applicable, the assignment referred
to in clause (a) above.
(d) Miscellaneous Certificate. The Miscellaneous Certificate of
-------------------------
Optionee dated as of the Closing Date.
(e) Opinion of Counsel. An opinion of counsel to Optionee opining on
------------------
such matters as may reasonably be requested by Optionors or their counsel, with
such qualifications, if any, as shall then be customary or appropriate under
then applicable Law and practice for like opinions.
(f) Good Standing Certificate. A Good Standing Certificate from the
-------------------------
Secretary of State of Optionee's state of incorporation.
(g) Additional Deliveries. Any additional deliveries as Optionors or
---------------------
their counsel may reasonably request that are customarily provided in connection
with transactions of a similar nature as of the Closing Date.
6.05 Disposition of Amended Initial Note. Immediately after delivery, if
-----------------------------------
any, of the Amended Initial Note by Optionee pursuant to Section 6.04(a),
Optionors shall either (a) contribute the Amended Initial Note to the
Partnership and cancel the indebtedness evidenced thereby, or (b) provide to
Optionee such documentation as is reasonably requested by Optionee or its
counsel to assure Optionee that the indebtedness evidenced by the Amended
Initial Note shall not be enforced as against the Project other than to the
extent of any proceeds of any Financing or Refinancing (as such terms are
defined in the Amended and Restated Partnership Agreement) obtained in
accordance with the terms and conditions of the Amended and Restated Partnership
Agreement.
22
<PAGE>
ARTICLE 7 CLOSING ADJUSTMENTS; CLOSING COSTS
----------------------------------
7.01. Closing Adjustments.
-------------------
(a) The "Gross Adjustment Amount" shall mean the sum obtained by
adding the amounts described in clauses (i) through (vi) below, and subtracting
from such sum the amount obtained by adding the amounts described in clauses
(vii) through (xiv) below, and adding or subtracting (as appropriate) the amount
determined pursuant to clause (xv) below (each of the following amounts
described in clauses (i) through (xv) shall be adjusted on a per diem basis as
of 11:59 p.m. of the day next preceding the Closing Date):
(i) Real estate and personal property taxes, franchise taxes,
sewer rents and charges and other state, county and municipal taxes, charges and
assessments affecting the Project or any portion thereof (collectively,
"Taxes"), paid by the Partnership for the period on or after the Closing Date.
(If the rate of any such Taxes, or the assessed value of the Project shall not
be fixed prior to the Closing, the calculation of the amount determined pursuant
to this clause (i) or pursuant to clause (viii) below at the Closing shall be
upon the basis of the rate for the preceding fiscal year applied to the latest
assessed valuation (or other basis of valuation) and the amount of any further
adjustment shall be paid in accordance with this Section 7.01 when the rate or
assessed valuation for the current fiscal year is fixed);
(ii) Charges for water, electricity, gas, oil, steam, telephone
and all other utilities (other than those paid directly by Tenants), paid by the
Partnership for all periods on or after the Closing Date. If the consumption of
any of the foregoing is measured by meters, the Partnership shall furnish a
current reading of each meter at the Closing. (If there is no such meter or if
the bills for any of the foregoing have not been issued prior to the Closing
Date, the charges therefor shall be adjusted for purposes of this clause (ii)
and clause (ix) at the Closing, on the basis of the charges for the prior period
for which bills were issued and the amount of any further adjustment shall be
paid in accordance with this Section 7.01 when the bills for the current period
are issued);
(iii) Wages, salaries, vacation pay, sick leave, bonuses and
other employee benefits, if any, for the Partnership's employees at the Project
paid by the Partnership for all periods on or after the Closing Date;
(iv) The premiums on the Partnership's insurance policies paid
by the Partnership for all periods on or after the Closing Date, but excluding
any such policies which will be canceled on or before the Closing Date;
(v) Charges under Service Contracts paid by the Partnership
for all periods on or after the Closing Date;
(vi) The management fee payable to the managing agent pursuant
to the Management Agreement paid by the Partnership for all periods on or after
the Closing Date;
23
<PAGE>
(vii) Rent (including, without limitation, all base rent and
additional rent) and other charges (including, without limitation, charges for
electricity, Taxes and operating expense, collectively, "Rental Amounts") paid
--------------
by Tenants under Leases for periods on or after the Closing Date;
(viii) Taxes payable (but not yet paid) by the Partnership for
all periods prior to the Closing Date;
(ix) Charges for water, electricity, gas, oil, steam, telephone
and all other utilities (other than those paid directly by Tenants), payable
(but not yet paid) by the Partnership for all periods prior to the Closing Date;
(x) Wages, salaries, vacation pay, sick leave, bonuses, and
other employee benefits, if any, for the Partnership's employees at the Project,
payable, but not yet paid, by the Partnership for all periods prior to the
Closing Date;
(xi) The premiums on the Partnership's insurance policies,
payable, but not yet paid, by the Partnership for all periods prior to the
Closing Date, but excluding any such policies which will be canceled on or
before the Closing Date;
(xii) Charges under Service Contracts payable, but not yet paid,
by the Partnership for all periods prior to the Closing Date;
(xiii) The management fee payable to the managing agent pursuant
to the Management Agreement payable, but not yet paid, by the Partnership for
all periods prior to the Closing Date;
(xiv) All amounts shown on the Updated Brokerage Commission
Schedule;
(xv) Any other items of income to, or expenses of, the
Partnership which would normally be apportioned or adjusted under standard real
estate customs in effect as of the Closing Date in respect to title closings in
New York, New York.
(b) If the Gross Adjustment Amount is less than zero, Optionors shall
deliver to the Partnership, on the Closing Date, a cashier's or certified bank
check in an amount equal to the absolute value of such Gross Adjustment Amount.
If the Gross Adjustment Amount is greater than zero, the Partnership shall
deliver to Optionors (in proportion to their respective interests in the
Partnership), on the Closing Date, a cashier's or certified bank check in an
amount equal to such Gross Adjustment Amount.
(c) All arrearages in rent (including, without limitation, all base
rent and additional rent) and other charges (including, without limitation,
charges for electricity, taxes and operating expense), as of the Closing Date,
shall be applied and distributed in accordance with the provisions of Section
5.4 of the Amended and Restated Partnership Agreement.
24
<PAGE>
(d) If any of the items described in Section 7.01(a) cannot be
apportioned at the Closing, or are incorrectly apportioned at the Closing, such
items shall be apportioned as soon as practical after the date of the Closing.
(e) The provisions of this Section 7.01 shall survive the Closing.
7.02. Closing Costs. All taxes which may be imposed in connection with
-------------
the Closing under the Transfer Tax Law and Documentary Stamp Tax Law shall be
paid by Optionors or Optionee, as may then be customary or required by
applicable Law; provided, however, that if there is a reasonable uncertainty as
--------- -------
to what may then be customary with respect to the payment of any of the
aforementioned taxes, such taxes shall be paid by Optionors. Each party hereto
shall bear its own closing costs and expenses.
ARTICLE 8 EVENTS OF DEFAULT; REMEDIES UPON DEFAULT
----------------------------------------
8.01. Events of Default. The occurrence of any one or more of the
-----------------
following shall constitute an Event of Default hereunder:
(a) any representation or warranty in this Agreement or in any
certificate, agreement, instrument or other document made or delivered pursuant
to or in connection with this Agreement proves to have been incorrect in any
material respect when made; or
(b) the failure to perform or observe any term, covenant or agreement
to be performed or observed contained in this Agreement and such failure shall
remain unremedied for thirty (30) days after written notice thereof shall have
been given to the defaulting party by any non-defaulting party or, if such
failure is of such a nature that it cannot be completely remedied within said
thirty (30) day period, if the defaulting party shall not (i) promptly upon the
non-defaulting party's giving notice of such failure, advise the non-defaulting
party(ies) in writing of the specific measures which the defaulting party
intends to implement to remedy such failure, (ii) promptly institute and
diligently pursue all such measures necessary to remedy the same, and (iii)
effect such remedy within a reasonable period of time after the date of the
giving of such notice by the non-defaulting party.
8.02. Remedies upon Default. Upon the occurrence of any Event of Default,
---------------------
the non-defaulting party(ies) may, at its option, terminate this Agreement by
written notice to the other party(ies) and neither party shall have any further
right or obligation hereunder. The parties reserve the right to any and all
remedies available to them at Law or in equity, including specific performance.
If the defaulting party is Optionee and Optionors elect to terminate this
Agreement, then the Maturity Date of the Loan shall be extended for a period of
twelve (12) months during which twelve (12)-month period the Partnership shall
have the right to prepay the Loan without premium or penalty upon twenty (20)
Banking Days' prior notice to Optionee.
25
<PAGE>
8.03. Events Accelerating Exercise of the Option and Closing.
------------------------------------------------------
(a) Option Acceleration Events. Optionee shall have the right, by
--------------------------
written notice given to Optionors as provided below, and notwithstanding
anything to the contrary contained in Section 2.02, to elect to exercise the
Option upon occurrence of any of the following events, if any such event occurs
at any time prior to the latest date upon which the Option may be exercised in
accordance with Section 2.02 (collectively, "Triggering Events"):
-----------------
(i) Project Sale. The sale of all or substantially all of the
------------
Project; or
(ii) Project Conversion. The payment to the Partnership of
------------------
insurance proceeds or condemnation awards as a result of a destruction of all or
substantially all of the Project (unless Optionors have elected, pursuant to the
terms of the Loan Documents, to use the insurance proceeds for restoration or
rebuilding), a taking in eminent domain of all or substantially all of the
Project or a title defect which deprives the Partnership of the beneficial use
and enjoyment of all or substantially all of the Project; or
(iii) Dissolution. The dissolution of the Partnership and
-----------
liquidation of its assets upon the mutual agreement of the Optionors to do so
following a determination by the Optionors that it is no longer economically
feasible to carry on the business of the Partnership.
To the extent that any Triggering Event constitutes an Event of Default, or
requires the prior written consent of Optionee under any of the Loan Documents,
this Section 8.03 shall not be deemed to modify the applicable terms of the Loan
Documents.
(b) Exercise of Option. Optionors shall deliver to Optionee at least
------------------
forty-five (45) days' prior written notice of the projected date of any
Triggering Event (and, in any event, shall deliver such notice as soon as
reasonably practicable). Optionors shall accompany any such notice with
reasonably detailed information regarding such Triggering Event. Optionors shall
supply such additional information with respect to such Triggering Event as
Optionee or its counsel may reasonably request and as is reasonably available to
Optionors. Not later than thirty (30) days after such notice is given to
Optionee, Optionee shall, if it desires to exercise the Option under Section
8.03(a), give to the Partnership written notice of its election to exercise the
Option hereunder.
In the event that Optionee exercises the Option as provided above, this
Agreement shall thereupon be deemed a contract for the acquisition of the 33-
1/3% Partnership Interest, subject to the condition that the applicable
Triggering Event occurs. The Closing Date pursuant to this Section 8.03 shall be
a date which is no later than one (1) day preceding the occurrence of the
applicable Triggering Event unless otherwise mutually agreed. If for any reason
such Triggering Event shall not occur, any exercise of the Option by Optionee
made pursuant to this Section 8.03 shall be deemed revoked and this Agreement
shall be reinstated in its entirety.
8.04. Intervening Governmental Action. If Optionee is unable to close or
-------------------------------
to act as Optionee under this Agreement on account of an Intervening
Governmental Action (as defined
26
<PAGE>
below) this Agreement shall, at the election of Optionee, either (a) terminate
and neither party shall have any rights or liabilities hereunder, or (b) be
assignable by Optionee in accordance with the terms of Section 9.06. An
"Intervening Governmental Action" shall mean a statute, rule, regulation, or
official or unofficial change of position, of the Government of Japan or of the
United States of any ministry or department thereof (a "Governmental Entity")
-------------------
which makes it Unlawful (as defined below) for Optionee to consummate the
Closing or act as Optionee, but only if (x) such Intervening Governmental Action
is not enacted or promulgated at the date hereof, (y) Optionee has made good
faith efforts to obtain an approval or exemption from the relevant Governmental
Agency to enable it to consummate the Closing or act as Optionee, but has been
unable to do so, and (z) Optionee has given Optionors such evidence, if any, as
may be available respecting the existence and effective date of such Intervening
Governmental Action, of its applicability to Optionee and this Agreement, and of
Optionee's compliance with subparagraph (y) hereof. For the purposes of this
Section 8.04 only, "Unlawful" shall mean violative of, prohibited, or
unauthorized by Law, or contrary to the advice, opinion or policy, whether
official or unofficial, of any Governmental Entity.
8.05. Waiver; No Election.
-------------------
(a) Except as specifically provided herein, the exercise of (or
failure to exercise) any one of a party's rights or remedies under this
Agreement shall not be deemed to be in lieu of, or a waiver of, any other right
or remedy contained herein.
(b) In the event of the occurrence of an Event of Default, the
non-defaulting party shall have the sole right to determine which remedies
available under this Agreement to pursue, and such party may elect to pursue (or
not to pursue) any or all of such remedies (regardless of whether such election
is deemed to be inconsistent).
ARTICLE 9 MISCELLANEOUS PROVISIONS
------------------------
9.01. Casualty. If the Project is damaged or destroyed by fire or other
--------
casualty subsequent to the Exercise Date, Optionors agree to notify Optionee of
that fact within ten (10) days following its occurrence, providing such details
as are available at that time. If it appears to Optionee on the basis of
available evidence and information that the repair or restoration of such damage
or destruction will not be completed by the Closing Date, Optionee shall have
the right to rescind its Exercise Notice by written notice to Optionors within
twenty (20) days following the occurrence of such damage or destruction, in
which event:
(a) the Closing Date shall be extended to a date not later than
twelve (12) months following the date of such damage or destruction and the
Maturity Date shall be extended for a period of twelve (12) months from the date
of the occurrence of such damage or destruction, during which twelve-month
period the Partnership shall, if Optionee elects to terminate this Agreement
pursuant to clause (c) below, have the right to prepay the Loan without premium
or penalty upon twenty (20) Banking Days' prior notice to Optionee;
27
<PAGE>
(b) within one hundred twenty (120) days following the occurrence of
such damage or destruction, Optionors agree to deliver to Optionee detailed
information respecting the nature and scope of the damage or destruction, the
plans for and timing of the restoration thereof and all other materials and
information necessary to enable Optionee to make an informed decision whether to
proceed to Closing;
(c) within one hundred twenty (120) days following receipt by Optionee
of the deliveries required by clause (b) above, Optionee agrees to notify
Optionors in writing of its decision either (i) to proceed to Closing or (ii) to
terminate this Agreement, in which latter event neither Optionors nor Optionee
shall have any further rights or obligations hereunder; and
(d) if Optionee elects to proceed to Closing, Optionors agree to
deliver to Optionee, as promptly as practicable, all of the items specified in
Section 6.02(a) hereof and, subject to compliance with and satisfaction of the
requirements of Sections 6.02(b) and 6.03 (but excluding the condition set forth
in Section 6.03(c)) hereof, the Closing shall occur not later than thirty (30)
days thereafter.
9.02. Casualty or Condemnation. The Partnership, Optionors and Optionee
------------------------
hereby waive the provisions of all applicable Laws relating to the occurrence of
a casualty or condemnation between the date hereof and the Closing, and the
parties agree that the provisions set forth in this Agreement shall govern in
lieu of such applicable Law.
9.03. Banking Day Extension. In the event any time period or any date
---------------------
provided in this Agreement ends or falls on a day other than a Banking Day, then
such time period shall be deemed to end and such date shall be deemed to fall on
the next succeeding Banking Day, and performance hereunder may be made on such
Banking Day with the same force and effect as if made on such other day.
9.04. Confidentiality. The existence and contents of this Agreement and
---------------
all other documents attached hereto as exhibits, the matters disclosed by any
review undertaken by Optionee in connection with this transaction and all
information now or hereafter furnished to Optionee pursuant to this Agreement
shall not be disclosed to any third parties without the advance written consent
of all parties hereto, except for any disclosure that may be required to be made
to any applicable Governmental Agency. No advertisement or other publicity
concerning this transaction shall be made or disseminated by any party either
before or after the Closing Date hereunder without the review and approval of
all parties hereto. All parties recognize the need to disclose aspects of this
transaction to their respective accountants, attorneys and other consultants.
No party is responsible for the actions of third parties as to the disclosure of
confidential information, but each party agrees to inform its accountants,
attorneys and other consultants of the confidentiality of this transaction and
all such other information and, upon request of any other, agrees to use
reasonable efforts to obtain confidentiality agreements from such third parties.
Notwithstanding the foregoing, Optionors hereby agree that Optionee may disclose
the general terms of this transaction (but not any
28
<PAGE>
information concerning Leases or other financial information regarding the
Project, the Partnership, Optionors or any other partner in the Partnership) to
third parties in Japan.
9.05. Brokerage. The parties each represent to the others that it has not
---------
dealt with any broker or finder in connection with this Agreement or the
transactions contemplated hereby except for Jones Lang Wootton USA ("JLW") and
---
that no commission, brokerage fee or similar charge is or will be payable in
connection with this Agreement or the transactions contemplated hereby, except
to JLW, which fee Optionors agree will be paid by Optionors pursuant to separate
agreement. The parties shall each indemnify, save and hold harmless the others
from any and all claims arising as a result of the inaccuracy of the
representation provided in this Section 9.05. The provisions of this Section
9.05 shall survive the Closing or termination of this Agreement.
9.06. Binding Effect; Assignment.. This Agreement shall be binding upon
--------------------------
and shall inure to the benefit of the parties hereto and their respective
permitted successors and assigns, except that Optionors may not assign their
rights or interests or delegate any of their duties under this Agreement without
the prior written consent of Optionee. Optionee shall have the right, in its
sole and absolute discretion, to transfer, assign or sell in its entirety any or
all of its right and interest in and under this Agreement; provided that
Optionee agrees only to transfer, assign or sell any or all of its right and
interest in and under this Agreement in connection with a transfer, assignment
or sale of Optionee's right and interest under the Loan Documents. As a
condition of any transfer by any Optionor of an interest in the Partnership to a
Permitted Transferee, such Optionor shall require such Permitted Transferee to
execute and deliver to Optionee such documentation as Optionee shall reasonably
require confirming such Permitted Transferee's agreement to be bound hereby.
9.07. Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts and any party hereto may execute any counterpart, each of
which when executed and delivered will be deemed to be an original and all of
which counterparts of this Agreement, taken together will be deemed to be but
one and the same instrument.
9.08. Amendments; Consents. No amendment, modification, supplement,
--------------------
termination or waiver of any provision of this Agreement, and no consent to any
departure by any party from the terms hereof, may in any event be effective
unless in writing signed by the party to be charged, and then only in the
specific instance and for the specific purpose given.
9.09. Non-Waiver of Remedies. No waiver of any breach or default
----------------------
hereunder shall constitute or be construed as a waiver by a party of any
subsequent breach or default or of any breach or default of any other provision
of this Agreement.
9.10. Survival. Except as specifically provided in this Agreement, the
--------
representations and warranties contained herein and in any certificate or
schedule delivered pursuant hereto shall survive the Closing for a period of one
(1) year.
29
<PAGE>
9.11. Notices. Any notice, request, demand or other communication
-------
required or permitted hereunder, shall be given by delivering the same in person
to the intended addressee by first class registered or certified mail, postage
prepaid, return receipt requested; or by air courier, sent to the intended
addressee at the address or addresses, set forth below, or to such different
address as the addressee shall have designated by written notice sent in
accordance herewith:
To Optionors:
BOSTON PROPERTIES LIMITED PARTNERSHIP
c/o Boston Properties, Inc.
8 Arlington Street
Boston, Massachusetts 02116-3495
Attention: President
BOSTON PROPERTIES L.L.C.
c/o Boston Properties, Inc.
8 Arlington Street
Boston, Massachusetts 02116-3495
Attention: President
Copy to:
Bingham, Dana & Gould LLP
150 Federal Street, 23rd Floor
Boston, Massachusetts 02111
Attention: Peter Van, Esq.
To Optionee:
Mitsui Seimei America Corporation
200 Park Avenue
16th Floor
New York, New York 10166
Attention: President
Copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
47th Floor
New York, New York 10166
Attention: Kimmarie Sinatra, Esq.
30
<PAGE>
Copy to:
Jones Lang Wootton USA
101 East 52nd Street
20th Floor
New York, New York 10022
Attention: R. Gary Barth
Such notice shall be deemed to have been given as of the date of receipt in
the case of personal delivery or air courier or, in the case of mailing, as of
the date of first attempted delivery at the address and in the manner provided
herein.
9.12. Governing Law. This Agreement shall be governed by, and construed
-------------
and enforced in accordance with, the laws of the State of New York applicable to
agreements intended to be wholly performed within the State of New York.
9.13. Severability of Provisions. Any provision of this Agreement that is
--------------------------
held to be inoperative, unenforceable or invalid as to any party or in any
jurisdiction shall, as to that party or jurisdiction, be inoperative,
unenforceable or invalid without affecting the remaining provisions or the
operation, enforceability or validity of that provision as to any other party or
in any other jurisdiction, and to this end the provisions of this Agreement are
declared to be severable.
9.14. Integration. This Agreement, together with the other Loan
-----------
Documents, comprises the complete and integrated agreement of the parties on the
subject matter hereof and supersedes all prior agreements, written or oral, on
the subject matter hereof. This Agreement was drafted with the joint
participation of the Partnership, Optionors and Optionee and shall be construed
neither against nor in favor of any such party.
9.15. Captions. The captions and headings hereof are for convenience of
--------
reference only and shall not be construed to define, limit, describe or
otherwise affect the scope or intent of this Agreement.
9.16. No Agency, Partnership or Joint Venture. Unless and until the
---------------------------------------
Amended and Restated Partnership Agreement is executed and exchanged by Optionee
and Optionors, the parties shall not be deemed to be partners, joint venturers
or any similar type of relationship, nor shall they be deemed to have any
fiduciary obligations to each other.
9.17. Time of the Essence. Time is of the essence with respect to the
-------------------
obligations under this Agreement.
9.18. Construction. As used herein, the masculine shall include the
------------
feminine and neuter, and the singular shall include the plural.
31
<PAGE>
9.19. Estoppel Certificates. Within ten (10) days after request by any
---------------------
party to this Agreement to the other, such other party shall certify to the
requesting party or its designee (a) that this Agreement is unmodified and in
full force and effect (or if there have been any modifications that this
Agreement is in full force and effect as modified, stating the modifications),
(b) whether to the knowledge of the party executing such certificate (i) there
exists any default by the requesting party under this Agreement or (ii) there
has occurred and is continuing any event which, with the passage of time and/or
the giving of notice would constitute such a default, and in the case of either
(i) or (ii) specifying the same, and (c) such other matters with respect to this
Agreement as shall be reasonably requested by such requesting party.
9.20. Consent to Jurisdiction; Waiver of Trial by Jury. The parties
------------------------------------------------
hereto irrevocably and unconditionally (a) agree that any suit, action or other
legal proceeding arising out of this Agreement may be brought in the courts of
record of the State of New York or the courts of the United States located in
the State of New York; (b) consent to the jurisdiction of each such court in any
such suit, action or proceeding; and (c) waive any objection which they may have
to the laying of venue of any such suit, action or proceeding in any of such
courts. In any action hereunder, each of the Partnership, Optionors and
Optionee waives the right to demand a trial by jury.
9.21. Certificates of Optionors The parties hereto agree that any
-------------------------
certificate to be executed by an Optionor and delivered to Optionee or any
document to be initialed by an Optionor and delivered to Optionee in accordance,
in either case, with the terms hereof, shall be executed or initialed, as the
case may be, on behalf of the Optionor by the managing member of such Optionor
if such Optionor is a limited liability company. The parties hereto agree that
any certificate to be executed by an Optionor and delivered to Optionee or any
document to be initialed by an Optionor and delivered to Optionee in accordance,
in either case with the terms hereof, shall be executed or initialed, as the
case may be, on behalf of the Optionor, by the managing general partner of such
Optionor if such Optionor is a partnership. Notwithstanding any provision of
this Agreement to the contrary, to the extent that conveyance of the 33 1/3%
Partnership Interest requires conveyance by only one Optionor, any provision of
this Agreement requiring a certificate to be executed by each of the Optionors
shall be deemed to require execution by only the transferring Optionor.
32
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first set forth above.
OPTIONORS:
BOSTON PROPERTIES LIMITED PARTNERSHIP, a Delaware limited
partnership
By: BOSTON PROPERTIES, INC.,
a Delaware corporation, General Partner
By:__________________________________________
Name:
Title:
BOSTON PROPERTIES, LLC,
a Delaware limited liability company
By: BOSTON PROPERTIES LIMITED
PARTNERSHIP, a Delaware limited partnership,
Managing Member
By: BOSTON PROPERTIES, INC., a Delaware corporation,
General Partner
By:__________________________________________
Name:
Title:
33
<PAGE>
PARTNERSHIP:
LEXREAL ASSOCIATES LIMITED PARTNERSHIP, a
New York limited partnership
By: BOSTON PROPERTIES, LLC, a Delaware
limited liability company, General Partner
By: BOSTON PROPERTIES LIMITED
PARTNERSHIP, a Delaware limited
partnership, Managing Member
By: BOSTON PROPERTIES, INC., a
Delaware corporation, General Partner
By:____________________________
Name:
Title:
By: BOSTON PROPERTIES LIMITED
PARTNERSHIP, a Delaware limited partnership,
Limited Partner
By: BOSTON PROPERTIES, INC., a Delaware
corporation, General Partner
By:_________________________________
Name:
Title:
34
<PAGE>
OPTIONEE:
MITSUI SEIMEI AMERICA CORPORATION,
a New York corporation
By:________________________________________
Name: Shinjiro Goto
Title: President
35
<PAGE>
EXHIBIT 10.17
- --------------------------------------------------------------------------------
LOAN MODIFICATION AND EXTENSION AGREEMENT
by and between
SOUTHWEST MARKET LIMITED PARTNERSHIP
a District of Columbia limited partnership,
MORTIMER B. ZUCKERMAN
a natural person,
and
EDWARD H. LINDE
a natural person,
and
THE SUMITOMO BANK, LIMITED,
a Japanese banking institution acting
through its NEW YORK BRANCH
FOR
ONE INDEPENDENCE SQUARE
Dated as of September 26, 1994
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I CERTAIN DEFINITIONS.............................................. 5
ARTICLE II EXTENSION AND RELATED MATTERS.................................... 7
Section 2.01 Extension of Maturity Date.................................. 7
Section 2.02 Reaffirmation of Liability.................................. 7
Section 2.03 Modification Fee............................................ 8
ARTICLE III AMENDMENT OF ORIGINAL LOAN AGREEMENT............................ 9
Section 3.01 Amendment of Original Loan Agreement........................ 9
Section 3.02 Amendment of Other Loan Documents........................... 13
Section 3.03 Reaffirmation of Certain Documents.......................... 14
Section 3.04 Ratification of Loan Documents.............................. 14
ARTICLE IV LENDER'S FIXED RATE OPTION...................................... 15
Section 4.01 Lender's Fixed Rate Option.................................. 15
Section 4.02 Exercise of Lender's Conversion Option...................... 16
Section 4.03 Implementation of Interest Rate Management Arrangement...... 18
Section 4.04 Recalculation of Trigger Rate............................... 23
ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS........................ 25
Section 5.01 Existence................................................... 25
Section 5.02 Authorization............................................... 26
Section 5.03 Conflicting Agreements...................................... 27
Section 5.04 Organizational Documents.................................... 28
Section 5.05 No Litigation............................................... 30
Section 5.06 Compliance with Applicable Laws............................. 31
Section 5.07 Information Delivered....................................... 32
Section 5.08 True Statement.............................................. 33
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 5.09 No Event of Default........................................ 33
Section 5.10 Space Leases............................................... 33
Section 5.11 Financial Statements of Borrower........................... 34
Section 5.12 Financial Statements of Guarantor.......................... 35
Section 5.13 Taxes and Other Assessments................................ 35
Section 5.14 No Liens................................................... 36
Section 5.15 Trust Estate............................................... 36
Section 5.16 No Bankruptcy.............................................. 37
Section 5.17 Absence of Transfer........................................ 37
Section 5.18 Certificates............................................... 38
Section 5.19 Representations and Warranties in
Loan Documents............................................. 38
Section 5.20 Event of Default........................................... 39
ARTICLE VI EFFECTIVE DATE.................................................. 39
Section 6.01 Effective Date........................................... 39
Section 6.02 Termination.............................................. 43
ARTICLE VII MISCELLANEOUS.................................................. 43
Section 7.01 Entire Agreement; Exhibits and
Schedules................................................ 43
Section 7.02 Counterparts............................................. 44
Section 7.03 Governing Law............................................ 44
Section 7.04 Severability............................................. 44
Section 7.05 Successors and Assigns................................... 45
Section 7.06 Time of the Essence...................................... 45
Section 7.07 Headings................................................. 45
Section 7.08 Notices.................................................. 45
Section 7.09 Survival................................................. 45
</TABLE>
ii
<PAGE>
EXHIBITS
--------
<TABLE>
<S> <C>
Exhibit "A" Form of Allonge
Exhibit "B" Form of Third Amendment to Construction Loan Deed of Trust and
Security Agreement
Exhibit "C" Form of Second Amendment to Collateral Assignment of Leases,
Rents, Profits and Income and Pledge of Accounts
Exhibit "D" Form of First Modification to Collateral
Assignment of Project Documents
Exhibit "E-1" Form of Closing Certificate
Exhibit "E-2" Form of Closing Certificate
Exhibit "E-3" Form of Closing Certificate
Exhibit "E-4" Form of Closing Certificate
Exhibit "E-5" Form of Closing Certificate
Exhibit "F" Form of First Amendment to Consent and Certificate of Manager
Exhibit "G" Form of Extension of Side Letter regarding Development Fee
Exhibit "H" List of Space Leases
Exhibit "I" Certificate Confirming Effective Date
Exhibit "J" First Amendment to Interest Guaranty and Indemnity
SCHEDULES
---------
Schedule 1 Trigger Rates
Schedule 2 Methodology for Converting Pre-Tax Net Operating Income to
Trigger Rates
Schedule 3 Representatives of Borrower
</TABLE>
iii
<PAGE>
LOAN MODIFICATION AND EXTENSION AGREEMENT
THIS LOAN MODIFICATION AND EXTENSION AGREEMENT (this "Agreement") made
and entered into as of the 26th day of September, 1994, by and among SOUTHWEST
MARKET LIMITED PARTNERSHIP, a District of Columbia limited partnership
("Borrower"); MORTIMER B. ZUCKEAAAN who is a natural person ("Zuckerman"), and
EDWARD H. LINDE, who is a natural person ("Linde") (Zuckerman and Linde being
collectively referred to as the "Guarantors"); and THE SUMITOMO BANK, LIMITED, a
Japanese banking institution acting through its NEW YORK BRANCH ("Lender");
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Borrower and Lender are the parties to a certain Construction
Loan Agreement dated as of August 21, 1990 (the "Original Loan Agreement"),
pursuant to which Lender, in periodic advances, advanced to Borrower on the
terms and conditions set forth in the Original Loan Agreement the aggregate
principal amount of Eighty Million and No/100 Dollars ($80,000,000.00) (the
"Loan"); and
WHEREAS, all advances made by Lender to Borrower pursuant to the
Original Loan Agreement are evidenced by that certain Promissory Note dated
August 21, 1990, in the principal amount of $80,000,000, made by Borrower to the
order of Lender (the "original Note"); and
<PAGE>
WHEREAS, the Original Note is secured by that certain Construction Loan
Deed of Trust and Security Agreement dated as of August 18, 1990 and effective
as of August 21, 1990, by and among Borrower, Lender and Trustee (as defined
therein) as recorded in the Land Records of the District of Columbia on August
21, 1990 as Instrument No. 46387 (the "Initial Deed of Trust"); and
WHEREAS, the Initial Deed of Trust was amended by that certain First
Amendment to Construction Loan Deed of Trust and Security Agreement (the "First
Amendment to Deed of Trust"), by and among Borrower, Lender and Trustee, dated
as of February 25, 1991 and effective as of August 21, 1990, which was recorded
in the Land Records of the District of Columbia on March 7, 1991 as Instrument
No. 12123; and
WHEREAS, the Initial Deed of Trust, as amended by the First Amendment to
Deed of Trust, was further amended by that certain Second Amendment to
Construction Loan Deed of Trust and Security Agreement (the "Second Amendment to
Deed of Trust"), by and among Borrower, Lender and Trustee, dated as of
September 9, 1994 and effective as of September 21, 1994, which was recorded in
the Land Records of District of Columbia on September 21, 1994 as Instrument No.
76267 (the Initial Deed of Trust as amended by the First Amendment to Deed
2
<PAGE>
of Trust and as further amended by the Second Amendment to Deed of Trust shall
hereinafter be referred to as the "Original Deed of Trust"); and
WHEREAS, Borrower's obligations under the Original Loan Agreement and
Original Note are further secured by that certain Collateral Assignment of
Leases, Rents, profits and Income and Pledge of Accounts (the "Original
Assignment"), dated as of August 18, 1990 and effective as of August 21, 1990,
by Borrower to Lender, as amended by that certain First Amendment to Collateral
Assignment of Leases, Rents, Profits and Income and Pledge of Accounts (the
"First Amendment to Assignment"), bearing date of February 22, 1991 and
effective as of August 21, 1990, by Borrower to Lender (the Original Assignment
as amended by the First Amendment to Assignment shall hereinafter be referred to
as the "Assignment of Rents") and the Assignment of Project Documents (as
defined in the Original Loan Agreement); and
WHEREAS, pursuant to an Interest Guaranty and Indemnity dated as of
August 21, 1990, Guarantors jointly and severally guaranteed to Lender, on and
subject to the terms and conditions of the Interest Guaranty and Indemnity, the
payment of the Obligations (as defined in the Interest Guaranty); and
WHEREAS, pursuant to an Environmental Guaranty dated as of August 21,
1990, Guarantors jointly and severally guaranteed to Lender Borrower's
performance of certain
3
<PAGE>
obligations under the Initial Deed of Trust relating to Hazardous Material, as
such term is defined in the Initial Deed of Trust; and
WHEREAS, the Loan by its terms will mature on August 21, 1997 (the
"Original Maturity Date") and the principal balance and all other Indebtedness
owed by Borrower to Lender will become due and payable in full on such date; and
WHEREAS, Borrower and Lender desire to extend the Original Maturity Date
and modify certain other terms of the Loan, on and subject to the terms and
conditions set forth herein; and
WHEREAS, the extension of the maturity and the modification of certain
other terms of the Loan will provide economic benefits to Borrower and
Guarantors;
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to
legally bind themselves, Borrower, Guarantors and Lender hereby agree as
follows:
4
<PAGE>
ARTICLE I
CERTAIN DEFINITIONS
-------------------
As used in this Agreement, the capitalized terms set forth below shall
have the meanings given them in this Article I. Capitalized terms used in this
Agreement but not defined in this Article I shall have the meanings set forth
elsewhere in this Agreement or, if not defined elsewhere in this Agreement, the
meanings given such terms in the Original Loan Agreement (as amended by this
Agreement).
Effective Date. As used herein, "Effective Date" shall have the meaning
--------------
given to such term in Section 6.01 hereinbelow.
Modification Documents. As used herein, the "Modification Documents"
----------------------
shall mean (a) an Allonge (the "Allonge") in the form attached hereto as Exhibit
"A"; (b) a Third Amendment to Construction Loan Deed of Trust and Security
Agreement in the form attached hereto as Exhibit "B" (the "Modification to Deed
of Trust"); (c) a Second Amendment to Collateral Assignment of Leases, Rents,
Profits and Income and Pledge of Accounts in the form attached hereto as Exhibit
"C" (the "Modification to Assignment of Rents"); (d) a First Modification to
Collateral Assignment of Project Documents in the form attached hereto as
Exhibit "D" (the "Modification to Assignment of Project Documents"); (e) Closing
Certificates in
5
<PAGE>
the forms attached hereto as Exhibits "E-1", "E-2", "E-3", "E4", and "E-5"; (f)
this Agreement; (g) a First Amendment to Consent and Certificate of Manager in
the form attached hereto as Exhibit "F"; (h) an Extension of Side Letter
regarding Development Fee in the form attached hereto as Exhibit "G"; (i) a
First Amendment to Interest Guaranty and Indemnity in the form attached hereto
as Exhibit "J"; and (j) such other documents and instruments amending,
modifying, restating, or extending any of the Loan Documents as Lender
reasonably may require.
Original Note. As used herein, "Original Note" shall have the meaning
-------------
given to such term in the recitals to this Agreement and is the "Note" as
defined in the Original Loan Agreement prior to the amendments thereto effected
by this Agreement.
Trigger Rate. As used herein, "Trigger Rate" shall mean, for each
------------
calendar year falling in whole or in part within the Loan Term, the per annum
rate of interest set forth on Schedule 1 to this Agreement (which has been
calculated in accordance with Schedule 2 to this Agreement), as such rate may
from time to time be modified in accordance with Section 4.04 of this Agreement.
Trigger Rate Notice. As used herein, "Trigger Rate Notice" shall mean a
-------------------
telephonic notice (followed by prompt written confirmation thereof) by Lender to
Borrower, which
6
<PAGE>
informs Borrower that the Weighted Average Rate (as hereinafter defined) has
reached or surpassed the Trigger Rate.
Weighted Average Rate. As used herein, "Weighted Average Rate" shall
---------------------
mean the weighted average of the rates of interest that are in effect under the
Note on the first day of each calendar month (applicable for the previous month)
falling within the Loan Term with respect to each of the Portions of Principal
that comprise the entire outstanding principal balance of the Loan.
ARTICLE II
EXTENSION AND RELATED MATTERS
-----------------------------
Section 2.01. Extension of Maturity Date. On the Effective Date, the
--------------------------
Maturity Date of the Loan shall be extended from the Original Maturity Date to
August 21, 2001 as provided in the Allonge.
Section 2.02. Reaffirmation of Liability.
--------------------------
a. Borrower acknowledges and agrees, and shall forever be estopped
from controverting the fact that, as of the date hereof, Borrower is indebted to
Lender for the following items in the following amounts:
(i) The principal amount of the Loan of Eighty Million and
No/100 Dollars
7
<PAGE>
($80,000,000.00) together with any accrued but unpaid
interest at the rate or rates of interest in effect in
accordance with the terms of the Original Note; and
(ii) Lender's unpaid Out-of-Pocket Costs, including, without
limitation, legal fees incurred in connection with the
modification of the terms of the Loan to be effected
pursuant to this Agreement, in the aggregate amount of
Twenty-Five Thousand One Hundred Fifteen and 08/100
Dollars ($25,115.08).
b. On the Effective Date, Borrower shall pay to Lender in
immediately available funds all of Lender's unpaid Out-of-Pocket Costs incurred
as of the Effective Date.
Section 2.03. Modification Fee. On the Effective Date and in
----------------
consideration of Lender's extending the Original Maturity Date of the Loan and
modifying the terms of the Loan in the other respects set forth herein, Borrower
shall pay to Lender in immediately available funds a modification fee in the
amount of Two Hundred Forty Thousand and No/100 Dollars ($240,000.00).
8
<PAGE>
ARTICLE III
AMENDMENT OF ORIGINAL LOAN AGREEMENT
------------------------------------
Section 3.01. Amendment of Original Loan Agreement. On the Effective
------------------------------------
Date, the Original Loan Agreement shall be deemed amended by Borrower and Lender
as follows:
a. Throughout the Original Loan Agreement, the term "Agreement"
shall be deemed to refer to the Original Loan Agreement as amended by this
Agreement, as such Loan Agreement from time to time may be further amended,
modified, supplemented, restated, or extended.
b. In Article I of the Original Loan Agreement, the following
definitions are amended as follows:
(i) The definition of "Assignment of Project Documents" is
amended by adding at the end thereof, immediately
preceding the period, the following language: ", as
amended by that certain First Modification to Collateral
Assignment of Project Documents dated as of September 26,
1994, as such Assignment of Project Documents may from
time to time be further amended, modified, supplemented,
restated, or extended.
9
<PAGE>
(ii) The definition of "Assignment of Rents" is amended by
adding at the end thereof, immediately preceding the
period, the following language: ", as amended by that
certain First Amendment to Collateral Assignment of
Leases, Rents, Profits and Income and Pledge of Accounts
dated as of February 22, 1991 and effective as of August
21, 1990, as further amended by that certain Second
Amendment to Collateral Assignment of Leases, Rents,
Profits and Income and Pledge of Accounts dated as of
September 23 , 1994 and effective as of September 26
1994, as such Assignment of Rents may from time to time
be further amended, modified, supplemented, restated or
extended".
(iii) The definition of "Environmental Guaranty" is amended by
adding at the end thereof, immediately proceeding the
period, the following language: ", as reaffirmed by that
certain Loan Modification and Extension Agreement dated
as of September 26, 1994, as such Environmental Guaranty
may from time to time be further
10
<PAGE>
reaffirmed, amended, modified, supplemented, restated or
extended".
(iv) The definition of "Interest Guaranty" is amended by
adding at the end thereof, immediately preceding the
period, the following language: ", as reaffirmed by that
certain Loan Modification and Extension Agreement dated
as of September 26, 1994, as amended by that certain
First Amendment to Interest Guaranty and Indemnity dated
as of September 26, 1994 and as such Interest Guaranty
may from time to time be further reaffirmed, amended,
modified, supplemented, restated or extended".
(v) The definition of "Loan Documents" is amended by adding
at the end thereof, immediately preceding the period, the
following language: ", as such Loan Documents may from
time to time be amended, modified, supplemented,
restated, or extended".
(vi) The definition of "Note" is amended to read in its
entirety as follows:
11
<PAGE>
Note. As used herein, "Note" shall mean that certain
----
Promissory Note dated August 21, 1990, made by Borrower
to the order of Lender, in the principal amount of Eighty
Million and No/100 U.S. Dollars (U.S. $80,000,000.00), as
amended by that certain Allonge dated September 26, 1994,
as such Note may from time to time be further amended,
modified, supplemented, restated, or extended.
c. Sections 3.03(e)(i) and 3.03(e) (ii) of the Original Loan
Agreement are hereby amended to read in their entirety as follows:
(i) In exercising the Conversion Option, Borrower must
designate a single Interest Period that begins on the
Conversion Date and expires on the Maturity Date.
(ii) In exercising the Conversion Option, Borrower must
designate as the Portion of Principal to bear interest at
the Fixed Rate the entire principal balance of the Loan
outstanding at such time.
12
<PAGE>
d. Section 7.21 of the Original Loan Agreement is hereby amended
by adding the following new paragraph (h) at the end thereof:
(h) Notwithstanding anything in this Section 7.21 to
the contrary, if the Third Amendment to Deed of Trust is not recorded
in the Land Records of the District of Columbia at Borrower's
request, Borrower shall not further mortgage, encumber for debt or
pledge the Trust Estate, Revenues or any part thereof or any interest
therein (including, without limitation, air or development rights)
without Lender's express written consent.
Section 3.02. Amendment of Other Loan Documents.
---------------------------------
a. On the Effective Date, the Original Note shall be amended by
Borrower's execution and delivery to Lender of the Allonge in the form of
Exhibit "A" hereto and Lender's affixation of the Allonqe to the Original Note
and thereafter shall be effective and interpreted in accordance with its terms
and conditions as so amended.
b. On the Effective Date, the Original Deed of Trust, the
Assignment of Rents, the Assignment of Project Documents and the Interest
Guaranty shall be modified by, respectively, the Modification to Deed of Trust,
the Modification to Assignment of Rents, the Modification to
13
<PAGE>
Assignment of Project Documents and the First Amendment to Interest Guaranty and
Indemnity, by Borrower's, Guarantors' and Lender's execution and delivery of
Exhibits "B", "C", "D" and "J" hereto, respectively, and thereafter shall be
effective and interpreted in accordance with their respective terms as so
modified.
Section 3.03. Reaffirmation of Certain Documents.
----------------------------------
Guarantors hereby absolutely, unconditionally and fully reaffirm all of
their guarantees, obligations and agreements under the Environmental Guaranty
and the Interest Guaranty according to the terms thereof.
Section 3.04. Ratification of Loan Documents. Except as expressly
------------------------------
amended, restated, modified, reaffirmed or extended by this Agreement and the
other Modification Documents, the Loan Documents shall remain in full force and
effect in accordance with their terms. Borrower and Guarantors, as to the Loan
Documents to which each is a party, acknowledge and agree that as of the date
hereof there exist no offsets, defenses, counterclaims, or abatements to the
obligations of Borrower or Guarantors thereunder and all obligations of Lender
thereunder have been fully performed.
Section 3.05 Termination of Completion Guaranty. Lender hereby confirms
----------------------------------
and acknowledges that the Completion
14
<PAGE>
Guaranty, dated as of August 21, 1990, made by Guarantors to Lender has been
terminated according to the terms thereunder.
ARTICLE IV
LENDER'S FIXED RATE OPTION
--------------------------
Section 4.01. Lender's Fixed Rate Option. Lender shall calculate and
--------------------------
notify Borrower on or after the first Business Day of each calendar month (but
not later than the tenth (10th) Business Day of such month) of the Weighted
Average Rate as of the first day of such calendar month. If the Weighted Average
Rate as of the first day of such month is equal to or greater than the Trigger
Rate for the calendar year in which such month occurs, Lender shall have the
right, on and subject to the terms and conditions set forth in this Article IV
("Lender's Conversion Option"), to cause the floating interest rate or rates
then in effect pursuant to the terms of the Note on the Portions of Principal
comprising the entire then-outstanding principal balance of the Loan to be
converted from such floating rate or rates to the Fixed Rate for an Interest
Period equal to the remainder of the Loan Term. Lender shall have no liability
to Borrower by reason of Lender's failure to calculate or give Borrower notice
of the Weighted Average Rate and such failure shall not constitute a default by
Lender under the terms of this Agreement or any other Loan Document. The sole
consequence of Lender's failure to calculate or give Borrower notice of the
Weighted Average
15
<PAGE>
Rate and such failure shall not constitute a default by Lender under the terms
of this Agreement or any other Loan Document. The sole consequence of Lender's
failure to calculate or give Borrower notice of the Weighted Average Rate shall
be that Lender shall not have the right to exercise Lender's Conversion Option
in a calendar month in which, by the tenth (10th) Business Day of such month,
Lender has not calculated and given Borrower notice of the Weighted Average Rate
in effect as of the first day of such month.
Section 4.02. Exercise of Lender's Conversion Option.
--------------------------------------
(a) If (i) Borrower has not theretofore exercised Borrower's Conversion
Option and converted the interest rate or rates on the Loan to the Fixed Rate
pursuant to Article III of the Original Loan Agreement as amended by this
Agreement, (ii) the Weighted Average Rate as of the first day of the calendar
month in which Lender elects to exercise Lender's Conversion Option is equal to
or greater than the Trigger Rate for the calendar year in which such month
occurs, and (iii) Lender has calculated and given Borrower notice of the
Weighted Average Rate not later than the tenth (10th) Business Day of such
month, Lender may thereafter exercise Lender's Conversion Option on any Business
Day during such month by giving Borrower a Trigger Rate Notice.
(b) The representatives of Borrower identified on Schedule 3 to this
Agreement (i) are each individually authorized to transmit to Lender Borrower's
acceptance or rejection of the Fixed Rate obtainable by Lender and offered to
Borrower, as hereinafter provided, and (ii) will be
16
<PAGE>
available to Lender by telephone from 9:00 a.m. New York time until 3:00 p.m.
New York time on each Business Day during the applicable Decision Period (as
defined in Section 4.02(c) below). Borrower may change the representatives
identified on Schedule 3 to this Agreement by delivering a written notice to
Lender identifying one or more representatives of Borrower (and the telephone
number of each such representative) for purposes of this Article IV. Borrower
may not change the representatives identified on Schedule 3 to this Agreement
during a Decision Period.
(c) A "Decision Period" shall mean a period commencing at 9:00 a.m. New
York time on the Business Day next following the date on which the Trigger Rate
Notice is given to Borrower and continuing through and including 3:00 p.m. New
York time on the fourth (4th) Business Day following the date on which the
Trigger Rate Notice is given to Borrower.
(d) Borrower's right to exercise Borrower's Conversion Option under
Article III of the Loan Agreement shall be suspended from the time Lender gives
a Trigger Rate Notice until the expiration of the ensuing Decision Period.
Section 4.03. Implementation of Interest Rate Management Arrangement.
------------------------------------------------------
(a) Lender shall, not later than 3:00 p.m. on the fourth (4th)
Business Day following the date on which the
17
<PAGE>
Trigger Rate Notice is given to Borrower, obtain one or more offers for an
Interest Rate Management Arrangement having a term equal to the remaining Loan
Term that, subject to Subsection 4.03(d) hereinbelow, will enable Lender to
convert the interest rate or rates on the entire principal balance of the Loan
outstanding at that time to a fixed rate of interest. Prior to accepting an
offer for an Interest Rate Management Arrangement, Lender shall telephonically
quote to Borrower the fixed per annum interest rate together with all Funding
Costs that will result from effectuating such an Interest Rate Management
Arrangement, which rate Borrower shall either accept or reject within three (3)
hours following Lender's telephonic quote to Borrower. The fixed rate offered by
Lender (i) if made applicable to the Loan prior to August 21, 1997 shall include
Lender's spread of seventy one hundredths of one percent (0.70%) and shall
increase on August 21, 1997 by ten one hundredths of one percent (0.10%), thus
increasing Lender's aggregate spread to eighty one hundredths of one percent
(0.80%) and on August 21, 2000 by an additional twenty one hundredths of one
percent (0.20%) , thus increasing Lender's aggregate spread to one percent
(1.00%); (ii) if made applicable to the Loan on or after August 21, 1997 but
prior to August 21, 2000, shall include Lender's spread of eighty one hundredths
of one percent (0.80%) and shall increase on August 21, 2000 by twenty
one hundredths of one percent (0.20%), thus increasing Lender's aggregate spread
to
18
<PAGE>
one percent (1.00%); and (iii) if made applicable to the Loan on or after August
21, 2000, shall include Lender's spread of one percent (1.00%).
(b) If Borrower accepts the fixed rate quoted by Lender, Lender shall
use all reasonable efforts to accept and enter into the offered Interest Rate
Management Arrangement. If Lender is able to enter into the offered Interest
Rate Management Arrangement then, commencing on the second (2nd) Business Day
after Lender enters into the offered Interest Rate Management Arrangement (the
"Lender Option Conversion Date") (subject to Section 4.03(d) below), the
interest rate on the entire principal balance of the Loan outstanding at that
time shall, without further notice to or action by Borrower or Lender, bear
interest at the fixed rate quoted by Lender for the remainder of the Loan term,
which shall include Lender's spread as set forth in Section 4.03(a) hereinabove
and shall increase as set forth in Section 4.03(a) hereinabove, which rate shall
constitute the Fixed Rate as defined in the Note. If Lender is unable to obtain
the fixed rate quote accepted by Borrower pursuant to this Section 4.03(b),
Lender shall, until 3:00 p.m. New York time on the
19
<PAGE>
final Business Day of the Decision Period, Lender shall have the right, in its
sole and absolute discretion, either (i) to accept and enter into an Interest
Rate Management Arrangement satisfactory to Lender in its sole and absolute
discretion in order to convert the interest rate or rates on the entire
principal balance of the Loan outstanding at that time to a fixed rate of
interest or (ii) not to enter into an Interest Rate Management Arrangement and
thereafter, subject to the same terms and conditions hereof, to give another
Trigger Rate Notice and, during the ensuing Decision Period, enter into an
Interest Rate Management Arrangement in the manner provided herein. If, under
clause (i) of the preceding sentence, Lender is able and so elects to enter into
an Interest Rate Management Arrangement then, commencing on the Lender Option
Conversion Date (subject to Section 4.03(d) hereinbelow), the interest rate on
the entire principal balance of the Loan outstanding at that time shall, without
further notice to or action by Borrower or Lender, bear interest for the
remainder of the Loan Term at a fixed per annum rate of interest equal to the
fixed rate provided for under the Interest Rate Management Arrangement accepted
by Lender plus Lender's spread as set forth in Section 4.03(a) hereinabove and
shall increase as set forth in Section 4.03(a) hereinabove, which rate shall
constitute the Fixed Rate as defined in the Note.
(c) If (i) Lender is able to contact Borrower and Borrower fails to
accept or reject the fixed rate quoted by
20
<PAGE>
Lender pursuant to Section 4.03(a) hereinabove, or (ii) Borrower rejects the
fixed rate quoted by Lender pursuant to Section 4.03(a) hereinabove, or (iii)
Borrower fails by 5:00 p.m. New York time on the Business Day immediately
preceding the last day of the Decision Period to designate one or more
individuals authorized to accept an offered fixed rate, or (iv) Lender is unable
to contact Borrower to obtain Borrower's election as to a proposed fixed rate,
Lender shall not accept an offered Interest Rate Management Arrangement and
shall, until 3:00 p.m. New York time on the final Business Day of the Decision
Period, continue to seek an Interest Rate Management Arrangement that will
result in a Fixed Rate acceptable to Borrower. If Borrower fails to accept a
Fixed Rate offered by Lender by 3:00 p.m. New York time on the final Business
Day of the Decision Period, Lender shall have the right, in its sole and
absolute discretion, either (A) to accept and enter into an Interest Rate
Management Arrangement satisfactory to Lender in its sole and absolute
discretion in order to convert the interest rate or rates on the entire
principal balance of the Loan outstanding at that time to a fixed rate of
interest or (B) not to enter into an Interest Rate Management Arrangement and
thereafter, subject to the same terms and conditions hereof, to give another
Trigger Rate Notice and, during the ensuing Decision Period, enter into an
Interest Rate Management Arrangement in the manner provided herein. If, under
clause (A) of the preceding sentence,
21
<PAGE>
Lender is able and so elects to enter into an Interest Rate Management
Arrangement then, commencing on the Lender Option Conversion Date (subject to
Section 4.03(d) hereinbelow), the interest rate on the entire principal balance
of the Loan outstanding at that time shall, without further notice to or action
by Borrower or Lender, bear interest for the remainder of the Loan Term at a
fixed per annum rate of interest equal to the fixed rate provided for under the
Interest Rate Management Arrangement accepted by Lender plus Lender's spread as
set forth in Section 4.03(a) hereinabove and shall increase as set forth in
Section 4.03(a), which rate shall constitute the Fixed Rate as defined in the
Note.
(d) Notwithstanding anything to the contrary in this Section 4.03, if,
on the Lender Option Conversion Date, the applicable interest rate for one or
more Portions of Principal will be the Eurodollar Rate pursuant to Section 3 of
the Note, Lender shall enter into an Interest Rate Management Arrangement that
will become effective (i) for each such Portion of Principal upon the expiration
of the Interest Period associated with the Eurodollar Rate applicable to such
Portion of Principal and (ii) for all other Portions of Principal on the Lender
Option Conversion Date. In such event, the Fixed Rate shall apply to each such
Portion of Principal bearing interest at a Eurodollar Rate upon the expiration
of the Interest Period associated with such Eurodollar Rate.
22
<PAGE>
(e) Borrower shall reimburse Lender for all Funding Costs and other
Out-of-Pocket Costs incurred by Lender in connection with Lender's entering into
an Interest Rate Management Arrangement under this Article IV.
Section 4.04. Recalculation of Trigger Rate.
-----------------------------
(a) Borrower and Lender acknowledge that the Trigger Rates set forth
on Schedule 1 to this Agreement were calculated using (i) the methodology
illustrated on Schedule 2 to this Agreement and (ii) the "Pre-Tax Net Operating
Income" of the Trust Estate as calculated and set forth by Leggat McCall &
Werner Appraisal and Consulting Co., Inc. ("Leggat McCall") in that certain re-
examination dated July 11, 1994 (the "Reappraisal") of earlier appraisals
prepared by Leggat McCall of the Trust Estate and Phase II.
(b) If Lender, in its reasonable discretion, determines at any time
during the Loan Term that the Pre-Tax Net Operating Income of the Trust Estate
has for any reason decreased since the date on which Trigger Rates were last
calculated by more than five percent (5%), Borrower shall, if Lender so requests
and at Borrower's sole cost and expense, but subject to Section 4.04(c)
hereinbelow, cause Leggat McCall (or another appraisal firm acceptable to Lender
in its reasonable discretion if Leggat McCall is not then in business or is
unable or unwilling to perform in a timely manner the work contemplated by this
Section 4.04(b)) within thirty (30)
23
<PAGE>
days of Lender's request to determine the then-current Pre-Tax Net Operating
Income of the Trust Estate using the same methodology used by Leggat McCall to
determine Pre-Tax Net Operating Income for purposes of the Reappraisal, provided
that in determining the then-current Pre-Tax Net Operating Income of the Trust
Estate, Borrower shall cause Leggat McCall (or such other appraisal firm as
provided for above) to use only Revenues received under Qualifying Space Leases.
Lender shall then recalculate each annual Trigger Rate using (i) the then-
current Pre-Tax Net Operating Income as so redetermined and (ii) the methodology
set forth on Schedule 2 to this Agreement. Lender shall give Borrower notice of
the Trigger Rates as so recalculated by Lender and, from and after the date on
which such notice is given, the Trigger Rates shall for all purposes hereunder
be deemed amended to be the Trigger Rates as so recalculated.
(c) If the Pre-Tax Net Operating Income of the Trust Estate has
decreased by more than five percent (5%) by reason of Space Tenants that occupy
more than five percent (5%) of the rentable space in the Improvements
terminating their Space Leases, then Borrower shall not be required to cause the
Pre-Tax Net Operating Income of the Trust Estate to be redetermined in
accordance with Section 4.04(b) hereinabove until such time as Space Tenants
occupy at least ninety-five percent (95%) of the rentable space in the
Improvements under Qualifying Space Leases.
24
<PAGE>
(d) Trigger Rates shall remain in effect until recalculated in
accordance with this Section 4.04.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
Each of Zuckerman, Linde, and Borrower makes the representations,
warranties and covenants respectively pertaining to himself or itself set forth
in Section 5.01 through and including Section 5.19 hereinbelow as of the date
hereof and again on and as of the Effective Date, all of which shall survive the
execution and delivery of this Agreement.
Section 5.01. Existence. Borrower is and at all relevant times was a
---------
limited partnership duly organized, validly existing and in good standing under
the laws of the District of Columbia. Borrower has and at all relevant times had
the authority, rights and franchises to own its properties, to carry on its
business as now conducted, to perform its obligations under the Loan Documents,
this Agreement, and the other Modification Documents, to complete the Project in
accordance with the Plans, to own and operate the Project as a first-class
commercial office building, and has made all filings in each jurisdiction in
which the character of its business or nature of its properties makes such
filings necessary and where not filing could have a material adverse impact on
its business. Borrower conducts no
25
<PAGE>
business, directly or indirectly, except for the ownership and operation of the
Project and of Phase II, and the ownership of Lot 872.
Section 5.02. Authorization. Enforceable Obligations. Each of
--------------------------------------
Guarantors and Borrower has the authority and legal right to execute, deliver
and perform this Agreement and the Modification Documents to which he or it is a
party and Borrower has taken all necessary partnership action to authorize the
execution, delivery and performance of this Agreement and the Modification
Documents to which it is a party. No consent, license, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or
declaration with any court, Governmental Authority, or third party which has not
been obtained is required for the execution, delivery, and performance by
Borrower or Guarantors of this Agreement or the Modification Documents to which
he or it is a party. This Agreement has been (and, on the Effective Date, each
of the Modification Documents will have been) executed and delivered by each of
Borrower and Guarantors if a party thereto and constitutes (and, on the
Effective Date, each of this Agreement and the Modification Documents will
constitute) the legal, valid and binding obligation of each of Borrower and
Guarantors if a party thereto, enforceable against such persons and entities in
accordance with its terms.
26
<PAGE>
Section 5.03. Conflicting Agreements. Neither the execution nor
----------------------
delivery of any of this Agreement or the Modification Documents nor the
fulfillment of or compliance with the terms and provisions hereof or thereof or
of the Loan Documents, nor the consummation of the transactions contemplated
hereby or by any of the other documents referred to herein, will conflict with
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the creation of any
Lien (other than the lien of the Loan Documents and the Modification Documents)
upon any of the properties or assets of either of Borrower or Guarantors
pursuant to its partnership agreement, any other contract, any award of any
arbitrator or any agreement, (including any agreement with Borrower's partners
and also including Project Documents), instrument, order, judgment, decree,
statute, law, ordinance, franchise, certificate, permit, rule, regulation or the
like to which any of Borrower or Guarantors is subject, or to or by which their
or its properties or their or its assets or the Trust Estate are bound or
affected.
Section 5.04. Organizational Documents. Borrower has furnished
------------------------
Lender with true, correct, and complete copies of the following documents:
27
<PAGE>
(a) with respect to Independence Square, Inc., sole Managing General
Partner of the sole General Partner of Borrower:
(i) The certificate of incorporation of such corporation and all
amendments thereof, certified by the Secretary of State of
the state of such corporation's incorporation, together with
a certificate of said Secretary of State to the effect that
the corporation is in good standing therein;
(ii) A certificate from the Secretary of State or comparable
official of the jurisdiction in which the Premises are
located (if other than such corporation's state of
incorporation) to the effect that the corporation is in good
standing and qualified to do business therein;
(iii) Bylaws certified to Lender by the secretary of the
corporation; and
(iv) A certificate of the secretary of the corporation certifying
(A) resolutions
28
<PAGE>
of the shareholders and directors of the corporation
authorizing the consummation of the transactions
contemplated by the Modification Documents to which such
corporation is a party or a signatory and the execution,
delivery, and performance of each of the Modification
Documents to which such corporation is a party or a
signatory and (B) the incumbency and signature of each of
the officers of the corporation to execute any Modification
Documents; and
(b) With respect to Boston Southwest Associates Limited Partnership,
sole General Partner of Borrower:
(i) A true, correct and complete copy of its partnership
agreement, together with all amendments thereto, as
currently in effect, certified by a Person satisfactory to
Lender in its sole discretion.
(ii) All certificates filed or required to be filed by the
partnership in the jurisdiction of its formation and the
jurisdiction where the Premises are
29
<PAGE>
located in order for it to do business in those
jurisdictions; and
(iii) Such evidence as may be available from the Secretary of
State or comparable official of the jurisdiction of the
partnership's formation to the effect that the partnership
continues to exist and is in good standing.
Section 5.05. No Material Litigation. No litigation, investigation
----------------------
or administrative proceeding of or before any court, arbitrator, or Governmental
Authority is pending, or has been threatened in writing by potential claimants
or their counsel, against any of Borrower or Guarantors or any of their assets
or that would, if adversely determined, be likely to have a material adverse
effect on (a) Borrower's or either Guarantor's ability to perform its or his
obligations under this Agreement, the other Loan Documents, or the Modification
Documents; (b) the validity or enforceability of this Agreement, the other Loan
Documents, or the Modification Documents; or (c) Lender's security under this
Agreement, any other Loan Document, or the Modification Documents. No notice
has been received by Borrower of any proceeding to condemn, purchase, or
otherwise acquire the Trust Estate or any part thereof or interest therein, and,
to the best of Borrower's
30
<PAGE>
knowledge, no such proceeding has been threatened by a duly authorized official
of a Governmental Authority acting in his official capacity.
Section 5.06. Compliance with Applicable Laws. Each of Borrower,
-------------------------------
Guarantors, the Project, and the Trust Estate is in compliance with the
requirements of all Laws, the failure to comply with which would materially and
adversely affect Borrower's or either Guarantor's ability to perform its or his
obligations under this Agreement, any of the other Loan Documents, or the
Modification Documents, and no written notice of non-compliance with any' of the
foregoing has been received by Borrower or either Guarantor from any
Governmental Authority. No consent, approval or authorization, or registration,
declaration or filing with any Governmental Authority or any other Person is
required for the valid execution, delivery and performance by Borrower and
Guarantors of this Agreement, the other Loan Documents, or the Modification
Documents, or the carrying out of the transactions contemplated of hereby or
thereby.
Section 5.07. Information Delivered. All facts, studies, reports,
---------------------
loan applications, financial statements, operating cost histories, and all other
documents and data, financial or otherwise, respecting Borrower and Guarantors,
or contracts, permits, licenses, or other matters affecting any part of the
Trust Estate or the operation thereof which
31
<PAGE>
have been furnished to Lender or Lender's counsel by Borrower or Borrower's
counsel or Guarantors or Guarantors' counsel were, to the best of Borrower's and
Guarantors' knowledge, true, correct, and complete in all material respects when
made or delivered to Lender, or, if copies thereof have been so furnished, such
copies are, to the best of Borrower's and each Guarantor's knowledge, true,
correct and complete in all material respects, and neither Borrower nor any and
Guarantor has failed to disclose any data or documents necessary to make the
foregoing true, accurate, complete in all material respects and not materially
misleading.
Section 5.08. True Statement. Neither this Agreement, any other Loan
--------------
Document, the Modification Documents nor any other document delivered to Lender
in connection with the Loan contains, or will contain when made, any untrue
statement of a material fact by Borrower or Guarantors and by this reference all
representations and warranties made in any of the Loan Documents and the
Modification Documents are hereby made a part of this Agreement to the same
extent as if fully set forth herein.
Section 5.09. No Event of Default. There exists no Event of Default
-------------------
under any of the Loan Documents nor any fact or circumstance which, with the
passage of time, giving of notice or action by third parties could become an
32
<PAGE>
Event of Default under any of the Loan Documents or the Modification Documents.
Section 5.10. Space Leases. Set forth on Exhibit "H" hereto is a true,
------------
correct, and complete list of all Space Leases now in effect with respect to the
Trust Estate. Except for such Space Leases and the Permitted Exceptions, there
are no leases, licenses, tenancy agreements, contracts, or understandings, oral
or written, pursuant to which any person or entity has or claims any right to
use or occupy any portion of the Trust Estate. Except as set forth on such
Exhibit "H", there are no amendments, modifications, supplements, or
understandings, oral or written, which affect any of the Space Leases. All other
information set forth on Exhibit "H" with respect to the Space Leases is true
and correct in all material respects. No notice of default has been given by any
party to any Space Lease which default remains uncured, there are no material
defaults under the provisions of any of the Space Leases, and all conditions to
the effectiveness and continuing effectiveness of each Space Lease required to
be satisfied as of the date hereof have been satisfied. The OCC has neither
exercised nor stated to Borrower orally or in writing an intention to exercise
the OCC's right to terminate the OCC Lease.
Section 5.11. Financial Statements of Borrower. Borrower has furnished
--------------------------------
to Lender the financial statements of
33
<PAGE>
Borrower for its fiscal year ended December 31, 1993, consisting of balance
sheets and statements of income and retained earnings and changes in financial
position for the years then ended, certified by the chief financial officer of
Borrower's general partner as being true, complete, and correct; the foregoing
financial statements are true and correct and contain no material misstatement
or omission, and fairly present financial position, assets, and liabilities of
Borrower as of the respective dates thereof and the results of its operations
for the respective periods then ended; since the respective dates of the
foregoing financial statements, there has been no material adverse change in the
assets, liabilities, financial position, or results of operations of Borrower;
and Borrower has not incurred any obligation or liability which would materially
and adversely affect its business operations or its interest in the Trust
Estate.
Section 5.12. Financial Statements of Guarantors. Borrower has furnished
----------------------------------
or caused to be furnished to Lender the financial statements of each Guarantor
for the fiscal year ending December 31, 1993, certified by the respective
Guarantor (a) as being true, complete, and correct; (b) containing no material
misstatement or omission, and fairly presenting the financial position, assets,
and liabilities of Guarantor as of the date thereof; (c) since the date of the
foregoing financial statements, there has been no material adverse change in the
assets, liabilities, or
34
<PAGE>
financial position of Guarantor; and (d) Guarantor not having incurred any
obligation or liability which would materially and adversely affect his
financial position.
Section 5.13. Taxes and Other Assessments. Each of Borrower and
---------------------------
Guarantors has filed all federal, state, and local tax returns and other reports
required by all laws to have been filed prior to the date hereof; has paid or
caused to be paid all taxes, assessments, and other governmental charges that
are due and payable prior to the date hereof; and has made adequate provision
for the payment of such taxes, assessments, or other charges accruing but not
yet payable. Neither Borrower nor any of Guarantors has knowledge of any
deficiency or additional assessment in a materially important amount in
connection with any taxes, assessments, or charges not provided for on its
respective books.
Section 5.14. No Liens. To the best of Borrower's knowledge, there are
--------
no liens or other impositions against the Trust Estate or any part thereof
except as may be included among the Permitted Exceptions. To the best of
Borrower's knowledge, there do not exist any unpaid conditional sales contracts,
chattel mortgages, security agreements, or financing statements in respect of
the Trust Estate, or any part thereof, except such as may be included among the
Permitted Exceptions. Without limiting the foregoing, the Trust Estate is, to
the best of Borrower's knowledge, free
35
<PAGE>
from due and unpaid water charges, sewer rents, taxes, assessments, and other
similar liens and/or impositions, mechanics' and materialmen's liens (choate, or
inchoate), and any other Liens (other than liens arising with respect to
nondelinquent property taxes) whether or not disclosed in the Title Policies.
Section 5.15. Trust Estate. There has occurred no material damage to
------------
any part of the Trust Estate. No part of the Trust Estate has been taken in
condemnation or other like proceedings. Borrower has received no notice of any
(i) proceedings in eminent domain or any similar proceeding or transaction with
respect to any part of the Trust Estate; or (ii) material change in the zoning
of the Land or the use thereof as permitted by law and, to the best of
Borrower's knowledge, no such proceeding or change has been threatened by a duly
authorized official of a Governmental Authority acting in his official capacity.
Section 5.16. No Bankruptcy. As of the date hereof, there is no (a)
-------------
filing by or against Borrower or any of Guarantors of a voluntary or involuntary
case or petition in bankruptcy, insolvency, or reorganization under the Federal
Bankruptcy Code as now or hereafter constituted or under any other laws of
similar nature, which bankruptcy, insolvency, or reorganization in the case of
an involuntary filing has not been dismissed; (b) appointment of a receiver or
trustee for
36
<PAGE>
Borrower, any of the foregoing persons or entities, or the Trust Estate, or any
part thereof; (c) making by Borrower or any of the foregoing persons or entities
of an assignment for the benefit of creditors; or (d) any similar act or
occurrence.
Section 5.17. Absence of Transfer. Since the date of the original
-------------------
funding of the Loan, there has not been any Transfer and there is not now in
existence any contract providing for or contemplating a Transfer.
Section 5.18. Certificates. Borrower has delivered to Lender all such
------------
permits, licenses, variances, approvals, consents, and other certificates or
documents with respect to the Trust Estate (collectively, the "Certificates") as
have been issued as of the date hereof by all relevant governmental authorities
of competent jurisdiction which to the best of Borrower's knowledge are
necessary to evidence the legal right and ability of Borrower to operate the
Trust Estate as it currently is operated. Borrower will deliver to Lender copies
of all other necessary Certificates as they are subsequently obtained.
Section 5.19. Representations and Warranties in Loan Documents. On
------------------------------------------------
the Effective Date, Borrower shall be deemed to represent and warrant to Lender
that all representations and warranties made by Borrower which are set forth in
the Original Loan Agreement, the Original Deed of
37
<PAGE>
Trust and in the other Loan Documents are true, correct, and complete in all
material respects as of and as if made on the Effective Date, subject only to
the following qualifications:
a. The representations and warranties that are remade pursuant to
this Section 5.19 shall take into account the amendments to the Loan Documents
effected on the Effective Date by this Agreement and the Modification Documents.
b. The representations and warranties made in Sections 6.01, 6.05,
6.12, and 6.17 of the Original Loan Agreement shall not be deemed to be remade
as of the Effective Date; instead the representations and warranties set forth
in Sections 5.01 and 5.05 of this Agreement are substituted therefor and are
represented and warranted by Borrower as true and correct on the Effective Date.
Section 5.20. Event of Default. It shall constitute an Event of
----------------
Default under the Loan Agreement (as in effect after giving application to the
changes set forth in this Agreement) and other Loan Documents if any
representation or warranty set forth in, made, or remade pursuant to this
Article V shall prove to have been untrue, incorrect, incomplete, or misleading
in any material respect when made or remade.
38
<PAGE>
ARTICLE VI
EFFECTIVE DATE
--------------
Section 6.01. Effective Date. The "Effective Date", as used in this
--------------
Agreement, shall be that date on which all of the conditions precedent set forth
in this Section 6.01 have been satisfied or, in Lender's absolute discretion,
waived by Lender. Upon the satisfaction of all of the conditions precedent set
forth in this Section 6.01 or the waiver thereof by Lender, in Lender's absolute
discretion, Borrower and Lender shall execute the certificate attached hereto as
Exhibit "I" confirming the Effective Date.
a. Lender shall have received a payment from Borrower of (i) the
modification fee due upon the Effective Date in the amount of Two Hundred and
Forty Thousand and No/100 Dollars ($240,000.00) and (ii) Lender's Out-of-Pocket
Costs.
b. There shall exist no Event of Default under any of the Loan
Documents nor any fact or circumstance which, with the passage of time, giving
of notice or action by third parties could become an Event of Default under any
of the Loan Documents and Lender shall have received a certificate executed and
delivered by Borrower and Guarantors, in form and substance satisfactory to
Lender, confirming such fact.
39
<PAGE>
c. All representations and warranties set forth in this Agreement,
the Modification Documents and the other Loan Documents, as amended and remade
in accordance with the terms of this Agreement, shall be true, correct, and
complete in all material respects as if remade on and as of the Effective Date
and Lender shall have received a certificate executed and delivered by Borrower
and Guarantors, in form and substance satisfactory to Lender, confirming such
fact.
d. All covenants to be performed by Borrower and Guarantors on or
before the Effective Date shall have been performed and Lender shall have
received a certificate executed and delivered by Borrower and Guarantors in form
and substance satisfactory to Lender, confirming such fact.
e. The Modification Documents shall have been duly executed and
delivered by all parties thereto and shall be binding and enforceable upon the
parties thereto in accordance with their terms. Those of the Modification
Documents to be recorded or filed shall have been successfully recorded or
filed, as appropriate; provided, however, that failure to record the Third
Amendment to Deed of Trust shall not be deemed to prevent the occurrence of the
Effective Date.
f. Lender shall have received and approved such endorsement or
endorsements to the Title Policies (and all outstanding reinsurance agreements)
as Lender may deem necessary or appropriate to insure that as of the Effective
40
<PAGE>
Date, the Original Deed of Trust as amended by the Modification to Deed of Trust
will be a valid first lien securing the full amount of the Loan, on a good and
indefeasible title to the Trust Estate, vested in Borrower, free and clear of
all encumbrances (including without limitation choate and inchoate mechanics'
and materialmen's liens, whether or not filed) except the Permitted Exceptions
(and that all reinsurance agreements remain in effect with respect to the Title
Policies as so endorsed).
g. Lender shall have received such opinions from counsel to Borrower
and Guarantors, in form and substance reasonably satisfactory to Lender, as
Lender may in its discretion require in respect of the Modification Documents,
this Agreement, the other Loan Documents, and any other documents, including,
without limitation, that the consummation of the transactions contemplated by
the Modification Documents and this Agreement, will not violate any law,
statute, rule regulation or order of any court or Governmental Authority
applicable to any of Borrower or Guarantors or to which any of the property of
any of such Persons may be subject.
h. There shall have been delivered to Lender with respect to each
general Partner of Borrower and each general Partner of a general Partner of
Borrower those
41
<PAGE>
organizational documents required to be delivered pursuant to
Section 5.04 hereof.
i. Lender shall have received evidence satisfactory to Lender that
there are no conditional sales contracts, chattel mortgages, leases of
personalty, financing statements, or title retention agreements which affect the
Premises.
j. Lender shall have received and approved all financial information
reasonably requested by Lender concerning Borrower and Guarantors.
k. All instruments and agreements in connection with the
transactions contemplated by this Agreement and the Modification Documents shall
be satisfactory in form and substance to Lender in its sole but reasonable
discretion.
Section 6.02. Termination. If the Effective Date has not occurred by
-----------
then, in its absolute discretion, Lender may terminate this Agreement, in which
case (i) this Agreement shall, except where otherwise expressly provided, be
null, void, and of no further force or effect and (ii) all original Loan
Documents shall remain in effect in accordance with their terms.
42
<PAGE>
ARTICLE VII
MISCELLANEOUS
-------------
Section 7.01. Entire Agreement; Exhibits and Schedules. This
----------------------------------------
Agreement, taken together with all of the other Loan Documents (as modified by
this Agreement), the Modification Documents and other documents delivered by
Borrower and Guarantors embodies the entire agreement with respect to the
subject matter hereof, and supersedes or incorporates all prior negotiations or
agreements written and oral. The Exhibits and Schedules attached to this
Agreement are incorporated herein by this reference and made a material part
hereof unless otherwise stated herein.
Section 7.02. Counterparts. This Agreement may be executed in any
------------
number of counterparts with the same effect as if the parties hereto had signed
the same document. All such counterparts shall constitute one instrument.
Section 7.03. Governing Law. This Agreement shall be governed by,
-------------
and construed in accordance with, the laws of the District of Columbia.
Section 7.04. Severability. If any of the terms and provisions
------------
specified herein is held by a court of law to be in violation of any applicable
local, state or federal ordinance, statute, law, administrative or judicial
decision, or public policy, and if such court should declare such term
43
<PAGE>
or provision to be illegal, invalid, unlawful, void, voidable, or unenforceable
as written, then such provision shall be given full force and effect to the
fullest possible extent that it is legal, valid and enforceable, and the
remainder of the terms and provisions herein shall be construed as if such
illegal, invalid, unlawful, void, voidable or unenforceable term or provision
was not contained therein.
Section 7.05. Successors and Assigns. All covenants and agreements
----------------------
herein shall bind the respective successors and assigns of the parties hereto
(but this provision is not intended nor shall it be construed to permit Borrower
or any of Guarantors to transfer or assign its or their rights and obligations
hereunder or under the Loan Documents except as permitted by the provisions of
the Loan Documents), whether so expressed or not, and all such covenants shall
inure to the benefit of such respective nominees, successors and assigns,
whether so expressed or not.
Section 7.06. Time of the Essence. Time is of the essence with
-------------------
regard to the performance of the terms and provisions of this Agreement.
Section 7.07. Headings. The titles and headings of Articles and
--------
Sections of this Agreement are intended for convenience only, and shall not in
any way affect the meaning or construction of any provision of this Agreement.
44
<PAGE>
Section 7.08. Notices. Any notice, request, demand, instruction or
-------
other communication given in connection with this Agreement shall be in writing
and shall be given in the manner provided in the Loan Agreement at the addresses
set forth in the Loan Agreement.
Section 7.09. Survival. The terms, covenants, representations, and
--------
warranties in this Agreement shall survive the consummation of the
transactions contemplated hereby.
IN WITNESS WHEREOF, the undersigned have executed this Loan
Modification and Extension Agreement as of the day and year first written above.
SOUTHWEST MARKET LIMITED PARTNERSHIP, a
District of Columbia limited partnership
By: Boston Southwest Associates Limited
partnership, a Massachusetts limited
partnership, General Partner
ATTEST: By: Independence Square, Inc., a
Delaware corporation, its Managing
General Partner
/s/ Grace E. Tarrigi By: /s/ Edward W. Linde
- ----------------------------- --------------------------
Name: Name: Edward W. Linde
Title: Vice President
/s/ Deb G. Moses
Deb G. Moses
45
<PAGE>
WITNESS:
/s/ Deb G. Moses /s/ M. Zuckerman
- ---------------------------- --------------------------------------------
Name: Deb G. Moses MORTIMER B. ZUCKERMAN (signing solely to
evidence those obligations and agreements of
Guarantor set forth herein)
WITNESS:
/s/ Grace E. Tarrigi /s/ Edward H. Linde
- ---------------------------- --------------------------------------------
Name: EDWARD H. LINDE (signing solely to evidence
those obligations and agreements of
Guarantor set forth herein)
THE SUMITOMO BANK, LIMITED,
a Japanese banking institution,
ATTEST: acting through its NEW YORK BRANCH
/s/ Patricia Tusa By: /s/ Robert A. Rabbino, Jr.
- ---------------------------- ----------------------------------------
Name: Patricia Tusa Robert A. Rabbino, Jr.
Joint General Manager
46
<PAGE>
EXHIBIT 10.18
- -------------------------------------------------------------------------------
LOAN MODIFICATION AND EXTENSION AGREEMENT
by and among
SOUTHWEST MARKET LIMITED PARTNERSHIP
a District of Columbia limited partnership,
MORTIMER B. ZUCKERMAN
a Natural Person,
and
EDWARD H. LINDE
a Natural Person,
and
THE SUMITOMO BANK, LIMITED,
a Japanese banking institution acting
through its NEW YORK BRANCH
FOR
TWO INDEPENDENCE SQUARE
Dated as of September 26, 1994
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE I - CERTAIN DEFINITIONS.............................................3
ARTICLE II - EXTENSION AND RELATED MATTERS .................................5
Section 2.01 Extension of Maturity Date .................................5
Section 2.02 Reaffirmation of Liability .................................5
Section 2.03 Modification Fee ...........................................6
ARTICLE III - AMENDMENT OF ORIGINAL LOAN AGREEMENT .........................6
Section 3.01 Amendment of Original Loan Agreement .......................6
Section 3.02 Amendment of other Loan Documents ..........................9
Section 3.03 Reaffirmation of Certain Documents .........................9
Section 3.04 Ratification of Loan Documents .............................9
Section 3.06 Termination of Bid Protest Guaranty .......................10
ARTICLE IV - LENDER'S FIXED RATE OPTION ...................................10
Section 4.01 Lender's Fixed Rate Option ................................10
Section 4.02 Exercise of Lender's Conversion Option ....................11
Section 4.03 Implementation of Interest Rate Management Arrangement ....12
Section 4.04 Recalculation of Trigger Rate .............................16
ARTICLE V - REPRESENTATIONS, WARRANTIES AND COVENANTS .....................18
Section 5.01 Existence .................................................18
Section 5.02 Authorization, Enforceable Obligations ....................18
Section 5.03 Conflicting Agreements ....................................19
Section 5.04 Organizational Documents ..................................20
Section 5.05 No Material Litigation ....................................21
Section 5.06 Compliance with Applicable Laws ...........................22
Section 5.07 Information Delivered .....................................22
Section 5.08 True Statement ............................................23
Section 5.09 No Event of Default .......................................23
Section 5.10 Space Leases ..............................................23
Section 5.11 Financial Statements of Borrower ..........................24
Section 5.12 Financial Statements of Guarantors ........................24
Section 5.13 Taxes and Other Assessments ...............................24
Section 5.14 No Liens ..................................................25
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
Section 5.15 Trust Estate ..............................................25
Section 5.16 No Bankruptcy .............................................26
Section 5.17 Absence of Transfer .......................................26
Section 5.18 Certificates ..............................................26
Section 5.19 Representations and warranties Loan Documents .............26
Section 5.20 Event of Default ..........................................27
ARTICLE VI - EFFECTIVE DATE ...............................................27
Section 6.01 Effective Date ............................................27
Section 6.02 Termination ...............................................30
ARTICLE VII - MISCELLANEOUS ...............................................30
Section 7.01 Entire Agreement; Exhibits and Schedules ..................30
Section 7.02 Counterparts ..............................................31
Section 7.03 Governing Law .............................................31
Section 7.04 Severability ..............................................31
Section 7.05 Successors and Assigns ....................................31
Section 7.06 Time of the Essence .......................................32
Section 7.07 Headings ..................................................32
Section 7.08 Notices ...................................................32
Section 7.09 Survival ..................................................32
</TABLE>
(ii)
<PAGE>
EXHIBITS
--------
Exhibit "A" Form of Allonge
Exhibit "B" Form of Second Amendment to Construction Loan Deed of Trust and
Security Agreement
Exhibit "C" Form of First Amendment to Collateral Assignment of Leases,
Rents, Profits and Income and Pledge of Accounts
Exhibit "D" Form of First Modification to Collateral Assignment of Project
Documents
Exhibit "E-1" Form of Closing Certificate
Exhibit "E-2" Form of Closing Certificate
Exhibit "E-3" Form of Closing Certificate
Exhibit "E-4" Form of Closing Certificate
Exhibit "E-5" Form of Closing Certificate
Exhibit "F" Form of Extension of Side Letter regarding Development Fee
Exhibit "G" List of Space Leases
Exhibit "H" Certificate Confirming Effective Date
Exhibit "I" First Amendment to Interest Guaranty and Indemnity
SCHEDULES
---------
Schedule 1 Trigger Rates
Schedule 2 Methodology for Converting Pre-Tax Net Operating Income to
Trigger Rates
Schedule 3 Representatives of Borrower
Schedule 4 Leases in Default
(iii)
<PAGE>
LOAN MODIFICATION AND EXTENSION AGREEMENT
THIS LOAN MODIFICATION AND EXTENSION AGREEMENT (this "Agreement") made and
entered into as of the _____ day of September, 1994, by and among SOUTHWEST
MARKET LIMITED PARTNERSHIP, a District of Columbia limited partnership
("Borrower"); MORTIMER B. ZUCKERMAN, who is a natural person ("Zuckerman"), and
EDWARD H. LINDE, who is a natural person ("Linde") (Zuckerman and Linde being
collectively referred to as the "Guarantors"); and THE SUMITOMO BANK, LIMITED, a
Japanese banking institution acting through its NEW YORK BRANCH ("Lender");
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Borrower and Lender are the parties to a certain Construction Loan
Agreement dated as of February 22, 1991 (the "Original Loan Agreement"),
pursuant to which Lender, in periodic advances, advanced to Borrower on the
terms and conditions set forth in the Original Loan Agreement the aggregate
principal amount of One Hundred Twenty-Five Million and No/100 Dollars
($125,000,000.00) (the "Loan"); and
WHEREAS, all advances made by Lender to Borrower pursuant to the Original
Loan Agreement are evidenced by that certain Promissory Note dated February 27,
1991, in the principal amount of $125,000,000, made by Borrower to the order of
Lender (the "Original Note"); and
WHEREAS, the Original Note is secured by that certain Construction Loan
Deed of Trust and Security Agreement dated as of February 22, 1991 and effective
as of February 27, 1991, by and among Borrower, Lender and Trustee (as defined
therein), as recorded in the Land Records of the District of Columbia on
February 27, 1991 as Instrument No. 10516 (the "Initial Deed of Trust"); and
<PAGE>
WHEREAS, the Initial Deed of Trust was amended by that certain First
Amendment to Construction Loan Deed of Trust and Security Agreement (the "First
Amendment to Deed of Trust"), by and among Borrower, Lender and Trustee, dated
as of September 9, 1994 and effective as of September 21, 1994, which was
recorded in the Land Records of the District of Columbia on September 9, 1994 as
Instrument No. 76268 (the Initial Deed of Trust as amended by the First
Amendment to Deed of Trust and shall hereinafter be referred to as the "Original
Deed of Trust"); and
WHEREAS, Borrower's obligations under the original Loan Agreement and
Original Note are further secured by the Assignment of Rents and the Assignment
of Project Documents, as such terms are defined in the Original Loan Agreement;
and
WHEREAS, pursuant to an Interest Guaranty and Indemnity dated as of
February 22, 1991 (the "Interest Guaranty"), Guarantors jointly and severally
guaranteed to Lender, on and subject to the terms and conditions of the Interest
Guaranty, the payment of the Obligations (as defined in the Interest Guaranty);
and
WHEREAS, pursuant to an Environmental Guaranty dated as of February 22,
1991, Guarantors jointly and severally guaranteed to Lender Borrower's
performance of certain obligations under the Initial Deed of Trust relating to
Hazardous Material, as such term is defined in the Initial Deed of Trust; and
WHEREAS, the Loan by its terms will mature on February 27, 1998 (the
"Original Maturity Date") and the principal balance and all other Indebtedness
owed by Borrower to Lender will become due and payable in full on such date; and
2
<PAGE>
WHEREAS, Borrower and Lender desire to extend the Original Maturity Date
and modify certain other terms of the Loan, on and subject to the terms and
conditions set forth herein; and
WHEREAS, the extension of the maturity and the modification of certain
other terms of the Loan will provide economic benefits to Borrower and
Guarantors;
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to
legally bind themselves, Borrower, Guarantors and Lender hereby agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
-------------------
As used in this Agreement, the capitalized terms set forth below shall have
the meanings given them in this Article I. Capitalized terms used in this
Agreement but not defined in this Article I shall have the meanings set forth
elsewhere in this Agreement or, if not defined elsewhere in this Agreement, the
meanings given such terms in the Original Loan Agreement (as amended by this
Agreement).
Effective Date. As used herein, "Effective Date" shall have the meaning
--------------
given to such term in Section 6.01 hereinbelow.
Modification Documents. As used herein, the "Modification Documents" shall
----------------------
mean (a) an Allonge (the "Allonge") in the form attached hereto as Exhibit "A";
(b) a Second Amendment to Construction Loan Deed of Trust and Security Agreement
in the form attached hereto as Exhibit "B" (the "Modification to Deed of
Trust"); (c) a First Amendment to Collateral
3
<PAGE>
Assignment of Leases, Rents, Profits and Income and Pledge of Accounts in the
form attached hereto as Exhibit "C" (the "Modification to Assignment of Rents");
(d) a First Modification to Collateral Assignment of Project Documents in the
form attached hereto as Exhibit I'D" (the "Modification to Assignment of Project
Documents"); (e) Closing Certificates in the forms attached hereto as Exhibits
"E-1", "E-2", "E-3", "E-4", and "E-5"; (f) this Agreement; (g) an Extension of
Side Letter regarding Development Fee in the form attached hereto as Exhibit
"F"; (h) a First Amendment to Interest Guaranty and Indemnity in the form
attached hereto as Exhibit "I"; and (i) such other documents and instruments
amending, modifying, restating, or extending any of the Loan Documents as Lender
reasonably may require.
Original Note. As used herein, "Original Note" shall have the meaning
-------------
given to such term in the recitals to this Agreement and is the "Note" as
defined in the original Loan Agreement prior to the amendments thereto effected
by this Agreement.
Trigger Rate. As used herein, "Trigger Rate" shall mean, for each calendar
------------
year falling in whole or in part within the Loan Term, the per annum rate of
interest set forth on Schedule 1 to this Agreement (which has been calculated in
accordance with Schedule 2 to this Agreement), as such rate may from time to
time be modified in accordance with Section 4.04 of this Agreement.
Trigger Rate Notice. As used herein, "Trigger Rate Notice" shall mean a
-------------------
telephonic notice (followed by prompt written confirmation thereof) by Lender to
Borrower, which informs Borrower that the Weighted Average Rate (as hereinafter
defined) has reached or surpassed the Trigger Rate.
Weighted Average Rate. As used herein, "Weighted Average Rate" shall mean
---------------------
the weighted average of the rates of interest that are in effect under the Note
on the first day of each
4
<PAGE>
calendar month (applicable for the previous month) falling within the Loan Term
with. respect to each of the Portions of Principal that comprise the entire
outstanding principal balance of the Loan.
ARTICLE II
EXTENSION AND RELATED MATTERS
-----------------------------
Section 2.01 Extension of Maturity Date. On the Effective Date, the
--------------------------
Maturity Date of the Loan shall be extended from the Original Maturity Date to
February 27, 2003 as provided in the Allonge.
Section 2.02 Reaffirmation of Liability.
--------------------------
(a) Borrower acknowledges and agrees, and shall forever be estopped
from controverting the fact that, as of the date hereof, Borrower is indebted to
Lender for the following items in the following amounts:
(i) The principal amount of the Loan of One Hundred Twenty-Five
Million and No/100 Dollars ($125,000,000.00) together with any accrued
but unpaid interest at the rate or rates of interest in effect in
accordance with the terms of the original Note; and
(ii) Lender's unpaid Out-of-Pocket Costs, including, without
limitation, legal fees incurred in connection with the modification of
the terms of the Loan to be effected pursuant to this Agreement, in
the aggregate amount of Thirty-Nine Thousand Two Hundred Forty-Nine
and 55/100 Dollars ($39,249.55).
(b) On the Effective Date, Borrower shall pay to Lender in immediately
available funds all of Lender's unpaid out-of-pocket Costs incurred as of the
Effective Date.
5
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Section 2.03 Modification Fee. On the Effective Date and in
----------------
consideration of Lender's extending the original Maturity Date of the Loan and
modifying the terms of the Loan in the other respects set forth herein, Borrower
shall pay to Lender in immediately available funds a modification fee in the
amount of Three Hundred Seventy Five Thousand and No/100 Dollars ($375,000.00).
ARTICLE III
AMENDMENT OF ORIGINAL LOAN AGREEMENT
------------------------------------
Section 3.01 Amendment of Original Loan Agreement. On the Effective
------------------------------------
Date, the Original Loan Agreement shall be deemed amended by Borrower and Lender
as follows:
(a) Throughout the Original Loan Agreement, the term "Agreement" shall
be deemed to refer to the Original Loan Agreement as amended by this Agreement,
as such Loan Agreement from time to time may be further amended, modified,
supplemented, restated, or extended.
(b) In Article I of the Original Loan Agreement, the following
definitions are amended as follows:
(i) The definition of "Assignment of Project Documents" is
amended by adding at the end thereof, immediately preceding the
period, the following language: ", as amended by that certain First
Modification to Collateral Assignment of Project Documents dated as of
September __, 1994, as such Assignment of Project Documents may from
time to time be further amended, modified, supplemented, restated, or
extended".
6
<PAGE>
(ii) The definition of "Assignment of Rents" is amended by adding
at the end thereof, immediately preceding the period, the following
language: ", as further amended by that certain First Amendment to
Collateral Assignment of Leases, Rents, Profits and Income and Pledge
of Accounts dated as of September __, 1994 and effective as of
September __, 1994, as such Assignment of Rents may from time to time
be further amended, modified, supplemented, restated or extended".
(iii) The definition of "Environmental Guaranty" is amended by
adding at the end thereof, immediately proceeding the period, the
following language: ", as reaffirmed by that certain Loan Modification
and Extension Agreement dated as of September __, 1994, as such
Environmental Guaranty may from time to time be further reaffirmed,
amended, modified, supplemented, restated or extended".
(iv) The definition of "Interest Guaranty" is amended by adding
at the end thereof, immediately preceding the period, the following
language: ", as reaffirmed by that certain Loan Modification and
Extension Agreement dated as of September __, 1994, as amended by that
certain First Amendment to Interest Guaranty and Indemnity dated as of
September __, 1994, and as such Interest Guaranty may from time to
time be further reaffirmed, amended, modified, supplemented, restated
or extended".
(v) The definition of "Loan Documents" is amended by adding at
the end thereof, immediately preceding the period, the following
language: ", as such Loan Documents may from time to time be amended,
modified, supplemented, restated, or extended".
7
<PAGE>
(vi) The definition of "Note" is amended to read in its entirety
as follows:
Note. As used herein, "Note" shall mean that certain Promissory
----
Note dated February 27, 1991, made by Borrower to the order of Lender,
in the principal amount of One Hundred Twenty-Five Million and No/100
U.S. Dollars (U.S. $125,000,000.00), as amended by that certain
Allonge dated September __ , 1994, as such Note may from time to time
be further amended, modified, supplemented, restated, or extended.
(c) Sections 3.03(e)(i) and 3.03(e)(ii) of the Original Loan Agreement
are hereby amended to read in their entirety as follows:
(i) In exercising the Conversion Option, Borrower must designate a
single Interest Period that begins on the Conversion Date and
expires on the Maturity Date.
(ii) In exercising the Conversion Option, Borrower must
designate as the Portion of Principal to bear interest at the Fixed
Rate the entire principal balance of the Loan outstanding at such
time.
(d) Section 7.21 of the Original Loan Agreement is hereby amended by
adding the following new paragraph (h) at the end thereof:
(h) Notwithstanding anything in this Section 7.21 to the contrary,
if the Second Amendment to Deed of Trust is not recorded in the Land
Records of District of Columbia at Borrower's request, Borrower shall
not further mortgage, encumber for debt or pledge the Trust Estate,
Revenues or any part thereof or any
8
<PAGE>
interest therein (including without limitation, air or development
rights) without Lender's express written consent.
Section 3.02 Amendment of other Loan Documents.
---------------------------------
(a) On the Effective Date, the original Note shall be amended by
Borrower's execution and delivery to Lender of the Allonge in the form of
Exhibit "A" hereto and Lender's affixation of the Allonge to the Original Note
and thereafter shall be effective and interpreted in accordance with its terms
and conditions as so amended.
(b) On the Effective Date, the Original Deed of Trust, the Assignment
of Rents, the Assignment of Project Documents and the Interest Guaranty shall be
modified by, respectively, the Modification to Deed of Trust, the Modification
to Assignment of Rents, the Modification to Assignment of Project Documents and
the First Amendment to Interest Guaranty, by Borrower's, Guarantors' and
Lender's execution and delivery of Exhibits "B", "C", "D" and "I" hereto,
respectively, and thereafter shall be effective and interpreted in accordance
with their respective terms as so modified.
Section 3.03 Reaffirmation of Certain Documents. Guarantors hereby
----------------------------------
absolutely, unconditionally and fully reaffirm all of their guarantees,
obligations and agreements under the Environmental Guaranty and the Interest
Guaranty and Indemnity according to the terms thereof.
Section 3.04 Ratification of Loan Documents. Except as expressly
------------------------------
amended, restated, modified, reaffirmed or extended by this Agreement and the
other Modification Documents, the Loan Documents shall remain in full force and
effect in accordance with their terms. Borrower and Guarantors, as to the Loan
Documents to which each is a party, acknowledge and agree that as of the date
hereof there exist no offsets, defenses, counterclaims, or abatements to the
9
<PAGE>
obligations of Borrower or Guarantors thereunder and all obligations of Lender
thereunder have been fully performed.
Section 3.05 Termination of Completion Guaranty. Lender hereby confirms
----------------------------------
and acknowledges that the Completion Guaranty, dated as of February 22, 1991,
made by Guarantors to Lender has been terminated according to the terms
thereunder.
Section 3.06 Termination of Bid Protest Guaranty. Lender hereby confirms
-----------------------------------
and acknowledges that the Bid Protest Guaranty, dated as of February 22, 1991,
made by Guarantors to Lender has been terminated according to the terms
thereunder.
ARTICLE IV
LENDER'S FIXED RATE OPTION
--------------------------
Section 4.01 Lender's Fixed Rate Option. Lender shall calculate and
--------------------------
notify Borrower on or after the first Business Day of each calendar month (but
not later than the tenth (10th) Business Day of such month) of the Weighted
Average Rate as of the first day of such calendar month. If the Weighted
Average Rate as of the first day of such month is equal to or greater than the
Trigger Rate for the calendar year in which such month occurs, Lender shall have
the right, on and subject to the terms and conditions set forth in this Article
IV ("Lender's conversion Option"), to cause the floating interest rate or rates
then in effect pursuant to the terms of the Note on the Portions of Principal
comprising the entire then-outstanding principal balance of the Loan to be
converted from such floating rate or rates to the Fixed Rate for an Interest
Period equal to the remainder of the Loan Term. Lender shall have no liability
to Borrower by reason of Lender's failure to calculate or give Borrower notice
of the Weighted Average Rate and such failure shall not constitute a default by
Lender under the terms of this Agreement or any other
10
<PAGE>
Loan Document. The sole consequence of Lender's failure to calculate or give
Borrower notice of the Weighted Average Rate shall be that Lender shall not have
the right to exercise Lender's Conversion option in a calendar month in which,
by the tenth (10th) Business Day of such month, Lender has not calculated and
given Borrower notice of the Weighted Average Rate in effect as of the first day
of such month.
Section 4.02 Exercise of Lender's Conversion Option.
--------------------------------------
(a) If (i) Borrower has not theretofore exercised Borrower's
Conversion Option and converted the interest rate or rates on the Loan to the
Fixed Rate pursuant to Article III of the Original Loan Agreement as amended by
this Agreement, (ii) the Weighted Average Rate as of the first day of the
calendar month in which Lender elects to exercise Lender's Conversion Option is
equal to or greater than the Trigger Rate for the calendar year in which such
month occurs, and (iii) Lender has calculated and given Borrower notice of the
Weighted Average Rate not later than the tenth (10th) Business Day of such
month, Lender may thereafter exercise Lender's Conversion Option on any Business
Day during such month by giving Borrower a Trigger Rate Notice.
(b) The representatives of Borrower identified on Schedule 3 to this
Agreement (i) are each individually authorized to transmit to Lender Borrower's
acceptance or rejection of the Fixed Rate obtainable by Lender and offered to
Borrower, as hereinafter provided, and (ii) will be available to Lender by
telephone from 9:00 a.m. New York time until 3:00 p.m. New York time on each
Business Day during the applicable Decision Period (as defined in Section
4.02(c) below). Borrower may change the representatives identified on Schedule
3 to this Agreement by delivering a written notice to Lender identifying one or
more
11
<PAGE>
representatives of Borrower (and the telephone number of each such
representative) for purposes of this Article IV. Borrower may not change the
representatives identified on Schedule 3 to this Agreement during a Decision
Period.
(c) A "Decision Period" shall mean a period commencing at 9:00 a.m.
New York time on the Business Day next following the date on which the Trigger
Rate Notice is given to Borrower and continuing through and including 3:00 p.m.
New York time on the fourth (4th) Business Day following the date on which the
Trigger Rate Notice is given to Borrower.
(d) Borrower's right to exercise Borrower's Conversion Option under
Article III of the Loan Agreement shall be suspended from the time Lender gives
a Trigger Rate Notice until the expiration of the ensuing Decision Period.
Section 4.03 Implementation of Interest Rate Management Arrangement.
------------------------------------------------------
(a) Lender shall, not later than 3:00 p.m. on the fourth (4th)
Business Day following the date on which the Trigger Rate Notice is given to
Borrower, obtain one or more offers for an Interest Rate Management Arrangement
having a term equal to the remaining Loan Term that, subject to Subsection
4.03(d) hereinbelow, will enable Lender to convert the interest rate or rates on
the entire principal balance of the Loan outstanding at that time to a fixed
rate of interest. Prior to accepting an offer for an Interest Rate Management
Arrangement, Lender shall telephonically quote to Borrower the fixed per annum
interest rate together with all Funding Costs that will result from effectuating
such an Interest Rate Management Arrangement, which rate Borrower shall either
accept or reject within three (3) hours following Lender's telephonic quote to
Borrower. The fixed rate offered by Lender (i) if made applicable to the Loan
prior to February 27, 1998 shall include Lender's spread of seventy one-
hundredths of one percent
12
<PAGE>
(0.70%) and shall increase on February 27, 1998 by ten one-hundredths of one
percent (0.10%), thus increasing Lender's aggregate spread to eighty one-
hundredths of one percent (0.80%) and on February 27, 2001 by an additional
twenty one-hundredths of one percent (0.20%), thus increasing Lender's aggregate
spread to one percent (1.00%); (ii) if made applicable to the Loan on or after
February 27, 1998 but prior to February 27, 2001, shall include Lender's spread
of eighty one-hundredths of one percent (0.80%) and shall increase on February
27, 2001 by twenty one-hundredths of one percent (0.20%), thus increasing
Lender's aggregate spread to one percent (1.00%); and (iii) if made applicable
to the Loan on or after February 27, 2001, shall include Lender's spread of one
percent (1.00%).
(b) If Borrower accepts the fixed rate quoted by Lender, Lender shall
use all reasonable efforts to accept and enter into the offered Interest Rate
Management Arrangement. If Lender is able to enter into the offered Interest
Rate Management Arrangement then, commencing on the second (2nd) Business Day
after Lender enters into the offered Interest Rate Management Arrangement (the
"Lender Option Conversion Date") (subject to Section 4.03(d) below), the
interest rate on the entire principal balance of the Loan outstanding at that
time shall, without further notice to or action by Borrower or Lender, bear
interest at the fixed rate quoted by Lender for the remainder of the Loan term,
which shall include Lender's spread as set forth in Section 4.03(a) hereinabove
and shall increase as set forth in Section 4.03(a) hereinabove, which rate shall
constitute the Fixed Rate as defined in the Note. If Lender is unable to obtain
the fixed rate quote accepted by Borrower pursuant to this Section 4.03(b),
Lender shall, until 3:00 p.m. New York time on the final Business Day of the
Decision Period, continue to seek an Interest Rate Management Arrangement that
will result in a Fixed Rate acceptable to Borrower and
13
<PAGE>
obtainable by Lender. If Lender is unable to obtain a Fixed Rate offered by
Lender and acceptable to Borrower by 3:00 p.m. New York time on the final
Business Day of the Decision Period, Lender shall have the right, in its sole
and absolute discretion, either (i) to accept and enter into an Interest Rate
Management Arrangement satisfactory to Lender in its sole and absolute
discretion in order to convert the interest rate or rates on the entire
principal balance of the Loan outstanding at that time to a fixed rate of
interest or (ii) not to enter into an Interest Rate Management Arrangement and
thereafter, subject to the same terms and conditions hereof, to give another
Trigger Rate Notice and, during the ensuing Decision Period, enter into an
Interest Rate Management Arrangement in the manner provided herein. If, under
clause (i) of the preceding sentence, Lender is able and so elects to enter into
an Interest Rate Management Arrangement then, commencing on the Lender option
Conversion Date (subject to Section 4.03(d) hereinbelow), the interest rate on
the entire principal balance of the Loan outstanding at that time shall, without
further notice to or action by Borrower or Lender, bear interest for the
remainder of the Loan Term at a fixed per annum rate of interest equal to the
fixed rate provided for under the Interest Rate Management Arrangement accepted
by Lender plus Lender's spread as set forth in Section 4.03(a) hereinabove and
shall increase as set forth in Section 4.03(a) hereinabove, which rate shall
constitute the Fixed Rate as defined in the Note.
(c) If (i) Lender is able to contact Borrower and Borrower fails to
accept or reject the fixed rate quoted by Lender pursuant to Section 4.03(a)
hereinabove, or (ii) Borrower rejects the fixed rate quoted by Lender pursuant
to Section 4.03(a) hereinabove, or (iii) Borrower fails by 5:00 p.m. New York
time on the Business Day immediately preceding the last day of the Decision
Period to designate one or more individuals authorized to accept an offered
fixed rate,
14
<PAGE>
or (iv) Lender is unable to contact Borrower to obtain Borrower's election as to
a proposed fixed rate, Lender shall not accept an offered Interest Rate
Management Arrangement and shall, until 3:00 p.m. New York time on the final
Business Day of the Decision Period, continue to seek an Interest Rate
Management Arrangement that will result in a Fixed Rate acceptable to Borrower.
If Borrower fails to accept a Fixed Rate offered by Lender by 3:00 p.m. New York
time on the final Business Day of the Decision Period, Lender shall have the
right, in its sole and absolute discretion, either (A) to accept and enter into
an Interest Rate Management Arrangement satisfactory to Lender in its sole and
absolute discretion in order to convert the interest rate or rates on the entire
principal balance of the Loan outstanding at that time to a fixed rate of
interest or (B) not to enter into an Interest Rate Management Arrangement and
thereafter, subject to the same terms and conditions hereof, to give another
Trigger Rate Notice and, during the ensuing Decision Period, enter into an
Interest Rate Management Arrangement in the manner provided herein. If, under
clause (A) of the preceding sentence, Lender is able and so elects to enter into
an Interest Rate Management Arrangement then, commencing on the Lender Option
Conversion Date (subject to Section 4.03(d) hereinbelow), the interest rate on
the entire principal balance of the Loan outstanding at that time shall, without
further notice to or action by Borrower or Lender, bear interest for the
remainder of the Loan Term at a fixed per annum rate of interest equal to the
fixed rate provided for under the Interest Rate Management Arrangement accepted
by Lender plus Lender's spread as set forth in Section 4.03(a) hereinabove and
shall increase as set forth in Section 4.03(a), which rate shall constitute the
Fixed Rate as defined in the Note.
(d) Notwithstanding anything to the contrary in this Section 4.03, if,
on the Lender option Conversion Date, the applicable interest rate for one or
more Portions of Principal
15
<PAGE>
will be the Eurodollar Rate pursuant to Section 3 of the Note, Lender shall
enter into an Interest Rate Management Arrangement that will become effective
(i) for each such Portion of Principal upon the expiration of the Interest
Period associated with the Eurodollar Rate applicable to such Portion of
Principal and (ii) for all other Portions of Principal on the Lender Option
Conversion Date. In such event, the Fixed Rate shall apply to each such Portion
of Principal bearing interest at a Eurodollar Rate upon the expiration of the
Interest Period associated with such Eurodollar Rate.
(e) Borrower shall reimburse Lender for all Funding Costs and other
Out-of-Pocket Costs incurred by Lender in connection with Lender's entering into
an Interest Rate Management Arrangement under this Article IV.
Section 4.04 Recalculation of Trigger Rate.
-----------------------------
(a) Borrower and Lender acknowledge that the Trigger Rates set forth
on Schedule 1 to this Agreement were calculated using (i) the methodology
illustrated on Schedule 2 to this Agreement and (ii) the "Pre-Tax Net Operating
Income" of the Trust Estate as calculated and set forth by Leggat McCall &
Werner Appraisal and Consulting Co., Inc. ("Leggat McCall") in that certain re-
examination dated July 11, 1994 (the "Reappraisal") of earlier appraisals
prepared by Leggat McCall of the Trust Estate and Phase I.
(b) If Lender, in its reasonable discretion, determines at any time
during the Loan Term that the Pre-Tax Net Operating Income of the Trust Estate
has for any reason decreased since the date on which Trigger Rates were last
calculated by more than five percent (5t), Borrower shall, if Lender so requests
and at Borrower's sole cost and expense, but subject to Section 4.04(c)
hereinbelow, cause Leggat McCall (or another appraisal firm acceptable to
16
<PAGE>
Lender in its reasonable discretion if Leggat McCall is not then in business or
is unable or unwilling to perform in a timely manner the work contemplated by
this Section 4.04(b)) within thirty (30) days of Lender's request to determine
the then-current Pre-Tax Net Operating Income of the Trust Estate using the same
methodology used by Leggat McCall to determine Pre-Tax Net Operating Income for
purposes of the Reappraisal, provided that in determining the then-current Pre-
Tax Net Operating Income of the Trust Estate, Borrower shall cause Leggat McCall
(or such other appraisal firm as provided for above) to use only Revenues
received under Qualifying Space Leases. Lender shall then recalculate each
annual Trigger Rate using (i) the then-current Pre-Tax Net Operating Income as
so redetermined and (ii) the methodology set forth on Schedule 2 to this
Agreement. Lender shall give Borrower notice of the Trigger Rates as so
recalculated by Lender and, from and after the date on which such notice is
given, the Trigger Rates shall for all purposes hereunder be deemed amended to
be the Trigger Rates as so recalculated.
(c) If the Pre-Tax Net Operating Income of the Trust Estate has
decreased by more than five percent (5%) by reason of Space Tenants that occupy
more than five percent (5%) of the rentable space in the Improvements
terminating their Space Leases, then Borrower shall not be required to cause the
Pre-Tax Net Operating Income of the Trust Estate to be redetermined in
accordance with Section 4.04(b) hereinabove until such time as Space Tenants
occupy at least ninety-five percent (95%) of the rentable space in the
Improvements under Qualifying Space Leases.
(d) Trigger Rates shall remain in effect until recalculated in
accordance with this Section 4.04.
17
<PAGE>
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
Each of Zuckerman, Linde, and Borrower makes the representations,
warranties and covenants respectively pertaining to himself or itself set forth
in Section 5.01 through and including Section 5.19 hereinbelow as of the date
hereof and again on and as of the Effective Date, all of which shall survive the
execution and delivery of this Agreement.
Section 5.01 Existence. Borrower is and at all relevant times was a
---------
limited partnership duly organized, validly existing and in good standing under
the laws of the District of Columbia. Borrower has and at all relevant times had
the authority, rights and franchises to own its properties, to carry on its
business as now conducted, to perform its obligations under the Loan Documents,
this Agreement, and the other Modification Documents, to complete the Project in
accordance with the Plans, to own and operate the Project as a first-class
commercial office building, and has made all filings in each jurisdiction in
which the character of its business or nature of its properties makes such
filings necessary and where not filing could have a material adverse impact on
its business. Borrower conducts no business, directly or indirectly, except for
the ownership and operation of the Project and of Phase I, and the ownership of
Lot 872.
Section 5.02 Authorization, Enforceable Obligations. Each of
--------------------------------------
Guarantors and Borrower has the authority and legal right to execute, deliver
and perform this Agreement and the Modification Documents to which he or it is a
party and Borrower has taken all necessary partnership action to authorize the
execution, delivery and performance of this Agreement and the Modification
Documents to which it is a party. No consent, license, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or
declaration with any
18
<PAGE>
court, Governmental Authority, or third party which has not been obtained is
required for the execution, delivery, and performance by Borrower or Guarantors
of this Agreement or the Modification Documents to which he or it is a party.
This Agreement has been (and, on the Effective Date, each of the Modification
Documents will have been) executed and delivered by each of Borrower and
Guarantors if a party thereto and constitutes (and, on the Effective Date, each
of this Agreement and the Modification Documents will constitute) the legal,
valid and binding obligation of each of Borrower and Guarantors if a party
thereto, enforceable against such persons and entities in accordance with its
terms.
Section 5.03 Conflicting Agreements. Neither the execution nor
----------------------
delivery of any of this Agreement or the Modification Documents nor the
fulfillment of or compliance with the terms and provisions hereof or thereof or
of the Loan Documents, nor the consummation of the transactions contemplated
------------
hereby or by any of the other documents referred to herein, will conflict with
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the creation of any
Lien (other than the lien of the Loan Documents and the Modification Documents)
upon any of the properties or assets of either of Borrower or Guarantors
pursuant to its partnership agreement, any other contract, any award of any
arbitrator or any agreement, (including any agreement with Borrower's partners
and also including Project Documents), instrument, order, judgment, decree,
statute, law, ordinance, franchise, certificate, permit, rule, regulation or the
like to which any of Borrower or Guarantors is subject, or to or by which their
or its properties or their or its assets or the Trust Estate are bound or
affected.
19
<PAGE>
Section 5.04 Organizational Documents. Borrower has furnished Lender
------------------------
with true, correct, and complete copies of the following documents:
(a) with respect to Independence Square, Inc., sole Managing General
Partner of the sole General Partner of Borrower:
(i) The certificate of incorporation of such corporation and
all amendments thereof, certified by the Secretary of State of the state of such
corporation's incorporation, together with a certificate of said Secretary of
State to the effect that the corporation is in good standing therein;
(ii) A certificate from the Secretary of State or comparable
official of the jurisdiction in which the Premises are located (if other than
such corporation's state of incorporation) to the effect that the corporation is
in good standing and qualified to do business therein;
(iii) Bylaws certified to Lender by the secretary of the
corporation; and
(iv) A certificate of the secretary of the corporation
certifying (A) resolutions of the shareholders and directors of the corporation
authorizing the consummation of the transactions contemplated by the
Modification Documents to which such corporation is a party or a signatory and
the execution, delivery, and performance of each of the Modification Documents
to which such corporation is a party or a signatory and (B) the incumbency and
signature of each of the officers of the corporation to execute any Modification
Documents; and
(b) With respect to Boston Southwest Associates Limited
Partnership, sole General Partner of Borrower:
20
<PAGE>
(i) A true, correct and complete copy of its
partnership agreement, together with all amendments thereto, as
currently in effect, certified by a Person satisfactory to Lender in
its sole discretion.
(ii) All certificates filed or required to be filed by
the partnership in the jurisdiction of its formation and the
jurisdiction where the Premises are located in order for it to do
business in those jurisdictions; and
(iii) Such evidence as may be available from the
Secretary of State or comparable official of the jurisdiction of the
partnership's formation to the effect that the partnership continues
to exist and is in good standing.
Section 5.05 No Material Litigation. No litigation, investigation or
----------------------
administrative proceeding of or before any court, arbitrator, or Governmental
Authority is pending, or has been threatened in writing by potential claimants
or their counsel, against any of Borrower or Guarantors or any of their assets
or that would, if adversely determined, be likely to have a material adverse
effect on (a) Borrower's or either Guarantor's ability to perform its or his
obligations under this Agreement, the other Loan Documents, or the Modification
Documents; (b) the validity or enforceability of this Agreement, the other Loan
Documents, or the Modification Documents; or (c) Lender's security under this
Agreement, any other Loan Document, or the Modification Documents. No notice
has been received by Borrower of any proceeding to condemn, purchase, or
otherwise acquire the Trust Estate or any part thereof or interest therein, and,
to the best of Borrower's knowledge, no such proceeding has been threatened by a
duly authorized official of a Governmental Authority acting in his official
capacity.
21
<PAGE>
Section 5.06 Compliance with Applicable Laws. Each of Borrower,
-------------------------------
Guarantors, the Project, and the Trust Estate is in compliance with the
requirements of all Laws, the failure to comply with which would materially and
adversely affect Borrower's or either Guarantor's ability to perform its or his
obligations under this Agreement, any of the other Loan Documents, or the
Modification Documents, and no written notice of non-compliance with any of the
foregoing has been received by Borrower or either Guarantor from any
Governmental Authority. No consent, approval or authorization, or registration,
declaration or filing with any Governmental Authority or any other Person is
required for the valid execution, delivery and performance by Borrower and
Guarantors of this Agreement, the other Loan Documents, or the Modification
Documents, or the carrying out of the transactions contemplated of hereby or
thereby.
Section 5.07 Information Delivered. All facts, studies, reports,
---------------------
loan applications, financial statements, operating cost histories, and all other
documents and data, financial or otherwise, respecting Borrower and Guarantors,
or contracts, permits, licenses, or other matters affecting any part of the
Trust Estate or the operation thereof which have been furnished to Lender or
Lender's counsel by Borrower or Borrower's counsel or Guarantors or Guarantors'
counsel were, to the best of Borrower's and Guarantors' knowledge, true,
correct, and complete in all material respects when made or delivered to Lender,
or, if copies thereof have been so furnished, such copies are, to the best of
Borrower's and each Guarantor's knowledge, true, correct and complete in all
material respects, and neither Borrower nor any and Guarantor has failed to
disclose any data or documents necessary to make the foregoing true, accurate,
complete in all material respects and not materially misleading.
22
<PAGE>
Section 5.08 True Statement. Neither this Agreement, any other Loan
--------------
Document, the Modification Documents nor any other document delivered to Lender
in connection with the Loan contains, or will contain when made, any untrue
statement of a material fact by Borrower or Guarantors and by this reference all
representations and warranties made in any of the Loan Documents and the
Modification Documents are hereby made a part of this Agreement to the same
extent as if fully set forth herein.
Section 5.09 No Event of Default. There exists no Event of Default
-------------------
under any of the Loan Documents nor any fact or circumstance which, with the
passage of time, giving of notice or action by third parties could become an
Event of Default under any of the Loan Documents or the Modification Documents.
Section 5.10 Space Leases. Set forth on Exhibit "H" hereto is a
------------
true, correct, and complete list of all Space Leases now in effect with respect
to the Trust Estate. Except for such Space Leases and the Permitted Exceptions,
there are no leases, licenses, tenancy agreements, contracts, or understandings,
oral or written, pursuant to which any person or entity has or claims any right
to use or occupy any portion of the Trust Estate. Except as set forth on such
Exhibit "H", there are no amendments, modifications, supplements, or
understandings, oral or written, which affect any of the Space Leases. All
other information set forth on Exhibit "H" with respect to the Space Leases is
true and correct in all material respects. Other than as set forth on Schedule
4, no notice of default has been given by any party to any Space Lease which
default remains uncured, there are no material defaults under the provisions of
any of the Space Leases, and all conditions to the effectiveness and continuing
effectiveness of each Space Lease required to be satisfied as of the date hereof
have been satisfied.
23
<PAGE>
Section 5.11 Financial Statements of Borrower. Borrower has
--------------------------------
furnished to Lender the financial statements of Borrower for its fiscal year
ended December 31, 1993, consisting of balance sheets and statements of income
and retained earnings and changes in financial position for the years then
ended, certified by the chief financial officer of Borrower's general partner as
being true, complete, and correct; the foregoing financial statements are true
and correct and contain no material misstatement or omission, and fairly present
financial position, assets, and liabilities of Borrower as of the respective
dates thereof and the results of its operations for the respective periods then
ended; since the respective dates of the foregoing financial statements, there
has been no material adverse change in the assets, liabilities, financial
position, or results of operations of Borrower; and Borrower has not incurred
any obligation or liability which would materially and adversely affect its
business operations or its interest in the Trust Estate.
Section 5.12 Financial Statements of Guarantors. Borrower has
----------------------------------
furnished or caused to be furnished to Lender the financial statements of each
Guarantor for the fiscal year ending December 31, 1993, certified by the
respective Guarantor (a) as being true, complete, and correct; (b) containing no
material misstatement or omission, and fairly presenting the financial position,
assets, and liabilities of Guarantor as of the date thereof; (c) since the date
of the foregoing financial statements, there has been no material adverse change
in the assets, liabilities, or financial position of Guarantor; and (d)
Guarantor not having incurred any obligation or liability which would materially
and adversely affect his financial position.
Section 5.13 Taxes and Other Assessments. Each of Borrower and
---------------------------
Guarantors has filed all federal, state, and local tax returns and other reports
required by all laws to have been filed prior to the date hereof; has paid or
caused to be paid all taxes, assessments, and other
24
<PAGE>
governmental charges that are due and payable prior to the date hereof; and has
made adequate provision for the payment of such taxes, assessments, or other
charges accruing but not yet payable. Neither Borrower nor any of Guarantors
has knowledge of any deficiency or additional assessment in a materially
important amount in connection with any taxes, assessments, or charges not
provided for on its respective books.
Section 5.14 No Liens. To the best of Borrower's knowledge, there
--------
are no liens or other impositions against the Trust Estate or any part thereof
except as may be included among the Permitted Exceptions. To the best of
Borrower's knowledge, there do not exist any unpaid conditional sales contracts,
chattel mortgages, security agreements, or financing statements in respect of
the Trust Estate, or any part thereof, except such as may be included among the
Permitted Exceptions. Without limiting the foregoing, the Trust Estate is, to
the best of Borrower's knowledge, free from due and unpaid water charges, sewer
rents, taxes, assessments, and other similar liens and/or impositions,
mechanics' and materialmen's liens (choate, or inchoate), and any other Liens
(other than liens arising with respect to non-delinquent property taxes) whether
or not disclosed in the Title Policies.
Section 5.15 Trust Estate. There has occurred no material damage to
------------
any part of the Trust Estate. No part of the Trust Estate has been taken in
condemnation or other like proceedings. Borrower has received no notice of any
(i) proceedings in eminent domain or any similar proceeding or transaction with
respect to any part of the Trust Estate; or (ii) material change in the zoning
of the Land or the use thereof as permitted by law and, to the best of
Borrower's knowledge, no such proceeding or change has been threatened by a duly
authorized official of a Governmental Authority acting in his official capacity.
25
<PAGE>
Section 5.16 No Bankruptcy. As of the date hereof, there is no (a)
-------------
filing by or against Borrower or any of Guarantors of a voluntary or involuntary
case or petition in bankruptcy, insolvency, or reorganization under the Federal
Bankruptcy Code as now or hereafter constituted or under any other laws of
similar nature, which bankruptcy, insolvency, or reorganization in the case of
an involuntary filing has not been dismissed; (b) appointment of a receiver or
trustee for Borrower, any of the foregoing persons or entities, or the Trust
Estate, or any part thereof; (c) making by Borrower or any of the foregoing
persons or entities of an assignment for the benefit of creditors; or (d) any
similar act or occurrence.
Section 5.17 Absence of Transfer. Since the date of the original
-------------------
funding of the Loan, there has not been any Transfer and there is not now in
existence any contract providing for or contemplating a Transfer.
Section 5.18 Certificates. Borrower has delivered to Lender all such
------------
permits, licenses, variances, approvals, consents, and other certificates or
documents with respect to the Trust Estate (collectively, the "Certificates") as
have been issued as of the date hereof by all relevant governmental authorities
of competent jurisdiction which to the best of Borrower's knowledge are
necessary to evidence the legal right and ability of Borrower to operate the
Trust Estate as it currently is operated. Borrower will deliver to Lender
copies of all other necessary Certificates as they are subsequently obtained.
Section 5.19 Representations and warranties Loan Documents. On the
---------------------------------------------
Effective Date, Borrower shall be deemed to represent and warrant to Lender that
all representations and warranties made by Borrower which are set forth in the
Original Loan Agreement, the Original
26
<PAGE>
Deed of Trust and in the other Loan Documents are true, correct, and complete in
all material respects as of and as if made on the Effective Date, subject only
to the following qualifications:
(a) The representations and warranties that are remade pursuant
to this Section 5.19 shall take into account the amendments to the Loan
Documents effected on the Effective Date by this Agreement and the Modification
Documents.
(b) The representations and warranties made in Sections 6.01,
6.05, 6.13, and 6.18 of the Original Loan Agreement shall not be deemed to be
remade as of the Effective Date; instead the representations and warranties set
forth in Sections 5.01 and 5.05 of this Agreement are substituted -therefor and
are represented and warranted by Borrower as true and correct on the Effective
Date.
Section 5.20 Event of Default. It shall constitute an Event of
----------------
Default under the Loan Agreement (as in effect after giving application to the
changes set forth in this Agreement) and other Loan Documents if any
representation or warranty set forth in, made, or remade pursuant to this
Article V shall prove to have been untrue, incorrect, incomplete, or misleading
in any material respect when made or remade.
ARTICLE VI
EFFECTIVE DATE
--------------
Section 6.01 Effective Date. The "Effective Date", as used in this
--------------
Agreement, shall be that date on which all of the conditions precedent set forth
in this Section 6.01 have been satisfied or, in Lender's absolute discretion,
waived by Lender. Upon the satisfaction of all of the conditions precedent set
forth in this Section 6.01 or the waiver thereof by Lender, in
27
<PAGE>
Lender's absolute discretion, Borrower and Lender shall execute the certificate
attached hereto as Exhibit "I" confirming the Effective Date.
(a) Lender shall have received a payment from Borrower of (i)
the modification fee due upon the Effective Date in the amount of Three Hundred
and Seventy-Five Thousand and No/100 Dollars ($375,000.00) and (ii) Lender's
Out-of-Pocket Costs.
(b) There shall exist no Event of Default under any of the Loan
Documents nor any fact or circumstance which, with the passage of time, giving
of notice or action by third parties could become an Event of Default under any
of the Loan Documents and Lender shall have received a certificate executed and
delivered by Borrower and Guarantors, in form and substance satisfactory to
Lender, confirming such fact.
(c) All representations and warranties set forth in this
Agreement, the Modification Documents and the other Loan Documents, as amended
and remade in accordance with the terms of this Agreement, shall be true,
correct, and complete in all material respects as if remade on and as of the
Effective Date and Lender shall have received a certificate executed and
delivered by Borrower and Guarantors, in form and substance satisfactory to
Lender, confirming such fact.
(d) All covenants to be performed by Borrower and Guarantors
on or before the Effective Date shall have been performed and Lender shall have
received a certificate executed and delivered by Borrower and Guarantors in form
and substance satisfactory to Lender, confirming such fact.
(e) The Modification Documents shall have been duly executed and
delivered by all parties thereto and shall be binding and enforceable upon the
parties thereto in accordance
28
<PAGE>
with their terms. Those of the Modification Documents to be recorded or filed
shall have been successfully recorded or filed, as appropriate; provided,
however, that failure to record the Second Amendment to Deed of Trust shall not
be deemed to prevent the occurrence of the Effective Date.
(f) Lender shall have received and approved such endorsement or
endorsements to the Title Policies (and all outstanding reinsurance agreements)
as Lender may deem necessary or appropriate to insure that as of the Effective
Date, the Original Deed of Trust as amended by the Modification to Deed of Trust
will be a valid first lien securing the full amount of the Loan, on a good and
indefeasible title to the Trust Estate, vested in Borrower, free and clear of
all encumbrances (including without limitation choate and inchoate mechanics'
and materialmen's liens, whether or not filed) except the Permitted Exceptions
(and that all reinsurance agreements remain in effect with respect to the Title
Policies as so endorsed).
(g) Lender shall have received such opinions from counsel to
Borrower and Guarantors, in form and substance reasonably satisfactory to
Lender, as Lender may in its discretion require in respect of the Modification
Documents, this Agreement, the other Loan Documents, and any other documents,
including, without limitation, that the consummation of the transactions
contemplated by the Modification Documents and this Agreement, will not violate
any law, statute, rule, regulation or order of any court or Governmental
Authority applicable to any of Borrower or Guarantors or to which any of the
property of any of such Persons may be subject.
29
<PAGE>
(h) There shall have been delivered to Lender with respect to
each general Partner of Borrower and each general Partner of a general Partner
of Borrower those organizational documents required to be delivered pursuant to
Section 5.04 hereof.
(i) Lender shall have received evidence satisfactory to Lender
that there are no conditional sales contracts, chattel mortgages, leases of
personalty, financing statements, or title retention agreements which affect the
Premises.
(j) Lender shall have received and approved all financial
information reasonably requested by Lender concerning Borrower and Guarantors.
(k) All instruments and agreements in connection with the
transactions contemplated by this Agreement and the Modification Documents shall
be satisfactory in form and substance to Lender in its sole but reasonable
discretion.
Section 6.02 Termination. If the Effective Date has not occurred by
-----------
October 31, 1994, or if, prior to such date an Event of Default shall occur,
then, in its absolute discretion, Lender may terminate this Agreement, in which
case (i) this Agreement shall, except where otherwise expressly provided, be
null, void, and of no further force or effect and (ii) all original Loan
Documents shall remain in effect in accordance with their terms.
ARTICLE VII
MISCELLANEOUS
-------------
Section 7.01 Entire Agreement; Exhibits and Schedules. This
----------------------------------------
Agreement, taken together with all of the other Loan Documents (as modified by
this Agreement), the Modification Documents and other documents delivered by
Borrower and Guarantors embodies the entire agreement with respect to the
subject matter hereof, and supersedes or incorporates all prior
30
<PAGE>
negotiations or agreements written and oral. The Exhibits and Schedules
attached to this Agreement are incorporated herein by this reference and made a
material part hereof unless otherwise stated herein.
Section 7.02 Counterparts. This Agreement may be executed in any
------------
number of counterparts with the same effect as if the parties hereto had signed
the same document. All such counterparts shall constitute one instrument.
Section 7.03 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the District of Columbia.
Section 7.04 Severability. If any of the terms and provisions
------------
specified herein is held by a court of law to be in violation of any applicable
local, state or federal ordinance, statute, law, administrative or judicial
decision, or public policy, and if such court should declare such term or
provision to be illegal, invalid, unlawful, void, voidable, or unenforceable as
written, then such provision shall be given full force and effect to the fullest
possible extent that it is legal, valid and enforceable, and the remainder of
the terms and provisions herein shall be construed as if such illegal, invalid,
unlawful, void, voidable or unenforceable term or provision was not contained
therein.
Section 7.05 Successors and Assigns. All covenants and agreements
----------------------
herein shall bind the respective successors and assigns of the parties hereto
(but this provision is not intended nor shall it be construed to permit Borrower
or any of Guarantors to transfer or assign its or their rights and obligations
hereunder or under the Loan Documents except as permitted by the provisions of
the Loan Documents), whether so expressed or not, and all such covenants shall
31
<PAGE>
inure to the benefit of such respective nominees, successors and assigns,
whether so expressed or not.
Section 7.06 Time of the Essence. Time is of the essence with regard
-------------------
to the performance of the terms and provisions of this Agreement.
Section 7.07 Headings. The titles and headings of Articles and
--------
Sections of this Agreement are intended for convenience only, and shall not in
any way affect the meaning or construction of any provision of this Agreement.
Section 7.08 Notices. Any notice, request, demand, instruction or
-------
other communication given in connection with this Agreement shall be in writing
and shall be given in the manner provided in the Loan Agreement at the addresses
set forth in the Loan Agreement.
Section 7.09 Survival. The terms, covenants, representations, and
--------
warranties in this Agreement shall survive the consummation of the transactions
contemplated hereby.
IN WITNESS WHEREOF, the undersigned have executed this Loan
Modification and Extension Agreement as of the day and year first written above.
SOUTHWEST MARKET LIMITED
PARTNERSHIP, a District of Columbia
limited partnership
By: Boston Southwest Associates Limited
Partnership, a Massachusetts limited
partnership, General Partner
ATTEST: By: Independence Square, Inc., a
Delaware corporation, its
Managing General Partner
By:
- ----------------------------------- ------------------------------------
Name: Name:
Title:
32
<PAGE>
WITNESS:
- ------------------------------------ ----------------------------------------
Name: MORTIMER B. ZUCKERMAN (signing solely
to evidence those obligations and
agreements of Guarantor set forth
herein)
WITNESS:
- ------------------------------------ ----------------------------------------
Name: EDWARD H. LINDE (signing solely to
evidence those obligations and
agreements of Guarantor set forth
herein)
ATTEST: THE SUMITOMO BANK, LIMITED, a Japanese
banking institution, acting through its
NEW YORK BRANCH
By:
- ------------------------------------ -------------------------------------
Name: Robert A. Rabbino, Jr.
Joint General Manager
33
<PAGE>
EXHIBIT "A"
ALLONGE
THIS ALLONGE ("Allonge") made as of the _____ day of September, 1994
by and between THE SUMITOMO BANK, LIMITED, a Japanese banking institution acting
through its NEW YORK BRANCH ("Lender") and SOUTHWEST MARKET LIMITED PARTNERSHIP,
a limited partnership organized and existing under the laws of the District of
Columbia ("Borrower");
WITNESSETH:
WHEREAS, Borrower and Lender are the parties to that certain
Construction Loan Agreement dated as of February 22, 1991, pursuant to which
Lender advanced to Borrower the aggregate principal amount of One Hundred
Twenty-Five Million and No/100 Dollars ($125,000,000); and
WHEREAS, the advances made by Lender to Borrower under the
Construction Loan Agreement identified above and Borrower's obligation to repay
same with interest are evidenced by that certain Promissory Note made by
Borrower as of February 27, 1991 to the order of Lender in the original
principal amount of up to One Hundred Twenty-Five Million and No/100 Dollars
($125,000,000.00) (the "Note"); and
WHEREAS, Borrower's obligations under the Construction Loan Agreement
and Promissory Note identified above and under the other "Loan Documents" as
defined in the Construction Loan Agreement are secured by, among other things,
that certain Construction Loan Deed of Trust and Security Agreement made by
Borrower as of February 22, 1991 and effective as of February 27, 1991 to Gerald
R. Perras and Stuart S. Levin for the benefit of Lender; and
WHEREAS, Borrower, Mortimer B. Zuckerman, Edward H. Linde, and Lender
have entered into that certain Loan Modification and Extension Agreement dated
as of September __, 1994 (the "Extension Agreement"), pursuant to which Borrower
and Lender have agreed, among other things, to execute and deliver this Allonge
in order to modify certain terms of the Note in the manner set forth below.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in accordance with the terms
of the Extension Agreement, Borrower and Lender hereby agree as follows:
1. Definitions. Capitalized terms used but not defined herein shall
-----------
have the meanings given to such terms in the Construction Loan Agreement
identified above, as amended, modified, and supplemented by the Extension
Agreement, and as hereafter amended, modified, supplemented or restated (the
Construction Loan Agreement, together with all amendments,
34
<PAGE>
modifications, supplements and restatements thereto and thereof being
hereinafter referred to as the "Loan Agreement").
2. Incorporation of Allonge. This Allonge shall be appended to and
------------------------
incorporated into and shall be a part of the Note.
3. Amendment of Note. The Note shall be and hereby is amended as follows:
-----------------
a. Deed of Trust. In Section 1 of the Note, the definition of Deed
-------------
of Trust is hereby amended to read in its entirety as follows:
"Deed of Trust" shall mean that certain Construction Loan Deed of
-------------
Trust and Security Agreement with an effective date of February 27, 1991
between Borrower and Lender, as amended by that certain First Amendment to
Construction Loan Deed of Trust and Security Agreement dated as of
September 9, 1994 and effective as of September 21, 1994, by and among
Lender, Borrower and others, securing this Note and encumbering certain
property located in the District of Columbia, as more particularly
described therein, as such Deed of Trust may from time to time be amended,
modified, supplemented or restated.
b. Eurodollar Rate. In Section 1 of the Note, the definition of
---------------
Eurodollar Rate is hereby amended to read in its entirety as follows:
"Eurodollar Rate" shall mean (a) for the period commencing on and
---------------
including September __, 1994 and continuing through but not including
February 27, 1998, LIBOR plus seventy one-hundredths of one percent
(0.70%), (b) for the period commencing on and including February 27, 1998
and continuing through but not including February 27, 2001, LIBOR plus
eighty one-hundredths of one percent (0.80%), and (c) for the period
commencing on and including February 27, 2001 and continuing through but
not including February 27, 2003, LIBOR plus one percent (1.00%).
c. Fixed Rate. In Section 1 of the Note, the definition of Fixed
----------
Rate is hereby amended to read in its entirety as follows:
"Fixed Rate" shall mean the fixed per annum rate of interest made
----------
applicable to the Loan pursuant to Article III of the Loan Agreement or
Article IV of the Extension Agreement, which rate (a) if made
applicable to the Loan prior to February 27, 1998 shall include
Lender's spread of seventy one-hundredths of one percent (0.70%) and
shall increase on February 27, 1998 by ten one-hundredths of one
percent (0.01%), thus increasing Lender's aggregate spread to eighty
one-hundredths of one percent (0.80%) and on February 27, 2001 by an
additional twenty one-hundredths of one percent (0.20%), thus
increasing Lender's aggregate spread to one percent (l.0%); (b) if made
applicable to the Loan on or after February 27, 1998 but prior to
February 27, 2001, shall include Lender's spread of eighty one-
hundredths of one percent (0.80%) and shall
35
<PAGE>
increase on February 27, 2001 by twenty one-hundredths of one percent
(0.20%), thus increasing Lender's aggregate spread to one percent
(1.00%); and (c) if made applicable to the Loan on or after February
27, 2001, shall include Lender's spread of one percent (1.00%).
d. Funding Costs. In Section 1 of the Note, the definition of
-------------
Funding Costs is hereby amended by adding after each instance in such definition
of the term "Loan Agreement" the following language:
or the Loan Extension and Modification Agreement dated September __,
1994 by and between Lender and Borrower
e. Loan Agreement. In Section 1 of the Note, the definition of
--------------
Loan Agreement is hereby amended to read in its entirety as follows:
"Loan Agreement" shall mean that certain Construction Loan
--------------
Agreement, dated as of February 22, 1991, between Borrower and Lender,
as amended by that certain Loan Modification and Extension Agreement,
dated as of September __, 1994, by and among Borrower, Mortimer B.
Zuckerman, Edward H. Linde, and Lender, as such Loan Agreement may from
time to time be further amended, modified, supplemented or restated.
f. Maturity Date. In Section 1 of the Note, the definition of
-------------
Maturity Date is hereby amended to read in its entirety as follows:
"Maturity Date" shall mean February 27, 2003 or, if such date
-------------
is not a Business Day, the first Business Day immediately following
February 27, 2003.
g. Prime Rate. In Section 1 of the Note, the first sentence of
----------
the definition of Prime Rate is hereby amended to read in its entirety as
follows :
"Prime Rate" shall mean the floating commercial loan interest
----------
rate of Citibank, N.A., publicly announced from time to time as its
"Prime Rate"; except that during the last two (2) weeks of every
calendar quarter ("Two-Week Period") the Prime Rate shall mean the sum
of (a) LIBOR for an Interest Period equal to and coincident with such
Two-Week Period plus (b)(i) during the period commencing on and
including September __, 1994 and continuing through but not including
February 27, 1998, seventy one-hundredths of one percent (0.70%), (ii)
during the period commencing on and including February 27, 1998 and
continuing through but not including February 27, 2001, eighty one-
hundredths of one percent (0.80%), and (c) during the period commencing
on and including February 27, 2001 and continuing through but not
including February 27, 2003, one percent (1.00%).
h. Modification of Section 3(b).
----------------------------
36
<PAGE>
(i) The fourth sentence of Section 3(b) of the Note is
hereby amended to read in its entirety as follows:
The Fixed Rate may not be designated for any Portion of Principal that
does not consist of the entire outstanding principal balance of the
Loan or for an Interest Period that ends on any day other than the
Maturity Date.
(ii) The following language is hereby added at the end of
Section 3(b) of the Note:
Notwithstanding anything contained in this Section 3(b) to the
contrary, for that Portion of Principal equal to the amount of the
quarterly principal payment next due in accordance with Section 6(a) of
this Note, Borrower shall not be entitled to elect an Interest Period
for the Eurodollar Rate, if applicable, which would extend beyond the
applicable principal payment date.
i. Modification to Section 3(d). Section 3(d) of the Note is
----------------------------
hereby amended by deleting "(i)" in the first line thereof and deleting the
second and third sentences thereof.
j. Amortization. At the end of Section 6(a) of the Note, the
------------
following language is hereby added:
Anything in the preceding sentence to the contrary notwithstanding,
Borrower shall, regardless of the interest rate or rates then in effect
under this Note, on each December __, March __, June __, and September 26,
prior to the Maturity Date (or the next preceding Business Day, if any of
such dates is not a Business Day), pay to Lender for application to the
outstanding principal balance of this Note (a) Two Hundred Eighty-One
Thousand and Two Hundred Fifty Dollars ($281,250) commencing with December
__, 1994 and continuing through and including December __, 1997, and (b)
Three Hundred Seventy-Five Thousand Dollars ($375,000) commencing on March
__, 1998 and continuing through and including December __, 2002. Each such
prepayment shall be deemed to be a voluntary prepayment for all purposes
under this Section 6 and the other provisions of this Note and the other
Loan Documents.
k. Modification of Section 6(b). Clause (A) of Section 6(b) is
----------------------------
hereby amended to read in its entirety as follows:
(A) the Fixed Rate less (1) during the period from and including September
__, 1994 to but not including February 27, 1998, seventy one-hundredths
percent (0.70%); (2) during the period from and including February 27, 1998
to but not including February 27, 2001, eighty one-hundredths percent
(0.80%); and (3) during the period from and including February 27, 2001 to
but not including the Maturity Date, one percent (1.00%) over
37
<PAGE>
l. Late Charge. The words "or any quarterly payment of principal
-----------
to be made under Section 6(a) hereinabove" are hereby added in the first
sentence of Section 25 after the words "provided for herein" and before the
words "shall not be paid when due".
4. Reaffirmation of Note. Except as expressly amended by this
---------------------
Allonge, the Note remains in full force and effect in accordance with its terms.
Borrower acknowledges and agrees that as of the date hereof there exist no
offsets, defenses, counterclaims or abatements to the obligations of Borrower
under the Note.
5. Counterparts. This Allonge may be executed in counterparts, each
------------
of which shall be deemed an original, but all of which taken together constitute
one and the same document.
IN WITNESS WHEREOF, the parties hereto have caused this Allonge to be
duly executed, delivered and affixed to that certain Promissory Note made by
Borrower as of February 27, 1991 to the order of Lender in the original
principal amount of up to One Hundred Twenty-Five Million and No/100 Dollars
($125,000,000.00), all as of the day and year first above written.
ATTEST: THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH, Lender
By:
- ------------------------------------- -----------------------------------
Title: Robert A. Rabbino, Jr.
Joint General Manager
SOUTHWEST MARKET LIMITED
PARTNERSHIP, a District of Columbia
limited partnership, Borrower
By: Boston Southwest Associates
Limited Partnership, a
Massachusetts limited partnership,
General Partner
ATTEST: By: Independence Square, Inc., a
Delaware corporation, its
managing General Partner
By:
- ------------------------------------- -------------------------------
Title: Name:
Title:
38
<PAGE>
EXHIBIT "B"
AFTER RECORDING RETURN TO:
Commercial Settlements, Inc.
1413 K Street, N.W.
Washington, D.C. 20005
Attn: Leonard W. Harrington, Jr.
FOR DELIVERY TO:
Gibson, Dunn & Crutcher
1050 Connecticut Avenue, N.W.
Suite 900
Washington, D.C. 20036
Attn: Michael A. Barrett, Esq.
SECOND AMENDMENT TO CONSTRUCTION LOAN DEED OF
TRUST
AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO CONSTRUCTION LOAN DEED OF TRUST AND SECURITY
AGREEMENT (this "Second Amendment to Deed of Trust") is made as of the _____ day
of September, 1994, and effective as of the _____ day of __________, 1994, by
and among SOUTHWEST MARKET LIMITED PARTNERSHIP, a District of Columbia limited
partnership ("Trustor"), THE SUMITOMO BANK, LIMITED, a Japanese banking
institution acting through its NEW YORK BRANCH ("Beneficiary"), and GERALD R.
PERRAS and STUART S. LEVIN, Trustees, either of whom may act (collectively,
"Trustee");
39
<PAGE>
W I T N E S S E T H:
-------------------
WHEREAS, Beneficiary and Trustor are the parties to that certain
Construction Loan Agreement dated as of February 22, 1991, by and between
Trustor and Beneficiary (the "Original Loan Agreement"); and
WHEREAS, Trustor is justly indebted to Beneficiary in the principal
sum of ONE HUNDRED TWENTY-FIVE MILLION AND N0/100 UNITED STATES DOLLARS (U.S.
$125,000,000), such amount having been advanced by Beneficiary to Trustor
pursuant to the Original Loan Agreement and being evidenced by that certain
Promissory Note (the "Original Note"), dated February 27, 1991, in the principal
amount of One Hundred Twenty-Five Million and No/100 Dollars ($125,000,000); and
WHEREAS, the Original Note is secured by that certain Construction
Loan Deed of Trust and Security Agreement (the "Initial Deed of Trust"), by and
among Trustor, Beneficiary and Trustee, dated as of February 22, 1991 and
effective as of February 27, 1991, which was recorded in the Land Records of the
District of Columbia on February 27, 1991 as Instrument No. 10516; and
WHEREAS, the Initial Deed of Trust was amended by that certain First
Amendment to Construction Loan Deed of Trust and Security Agreement (the "First
Amendment to Deed of Trust"), by and among Trustor, Beneficiary and Trustee,
dated as of September 9, 1994 and effective as of September 21, 1994, which was
recorded in the Land Records of the District of Columbia on September 21, 1994
as Instrument No. 76268 (the Initial Deed of Trust as amended by the First
Amendment to Deed of Trust shall hereinafter be referred to as the "Original
Deed of Trust"); and
40
<PAGE>
WHEREAS, Beneficiary and Trustor have agreed to amend the Original
Loan Agreement, the Original Note and the Original Deed of Trust pursuant to
that certain Loan Modification and Extension Agreement, dated as of September
__, 1994 (the "Modification Agreement"), by and among Trustor, Beneficiary, and
Mortimer B. Zuckerman and Edward H. Linde (collectively "Guarantors"); and
WHEREAS, Beneficiary and Trustor desire with this document to amend
and modify the Original Deed of Trust in accordance with the Modification
Agreement; and
WHEREAS, capitalized terms used but not defined herein shall have the
meanings given them in the original Deed of Trust;
NOW, THEREFORE, for good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, Trustor hereby covenants and
agrees with Beneficiary as follows:
Section 1. General Definitions. The following terms defined in the
-------------------
Original Deed of Trust are hereby redefined as follows:
(a) Assignment of Project Documents. Throughout the Original Deed
-------------------------------
of Trust, the term "Assignment of Project Documents" shall be deemed to refer to
that certain Collateral Assignment of Project Documents, dated as of February
27, 1991, by and between Trustor as assignor and Beneficiary as assignee, as
amended by that certain First Modification to Collateral Assignment of Project
Documents, of even date herewith, as such Assignment of Project Documents from
time to time may be further amended, modified, supplemented, restated or
extended.
41
<PAGE>
(b) Assignment of Rents. Throughout the Original Deed of Trust, the
-------------------
term "Assignment of Rents" shall be deemed to refer to that certain Collateral
Assignment of Leases, Rents, Profits and Income and Pledge of Accounts, dated as
of February 22, 1991 and effective as of February 27, 1991, by and between
Trustor as assignor and Beneficiary as assignee, recorded in the Land Records of
the District of Columbia on February 27, 1991 as Instrument No. 10517, as
amended by that certain First Amendment to Collateral Assignment of Leases,
Rents, Profits and Income and Pledge of Accounts, bearing date of September __,
1994 and effective as of September __, 1994, as such Assignment of Rents from
time to time may be further amended, modified, supplemented, restated or
extended.
(c) Environmental Guaranty. Throughout the Original Deed of Trust,
----------------------
the term "Environmental Guaranty" shall be deemed to mean the Environmental
Guaranty from Guarantors to Beneficiary, dated February 22, 1991, as reaffirmed
by the Modification Agreement, as such Environmental Guaranty may from time to
time be further reaffirmed, amended, modified, supplemented, restated or
extended.
(d) Interest Guaranty. Throughout the Original Deed of Trust, the
-----------------
term "Interest Guaranty" shall be deemed to mean the Interest Guaranty and
Indemnity from Guarantors to Beneficiary, dated February 22, 1991, as amended by
that certain First Amendment to Interest Guaranty and Indemnity dated as of
September __, 1994, by and between Beneficiary and Guarantors, as reaffirmed by
the Modification Agreement, as such Interest Guaranty may from time to time be
further reaffirmed, amended, modified, supplemental, restated or extended.
42
<PAGE>
(e) Loan Agreement. Throughout the original Deed of Trust, the term
--------------
"Loan Agreement" shall be deemed to refer to the Original Loan Agreement, as
amended by the Modification Agreement, as such Loan Agreement from time to time
may be further amended, modified, supplemented, restated or extended.
(f) Note. Throughout the Original Deed of Trust, the term "Note"
----
shall be deemed to refer to the Original Note, as amended by that certain
Allonge dated September __, 1994, as such Note may from time to time be further
amended, modified, supplemented, restated or extended.
(g) Out-of-Pocket Cost. The definition of "Out-of-Pocket Costs" is
------------------
amended as follows:
(i) The following is added in the fourth (4th) line thereof,
immediately following the words "third parties": "and to affiliated third
parties (so long as such costs, fees and expenses to affiliated third
parties do not exceed such costs, fees or expenses as would be incurred in
a transaction with an unaffiliated third party)".
(ii) The following is added in the fifth (5th) line thereof,
immediately following the word "limitation,": "Funding Costs, ".
Section 2. Representations and Warranties. Trustor hereby represents and
------------------------------
warrants that all of the representations and warranties set forth in the
original Deed of Trust other than those set forth in Section 1.21 and 1.23
(which Trustor shall not be deemed to have remade) are true, correct and
complete as of and as if made again on the date hereof.
Section 3. Reaffirmation of Original Indebtedness. This Second Amendment
--------------------------------------
to Deed of Trust shall not constitute a refinancing of the Indebtedness nor
shall anything contained herein or
43
<PAGE>
in any other agreement or instrument between Trustor and Beneficiary constitute,
or be deemed to constitute, any limitation on the validity or enforceability or
priority of the Original Note as amended and restated by an Allonge of even date
herewith, the Original Deed of Trust as amended hereby or any other instrument
or agreement securing payment of, evidencing or otherwise pertaining to the
Indebtedness nor shall this Second Amendment to Deed of Trust be deemed to
create any interest different from that created by the Original Deed of Trust,
which interest continues unimpaired and in full force and effect in accordance
with the terms of the Original Deed of Trust as amended and modified by this
Second Amendment to Deed of Trust.
Section 4. No Defenses. Trustor represents and warrants to
-----------
Beneficiary that, as of the date hereof, there exist no defenses, claims,
counterclaims, setoffs, offsets or rights of recoupment to, against or with
respect to any portion of the Indebtedness.
Section 5. Ratification. Except as expressly modified by this Second
------------
Amendment to Deed of Trust, all of the terms and conditions of the original Deed
of Trust shall remain in full force and effect in accordance with their terms.
Section 6. Counterparts. This Second Amendment to Deed of Trust may
------------
be executed in counterparts, each of which shall be deemed an original, but all
of which taken together constitute one and the same document.
44
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Second Amendment to
Construction Loan Deed of Trust and Security Agreement as of the day and year
first above written.
TRUSTOR:
-------
SOUTHWEST MARKET LIMITED PARTNERSHIP, a
District of Columbia limited partnership
By: Boston Southwest Associates Limited
Partnership, a Massachusetts limited
partnership, General Partner
ATTEST: By: Independence Square, Inc., a
Delaware corporation, its
managing General Partner
By: By:
---------------------------------- ----------------------------------
Name: Name:
Title:
BENEFICIARY:
-----------
ATTEST: THE SUMITOMO BANK, LIMITED, a Japanese
banking institution acting through its
NEW YORK BRANCH
By: By:
---------------------------------- --------------------------------------
Name: Robert A. Rabbino, Jr.
Joint General Manager
WITNESS: TRUSTEE:
-------
- ------------------------------------- -----------------------------------------
Name: Gerald R. Perras or Stuart S. Levin,
trustee, either of whom may act
45
<PAGE>
EXHIBIT 10.19
---------------------------------------------------------------
CONSTRUCTION LOAN AGREEMENT
by and between
THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH
and
SOUTHWEST MARKET LIMITED PARTNERSHIP
Dated as of August 21, 1990
---------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS......................................... 1
ARTICLE II TERMS OF THE LOAN AND DISBURSEMENT OF PROCEEDS...... 16
Section 2.01 Agreement to Lend.............................. 16
Section 2.02 Repayment...................................... 16
Section 2.03 Loan Documents................................. 16
Section 2.04 Payment of Principal and Interest.............. 16
Section 2.05 Disbursements - General........................ 16
Section 2.06 Project Budget................................. 17
Section 2.07 Timing of Disbursements........................ 17
Section 2.08 Lender's Right to Condition Disbursements...... 18
Section 2.09 Disbursements for Project Costs................ 18
Section 2.10 Disbursement of Hard Costs Contingency Funds... 19
Section 2.11 Disbursements of Interest...................... 19
Section 2.12 Disbursement of Tenant Improvement Costs....... 19
Section 2.13 Modifications to Project Costs Statement....... 24
Section 2.14 Balancing...................................... 25
Section 2.15 Automatic Debit and Credit; Wire Transfer...... 25
ARTICLE III BORROWER'S FIXED RATE OPTION........................ 26
Section 3.01 Borrower's Fixed Rate Option................... 26
Section 3.02 Exercise of Conversion Option.................. 26
Section 3.03 Interest Rate Management Arrangement........... 26
Section 3.04 Conditions to Lender's Obligation to Enter
Into an Interest Rate Management Arrangement.. 28
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE IV CONDITIONS TO THE INITIAL
DISBURSEMENT.................................. 29
Section 4.01 Loan Documents.................................. 29
Section 4.02 Title Policy.................................... 30
Section 4.03 Survey.......................................... 31
Section 4.04 Insurance
Section 4.05 Flood Insurance................................. 31
Section 4.06 Existence and Authorization..................... 31
Section 4.07 Opinion of Borrower's Counsel................... 32
Section 4.08 Opinion from Counsel to Each
Guarantor..................................... 33
Section 4.09 UCC Search...................................... 33
Section 4.10 Hazardous Material.............................. 33
Section 4.11 Streets and Utilities........................... 33
Section 4.12 Project Budget.................................. 34
Section 4.13 Construction Schedule........................... 34
Section 4.14 Permits......................................... 34
Section 4.15 Plans........................................... 34
Section 4.16 Architect Materials............................. 34
Section 4.17 General Contractors' Materials.................. 34
Section 4.18 Contractor and Subcontractor
Materials..................................... 35
Section 4.19 Engineer's Certificate.......................... 35
Section 4.20 Other Project Documents......................... 35
Section 4.21 Consultants' Report............................. 35
Section 4.22 Cost to Complete................................ 35
Section 4.23 OCC Materials................................... 35
Section 4.24 Appraisal....................................... 36
Section 4.25 Fees............................................ 36
Section 4.26 General Conditions.............................. 36
Section 4.27 Construction-Related Conditions................. 36
ARTICLE V CONDITIONS TO ALL SUBSEQUENT
DISBURSEMENTS..................................... 37
Section 5.01 Initial Disbursement............................ 37
Section 5.02 General Conditions.............................. 37
Section 5.03 Request for Disbursement Documents.............. 38
Section 5.04 Title Endorsements.............................. 39
Section 5.05 Plan and Permit Approval........................ 39
Section 5.06 Stored Materials................................ 40
Section 5.07 Contractors and Subcontractors.................. 40
Section 5.08 Final Construction Disbursement................. 41
Section 5.09 Advances Without Requests....................... 41
Section 5.10 Surveys......................................... 42
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VI REPRESENTATIONS AND WARRANTIES..................... 43
Section 6.01 Existence....................................... 43
Section 6.02 Authorization, Enforceable
Obligation................................... 43
Section 6.03 Conflicting Agreements.......................... 43
Section 6.04 Required Documents ............................. 44
Section 6.05 No Material Litigation.......................... 44
Section 6.06 Margin Regulations ............................. 44
Section 6.07 Compliance With Applicable Laws................. 44
Section 6.08 OCC Lease....................................... 45
Section 6.09 No Brokers...................................... 45
Section 6.10 Project Documents............................... 46
Section 6.11 Plans........................................... 46
Section 6.12 Project Budget and Construction Schedule........ 46
Section 6.13 Streets and Utilities........................... 46
Section 6.14 ERISA........................................... 46
Section 6.15 Environmental................................... 46
Section 6.16 Whole Tax Parcel................................ 47
Section 6.17 Casualty........................................ 47
Section 6.18 True Statements................................. 47
ARTICLE VII AFFIRMATIVE AND NEGATIVE COVENANTS................. 47
Section 7.01 Commencement and Completion of
Construction................................. 47
Section 7.02 Encroachments................................... 48
Section 7.03 Conformity with Plans........................... 48
Section 7.04 Compliance with Laws
and Other Requirements....................... 49
Section 7.05 Change Orders................................... 49
Section 7.06 Project Budget; Annual Operating
Budget....................................... 50
Section 7.07 Contractors and Subcontractors.................. 50
Section 7.08 Permits and Warranties.......................... 51
Section 7.09 Protection Against Liens and Claims............. 51
Section 7.10 Removal of Personalty........................... 52
Section 7.11 Insurance....................................... 52
Section 7.12 Title Reports................................... 52
Section 7.13 Entry and Inspection............................ 52
Section 7.14 Physical Security of Project.................... 52
Section 7.15 Information Covenants........................... 53
Section 7.16 Management of Property.......................... 55
Section 7.17 Project Documents............................... 55
Section 7.18 Operation and Maintenance of
Project...................................... 55
Section 7.19 Environmental................................... 56
Section 7.20 Other Business.................................. 56
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 7.21 Further Encumbrance............................. 56
Section 7.22 Transfers....................................... 58
Section 7.23 Reimbursable Expenses........................... 59
Section 7.24 Preservation of Existence....................... 59
Section 7.25 Future Tenant Estoppel
Certificates.................................. 60
Section 7.26 Use of Proceeds................................. 60
Section 7.27 Publicity....................................... 60
Section 7.28 Name............................................ 60
Section 7.29 Consultants' Fees............................... 61
Section 7.30 Partnership Agreement; No
No Partnership Distributions.................. 61
Section 7.31 Major Leases.................................... 61
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES..................... 62
Section 8.01 Events of Default............................... 62
Section 8.02 Remedies........................................ 66
ARTICLE IX MISCELLANEOUS...................................... 70
Section 9.01 Expenses........................................ 70
Section 9.02 Entire Agreement................................ 70
Section 9.03 Counterparts.................................... 70
Section 9.04 Governing Law/Venue/Jurisdiction................ 70
Section 9.05 Severability.................................... 70
Section 9.06 Successors and Assigns.......................... 71
Section 9.07 Setoff.......................................... 71
Section 9.08 Time of the Essence............................. 71
Section 9.09 Headings........................................ 71
Section 9.10 Notices......................................... 71
Section 9.11 Successive Remedies............................. 73
Section 9.12 No-Waiver....................................... 73
Section 9.13 Estoppel Certificates/Non-disturbance/
Other Agreements.............................. 73
Section 9.14 Cross-Default................................... 73
Section 9.15 Purpose of Loans................................ 74
Section 9.16 Inconsistencies with Loan
Documents..................................... 74
Section 9.17 Survival........................................ 74
Section 9.18 Indemnification................................. 74
Section 9.19 No Agency, Partnership or
Joint Venture; Nonliability
of Lender...................................... 75
Section 9.20 Negotiated Document............................. 76
Section 9.21 Limitation on Recourse.......................... 76
Section 9.22 Actions on Behalf of Lender..................... 77
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
EXHIBITS
Exhibit A - Form of Assignment of Project Documents
Exhibit B - Form of Assignment of Rents
Exhibit C - Form of Completion Guaranty
Exhibit D - Form of Deed of Trust
Exhibit E - Form of Environmental Guaranty
Exhibit F - Form of Interest Guaranty
Exhibit G - Form of Note
Exhibit H - Form of Request for Disbursement
Exhibit I - Form of Lien Waiver Payment and Affidavit of
Payment
Exhibit J-l - Form of Architect's Consent
Exhibit J-2 - Form of Architect's Certificate
Exhibit K - Form of Contractor's Consent and
Certificate
Exhibit L - Form of Engineer's Certificate
Exhibit M - Form of OCC Estoppel
Exhibit N - Form of OCC Subordination, Etc. Agreement
SCHEDULES
Schedule 4.12 - Project Budget
Schedule 4.13 - Construction Schedule
Schedule 6.10 - Project Documents
Schedule 6.11 - Plans
</TABLE>
<PAGE>
CONSTRUCTION LOAN AGREEMENT
THIS CONSTRUCTION LOAN AGREEMENT made as of the 21st day of August,
1990 by and between SOUTHWEST MARKET LIMITED PARTNERSHIP, a limited partnership
organized and existing under the laws of the District of Columbia, having an
office at c/0 Boston Properties, 500 E Street, S.W., Washington, D.C., 20024
("Borrower"), and THE SUMITOMO BANK, LIMITED, a Japanese banking institution
acting through its NEW YORK BRANCH, having an office at One World Trade Center,
Suite 9651, New York, New York 10048 ("Lender");
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, pursuant to that certain commitment letter dated June 13, 1990
from Lender to Borrower (the "Commitment") and on the terms and conditions
hereinafter set forth, Lender is willing to lend to Borrower the aggregate sum
of EIGHTY MILLION DOLLARS ($80,000,000), to be evidenced by a promissory note
and secured by, among other things, a lien upon certain real property located in
the District of Columbia;
NOW, THEREFORE, for and in consideration of the mutual covenants
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lender hereby agree
as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.01. Definitions. As used in this Agreement, the capitalized
-----------
terms set forth in this Article I shall have the meanings given them in this
Article I. Capitalized terms used in this Agreement but not defined in this
Article I shall have the meanings set forth elsewhere in this Agreement.
Capitalized terms used but not defined in this Agreement shall have the meanings
given such terms in the Note or, if not defined therein, in the Deed of Trust
(as those terms are hereinafter defined).
Affiliate. As used herein, "Affiliate" shall mean each of: (a) any
---------
general Partner, (b) any Guarantor, and (c) any other Person which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, Borrower, any general Partner or any Guarantor.
For purposes of this and all other definitions, the
<PAGE>
term "control" shall mean the possession, directly or indirectly, of the power
to cause the direction of the management and policies of a Person, whether
through the ownership of voting securities or equity interests, by contract,
mutual understanding, family relationship or otherwise.
Agent. As used herein, "Agent" shall mean Commercial Settlements,
------
Inc., a District of Columbia corporation, an authorized agent of the Title
Companies.
Agreement. As used herein, "Agreement" shall mean this Construction
---------
Loan Agreement, including all schedules and exhibits hereto, as the same may be
amended or otherwise modified from time to time.
Annual Operating Budget. As used herein, "Annual Operating Budget"
-----------------------
shall have the meaning given such term in Section 7.15(g) hereof.
Appraisal. As used herein, "Appraisal" shall mean an appraisal of the
---------
fair market value of the Project performed by the Appraiser in accordance with
the rules and guidelines of the American Institute of Real Estate Appraisers.
Appraised Value of the Trust Estate. As used herein, "Appraised Value
-----------------------------------
of the Trust Estate" shall mean the fair market value of Borrower's estate in
the Trust Estate as set forth (a) as of the date hereof in the Appraisal
performed and prepared by the Appraiser dated May 9, 1990, and delivered to
Lender in connection with the making of the Loan or (b) thereafter, from time to
time, in a current Appraisal prepared by the Appraiser.
Appraiser. As used herein, "Appraiser" shall mean Leggatt McCall &
---------
Werner Appraisal and Consulting Company, Inc., or another appraiser designated
by Borrower and approved by Lender, such approval not to be unreasonably
withheld or delayed.
Architect. As used herein, "Architect" shall mean each of the
---------
following: (a) with respect to all of the Project other than the Tenant
Improvements, Kohn Pedersen Fox Associates P.C.; (b) with respect to the OCC
Tenant Improvements only, Studios Architecture; and (c) with respect to the Spec
Tenant Improvements to be constructed pursuant to a Space Lease, the Person
designated by Borrower or the Space Tenant to perform the design services for
such Spec Tenant Improvements. Architect also shall mean, with respect to the
successor or successors to each Architect in (a), (b) and (c) above, each such
other Person as may hereafter be designated by Borrower or a Space Tenant and
reasonably approved by Lender in accordance with the terms hereof to act in the
place of any of
- 2 -
<PAGE>
the foregoing Persons as architect for such Person's respective portion of the
Project; provided, however, that Lender shall have such approval right only to
the extent that Borrower has the right to designate and/or approve such
successor Architect in accordance with the terms of such Person's contract with
Borrower or a Space Tenant.
Architect Contract. As used herein, "Architect Contract" shall mean
------------------
each of the following: (a) with respect to Kohn Pedersen Fox Associates P.C.,
that certain agreement with Borrower dated December 18, 1989; (b) with respect
to Studios Architecture, that certain agreement currently under negotiation with
Borrower providing for interior design services for the OCC Tenant Improvements,
(c) with respect to a Person designated by Borrower or a Space Tenant to perform
the design services for Space Tenant Improvements, the contract between Borrower
and such Person for such services; and (d) the contract between Borrower and any
subsequent Architect similarly providing for architectural services for the
Project.
Assignment of Project Documents. As used herein, "Assignment of
-------------------------------
Project Documents" shall mean the Collateral Assignment of Project Documents in
the form of Exhibit A hereto.
Assignment of Rents. As used herein, "Assignment of Rents" shall mean
-------------------
the Collateral Assignment of Leases, Rents, Profits and Income and Pledge of
Accounts in the form of Exhibit B hereto.
Business Day. As used herein, a "Business Day" shall mean a day on
------------
which (a) commercial banks in New York City are open for business, (b)
commercial banks in London, England are open for business, and (c) dealings in
U.S. Dollar deposits are carried on in the London Interbank Eurodollar Market
(as defined in the Note).
Change Order. As used herein, "Change Order" shall mean a change in
------------
the Plans, or in the Construction Contract.
Completion Date. As used herein, "Completion Date" shall mean
---------------
October 31, 1991, subject to extension for Force Majeure as provided in this
Agreement.
Completion Guaranty. As used herein, "Completion Guaranty" shall mean
-------------------
the joint and several guaranty in the form of Exhibit C hereto made by
Guarantors in favor of Lender, guaranteeing Lien-free completion of the entire
Project.
Completion of Construction. As used herein, "Completion of
--------------------------
Construction" shall mean that (a) the core, shell and other portions of the
Project (other than Tenant Improvements) have been constructed in a good and
workmanlike manner substantially in accordance with the Plans and with all
- 3 -
<PAGE>
Laws and all requirements of the National Fire Protection Association (or its
successor); (b) all required inspections by Governmental Authorities have been
completed and either a permanent certificate of occupancy or a temporary
certificate of occupancy subject to no conditions that cannot be satisfied
within the Project Budget and Project Schedule has been obtained covering all of
the core, shell and other "base building" portions of the Project such that
(without limiting the foregoing), upon construction of the Tenant Improvements,
the entire Project may lawfully be occupied for its intended purpose; (c) all
conditions to the final Disbursement of Hard Costs as set forth in Section 5.08
have been satisfied (except to the extent same relate to completion of the OCC
Tenant Improvements in space other than the "Initial Premises" (as defined in
the OCC Lease)) or, in Lender's sole discretion, waived; (d) all Tenant
Improvements required to be constructed by Borrower under the OCC Lease for the
Initial Premises shall have been constructed in a good and workmanlike manner
substantially in accordance with the plans and specifications therefor and with
all Laws and all requirements of the National Fire Protection Association (or
its successor); (e) Borrower shall have obtained either a permanent certificate
of occupancy or a temporary certificate of occupancy subject to no conditions
that cannot be satisfied within the Project Budget and Project Schedule covering
the Initial Premises; and (f) the OCC shall have commenced paying Base Rent
without protest and as required by the terms of the OCC Lease.
Consultants. As used herein, "Consultants" shall mean all independent
-----------
third-party consultants, including the Inspecting Engineer, that Lender
reasonably deems necessary and selects to provide the following services to
Lender: (a) review the Plans; (b) review Project Cost breakdowns and the
Construction Schedule; (c) conduct compliance inspections with respect to the
progress of construction of the Project and approve each element of a Request
for Disbursement; and (d) perform such other services as may, from time to time,
reasonably be required by Lender in connection with the performance of any
undertaking of Lender contemplated hereunder or to protect or assess the value
of lender's security or to assist in enforcing Lender's rights under any of the
Loan Documents.
Construction Contract. As used herein, "Construction Contract" shall
---------------------
mean (a) that certain Agreement Between Owner and Contractor dated as of
September 27, 1989 made by and between Borrower and McDevitt & Street Company, a
Florida corporation, providing for the construction of the Project or (b) the
lump-sum contract between Borrower and any subsequent Contractor similarly
providing for construction of the Project.
Construction Schedule. As used herein, "Construction Schedule" shall
---------------------
mean the schedule of dates upon which completion of certain portions of the
Project is anticipated to
- 4 -
<PAGE>
occur, which schedule is or shall, pursuant to Section 4.13, hereafter be
attached hereto as Schedule 4.13.
Contract and Contractor. As used herein, "Contract" shall mean a
-------- ----------
contract, other than the Construction Contract or Architect Contract, to which
Borrower or Boston Properties, as Borrower's agent on behalf of Borrower, is a
party for the supply of materials, labor, services or a combination thereof in
connection with the Project. As used herein, "Contractor" shall mean the Person
who, as a party to a Contract, is to supply materials, labor, services or a
combination thereof.
Conversion Date. As used herein, "Conversion Date" shall have the
---------------
meaning ascribed to such term in Subsection 3.03(b) hereof.
Debt Service Coverage Ratio. As used herein, "Debt Service Coverage
---------------------------
Ratio" shall mean the ratio obtained by dividing (a) Net Cash Flow for the
pertinent period by
(b) Project Debt Service for the pertinent period.
Deed of Trust. As used herein, "Deed of Trust" shall mean the
-------------
Construction Loan Deed of Trust and Security Agreement in the form of Exhibit D
hereto, as the same may be modified, consolidated or restated from time to time.
Designated Representative. As used herein, "Designated Representative"
-------------------------
shall mean an individual authorized, from time to time, in writing by Borrower,
with the approval of Lender, to deliver Requests for Disbursements,
certificates, and other documents and material to Lender pursuant to this
Agreement and the other Loan Documents.
Disbursement. As used herein, "Disbursement" shall mean each of the
------------
disbursements of the proceeds of the Loan made pursuant to this Agreement.
Environmental Guaranty. As used herein, "Environmental Guaranty" shall
----------------------
mean the joint and several guaranty in the form of Exhibit E hereto made by
Guarantors in favor of Lender guaranteeing Borrower's performance of certain
obligations under the Deed of Trust relating to Hazardous Material.
Event of Default. As used herein, "Event of Default" shall have the
----------------
meaning ascribed to such term in Section 8.01 hereof.
Exercise Period. As used herein, "Exercise Period" shall have the
---------------
meaning ascribed to such term in Subsection 3.02(c) hereof.
- 5 -
<PAGE>
Expenses. As used herein, "Expenses" shall mean the actual costs
--------
incurred by Borrower with respect to or allocable to a given period in
connection with the operation or ownership of the Trust Estate; provided,
however, that in the case of capital expenditures, Expenses shall mean the total
amount of such expenditures allocated over the useful life of the property for
which the expenditure was made, and in the case of prepaid expenditures, the
total amount of such prepaid expenditures allocated over the period for which
the expenditure was prepaid. Expenses shall not include (a) payments of
interest and other charges required to be made in respect of the Note, the Deed
of Trust or any other Loan Document, and (b) payments of principal, interest and
other charges required to be made by Borrower in respect of any other
indebtedness secured by all or any part of the Trust Estate or the Revenues, and
(c) distributions to Partners. Expenses shall include, without limitation: (i)
real property taxes; (ii) utility charges; (iii) premiums on insurance policies;
(iv) maintenance and cleaning expenses; (v) legal, accounting brokerage, and
other professional fees attributable to the operation of the Trust Estate; and
(vi) all other expenses, fees, charges and costs incurred in connection with the
ownership or operation of the Trust Estate that are usually and customarily
incurred by owners of first-class commercial office buildings of a size and
usage comparable to the Trust Estate in the District of Columbia area, provided,
however, that no Item included in the Project Budget as an item to be financed
by the Loan shall be deemed part of "Expenses."
Force Majeure. As used herein, "Force Majeure" shall mean the
-------------
occurrence of any of the following events which results in the delay of some
performance mandated by this Agreement: the enactment of any law or issuance of
any governmental order, rule or regulation establishing rationing or priorities
in the use of materials or restricting the use of labor; labor strikes,
lockouts, acts of God, enemy action, civil commotion or fire; or other similar
unavoidable casualty or events. Force Majeure shall include Unavoidable
Government Delay as hereinafter defined.
Funding Costs. As used herein, "Funding Costs" shall have the meaning
-------------
ascribed to such term in the Note.
General Contractor. As used herein, "General Contractor" shall mean
------------------
each of the following: (a) with respect to all of the Project other than the
Spec Tenant Improvements, McDevitt & Street Company, a Florida corporation, or
such other party as may hereafter be designated by Borrower and reasonably
approved by Lender in accordance with the terms hereof to act as the general
contractor for the Project; and (b) with respect to the Spec Tenant
Improvements, such Person as may be designated by Borrower or by any Space
Tenant and reasonably approved by Lender in accordance with the terms hereof to
act
- 6 -
<PAGE>
as the general contractor for the Spec Tenant Improvements; provided, however,
that Lender shall have the right to approve the General Contractor for the Spec
Tenant Improvements only to the extent that Borrower has the right to designate
and/or approve such successor General Contractor in accordance with the terms of
such Person's contract with Borrower or a Space Tenant.
Governmental Authority. As used herein, "Governmental Authority" shall
----------------------
have the meaning ascribed to such term in the Deed of Trust.
Guarantees. As used herein, "Guarantees" shall mean the Completion
----------
Guaranty, the Interest Guaranty, and the Environmental Guaranty.
Guarantors and Guarantor. As used herein "Guarantors" shall mean
---------- ---------
Mortimer B. Zuckerman and Edward H. Linde, and "Guarantor" shall mean one of the
Guarantors.
Hard Costs. As used herein, "Hard Costs" shall mean those Project
----------
Costs set forth on the Project Budget under the headings "Land and Land Carry"
and "Building Construction", including without limitation costs of labor,
materials, equipment, and fixtures.
Hazardous Material. As used herein, "Hazardous Material" shall have
------------------
the meaning ascribed to such term in the. Deed of Trust.
Improvements. As used herein, "Improvements" shall mean the meaning
------------
ascribed to such term in the Deed of Trust.
Indebtedness. As used herein, "Indebtedness" shall have the meaning
------------
ascribed to such term in the Deed of Trust.
Initial Disbursement. As used herein, "Initial Disbursement" shall
--------------------
mean the first disbursement of proceeds of the Loan made hereunder.
Inspecting Engineer. As used herein, "Inspecting Engineer" shall mean
-------------------
EMJ Construction Consultants or such other party as shall hereafter be appointed
by Lender to act as the Inspecting Engineer.
Institutional Lender. As used herein, "Institutional Lender" shall
--------------------
mean (a) a savings and loan association, a savings bank, a commercial bank or
trust company, an insurance company, an educational, religious or charitable
institution, an endowment fund, a federal, state, municipal or private, foreign
or domestic employees' welfare pension or retirement fund or system, an
investment banking firm, a real estate investment trust or other financial
institution provided that
- 7 -
<PAGE>
any such entity (i) is subject to or submits to service of process within the
State of New York and the District of Columbia, (ii) has total assets of at
least One Billion Dollars ($1,000,000,000), (iii) either (A) reports to or is
subject to the supervision of the Comptroller of the Currency, the Federal
Deposit Insurance Corporation, the Department of Labor, the Federal Reserve
Board, the Office of Thrift Supervision or any similar state or federal
regulatory agency or official, or any successor to any of the foregoing
agencies, entities or officials, or (B) is subject to public financial reporting
requirements or oversight jurisdiction of the Securities and Exchange
Commission; (iv) is financially sound in Lender's sole discretion; and (v) is
acting in its own interest and capacity or as a fiduciary or trustee for any of
the foregoing; (b) an Affiliate of Borrower; or (c) any other Person approved by
Lender.
Interest Guaranty. As used herein, "Interest Guaranty" shall mean the
-----------------
joint and several guaranty and indemnity in the form of Exhibit F hereto made by
Guarantors in favor of Lender, guaranteeing the payment of interest on the Note
and indemnifying Lender against certain liabilities.
Interest Rate Management Arrangement. As used herein, "Interest Rate
------------------------------------
Management Arrangement" shall mean an interest rate swap agreement, an agreement
providing for an interest rate ceiling (commonly known as a "cap") or an
interest rate floor and ceiling (commonly known as a "collar"), or any other
contractual protection against interest rate increases that is generally
accepted in the financial industry and is in such form and on such terms as are
customary in the ordinary conduct of Lender's business or are otherwise
acceptable to Lender in its reasonable discretion.
Involuntary Rate. As used herein, "Involuntary Rate" shall have the
----------------
meaning ascribed to such term in the Note.
Item. As used herein, "Item" shall mean any identified line item set
----
forth in either the Project Budget or the Annual Operating Budget, as
applicable.
Land. As used herein, "Land" shall have the meaning ascribed to such
----
term in the Deed of Trust.
Laws. As used herein, "Laws" shall mean all laws, rules, regulations,
----
codes, and ordinances of Governmental Authorities, and all rulings, orders,
decisions and interpretations issued by Governmental Authorities in respect
thereof.
Lien. As used herein, "Lien" shall mean any charge, lien (including
----
mechanics, materialmen and other liens), mortgage, deed of trust, pledge,
security interest or other encumbrance of any nature whatsoever upon, of, or in
property
- 8 -
<PAGE>
or other assets of a Person, whether absolute or conditional, voluntary or
involuntary, whether created by agreement, assignment, statute, judicial
proceedings or otherwise.
Loan. As used herein, "Loan" shall mean the aggregate of all principal
----
amounts advanced to Borrower pursuant to the terms hereof or pursuant to the
other Loan Documents and all interest required by the terms hereof, by the terms
of the Note or by the terms of the other Loan Documents to be paid by Borrower
to Lender.
Loan Documents. As used herein, "Loan Documents" shall mean and
--------------
include this Agreement, the Note, the Deed of Trust, the Interest Guaranty, the
Completion Guaranty, the Environmental Guaranty, the Assignment of Rents, the
Assignment of Project Documents, all UCC-l Financing Statements given by
Borrower to Lender, and any and all other documents given from time to time as
security for, or in evidence of, or to provide the terms of or otherwise in
connection with the Loan.
Loan Participant. As used herein, "Loan Participant" shall have the
----------------
meaning ascribed to such term in the Note.
Loan Term. As used herein, "Loan Term" shall have the meaning ascribed
---------
to such term in the Note.
Loan to Value Ratio. As used herein, "Loan to Value Ratio" shall mean
-------------------
the ratio (expressed as a percentage) obtained at any particular time by
dividing (a) the sum of (i) the then-outstanding principal balance of the Note
and (ii) the then-outstanding principal balance of any other indebtedness
secured by all or any part of the Trust Estate or the Revenues, by (b) the
Appraised Value of the Trust Estate at the time.
Lot 872. As used herein, "Lot 872" shall mean that portion of Square
-------
538, Lot 49, Assessment and Tax Lot 872, subject to a long-term leasehold
interest of John Mandis, Inc., and improved as of the date hereof by a
restaurant commonly know as the Market Inn.
Major Change Order. As used herein, "Major Change Order" shall have
------------------
the meaning ascribed to such term in Section 7.05(e) hereof.
Major Lease. As used herein, "Major Lease" shall have the meaning
-----------
ascribed to such term in the Deed of Trust.
Maturity Date. As used herein, "Maturity Date" shall have the meaning
-------------
ascribed to such term in the Note.
Net Cash Flow. As used herein, "Net Cash Flow" shall mean an amount
-------------
equal to Revenues for a particular period minus Expenses for such period.
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<PAGE>
Note. As used herein, "Note" shall mean the Promissory Note in the
----
principal amount of Eighty Million Dollars ($80,000,000) or such lesser amount
as may be advanced by Lender to Borrower under this Agreement, and otherwise in
the form of Exhibit G hereto.
OCC. As used herein, "OCC" shall mean the Office of the Comptroller of
---
the Currency, an agency of the United States Government.
OCC Lease. As used herein, "OCC Lease" shall mean that certain Lease
---------
Agreement dated as of August 21, 1989 by and between Borrower and the OCC, as
amended by (a) a letter agreement dated July 18, 1989 and executed by the OCC on
August 2, 1989 and by Boston Properties on behalf of Borrower on August 23,
1989, (b) a letter agreement dated August 28, 1989 to the OCC and executed by
Boston Properties on behalf of Borrower, (c) a letter agreement dated December
18, 1989 and executed by the OCC and Boston Properties on behalf of Borrower,
(d) a letter agreement dated June 29, 1990 by and between Borrower and the OCC,
and (e) a letter agreement dated June 29, 1990 by and between Borrower and the
OCC, as the same may hereafter be further amended, modified or supplemented in
accordance with the terms of the Loan Documents.
OCC Tenant Improvements. As used herein, "OCC Tenant Improvements"
-----------------------
shall have the meaning ascribed to such term in Section 2.12(b) hereof.
Out-of-Pocket Costs. As used herein, "Out-of-Pocket Costs" shall have
-------------------
the meaning ascribed to such term in the Deed of Trust.
Partner. As used herein, "Partner" shall mean those Persons identified
-------
as limited or general partners in the limited partnership agreement of Borrower
in effect on the date hereof, and any other Person hereafter holding legal
and/or beneficial title to an equity interest in Borrower.
Permitted Exceptions. As used herein, "Permitted Exceptions" shall
--------------------
have the meaning ascribed to such term in the Deed of Trust.
Permitted Transferee. As used herein, "Permitted Transferee" shall
--------------------
mean a Person (a) in which Mortimer B. Zuckerman and Edward H. Linde in the
aggregate or either alone shall have an indirect or direct ownership interest of
at least twenty-five percent (25%) in the aggregate, (b) which shall be
controlled by Mortimer B. Zuckerman and Edward H. Linde or by either alone, and
(c) which (i) shall control Borrower or a Person that is the successor to
Borrower and the day-to-day operations and management of the Trust Estate and
(ii) shall have the right to make all significant economic and management
- 10 -
<PAGE>
decisions on behalf of Borrower (or such successor) without the need for the
vote, approval or consent of any other Person other than a Permitted Transferee.
Person. As used herein, "Person" shall mean any natural person or
------
entity, including without limitation, any trustee, corporation, partnership,
joint stock company, trust, association, unincorporated organization, bank,
business association or firm, or Governmental Agency.
Personal Property. As used herein, "Personal Property" shall mean all
-----------------
of Borrower's right, title and interest, whether now existing or hereafter
acquired, in and to all furniture, furnishings, fixtures, machinery, equipment,
inventory and other personal property of every kind, tangible or intangible, now
or hereafter located at, upon or about the Premises and used or to be used in
connection with or related or arising with respect to the Trust Estate and/or
the Project, excluding that personal property owned by any Space Tenant and
located at, upon or about the Premises that does not become the property of
Borrower under the terms of the applicable Space Lease.
Phase II. As used herein, "Phase II" shall mean the additional
--------
building to be built by Borrower on the remaining undeveloped portion of Square
538, Lot 49, Assessment and Tax Lot 874, substantially in accordance with the
loan proposal heretofore submitted to Lender, to be known as Two Independence,
Square.
Plans. As used herein, "Plans" shall mean all preliminary and, as they
-----
are developed in accordance with the provisions hereof, final drawings, plans,
specifications and other documents (including but not limited to architectural,
structural, mechanical, electrical, and safety), prepared by Borrower,
Architect, General Contractor, any Contractor or Subcontractor, or any other
architect and/or engineer reasonably acceptable to Lender, which Plans shall be
subject to Lender's prior written approval to the extent required by this
Agreement, and which shall describe and show the construction and labor,
materials, equipment and fixtures necessary for the completion of the Project.
Portion of Principal. As used herein, "Portion of Principal" shall
--------------------
have the meaning ascribed to such term in the Note.
Premises. As used herein, "Premises" shall have the meaning ascribed
--------
to such term in the Deed of Trust.
Project. As used herein, "Project" shall mean (a) the development of
-------
the Premises in accordance with the Plans, including, without limitation, the
construction of the
- 11 -
<PAGE>
Improvements and all Tenant Improvements and the performance of all other work
required by the Plans or applicable Laws, whether on or off the Land, including
without limitation (i) constructing parking, curbs, gutters, sidewalks, and
public areas and amenities, (ii) providing landscaping, (iii) repairing,
constructing or modifying streets, alleys and other passage-ways or connections
with or support for the foregoing, (iv) repairing or constructing utilities, and
(v) otherwise repairing or modifying existing improvements on or near the Land;
and (b) the ownership and operation of the Premises developed as aforesaid.
Project Budget. As used herein, "Project Budget" shall mean the budget
--------------
now or, pursuant to Section 4.12, hereafter attached hereto as Schedule 4.12,
prepared by Borrower, as the same may be modified from time to time in
accordance with the terms hereof, setting forth a projection of all Project
Costs.
Project Costs. As used herein, "Project Costs" shall mean (a) the
-------------
costs identified on the Project Budget to be funded with the proceeds of the
Loan; (b) all amounts payable to or for the benefit of the OCC under the terms
of the OCC Lease, including amounts payable as liquidated damages, tenant
improvement allowances, contributions for signs, logos and/or other mediums
naming the Improvements, contributions for improving the vicinity of the
Premises, and payments for failure to complete a health facility; and (c) all
other costs necessary to construct or otherwise payable in connection with the
construction of the entire Project.
Project Development Agreement. As used herein, "Project Development
-----------------------------
Agreement" shall mean the Development Agreement, dated as of September 1, 1989,
between Borrower and Boston Properties, a Massachusetts business trust.
Project Documents. As used herein, "Project Documents" shall mean,
-----------------
collectively, all agreements, documents, instruments and materials of whatever
nature now or hereafter existing which relate to the Project or the Trust
Estate, including but not limited to: (a) the Plans and all other plans,
specifications, and drawings and all soil, environmental and engineering test
reports relating to the Project, (b) all approvals, consents, licenses and
permits issued by any Governmental Authority in connection with the Project, (c)
the Construction Contract, the Architect Contract, all Contracts and
Subcontracts, and all other agreements relating to the Project between Borrower
and any consultant, architect, engineer, Contractor, Subcontractor, project
manager or supervisor, laborer or supplier of materials, (d) all development,
management and brokerage agreements, and (e) all payment or performance bonds,
warranties, and guaranties with respect to any portion of the Project. Project
Documents shall not include Space Leases.
- 12 -
<PAGE>
Project Debt Service. As used herein, "Project Debt Service" shall
--------------------
mean the sum of (a) all payments of interest and other charges which must be
made by Borrower during a particular period in respect of the Loan, plus (b) all
payments of principal, interest, and other charges which must be made by the
Borrower during such period in connection with all other indebtedness of the
Borrower secured by the Project or revenues therefrom.
Qualifying Space Lease. As used herein, a "Qualifying Space Lease"
----------------------
shall mean a bona fide lease agreement pursuant to which all or a portion of the
Premises is or is intended to be occupied; provided, however, that (a) such
lease is then in full force and effect; (b) such lease, if entered into after
the date hereof, has been created substantially in accordance with all
requirements applicable to leases as set forth in the Deed of Trust, Assignment
of Rents, and other Loan Documents; and (c) either (i) the tenant under such
lease is paying all the rent and other charges due thereunder or (ii) as to a
tenant not yet paying rent, such tenant is obligated to pay all of such rent,
costs, and other charges thereunder, subject only to satisfaction of conditions
precedent to such obligation set forth in such lease and evidenced by an
estoppel certificate in form and substance reasonably satisfactory to Lender.
Lender hereby acknowledges and agrees that, subject to its remaining in full
force and effect, the OCC Lease shall be deemed to be a Qualifying Space Lease.
Request for Disbursement. As used herein, "Request for Disbursement"
------------------------
shall mean a written request for a Disbursement signed by the Designated
Representative on behalf of Borrower in substantially the form of Exhibit H
hereto.
Revenues. As used herein, "Revenues" shall mean all cash revenues
--------
actually received by Borrower under Qualifying Space Leases and all binding and
effective written licenses, concessions and other agreements providing for the
use of space in the Premises entered into in accordance with the terms of the
Loan Documents and assigned to Lender pursuant to one or more of the Loan
Documents with respect to or allocable to a particular period; provided,
however, that (a) Revenues shall not include payments made by a Space Tenant to
Borrower for (i) a security deposit or (ii) Tenant Improvements to the extent
such payments are transmitted to a contractor installing such Tenant
Improvements or are retained by Borrower as reimbursement for the cost of
installing such Tenant Improvements; and (b) with respect to percentage rent or
other payments based on the revenues or income of a Space Tenant or other Person
which Borrower proposes to include in the determination of Revenues, Revenues
shall mean the monthly average of percentage rent or such other payments
received by Borrower for the previous twelve (12) months and to the extent
Borrower has not received percentage rent or such other
- 13 -
<PAGE>
payments under such Qualifying Space Leases or other agreements for the previous
twelve-month period, the percentage rent or such other payments for such
Qualifying Space Leases or other agreements shall not be included in the
calculation of Revenues.
Soft Costs. As used herein, "Soft Costs" shall mean all Project Costs
----------
set forth on the Project Budget under the headings "Architect and Engineer",
"Financing", "Marketing", "Carrying Costs", "Legal", and "Overhead", including
without limitation fees for the Architect and the Lender's attorneys and
Consultants, interest on the Loan, real estate taxes, transfer and recordation
taxes, survey costs, and title insurance premiums.
Space Lease. As used herein, "Space Lease" shall have the meaning
-----------
ascribed to such term in the Deed of Trust.
Space Tenant. As used herein, "Space Tenant" shall have the meaning
------------
ascribed to such term in the Deed of Trust.
Spec Tenant Improvements. As used herein, "Spec Tenant Improvements"
------------------------
shall have the meaning ascribed to such term in Section 2.12(c) hereof.
Stored Materials. As used herein, "Stored Materials" shall mean
----------------
materials purchased by Borrower and stored at the Premises or at an off-site
location reasonably acceptable to Lender for use in the Project, but not yet
installed or incorporated into the Project.
Subcontract and Subcontractor. As used herein, "Subcontract" shall
-----------------------------
mean a contract to which Borrower is not a party for the supply of materials,
labor, services or a combination thereof in connection with the Project. As
used herein, "Subcontractor" shall mean the Person who, as a party to a
Subcontract, is to supply materials, labor, services or a combination thereof.
Subordinate Financing. As used herein, "Subordinate Financing" shall
---------------------
have the meaning ascribed to such term in Section 7.21 hereof.
Subordinate Lender. As used herein, "Subordinate Lender" shall have
------------------
the meaning ascribed to such term in Section 7.21 hereof.
Survey. As used herein, "Survey" shall have the meaning ascribed to
------
such term in Section 4.03.
Tenant Improvement Costs. As used herein, "Tenant Improvement Costs"
------------------------
shall mean those Hard Costs and Soft Costs attributable to construction of the
Tenant Improvements as set forth on the Project Budget under the headings
"Tenant Work (OCC)" and "Tenant Work (Spec)".
- 14 -
<PAGE>
Tenant Improvements. As used herein, "Tenant Improvements" shall mean,
-------------------
with respect to each and every portion of space in the Improvements, all
improvements, alterations, and tenant finish work required to be constructed by
Borrower pursuant to a Space Lease.
Timing Notice. As used herein, "Timing Notice" shall have the meaning
-------------
ascribed to such term in Section 3.02(b) hereof.
Title Companies. As used herein, "Title Companies" shall mean Chicago
---------------
Title Insurance Company and Ticor Title Insurance Company, as coinsurers under
an agreement acceptable to Lender.
Title Policies. As used herein, "Title Policies" shall have the
--------------
meaning ascribed to such term in Section 4.02 hereof.
Transfer. As used herein, "Transfer" shall mean any or all of the
--------
following events, whether effected voluntarily, involuntarily, by operation of
law or otherwise: (i) the assignment, sale or other transfer of the Trust
Estate or any part thereof or any interest therein (including, without
limitation, any air or development rights), (ii) the lease or sublease of all or
substantially all of the space in the Improvements, in a single or successive
transactions to any single lessee or related lessees, and (iii) the transfer of
any interest in Borrower or any interest in a Person, which has a direct or
indirect ownership interest in Borrower, other than the assignment or collateral
assignment by a limited partner of such limited partner's interest in Borrower,
provided the general partners of Borrower have consented to such assignment and
that the interests so assigned do not exceed, in the aggregate, forty-nine
percent (49%) of the partnership interests in Borrower.
Trust Estate. As used herein, "Trust Estate" shall have the meaning
------------
ascribed to such term in the Deed of Trust.
Unavoidable Government Delay. As used herein, "Unavoidable Government
----------------------------
Delay" shall mean the actual delay of some performance mandated by this
Agreement (other than a monetary obligation) due to any act or failure to act of
the OCC or any person or firm exclusively employed or retained by, or under the
exclusive direction of the OCC or Studios Architecture which, pursuant to
Paragraph 9(b) of Exhibit B to the OCC Lease, would require the OCC Tenant
Improvements to be deemed to be substantially complete prior to actual
substantial completion thereof and as to which Borrower, to the extent required,
has preserved its rights under Paragraph 8 of Exhibit B to the OCC Lease.
- 15 -
<PAGE>
Undisbursed Construction Funds. As used herein, "Undisbursed
------------------------------
Construction Funds" shall mean, as of any time of determination, the undisbursed
principal portion of the Loan.
Section 1.02. Accounting Terms. All accounting terms not specifically
----------------
defined in this Agreement shall be construed in conformity with, and all
financial data required to be submitted by this Agreement shall be prepared in
conformity with, generally accepted accounting principles customarily used in
the real estate industry, applied on a consistent basis.
ARTICLE II
TERMS OF THE LOAN AND DISBURSEMENT OF PROCEEDS
----------------------------------------------
Section 2.01. Agreement to Lend. Subject to and on the terms and
-----------------
conditions of this Agreement and the other Loan Documents, Lender shall lend to
Borrower and Borrower shall borrow from Lender the principal amount of EIGHTY
MILLION DOLLARS ($80,000,000), such amount being the aggregate maximum principal
amount that Lender shall under any circumstances be required to advance to
Borrower.
Section 2.02. Repayment. On (a) the Maturity Date, or (b) such
---------
earlier date upon which the Loan becomes due and payable pursuant to the terms
of the Loan Documents, Borrower shall fully repay the Loan to Lender.
Section 2.03. Loan Documents. This Agreement, the Note, the Deed of
--------------
Trust, and the other Loan Documents provide the terms of, evidence, and secure
the Loan.
Section 2.04. Payment of Principal and Interest. The Loan shall bear
---------------------------------
interest at the rate or rates of interest calculated in accordance with the
terms of the Note and shall be payable at the place and in the time and manner
provided and more particularly set forth in the Note.
Section 2.05. Disbursements - General.
-----------------------
(a) Unless Lender otherwise agrees in writing:
(i) The principal amount of each Disbursement, including any
portion thereof advanced for the payment of interest, shall not be less than the
lesser of One Hundred Thousand Dollars ($100,000.00) or an amount equal to the
Undisbursed Construction Funds;
(ii) Not more than one Disbursement shall be made in any calendar
month; and
- 16 -
<PAGE>
(iii) Disbursements shall be made in accordance with and on the
terms and conditions of this Article II and the other provisions of this
Agreement.
(b) Borrower acknowledges and agrees that Lender may make
Disbursements to Guarantors for Project Costs pursuant to, and in accordance
with, the terms of the Completion Guaranty.
Section 2.06. Project Budget. The proceeds of the Loan shall be
--------------
disbursed to pay Project Costs in accordance with the Project Budget and this
Agreement. The amount set forth in the Project Budget opposite each Item of
Project Cost shall be the maximum amount of Loan funds which Lender shall
disburse in payment of such Item, subject to any increase in the amount of such
Item in accordance with the terms of this Section 2.06 and Section 2.10.
Borrower, upon prior written notice to Lender, may reduce the amount remaining
to be disbursed with respect to any Item to reflect actual or anticipated
savings in Project Costs with respect thereto and allocate such savings to
increase the amount remaining to be disbursed with respect to any other Item,
provided, however, that the application of funds from such savings (i) among
Items of Hard Costs, (ii) between an Item of Hard Costs and an Item of Soft
Costs, or (iii) between the major Project Budget categories of Architecture and
Engineer, Marketing, Legal, Overhead and Operating Costs shall not exceed ten
percent (10%) of the cost Item, or with respect to clause (iii) above the major
Project Budget category, to which such funds are applied without Lender's prior
consent, which consent will not be unreasonably withheld or delayed and which
will be deemed given if Borrower does not receive written objection from Lender
within ten (10) Business Days after Borrower's notice to Lender. Borrower shall
retain a numbered, sequential record of all such reallocations.
Section 2.07. Timing of Disbursenemts. No later than the tenth (10th)
-----------------------
Business Day of each calendar month (except in the case of the Initial
Disbursement), and at such other times as Lender may agree, Borrower shall
submit to Lender a Request for Disbursement accompanied by the information,
documents and materials required pursuant to the provisions of this Agreement.
Lender will not review and approve any Request for Disbursement not submitted by
the date set forth in the preceding sentence until the next succeeding month and
no Loan funds will be disbursed other than pursuant to a Request for
Disbursement that has been reviewed and approved by Lender. Each Request for
Disbursement by Borrower shall constitute a representation and warranty by
Borrower that, (i) at such time, each of the conditions precedent to
Disbursements specified in Articles IV and V of this Agreement is satisfied, and
(ii) all of the representations and warranties contained in Articles IV and V
are true and correct in all material respects on the date of such Request for
Disbursement. Lender shall make each Disbursement within the time period set
forth in Section 2.09(i).
- 17 -
<PAGE>
Section 2.08. Lender's Right to Condition Disbursements. In addition
-----------------------------------------
to the conditions set forth in Articles IV and V of this Agreemnent, Lender
shall have the right to condition any Disbursement upon Lender's use or receipt
and approval of the following:
(a) Bills, invoices, documents of title, vouchers, statements,
payroll records, receipts and any other documents reasonably necessary to enable
Lender to confirm to its reasonable satisfaction the total amount expended,
incurred or due for any requested or paid Item;
(b) Use of a voucher or joint check system acceptable to Lender
for payments of Disbursements directly to any Contractor or Subcontractor if (i)
there shall have occurred an Event of Default, or (ii) Borrower shall be in
default on any obligation to pay such Contractor or Subcontractor and Lender
reasonably believes the default will have a material adverse effect on the
Project or Lender's security, or (iii) there shall have occurred a material
adverse change in the financial condition of Borrower, any General Partner of
Borrower or any Guarantor; or
(c) Any other documents, requirements, evidence or information
that Lender may reasonably request under any provision of the Loan Documents.
Section 2.09. Disbursements for Project Costs. The amounts set forth
-------------------------------
on the Project Budget shall be disbursed as follows:
(a) Each Request for Disbursement for each Item of Hard Costs and
Soft Costs shall show the total amount incurred for work performed or material
or equipment furnished for the periods since the last Request for Disbursement
and from the inception of the Project and the percentage of materials provided
and/or work completed for each such Item from the inception of the Project to
the date of the Request for Disbursement. The Request for Disbursement shall be
in sufficient detail to show that the amount of the Disbursement requested is
within the limits for each Item of Project Costs as shown in the Project Budget.
(b) Each Disbursement shall be in the amount requested by
Borrower in the Request for Disbursement, which amount shall not exceed, (i)
with respect to Hard Costs, the Hard Costs incurred by Borrower as of the date
of a Request for Disbursement, plus, subject to Section 5.06 hereinbelow, the
----
cost of Stored Materials not as yet installed or incorporated in the Project,
less "retained amounts" provided for under the terms of the Construction
- ----
Contract and/or relevant Contracts or Subcontracts and (ii) with respect to Soft
Costs, those Soft Costs incurred by Borrower as of the date of the Request for a
- 18 -
<PAGE>
Disbursement. Retainage shall be disbursed upon satisfaction of the conditions
for the final disbursement of Hard Costs set forth in Section 5.08. However,
retainage due a Contractor or Subcontractor (including the General Contractor to
the extent that it is acting in the capacity of a Subcontractor) may be released
upon completion of such Contractor's or Subcontractor's work, in accordance with
the terms of the Construction Contract or applicable Contract or Subcontract,
provided that (i) the labor and/or materials to be provided have been
substantially completed or supplied pursuant to the Construction Contract or
such applicable Contract or Subcontract and the Plans applicable to the
Construction Contract or such Contract or Subcontract, (ii) the Contractor or
Subcontractor has executed and delivered a final Lien waiver and affidavit of
payment in the form of Exhibit I hereto, modified to state that all work and
materials to be performed and supplied by such Contractor or Subcontractor have
been performed and supplied and upon payment only of such retainage, all amounts
owing to such Contractor or Subcontractor will be paid in full, and otherwise
satisfactory to Lender and in compliance with the lien law of the District of
Columbia, (iii) all requirements of all Governmental Authorities have been
satisfied with respect to the Contractor's or Subcontractor's work, and (iv)
Inspecting Engineer has confirmed in writing that such Contractor or
Subcontractor has complied with clause (i) and (iii). Tenant Improvement Costs
shall be disbursed subject to the additional conditions and limitations set
forth in Section 2.12 hereof.
(c) There shall be deducted from each Disbursement and it shall
not include: (i) any amounts previously disbursed hereunder, (ii) any costs
covered by the Request for Disbursement not approved, certified or verified as
required by this Agreement, (iii) any Soft Costs covered by the Initial Request
for Disbursement and, thereafter, a previous Request for Disbursement for which
proof of payment has been requested but not received by Lender, (iv) any Hard
Costs for which Lien waivers have not been received by Lender for the Initial
Request for Disbursement to the extent required by Section 4.27(c) hereinbelow
and, thereafter, all Requests for Disbursement submitted prior to the then-
pending Request for Disbursement; and/or (v) any real estate taxes, mechanics
Liens, security interests, claims or other charges against the Premises or
Project and any interest, fees or other costs which Borrower may have failed to
pay in accordance with this Agreement or the other Loan Documents.
(d) Except as may otherwise be expressly provided for herein with
respect to Stored Materials, for purposes of this Section 2.09, Project Costs
shall be deemed to have been "incurred" by Borrower at the following times: (i)
Hard Costs -when the labor has been performed or the materials have been
supplied and incorporated into the Project,
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<PAGE>
payment therefor has been requested by the General Contractor or a Contractor
and the Subcontractor, if any, therefor, and the General Contractor or
Contractor and the Subcontractor, if any, therefor is entitled to payment
pursuant to the Construction Contract and the applicable Contract or
Subcontract; and (ii) Soft Costs -when such costs are due and payable (or have
been paid by Borrower) and the services relating thereto have been rendered or
the value thereof has been received by Borrower.
(e) All Hard Costs shall be certified by General Contractor (or
the Contractor providing the labor or materials related to such Hard Costs) and
Borrower in the manner provided in this Section 2.09 and in Section 5.03 and
shall be verified by the Inspecting Engineer as having been incurred.
Verification of the monthly progress and Hard Costs which have been incurred by
Borrower from time to time and the estimated total Hard Costs from time to time
may be made by Lender and/or Inspecting Engineer in its or their reasonable
judgment.
(f) If (i) Borrower shall have requested an acceleration of
payments under this Agreement or (ii) there shall have occurred an Event of
Default or (iii) Borrower shall be in default on any obligation to pay money in
any way related to the Project and Lender has reason to believe this default
will have an adverse effect on the Project or Lender's security or (iv) Lender
shall be entitled under any other Loan Document to advance funds or make
payments in respect of the Project, and if Lender considers that its best
interests and the best interests of the Project lie in accelerating the amounts
to be advanced pursuant to this Article II, it shall be entitled to do so in
amounts not more than was required under the applicable underlying contract and
no person dealing with Borrower or General Contractor or any other Person shall
have standing to demand any different performance from Lender.
(g) Subject to the provisions of Section 2.12 governing Tenant
Improvement Costs, all other Hard Costs not advanced during the course of
construction of the Project shall be advanced upon the satisfaction of the
conditions for the receipt of the final disbursement for Hard Costs set forth in
Section 5.08 hereof. Subject to the provisions of Section 2.12 governing Tenant
Improvement Costs, all other Soft Costs not advanced prior to Completion of
Construction shall be advanced until exhausted, not more frequently than once a
month, for Soft Costs as incurred after Completion of Construction.
(h) If Lender is entitled and deems it appropriate to make
Disbursements directly to the third parties entitled to payment as provided in
Sections 2.08(b) and 2.09(f) hereof, all sums so advanced by direct payment
shall satisfy pro tanto the obligations of Lender under this Agreement and
--- -----
Lender shall have no obligation to see to the disposition by any such Person of
any direct payments made to such Person.
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<PAGE>
(i) Each Disbursement shall be payable within five (5) Business
Days after satisfaction of all conditions to the requested Disbursement.
Section 2.10. Disbursement of Contingency Funds. Any amount set forth
---------------------------------
in the Project Budget for "Contingency" or "Change Orders" ("Contingency") may
be used to pay any Project Costs not specifically included in the Project
Budget, including excess costs on specific Items or costs associated with
permitted Change Orders relating to specific Items. Contingency amounts may be
disbursed upon the written request of Borrower to Lender and upon compliance
with the conditions precedent applicable to the Item or Items for which
contingency funds are requested. Use of Contingency funds (other than for
application to Change Orders not subject to Lender's prior approval pursuant to
Section 7.05 hereof) shall be subject to the prior reasonable approval of
Lender. Prior to Completion of Construction, no Contingency funds may be used
to pay interest on the Loan.
Section 2.11. Disbursements of Interest. The amount set forth under
-------------------------
the Item "Interest" shall be periodically disbursed directly to Lender in order
to pay interest. Pursuant to Section 2.15 hereinbelow, Lender is authorized to
credit to Borrower's demand deposit account with Lender and to make
Disbursements automatically from such demand deposit account to pay interest
without request from or prior notice to Borrower. The amount of such
Disbursements shall be added to the principal amount of the Loan, and Lender
will provide Borrower with a monthly statement showing the total amount of such
Disbursements. Depletion of the amounts set forth for the Item "Interest" shall
not release Borrower from any of Borrower's obligations under the Loan
Documents, including but not limited to its obligation to pay interest on the
Loan.
Section 2.12. Disbursement of Tenant Improvement Costs.
----------------------------------------
(a) Tenant Improvement Costs shall be disbursed in the manner and
on the terms and conditions provided in this Agreement for the disbursement of
all other Project Costs, modified only as set forth in this Section 2.12.
(b) Lender's disbursement of Tenant Improvement Costs for Tenant
Improvements required to be constructed under the OCC Lease (the "OCC Tenant
Improvements") shall, in addition to the other terms and conditions of this
Agreement, be subject to the following terms and conditions:
(i) Lender shall not be required to make any Disbursement with
respect to the OCC Tenant Improvements unless and until (A)
Borrower has provided Lender with a detailed
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<PAGE>
breakdown of the Project Costs included in the Project Budget
under the heading "Tenant Improvements (OCC)" in form and
substance reasonably satisfactory to Lender and (B) Borrower
and Studios Architecture have executed a valid and binding
contract, reasonably acceptable to Lender, for the planning
and design of the Tenant Improvements, which contract requires
Studios Architecture to execute a certificate and consent
substantially in the form of Exhibit J-1 hereto and containing
the information in Exhibit J-2 hereto, to the extent
applicable to the services to be provided by Studios
Architecture.
(ii) Each Request for Disbursement that includes any Tenant
Improvement Costs for the OCC Tenant Improvements ("OCC Tenant
Improvement Costs") shall be accompanied by a copy of (A) the
monthly invoice to be submitted to the OCC under Paragraph
3(b) of Exhibit B to the OCC Lease in respect of such OCC
Tenant Improvement Costs, together with copies of all related
materials and information to be submitted with such invoice,
and (B) evidence of payment by the OCC of all prior monthly
invoices, to the extent payment has been made.
(iii) In addition to all other limitations set forth in this
Agreement, no Disbursement for OCC Tenant Improvement Costs
shall be greater than the Borrowers pro rata portion of the
Improvements Allowance (as defined in the OCC Lease) which in
accordance with the OCC Lease is then due and owing as set
forth in the then current monthly invoice for Tenant Work
Costs (as defined in the OCC Lease).
(iv) In the event that the OCC hereafter elects to prepay any of
its share of OCC Tenant Improvement Costs, such prepaid
amounts shall be deposited into the Receipts Account (as
defined in the Assignment of Rents) and disbursed to pay the
OCC's share of OCC Tenant Improvement Costs in accordance with
the terms of the Assignment of Rents.
(c) Lenders disbursement of Tenant Improvement Costs for Tenant
Improvements constructed in space in the Project other than that demised by the
OCC Lease (the "Spec Tenant Improvements") shall, in addition to the other terms
and conditions of this Agreement, be subject to the following terms and
conditions:
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<PAGE>
(i) Borrower shall be entitled to request and Lender shall be
obligated to make Disbursements in respect of Tenant
Improvement Costs for Spec Tenant Improvements ("Spec Tenant
Improvement Costs") constructed before January 1, 1993, or
constructed thereafter pursuant to Space Leases entered into
prior to January 1, 1993.
(ii) In addition to all other limitations set forth in this
Agreement the following limitations shall apply to
Disbursements for Spec Tenant Improvement Costs:
(A) The aggregate of Disbursements for particular Spec Tenant
Improvements shall not exceed the lesser of (1) if such
Spec Tenant Improvements are being constructed pursuant
to a Space Lease, the actual aggregate allowance provided
by Borrower for such Spec Tenant Improvements under such
Space Lease and (2) whether or not such Spec Tenant
Improvements are being constructed pursuant to a Space
Lease, the product of Twenty-Six Dollars ($26.00)
multiplied by the rentable square feet of space for which
the Spec Tenant Improvements are being constructed;
provided, however, to the extent that there are "savings"
(as defined in the next sentence) with respect to the
cost of constructing particular Spec Tenant Improvements,
the amount of such savings (on a per square foot basis)
may be applied by Borrower to increase the per square
foot maximum amount of the Loan available for Spec Tenant
Improvement Costs under clause (2). "Savings" as used in
the preceding sentence shall mean (Y) the amount by which
the cost of constructing Spec Tenant Improvements for
space not demised by a Space Lease is less than Twenty-
Six Dollars ($26.00) per square foot and (Z) the amount
by which the portion of the cost of constructing Spec
Tenant Improvements covered by a Space Lease that is to
be borne by Borrower is less than Twenty-Six Dollars
($26.00) per square foot.
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<PAGE>
(B) No Disbursement shall exceed the "Borrower's Share" (as
hereinafter defined) multiplied by the then incurred but
unpaid Spec Tenant Improvement Costs. The "Borrower's
Share" shall be a fraction, the numerator of which shall
be the aggregate maximum of all Disbursements available
for particular Spec Tenant Improvements Costs, determined
pursuant to Section 2.12(c)(ii)(A) above, and the
denominator of which shall be the total of such Spec
Tenant Improvement Costs, as reasonably estimated by
Lender in consultation with Borrower.
(iii) Prior to the first Disbursement for Spec Tenant Improvement
Costs for particular Spec Tenant Improvements, Lender shall
have received and approved (such approval not to be withheld
or delayed unreasonably) the following:
(A) With respect to Spec Tenant Improvements to be designed
by an architect, engineer, designer or space planner
other than the Architect and/or to be constructed by a
contractor other than the General Contractor, copies of
the agreements with such Persons providing for the
performance of all work required to complete such Spec
Tenant Improvements;
(B) Copies of the Plans for such Spec Tenant Improvements;
and
(C) A budget and construction schedule for the completion of
such Spec Tenant Improvements.
If Borrower or an Affiliate is not required to design or
construct the Spec Tenant Improvements for which a
Disbursement is being requested, then the items identified in
this Section 2.12(c)(iii) shall be provided by Borrower only
to the extent required to be or, if not so required, actually
made available to Borrower by the tenant under the pertinent
Space Lease.
(v) Prior to the final Disbursement for Tenant Improvement Costs
for particular Spec Tenant Improvements, Lender shall have
received and
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<PAGE>
approved certificates, letters, waivers, affidavits and
endorsements to the effect set forth in Section 5.08, but
limited to such Spec Tenant Improvements.
Section 2.13. Modifications to Project Budget. From time to time,
-------------------------------
Borrower or Lender may determine that increases or decreases are necessary to
the amounts set forth in the Project Budget because of actual or anticipated
changes in Project Costs. If, after due consultation and consideration of the
views of Borrower and supporting documentation, Borrower and Lender do not agree
to what increases or decreases need to be made to the Project Budget amounts set
forth in the Project Budget, the determination of Lender shall control, unless
Borrower delivers an acceptable letter of credit or other security to the Lender
for the disputed amount, to the extent that the disputed amount increases the
overall Project Budget.
Section 2.14. Balancing. Disbursements to pay Project Costs shall
---------
only be made at such times as the Loan is "in balance." The Loan shall be
deemed to be "in balance" only at such times as Lender shall determine, after
consultation with Borrower, that the sum of (a) the portion of the Loan not yet
disbursed for each Item of Project Costs (including Retainage on funds
previously advanced on account of such Item), plus (b) any excess amounts from
savings on any other Items to be applied to the Item in question plus (c) the
portion of such Item to be paid by the OCC or another Space Tenant under the OCC
Lease or another Space Lease, is equal to or greater than the full cost of such
Item. If the Loan is not in balance, Lender shall have no obligation to make,
and Borrower shall not be entitled to receive, Disbursements pursuant hereto
(excluding Disbursements for interest drawn by and paid to Lender) with respect
to that portion of the Loan for each Item which is out of balance. When the
Loan is again in balance, Lender shall resume funding the portion of the Loan
for the Item in question in accordance with the terms of this Loan Agreement.
With respect to those Items covered by the Construction Contract or other fixed
price Contracts, if an Item or Items under the Construction Contract or such
other Contract is or are out of balance by an aggregate amount of Five Hundred
Thousand Dollars ($500,000) or more, Lender shall have the right to require that
the Contractor or Subcontractor performing the work for the Item or Items which
is or are out of balance provide a payment and performance bond to guarantee the
completion of the work for the Item or Items, to the extent the Contractor or
Subcontractor has not already provided such bond.
2.15. Automatic Debit and Credit; Wire Transfers. Subject to Section
------------------------------------------
2.08(b), Disbursements of the Loan proceeds shall be made in immediately
available funds by Lender crediting the Disbursement Account established by
Borrower with Lender pursuant to the Assignment of Rents. Upon Borrower's
request, Lender will wire such Loan proceeds from the
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<PAGE>
Disbursement Account to such account(s) as Borrower shall designate in the
related Request for Disbursement. Borrower hereby authorizes Lender to
automatically debit the Disbursement Account for all interest, fees and other
charges payable to Lender pursuant to the Note, this Agreement and/or any of the
Loan Documents; provided, however, that the failure of Lender to so debit the
Disbursement Account shall not relieve Borrower of any of its obligations under
the Note, this Agreement and/or any of the Loan Documents.
ARTICLE III
BORROWER'S FIXED RATE OPTION
----------------------------
Section 3.01. Borrower's Fixed Rate Option. At any time after
----------------------------
Completion of Construction has occurred, Borrower shall have the right, on and
subject to the terms and conditions hereinafter set forth (the "Conversion
Option"), to cause the interest rate on a Portion of Principal to be converted
from the floating rate or rates then in effect pursuant to the terms of the Note
to the Fixed Rate for an Interest Period designated by Borrower.
Section 3.02. Exercise of Conversion Option.
-----------------------------
(a) Borrower may exercise the Conversion Option on any Business Day by
(i) giving Lender an Interest Rate Notice in accordance with the Note
designating the Fixed Rate and the desired Interest Period and (ii) thereafter
accepting a Fixed Rate in the manner provided in this Article III.
(b) Upon or after delivery of an Interest Rate Notice designating the
Fixed Rate, but in no event later than 5:00 p.m. New York time on the Business
Day immediately preceding the last day of the ensuing Exercise Period (as
defined in Section 3.02(c) below), Borrower shall deliver to Lender written
notice ("Timing Notice") identifying one or more representatives of Borrower
(and their telephone numbers), each of whom (i) is individually authorized to
accept or reject the Fixed Rate obtainable by Lender and offered to Borrower, as
hereinafter provided, and (ii) will be available to Lender by telephone until
5:00 p.m. New York time on the Business Day said timing Notice is given and from
9:00 a.m. New York time until 3:00 p.m. New York time on the next following
Business Day.
(c) An "Exercise Period" shall mean a period commencing at 9:00 a.m.
New York time on the Monday (or, if such Monday is not a Business Day, the next
following Business Day) next following the date on which an Interest Rate Notice
designating the Fixed Rate is given to Lender and continuing through and
including 3:00 p.m. New York time on the next following Thursday (or, if such
Thursday is not a Business Day, the next preceding Business Day).
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<PAGE>
Section 3.03. Interest Rate Management Arrangement.
------------------------------------
(a) Lender shall, by no later than 3:00 p.m. on the Business Day next
following Borrower's giving of a Timing Notice during an Exercise Period, use
all reasonable efforts to obtain an offer for an Interest Rate Management
Arrangement having a term equal to the Interest Period designated in the
Interest Rate Notice that will enable Lender to convert the interest rate on the
affected Portion of Principal on Lender's books from a floating to a fixed rate
of interest (subject, however, to adjustment as provided in the Note). Prior to
accepting such offer for an Interest Rate Management Arrangement, Lender shall
telephonically quote to Borrower the fixed per annum interest rate together with
all Funding Costs that will result from effectuating such an Interest Rate
Management Arrangement, which rate Borrower shall immediately either accept or
reject. If Lender is able to contact Borrower and Borrower fails to immediately
accept or reject the offered Fixed Rate, Lender shall have no obligation to
further attempt to effectuate such an Interest Rate Management Arrangement. The
Fixed Rate offered by Lender shall be the sum of the fixed rate of interest
obtainable in the offered Interest Rate Management Arrangement plus five hundred
fifty one-thousandths of one percent (0.550%).
(b) If Borrower accepts the Fixed Rate quoted by Lender, Lender shall
use all reasonable efforts to accept and enter into the offered Interest Rate
Management Arrangement. If Lender is able to enter into the offered Interest
Rate Management Arrangement then, commencing on the third (3rd) Business Day
after Lender enters into the offered Interest Rate Management Arrangement (the
"Conversion Date"), the interest rate on the Portion of Principal to which the
Fixed Rate is to apply shall, without further notice to or action by Borrower or
Lender, bear Interest at the Fixed Rate for the designated Interest Period.
Borrower's acceptance of a Fixed Rate shall be irrevocable for the designated
interest Period.
(c) If Borrower rejects the Fixed Rate quoted by Lender pursuant to
Subsection 3.03(a) or if Lender is unable to contact Borrower to obtain
Borrower's election as to such Fixed Rate, Lender shall not accept the offered
Interest Rate Management Arrangement and shall, until 3:00 p.m. on the final
Business Day of the Exercise Period then in effect, continue to use all
reasonable efforts to seek an Interest Rate Management Arrangement that will
result in a Fixed Rate acceptable to Borrower. If Borrower fails to accept a
Fixed Rate by 3:00 p.m. on such date, Borrower shall have no further right
during such Exercise Period to convert the interest rate on the Note from a
floating to a fixed rate. Borrower shall nonetheless retain the right, subject
to the same terms and conditions hereof, to give another Interest Rate Notice
designating the Fixed Rate and, during the ensuing Exercise Period, to give the
Timing Notice and accept a Fixed Rate.
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<PAGE>
(d) If Borrower accepts the Fixed Rate, Borrower shall reimburse
Lender for all Funding Costs incurred by Lender as a result of Borrower's
exercise of the Conversion Option and acceptance of a Fixed Rate.
(e) Notwithstanding anything to the contrary contained in this
Agreement or any other Loan Document, the following limitations shall apply to
Borrower's rights in respect of the Conversion Option:
(i) In exercising the Conversion Option, Borrower may designate
an Interest Period that expires on or before, but not after
the Maturity Date. If Borrower designates the Fixed Rate for
an Interest Period that expires prior to the Maturity Date,
then the applicable rate or rates of interest for the
remainder of the Loan Term shall be that or those rates from
time to time in effect by reason of Borrower's election of
such rate or rates pursuant to Section 3(b) of the Note or by
operation of the other provisions of the Note.
(ii) In exercising the Conversion Option, Borrower must designate
as the Portion of Principal to bear interest at the Fixed
Rate the entire principal balance of the Loan outstanding at
such time. Amounts thereafter advanced under the Note shall
bear interest at the Eurodollar Rate or Prime Rate in
accordance with the terms of the Note, but shall not be
entitled to bear interest at the Fixed Rate unless and until
(A) the Interest Period for the Fixed Rate as previously
selected by Borrower expires prior to the Maturity Date and
Borrower thereafter again exercises the Conversion Option or
(B) the entire remaining balance of the Loan still available
to be drawn has been drawn and Lender, upon Borrower's
delivery of an appropriate Interest Rate Notice, is able to
obtain an Interest Rate Management Arrangement that will
permit Lender, on terms reasonably acceptable to Lender and
Borrower, to convert the interest rate on the amount of such
entire remaining balance to a fixed rate of interest.
Section 3.04. Conditions to Lender's Obligation to Enter Into an
--------------------------------------------------
Interest Rate Management Arrangement. Lender's obligation to enter into an
- ------------------------------------
Interest Rate Management Arrangement and thereby convert the interest rate on
the Note to the Fixed Rate shall in all respects be conditioned upon the
satisfaction (or waiver by Lender) of all of the following conditions:
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<PAGE>
(a) Borrower shall have delivered to Lender Borrower's certificate
that no material adverse change in the financial condition of Borrower and
Guarantors' certificate that no material adverse change in the financial
condition of Guarantors has occurred since the date hereof.
(b) There shall exist at the Conversion Date (i) no uncured Event of
Default and (ii) no fact or circumstance, which, with the passage of time,
giving of notice or action of third parties, could become an Event of Default
that is not then being cured in accordance with the terms of this Agreement and
the Loan Documents.
(c) All of the representations and warranties set forth in this
Agreement, the Loan Documents and other documents delivered to Lender in
connection with the funding of the Loan shall be true and correct in all
material respects as of the Conversion Date, and Borrower shall have recertified
such representations and warranties to Lender as of such date.
(d) As of the Conversion Date, there shall be (i) no litigation
pending nor shall lit litigation have been threatened in writing by a potential
claimant or a potential claimant's counsel with respect to the Trust Estate, and
(ii) no condemnation or similar proceeding shall be pending nor shall same have
been threatened by a duly authorized official of a Governmental Authority acting
in his official capacity with respect to all or any part of the Trust Estate,
either of which, if determined adversely to Borrower, would materially and
adversely affect the Trust Estate or the priority of Lender's lien thereon or
the financial condition of Borrower or Guarantors
(e) Borrower shall have complied in all respects with the applicable
terms and conditions of this Article III.
ARTICLE IV
CONDITIONS TO THE INITIAL DISBURSEMENT
--------------------------------------
The obligation of Lender to make the Initial Disbursement to or for the
account of Borrower shall be subject to the satisfaction of all the conditions
set forth in this Article IV and, absent satisfaction or Lender's written waiver
of the same, Lender shall have no obligation to make the Initial Disbursement.
Section 4.01. Loan Documents. The following Loan Documents shall have
--------------
been duly executed by all parties thereto other than Lender, acknowledged as
required, and delivered either to Lender or, as to Loan Documents that are to be
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<PAGE>
recorded or filed, to the Agent with written instructions satisfactory to Lender
that such Loan Documents be filed or recorded prior to the funding of the
Initial Disbursement:
(a) this Agreement;
(b) the Note;
(c) the Deed of Trust;
(d) such Form UCC-l Financing Statements as Lender may require
naming Borrower as debtor;
(e) the Assignment of Rents;
(f) a Notice of Assignment of the OCC Lease in form and substance
satisfactory to Lender as required by the Assignment of Rents;
(g) the Assignment of Project Documents; and
(h) the Guarantees.
Section 4.02. Title Policies. Lender shall have received ALTA
--------------
extended coverage mortgagee form of title insurance policies 1987 form B (the
"Title Policy") (with proof of the payment of the premiums therefor) or
commitments therefor in form and substance acceptable to Lender issued by the
Agent on behalf of the Title Companies, together with (a) an executed
coinsurance agreement in form and substance satisfactory to Lender and (b)
reinsurance from other title insurance companies approved by Lender and
evidenced by executed reinsurance agreements satisfactory to Lender containing a
right of direct access, insuring the lien of the Deed of Trust to be a first
lien against the Premises, free and clear of all defects, encumbrances and
exceptions, including mechanics' Liens and claims of Liens, other than the
Permitted Exceptions, together with such affirmative insurance as Lender may
require. The aggregate amount of the Title Policies shall be not less than the
maximum amount of the Loan, the coverage then provided by the Title Policies
shall be in the amount of the Initial Disbursement, and the Title Policies shall
contain a "pending disbursements" clause in substantially the following form:
"Pending disbursement of the full proceeds of the loan secured by
the mortgage set forth under Schedule A hereof, this policy insures
only to the extent of the amount actually disbursed but increases as
each disbursement is made in good faith and without knowledge of any
defects in, or objections to, the title up to the face amount of the
policy. At the time of each disbursement of the proceeds of the loan,
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<PAGE>
the title must be continued down to such time for possible liens or
objections intervening between the date hereof and the date of such
disbursement."
Section 4.03. Survey. Lender shall have received a current survey
------
(the "Survey") of the Premises prepared by a surveyor acceptable to Lender who
is qualified as a land surveyor in the District of Columbia, which shall be
satisfactory, in form and substance, to Lender and which survey shall (a) on its
face set forth (i) the legal description of the Premises and (ii) a
certification from the surveyor to Lender and the Title Companies that it was
prepared in compliance with standards of the American Land Title Association and
otherwise containing such certifications of fact as Lender may require; (b) show
the locations of the Improvements then constructed on the Premises; (c) show
that the Improvements, to the extent then constructed, are located entirely
within the Land property lines and do not encroach upon any easement or breach
or violate any Law or any covenant, condition or restriction of record, or any
building or zoning ordinance; and (d) otherwise satisfy the reasonable
requirements of Lender and the Title Companies.
Section 4.04. Insurance. Lender shall have received evidence that the
---------
insurance required under Section 1.08 of the Deed of Trust is in full force and
effect with all annual premiums paid.
Section 4.05. Flood Insurance. Lender shall have been provided with
---------------
satisfactory evidence, which may be in the form of a letter from an insurance
broker, municipal engineer, or other knowledgeable source unaffiliated with
Borrower, as to whether (a) the Premises is located in an area designated by the
Department of Housing and Urban Development as having special flood or mudslide
hazards, and (b) the community in which the Project is located is participating
in the National Flood Insurance Program. If both of the aforesaid conditions
exist, Lender shall have received evidence that satisfactory policies of flood
insurance covering the Project are in full force and effect with all annual
premiums paid and that such policies have been endorsed to name Lender as a loss
payee pursuant to the standard mortgage clause without contribution.
Section 4.06. Existence and Authorization. Lender shall have received
---------------------------
true, correct, and complete executed copies of the following documents:
(a) With respect to each Guarantor, each general Partner of
Borrower, and each general Partner of a general Partner of Borrower that is a
corporation:
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<PAGE>
(i) The certificate of incorporation of such corporation
and all amendments thereof, certified by the Secretary of State of the state of
such corporation's incorporation, together with a certificate of said Secretary
of State to the effect that the corporation is in good standing therein;
(ii) A certificate from the Secretary of State or comparable
official of the jurisdiction in which the Premises are located (if other than
such corporation's state of incorporation) to the effect that the corporation is
in good standing and qualified to do business therein;
(iii) Bylaws certified to Lender by the secretary of the
corporation; and
(iv) A certificate of the secretary of the corporation
certifying (A) resolutions of the shareholders and directors of the corporation
authorizing the consummation of the transactions contemplated by the Loan
Documents to which such corporation is a party or a signatory and the execution,
delivery, and performance of each of the Loan Documents to which such
corporation is a party or a signatory and (B) the incumbency and signature of
each of the officers of the corporation to execute any Loan Documents; and
(b) With respect to Borrower and each Guarantor, each general
Partner of Borrower, and each general partner of a general partner of Borrower
that is a partnership:
(i) The partnership or joint venture agreement and all
amendments, attachments and agreements related thereto certified to Lender by
all general Partners thereof;
(ii) All certificates filed or required to be filed by the
partnership in the jurisdiction of its formation and the jurisdiction where the
Premises are located in order for it to do business in those jurisdictions; and
(iii) Such evidence as may be available from the Secretary of
State or comparable official of the jurisdiction of the partnership's formation
to the effect that the partnership continues to exist and is in good standing.
Section 4.07. Opinion of Borrower's Counsel. Lender shall have
-----------------------------
received a favorable opinion of Borrower's counsel to the following effect:
(a) Borrower is duly organized, validly existing, in good
standing, and authorized to do business in the District of Columbia.
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<PAGE>
(b) All Loan Documents to which the Borrower is a party have been
duly authorized, executed and delivered by Borrower and constitute legal, valid,
binding and enforceable agreements in accordance with their respective terms
under federal and District of Columbia law, subject only to any applicable
bankruptcy, insolvency, reorganization, moratorium law, or other laws affecting
creditors rights generally, and do not breach or violate any agreement, court
order, or law of which such counsel has knowledge and by or under which Borrower
is bound or affected.
(c) Such other matters as Lender may require.
Section 4.08. Opinion from Counsel to Each Guarantor. Lender shall
--------------------------------------
have received a favorable opinion from counsel to each Guarantor to the same
effect as the opinion of Borrower's counsel (to the extent applicable).
Section 4.09. UCC Search. Lender shall have received current searches
----------
of the UCC filing offices in such jurisdictions as Lender may require and the
land records in the District of Columbia showing no security interests affecting
the Premises, the Project, Borrower, the general Partners of Borrower, the
general Partners of the general Partners of Borrower or Guarantors other than
those expressly permitted by the Loan Documents.
Section 4.10. Hazardous Material. Borrower shall have furnished
------------------
Lender with a report or reports satisfactory to Lender showing no Hazardous
Material present at or conveyed from or to the Premises, except to the extent
used in construction of the Project and for which there is no practical
alternative and which will be used in strict compliance with all Laws and
removed in its entirety from the Project promptly upon completion of such use.
Borrower shall have furnished Lender with evidence satisfactory to Lender that
no Hazardous Material will be knowingly incorporated into the Project by
Borrower or, following Completion of Construction, present at or conveyed from
or to the Premises except for petroleum products, cleaning solvents, paint and
other similar materials necessary in the ordinary operation of the Premises and
which are stored, handled and disposed of in strict compliance with all Laws
applicable thereto.
Section 4.11. Streets and Utilities. Borrower shall have furnished
---------------------
evidence satisfactory to Lender that (a) all utility services necessary for the
construction of the Project and the operation thereof for its intended purposes
are available at the boundaries of the Premises and in adequate supply at the
boundaries of the Premises and (b) the Project has lawful, adequate,
unobstructed, and unimpaired access to public streets.
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<PAGE>
Section 4.12. Project Budget. Lender shall have received and approved
--------------
a detailed budget of all Project Costs, together with supporting documentation
reasonably requested by Lender, which budget shall, upon approval by Lender, be
initialed by Borrower and Lender and attached hereto as Schedule 4.12.
Section 4.13. Construction Schedule. Lender shall have received and
---------------------
approved a detailed schedule for the construction of the Project and
corresponding expenditures, which schedule shall show, among other things, a
trade-by-trade breakdown of the estimated periods of commencement and completion
of the work of each such trade. Upon approval by Lender, the schedule shall be
initialed by Borrower and Lender and attached hereto as Schedule 4.13.
Section 4.14. Permits. Lender shall have received evidence (a) that
-------
Borrower has obtained all approvals, permits, licenses and other authorization
of Governmental Authorities (i) for that portion of construction of the Project
covered by the Plans for which the Initial Disbursement is being requested and
(ii) for future construction to the extent then obtainable and (b) that there is
no basis to believe that any and all approvals, permits, licenses and other
authorizations of Governmental Authorities needed for Completion of Construction
will not be forthcoming in a timely manner consistent with the Construction
Schedule.
Section 4.15. Plans. Lender shall have received and approved the
-----
Plans for the Project, to the extent available as of the date the Initial
Disbursement is funded. Plans shall be scheduled by sheet number, title, date
and revised date, which schedule shall be true and correct, and such Plans shall
include the filed plans referred to in any permit for the Project.
Section 4.16. Architect Materials. Lender shall have received and
-------------------
approved (a) a true, correct and complete copy of the fully executed Architect
Contract for each Architect, (b) a consent executed by each Architect,
substantially in the form of Exhibit J-1 hereto, and (c) a certificate executed
by each Architect, substantially in the form of Exhibit J-2 hereto. Lender shall
have received and approved copies of all inspection and test records and reports
made by or for each Architect with respect to the Project.
Section 4.17. General Contractor's Materials. Lender shall have
------------------------------
received and approved a true, correct and complete copy of the fully executed
Construction Contract, together with a consent and certificate executed by the
Contractor substantially in the form of Exhibit K.
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<PAGE>
Section 4.18. Contractor and Subcontractor Materials. Lender shall
--------------------------------------
have received (a) a list of all Contractors and Subcontractors and (b) copies of
all Contracts and Subcontracts as executed or as then being negotiated.
Section 4.19. Engineer's Certificate. Lender shall have received from
----------------------
Flack & Kurtz, Consulting Engineers, and from any other engineer providing
services on the Project, an executed certificate substantially in the form of
Exhibit L hereto.
Section 4.20. Other Project Documents. Lender shall have received
-----------------------
true, correct and complete copies of any and all Project Documents not elsewhere
identified herein and reasonably requested by Lender, and such additional
information as Lender may require relative to the development, construction,
use, occupancy, and management of the Project.
Section 4.21. Consultants' Report. Lender shall have received reports
-------------------
from Lender's Consultants, including the Inspecting Engineer, addressed to
Lender regarding such matters as Lender requests and, without limiting the
foregoing, to the effect that (a) the Plans conform with generally acceptable
building construction practice, including architectural, structural, mechanical
and electrical aspects thereof, (b) the Inspecting Engineer concurs with (i) the
Hard Costs shown in the Project Budget, and (ii) the Construction Schedule
prepared by Borrower, (c) based upon the information submitted by Borrower or
such other Person as the Inspecting Engineer may deem necessary or appropriate,
all permits, licenses and approvals required for the construction of the Project
have been obtained to the extent applicable to the state of construction or no
impediment exists to further required permits, licenses and approvals being
timely obtained, (d) Contracts and Subcontracts are in effect which
satisfactorily provide for the construction of the Project, (e) all roads and
utilities necessary for the full utilization of the Project for its intended
purposes have been completed or there are sufficient amounts budgeted for such
improvements, (f) the construction of the Project theretofore performed has been
completed substantially in accordance with the Plans reviewed by Inspecting
Engineer and approved by Lender, and (g) the Project has, in the aggregate,
reached a stated percentage of completion.
Section 4.22. Cost to Complete. Lender shall have determined in the
----------------
exercise of its sole discretion that the Project can be built for not more than
the amount specified therefore in the Project Budget.
Section 4.23. OCC Materials. Lender shall have received an executed
-------------
estoppel certificate from the OCC substantially in the form of Exhibit M hereto
and an executed
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subordination, nondisturbance and attornment agreement substantially in the form
of Exhibit N hereto.
Section 4.24. Appraisal. Lender shall have approved the Appraisal
---------
heretofore delivered by Borrower.
Section 4.25. Fees. Borrower shall have made arrangements reasonably
----
satisfactory to Lender for the payment from the Initial Disbursement of the
following fees, costs and expenses:
(a) A commitment fee of Three Hundred Twenty Thousand Dollars
($320,000.00), to be retained by Lender whether or not any further Disbursements
are made under this Agreement;
(b) The fees, costs and other expenses then due and payable to
Lender's Consultants under their agreements with Lender;
(c) Reimbursement to Lender for monies it has heretofore' paid to
its Consultants in connection with the transactions contemplated by the Loan
Documents; and
(d) Lender's counsel's fees and disbursements incurred in
connection with the Loan.
Section 4.26. General Conditions.
------------------
(a) On the date of funding of the Initial Disbursement, there
shall exist (i) no Event of Default and (ii) no fact or circumstance, which,
with the passage of time, giving of notice or action of third parties, could
become an Event of Default.
(b) All representations and warranties contained herein and in
the other Loan Documents and in any document delivered to Lender by Borrower in
connection with the Loan shall be true and correct in all material respects.
(c) Lender shall have received such additional agreements,
certificates, reports, approvals, instruments, documents, financing statements,
consents and opinions as Lender may reasonably request, all in form and
substance reasonably satisfactory to Lender.
Section 4.27. Construction-related Conditions. Lender shall have
-------------------------------
received all of the following documents, materials and information with respect
to the Initial Disbursement:
(a) A Request for Disbursement;
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<PAGE>
(b) All information required by Section 5.06 (to the extent the
Initial Disbursement is for Stored Materials);
(c) Partial Lien waivers and affidavits of payment in the form of
Exhibit I hereto from the General Contractor and all Contractors and
Subcontractors for the full amount (less actual retainage) of all Hard Costs due
and owing to the General Contractor, Contractors and Subcontractors as of the
date of the last payment from Borrower (or an Affiliate) to such Persons;
(d) A certificate from each Architect with responsibility for
work being paid for from the Initial Disbursement to the effect set forth in
Section 5.03(c);
(e) A certificate from the General Contractor to the effect set
forth in Section 5.03(d); and
(f) As to any phase of construction that has been completed, the
information and materials set forth in Section 5.03(f).
ARTICLE V
CONDITIONS TO ALL SUBSEQUENT DISBURSEMENTS
------------------------------------------
The obligation of Lender to make each Disbursement after the Initial
Disbursement to or for the account of Borrower shall be subject to the
satisfaction of all the conditions set forth in this Article V and, absent
satisfaction or Lender's written waiver of the same, Lender shall have no
obligation to make such Disbursement.
Section 5.01. Initial Disbursement. All conditions to making the
--------------------
Initial Disbursement shall have been satisfied or waived in writing by Lender
and the Initial Disbursement shall have been made.
Section 5.02. General Conditions.
------------------
(a) All representations and warranties contained herein and in
the other Loan Documents and in any document delivered to Lender by Borrower in
connection with the Loan, including without limitation all Requests for
Disbursement, shall be true and correct in all material respects on and as of
the date of the Disbursement then to be made as though made on and as of that
date, except to the extent otherwise disclosed by Borrower to Lender in writing,
provided that the facts set forth in such disclosures are acceptable to Lender
in its sole discretion.
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<PAGE>
(b) On the date of funding the Disbursement, there shall exist
(i) no Event of Default and (ii) no fact or circumstance which, with the passage
of time, giving of notice or action of third parties, could become an Event of
Default.
Section 5.03. Request for Disbursement Documents. Prior to each
----------------------------------
Disbursement, Borrower shall have furnished to Lender and Lender shall have
received and approved all of the following documents, materials, and
information:
(a) A Request for Disbursement;
(b) Partial Lien waivers in the form of Exhibit I hereto from the
General Contractor and all Contractors and Subcontractors for the full amount
(less actual retainage) of all Hard Costs covered by all prior Requests for
Disbursement, except that Borrower shall not be required to obtain Lien waivers
(i) with respect to (and shall not be entitled to any Disbursement for) any
claim for labor, service, equipment or material that is being actively contested
in accordance with the requirements of the Deed of Trust and (ii) with respect
to any Contractor or Subcontractor that only supplies materials to the Project
and whose Contract or Subcontract requires the payment of less than One Hundred
Thousand Dollars ($100,000.00) in the aggregate, except to the extent Lender has
given Borrower not less than fifteen (15) days' prior written notice that a Lien
waiver will be required from such Contractor or Subcontractor for a subsequent
Disbursement;
(c) A certificate from each Architect with responsibility for
work being paid for from that Disbursement, in the form set forth in Exhibit H,
with respect to that portion of the Project for which such Architect has design
responsibility, to the effect that, in the Architect's professional opinion: (i)
all revisions to the Plans since the date of the last Disbursement are in
conformity with all applicable Laws, (ii) the work completed to the date of the
Disbursement is in substantial conformity with the Plans, Construction Contract
and applicable Contract if any, and (iii) stating the percentage of completion
of the work on such portion of the Project;
(d) A certificate from the General Contractor or appropriate
Contractor, if any (with respect to Hard Costs only), in the form set forth in
Exhibit H, setting forth all incurred Items of Project Costs for the periods
since the last Request for Disbursement and from the inception of the Project
(or, as appropriate, the Spec Tenant Improvements), all Items of Project Costs
projected to complete the Project (or, as appropriate, the Spec Tenant
Improvements), any variance between actual and projected Project Costs and the
amounts set forth in the Project Budget, the percentage of materials provided
and/or work completed for each Item from the inception of the Project (or, as
appropriate, the Spec Tenant
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<PAGE>
Improvements) to the date of the certification, and all changes from the
previous certificate which are known or reasonably anticipated by the General
Contractor or appropriate Contractor, if any.
(e) A report from the Inspecting Engineer with respect to any
revised Plans, Project Budget and Construction Schedule (or, as to Spec Tenant
Improvements, any new plans, schedule and budget) stating (i) that in the
opinion of Inspecting Engineer, all Change Orders and modifications or
amendments to the Plans, Project Budget and Construction Schedule (or, as to
Spec Tenant Improvements, any new plans, schedule and budget) required hereby to
be approved by Lender have been approved by Lender; (ii) that, in the opinion of
Inspecting Engineer, based on a review of the partial Lien waivers, certificates
and other reports submitted to substantiate the Request for Disbursement, the
construction of the Project (or, as appropriate, the Spec Tenant Improvements)
theretofore performed has been completed substantially in accordance with the
Plans, Construction Contract and applicable Contract, if any, reviewed by
Inspecting Engineer and approved by Lender; (iii) what percentage of completion
in the aggregate has been reached in the construction of the Project (or, as
appropriate, the Spec Tenant Improvements); (iv) the extent to which, if any,
the Disbursements for the Hard Costs not yet approved are not sufficient to
complete construction of the Project; (v) whether completion of the portions of
the Project not yet completed can, in Inspecting Engineer's opinion, be
completed prior to the Completion Date (or, with respect to Spec Tenant
Improvements only, the completion date set forth in the supplemental schedule
for such Spec Tenant Improvements); and (vi) that Inspecting Engineer has
approved the items referred to in Sections 5.03(b), (c), and (d) hereof; and
(f) As to a stage of construction which has been completed, any
required reports or approvals covering structural and mechanical work and
certifications or other appropriate written statements from the appropriate
Governmental Authorities for electrical work with respect to such stage to the
extent reasonably obtainable.
Section 5.04. Title Endorsements. Prior to each Disbursement, Lender
------------------
shall have received from the Agent on behalf of the Title Companies endorsements
to the Title Policies extending the coverage to be provided thereby to the date
and to the full amount of the requested Disbursement, without exception for
mechanics Liens or claims of Liens, or any other matter not previously approved
by Lender in writing. Such endorsements will insure the Deed of Trust to be a
first lien on the Project, subject only to the Permitted Exceptions.
Section 5.05. Plan and Permit Approval. Lender shall have received
------------------------
and approved all changes to the Plans (to the extent required by Section 7.05(e)
hereof) and all new Plans and all permits, licenses, approvals and other
authorizations
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<PAGE>
from Governmental Authorities necessary to complete the work contemplated by
such Plans, to the extent then required or obtainable, for the development,
construction, use and occupancy of the Project in respect of which the
Disbursement is requested.
Section 5.06. Stored Materials. Lender will make Disbursements for the
----------------
cost of Stored Materials (not including any profit or overhead of General
Contractor or any Contractor or Subcontractor (other than the manufacturer or
supplier of such materials) payable in respect of such Stored Materials, for
which a Disbursement shall be made only after incorporation of the Stored
Materials into the Project) subject to the other provisions of this Agreement,
and further provided that Lender shall have received the following, in form and
substance satisfactory to Lender:
(a) for materials stored on the Premises, invoices indicating
actual cost of the Stored Materials, not including profit and overhead;
(b) evidence that the Stored Materials are appropriate for
purchase during the then current stage of construction;
(c) evidence that the Stored Materials have been paid for and are
owned by (or upon payment of the amount to be disbursed pursuant to the
applicable Request for Disbursement shall be paid for and owned by) Borrower
free of all lien rights or claims of the vendor or any third party;
(d) evidence satisfactory to Lender that the Stored Materials are
securely stored on-site or in a bonded warehouse or storage yard approved by
Lender and, if stored in a warehouse or storage yard, the warehouse or storage
yard has been notified that Lender has a security interest in the subject stored
materials and the original warehouse receipt;
(e) for those stored materials stored off-site, a certificate or
binder of insurance from Borrower or the supplier, fabricator or other
subcontractor, covering the Stored Materials against loss, theft and damage in a
manner and amount satisfactory to Lender, naming Lender as a loss-payee; and
(f) evidence of filing of any UCC-1 financing statement or
statements required to perfect Lender's lien with respect to such Stored
Materials, and satisfactory assurance to Lender that such materials are covered
by the security agreement provisions of the Deed of Trust and that Lender has a
perfected security interest in such materials.
Section 5.07 Contractors and Subcontractors. To the extent required
------------------------------
by Section 7.07 hereof, Lender shall have received copies of all Contracts and
Subcontracts not theretofore reviewed by Lender.
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<PAGE>
Section 5.08. Final Construction Disbursement. The final Disbursement
-------------------------------
of Hard Costs for all portions of the Project excluding Spec Tenant Improvement
Costs and the release of related retainage (to the extent not theretofore
released pursuant to Section 2.09(b)) shall be made subject to satisfaction of
all of the foregoing as well as the following conditions:
(a) Lender shall have received a certification by Borrower and a
letter from each Architect other than the Architect for the Spec Tenant
Improvements that all work on the Project other than the Spec Tenant
Improvements has been finished and made available for use substantially in
accordance with the Plans, Construction Contract, other applicable Contract if
any, and OCC Lease;
(b) Lender shall have received a certificate of Inspecting
Engineer stating, in effect, that all of the Project other than the Spec Tenant
Improvements has been completed in a good and workmanlike manner substantially
in accordance with the Plans, Construction Contract, other applicable Contract
if any, and OCC Lease;
(c) Lender shall have received final Lien waivers and affidavits
of payment from the General Contractor and all Contractors and Subcontractors
who have performed work, labor or services or furnished supplies in connection
with the construction, of the project substantially in the form of Exhibit I
hereto, modified to state that all work, labor, services and materials to be
performed or provided by such Person have been performed and provided and, upon
payment of a specified sum, all amounts owing to such Person in respect of the
Project will then be paid in full; and
(d) Lender shall have received final and comprehensive
endorsements to the Title Policies or evidence satisfactory to Lender that the
Title Companies are in a position to issue to Lender final policies of title
insurance with such endorsements thereto as Lender may reasonably require,
insuring the Deed of Trust as a first lien, subject only to the Permitted
Exceptions and providing coverage in the full amount of the Loan.
Section 5.09. Advances Without Requests. Notwithstanding anything
-------------------------
to the contrary and without regard to the minimum Disbursement amount set forth
in Section 2.05(a), Borrower hereby authorizes Lender to disburse proceeds of
the Loan to pay (i) interest and fees on the dates when interest and fees are
due and owing in accordance with Section 2.12 hereof and the terms of the Note
and the other Loan Documents and (ii) upon the occurrence of an Event of
Default, or upon Borrower's default on any obligation to pay money in any way
related to the Project which default Lender reasonably believes may have a
material adverse effect on the Project, (A) all costs of title searches or
abstracts, document taxes, stamp
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<PAGE>
taxes and recording expenses; (B) the Inspecting Engineer's fees and expenses
reasonably incurred; (C) reasonable fees and expenses for any services of a
Consultant which may be required for purposes contemplated by this Agreement;
and (D) notwithstanding that Borrower may not have requested a Disbursement of
such amount, subject to the further provisions of the Deed of Trust, all costs,
fees and expenses due to (1) contractors, subcontractors, laborers, materialmen
or other persons furnishing labor, services or materials used or to be used on
or in connection with the Project, (2) taxing authorities or insurers in payment
of taxes or hazard, liability or title insurance premiums when due, and/or (3)
the holder, of any Lien on the Premises or Project or Borrower 5 interest
therein, as necessary to discharge such Lien. The authorization hereby granted
shall be irrevocable, and no further direction or authorization from Borrower
shall be necessary for Lender to make such Disbursements. However, the
provisions of this Article V shall neither require Lender to make such
Disbursements, nor prevent Borrower from paying interest and fees from its own
funds. Any Disbursement so made shall be deemed made to and received by Borrower
and shall be added to the unpaid principal balance of the Note. Lender will
promptly advise Borrower of the making of any Disbursement pursuant to this
Section 5.09, and such notice shall set forth, in reasonable detail, a
description of those Items which were paid with the proceeds of such
Disbursement.
Section 5.10. Surveys. If necessary in the reasonable judgment of
-------
Lender or if required by either of the Title Companies, Borrower, within thirty
(30) days after written notice from Lender or such Title Company, shall from
time to time furnish to Lender updates of the Survey certified to Lender and the
Title Companies and updated by inspection with respect to all relevant
requirements and giving current information as described in Section 4.03. Within
thirty (30) days after Completion of Construction, Borrower shall deliver to
Lender a final, "as-built" version of the Survey which shall show: (a) the
Project as completed in accordance with the Plans and otherwise in accordance
with the provisions of this Agreement, (b) all easements affecting the Premises,
whether benefiting or burdening same, rights of way and existing utility lines,
whether recorded or disclosed by a physical inspection of the Premises, (c) a
calculation of the dimensions of the Premises, (d) the lines of the public
streets abutting the Premises and the widths thereof, (e) encroachments and the
extent thereof in feet and inches onto the Premises and all encroachments by any
buildings, structures or improvements located on the Premises onto any easements
over, and onto property adjacent to, the Premises, and (f) all Improvements, and
any other physical matters on the ground which may adversely affect the Premises
or title thereto and the relationship of such Improvements and other physical
matters by distances to the perimeter of the Premises, established building
lines and street lines.
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<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Lender to enter into this Agreement and to make the Initial
Disbursement and each subsequent Disbursement under the Loan, Borrower makes the
following representations and warranties which shall survive the execution and
delivery of this Agreement, the Note and the other Loan Documents and shall be
remade from time to time as elsewhere provided in this Agreement.
Section 6.01. Existence. Borrower is a limited partnership duly
---------
organized and validly existing under the laws of the District of Columbia.
Borrower has the authority, rights and franchises to own its properties, to
carry on its business as now conducted, to perform its obligations hereunder and
under the other Loan Documents, to complete the Project in accordance with the
Plans, and to own and operate the Project as a first-class commercial office
building. Borrower has made all filings in each jurisdiction in which the
character of its business or nature of its properties makes such filings
necessary and where not filing could have a material adverse impact on its
business. Borrower conducts no business, directly or indirectly, except for the
development, construction, ownership, and operation of the Project and of Phase
II, and the ownership of Lot 872.
Section 6.02. Authorization, Enforceable Obligation. Borrower has the
-------------------------------------
authority and legal right to execute, deliver and perform the Loan Documents to
which Borrower is a party, to borrow under the Loan Documents and to grant the
liens and security interests contemplated thereby, and has taken all necessary
action to authorize the borrowings on the terms and conditions hereof and the
execution, delivery and performance of the Loan Documents to which Borrower is a
party. No consent, license, permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or declaration with any
Governmental Authority which has not been obtained is required for the
execution, delivery and performance by Borrower of the Loan Documents to which
it is a party. Each of the Loan Documents to which Borrower is a party has been
executed and delivered by a Person duly authorized to execute and deliver such
documents on behalf of Borrower and constitutes the legal, valid and binding
obligation of Borrower, enforceable against Borrower in accordance with its
terms.
Section 6.03. Conflicting Agreements. Neither the execution nor
----------------------
delivery of this Agreement or any other Loan Document or any amendments thereto,
nor fulfillment of or compliance with the terms and provisions hereof or
thereof, nor
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<PAGE>
the consummation of the transactions contemplated hereby or by any of the other
documents referred to herein, will conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, or result in
any violation of, or result in the creation of any lien (other than the lien of
the Loan Documents) upon any of the properties or assets of Borrower pursuant to
its partnership agreement, any award of any arbitrator or any agreement
(including any Project Document and any agreement with Borrower's partners),
instrument, order, judgment, decree, statute, law, ordinance, franchise,
certificate, permit, rule, regulation or the like to which Borrower is subject,
or to or by which its properties or its assets or the Trust Estate are bound or
affected.
Section 6.04. Required Documents. Borrower has furnished Lender true,
------------------
correct and complete certified copies of all documents and materials to be
furnished under Section 4.06 hereof.
Section 6.05. No Material Litigation. No litigation, investigation or
----------------------
administrative proceeding of or before any court, arbitrator or governmental
authority is pending or has been threatened in writing by or on behalf of a
potential claimant against Borrower, the general Partners of Borrower or assets
of Borrower or that would, if determined adversely, be likely to have a material
adverse effect on (a) Borrower's ability to perform its obligations under the
Loan Documents in accordance with the terms thereof, (b) the validity of this
Agreement or any other Loan Document, or (c) Lender's security under this
Agreement or any other Loan Document. No notice has been received by Borrower of
any proceeding to condemn, purchase or otherwise acquire the Trust Estate or any
part thereof or interest therein, and, to the best of Borrower's knowledge, no
such proceeding has been threatened by a duly authorized official of a
Governmental Authority acting in his official capacity.
Section 6.06. Margin Regulations. No part of the proceeds of the Loan
------------------
will be used to purchase or carry any margin stock (as such term is defined in
Regulations G, U and X of the Board of Governors of the Federal Reserve System).
Borrower is not engaged, principally or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying any
margin stock.
Section 6.07. Compliance With Applicable Laws. Each of Borrower, the
-------------------------------
Project, and the Trust Estate is in compliance with the requirements of all
Laws, the failure to comply with which would materially and adversely affect
Borrower's ability to perform its obligations under this Agreement or any of the
other Loan Documents, and no written notice of non-compliance with any of the
foregoing has been received by Borrower from any Governmental Authority. No
consent, approval or
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<PAGE>
authorization, or registration, declaration or filing with any Governmental
Authority or any other Person is required for the valid execution, delivery and
performance by Borrower of this Agreement or any other Loan Document, or the
carrying out of the transactions contemplated hereby or thereby. All approvals,
permits, licenses and other authorizations of Governmental Authorities required
for the current stage of construction of the Project and for future stages to
the extent now obtainable have been obtained and are in full force and effect
and true and complete copies thereof have been furnished to Lender. Borrower
has no basis to believe that any and all approvals, permits, licenses and other
authorizations of Governmental Authorities needed for Completion of Construction
will not be forthcoming in a timely manner consistent with the Construction
Schedule.
Section 6.08. OCC Lease. Borrower has furnished to Lender a true and
---------
complete copy of the OCC Lease with all amendments and supplements thereto. The
OCC Lease is in full force and effect and (a) no notice of default has been
given by either Borrower or the OCC thereunder, (b) there are no material
defaults under any of the provisions thereof and (c) all conditions to the
effectiveness and continuing effectiveness thereof required to be satisfied as
of the date hereof have been satisfied.
Section 6.09. No Brokers. Borrower and Lender each represent to the
----------
other that they have not dealt with any mortgage or other broker or finder in
connection with the Loan. Borrower and Lender agree to indemnify, defend and
hold the other harmless from and against any claim for brokerage fees or
commissions or other compensation in connection with the Loan by reason of an
alleged misrepresentation of the statement made by it in the immediately
preceding sentence. In case any action, suit or proceeding is brought against
Lender by reason of such alleged misrepresentation by Borrower (a) Lender shall
give prompt notice thereof to Borrower, (b) Borrower may, at Borrower's sole
cost and expense, resist and defend such action, suit or proceeding by counsel
reasonably satisfactory to Lender, and (c) if Borrower elects to defend such
action, suit or proceeding, Lender shall not compromise or settle any such
action, suit or proceeding without the consent of Borrower unless Lender waives
its right to indemnification under this Section. In case any action, suit or
proceeding is brought against Borrower by reason of such alleged
misrepresentation by Lender, (i) Borrower shall give prompt notice thereof to
Lender, (ii) Lender may, at Lender's sole cost and expense, resist and defend
such action, suit or proceeding by counsel reasonably satisfactory to Borrower,
and (iii) if Lender elects to defend such action, suit or proceeding, Borrower
shall not compromise or settle any such action, suit or proceeding without the
consent of Lender, unless Borrower waives its right to indemnification under
this Section.
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Section 6.10. Project Documents. All material Project Documents,
-----------------
excluding the Plans, Construction Contract, and the Architect Contract for each
Architect, and, to the best of Borrower's knowledge after due inquiry, all other
Project Documents, are listed in Schedule 6.10 annexed hereto and made a part
hereof, and, to the extent required by the provisions of this Agreement or to
the extent Lender has so requested, true and complete copies of all Project
Documents, including the Plans, Construction Contract, and the Architect
Contract for each Architect, together with all amendments thereof and
modifications thereto, have been delivered to Lender. All Project Documents are
in full force and effect in accordance with their respective terms, and no party
to any Project Document has asserted any claim of default or offset against the
other with respect thereto that remains uncured.
Section 6.11. Plans. All Plans for the Project are listed in Schedule
-----
6.11 hereto. The Plans have been approved, and all amendments and supplements
to the Plans will be approved, by (a) all Governmental Authorities with
jurisdiction over the Project, to the extent required, (b) the General
Contractor (to the extent required by the Construction Contract), and (c) the
beneficiary of any restrictive covenant requiring such approval.
Section 6.12. Project Budget and Construction Schedule. The Project
----------------------------------------
Budget accurately reflects, to the best of Borrower's knowledge and belief, all
Project Costs which have been and will be incurred by Borrower in the
acquisition, development and construction of the Project. The Construction
Schedule accurately reflects, to the best of Borrower's knowledge and belief,
the time required to complete the entire Project and each portion thereof.
Section 6.13. Streets and Utilities. All utility services necessary
---------------------
for the construction of the Project and the operation thereof for its intended
purposes are available at the boundaries of the Premises, including water
supply, fire protection, storm and sanitary sewer, gas, electricity, and
telephone facilities. The Project has lawful, adequate, unobstructed, and
unimpaired access to public streets.
Section 6.14. ERISA. Borrower does not have a defined benefit pension
-----
plan under the Employee Retirement Income Security Act of 1974, as amended, the
unfunded liabilities of which could, upon termination of the plan, be held to be
a liability of Borrower by the Pension Benefit Guaranty Corporation.
Section 6.15. Environmental. Except as disclosed in the Environmental
-------------
Report, there are not now and, to Borrower's best knowledge after due inquiry;
never have been any Hazardous Materials present at or conveyed from or to the
Premises or
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incorporated into the Project, except for Hazardous Materials used in the normal
course of construction of the Project, as to which there exists no practical
alternative and which have been used or are being used in strict compliance with
all Laws and have been or will be removed in their entirety from the Premises
promptly upon completion of such use.
Section 6.16. Whole Tax Parcel. The Land constitutes a single, whole
----------------
tax parcel and is assessed separately from any other real property.
Section 6.17. Casualty. The Project has not been materially damaged
--------
by fire or other casualty, or if damaged, Lender as loss payee has received
insurance proceeds and, if necessary, a Completion Deposit in the manner, amount
and as otherwise contemplated by Section 1.09 of the Deed of Trust and such
proceeds and Completion Deposit are sufficient to effect the satisfactory
restoration of the Project and to permit Completion of Construction on or prior
to the Completion Date and in accordance with all of the terms and provisions of
this Agreement.
Section 6.18. True Statements. Neither this Agreement, any other Loan
---------------
Document nor any other document delivered to Lender in connection with the Loan
(including without limitation all Requests for Disbursements) contains, or will
contain when made, any untrue statement of a material fact and by this reference
all representations and warranties made in any of the Loan Documents are hereby
made a part of this Agreement to the same extent as if fully set forth herein.
ARTICLE VII
AFFIRMATIVE AND NEGATIVE COVENANTS
----------------------------------
Section 7.01. Commencement and Completion of Construction. Borrower
-------------------------------------------
shall proceed with the construction of the Project with due diligence,
substantially in accordance with the Construction Schedule, and subject to the
terms of this Section 7.01, shall effect Completion of Construction on or prior
to the Completion Date. Borrower shall thereafter complete all incomplete
portions of the Project in a timely fashion in compliance with the OCC Lease and
all other applicable Space Leases. The Completion Date may be extended for a
period not to exceed sixty (60) days by Force Majeure, provided that (i)
Borrower shall promptly, but in no event later than ten (10) days after the
occurrence of Force Majeure circumstances, notify Lender of the existence of
such Force Majeure circumstances, which notice shall set forth the date upon
which such circumstance began, (ii) Borrower shall provide Lender with such
evidence of the Force Majeure circumstances as
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Lender shall reasonably request, including any information provided by General
Contractor to Borrower in General Contractor's request for extension of the
Completion Date pursuant to the terms of the Construction Contract or by
Borrower to the OCC under the OCC Lease and (iii) dates for the performance of
Borrower's obligations under the OCC Lease shall be extended by an equal period
pursuant to Section 28.16 of the OCC Lease. The progress of construction of the
Project shall be deemed to be substantially in accordance with the Construction
Schedule so long as target dates set forth in such schedule have been met or, if
such target dates have not been met, Lender has determined in its reasonable
discretion that Completion of Construction will occur not later than the
Completion Date as extended in compliance with this Section 7.01. Borrower
shall not permit construction to cease for more than ten (10) consecutive days
or for more than twenty (20) days in the aggregate, subject, however, to delays
for Force Majeure as permitted by this Section 7.01. During any discontinuance
of construction, Borrower shall make adequate provision, acceptable to Lender,
for the protection of the Project to the extent then constructed, against
deterioration and against other loss, damage or theft.
Section 7.02. Encroachments. Borrower shall construct the
-------------
Improvements entirely on the Land without encroachment upon any lot line or
boundary, easement or right-of-way or any other land, except for the existing
encroachment of the foundation of the Project onto land adjacent to the Land to
the east, as shown on the Survey heretofore delivered to Lender.
Section 7.03. Conformity with Plans. Borrower shall construct the
---------------------
Project in substantial conformity with the Plans and in a good and workmanlike
manner with new materials of good quality. If at any time construction of the
Improvements is not in compliance with the foregoing requirements, Borrower
shall promptly give notice thereof to Lender and Lender shall have the right to
stop such nonconforming construction and order repair or reconstruction in
accordance with the foregoing requirements and to withhold all further
Disbursements until construction is in satisfactory compliance therewith. Upon
notice from Lender to Borrower, or Borrower's discovery irrespective of such
notice, that construction is not in substantial conformity with such
requirements, Borrower shall commence correcting the deviation as promptly as
practical and, in any event, within fifteen (15) days after such notice or
discovery and shall prosecute such work diligently to completion, which in no
event shall be later than sixty (60) days after such notice or discovery. If
Lender reasonably determines that the corrective work is not proceeding
satisfactorily, Lender may, upon not less than fifteen (15) days' notice to
Borrower, prosecute such corrective work to completion at Borrower's expense.
Lender's approval of any
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Disbursement shall not constitute a waiver of Lender's right to require
correction of any such defects or departures from the Plans not theretofore
discovered by, or called to the attention, of Lender.
Section 7.04. Compliance with Laws and Other Requirements. Borrower
-------------------------------------------
shall in all material respects with all conditions, covenants, restrictions,
Space Leases, easements, reservations, rights and rights of way and all
applicable Laws and other requirements relating to the Trust Estate and the
Project, and obtain in a timely fashion all necessary approvals, consents,
licenses and permits of all Governmental Authorities.
Section 7.05. Change Orders. Change Orders:
-------------
(a) Shall all be in writing, numbered in sequence, and signed by
Borrower and General Contractor or the appropriate Contractor;
(b) Shall all, as part of each Request for Disbursement, be
certified by Borrower and each Architect, the Architect's professional opinion,
with respect to that portion of the Project for which such Architect has design
responsibility, to be in compliance with all applicable Laws and other
requirements;
(c) Shall all contain an estimate by Borrower and General
Contractor or the appropriate Contractor of the increase or decrease in each
Item of Project Costs that would be caused by the change (or, if the Change
Order involves changes both increasing or decreasing estimated Project Costs,
the amount of each change either increasing or decreasing Project Costs shall be
stated), as well as the aggregate amount of changes in estimated Project Costs,
both increases and decreases, previously made;
(d) Shall, if a Major Change Order, be submitted to Lender not
later than five (5) Business Days prior to the proposed effectiveness thereof;
and
(e) Shall be subject to the prior written approval of Lender
where (i) the change affects the structural aspects or intended use of the
Improvements, (ii) the Change Order includes any change that, regardless of the
net effect of the aggregate Change Order, increases or decreases any estimated
Project Costs by Seventy-Five Thousand Dollars ($75,000.00) or more, or (iii)
together with prior Change Orders, whether or not approved, the change involves
an aggregate amount, whether for increases or decreases, of over Five Hundred
Thousand Dollars ($500,000.00) or (iv) the change would cause any Governmental
Authority to suspend or revoke any license, approval, permit or other
authorization. (All such
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<PAGE>
Change Orders are herein referred to as "Major Change Orders".) If any Change
Order involves a net increase in estimated Project Costs the payment of which
increase is not the sole obligation of the OCC or another Space Tenant under its
respective Space Lease, whether or not such Change Order is subject to Lender's
prior approval, Lender shall have no obligation to make any further
Disbursements unless the Loan taking such Change Order into account, remains in
balance.
Section 7.06. Project Budget; Annual Operating Budget.
---------------------------------------
(a) Subject to the provisions of Section 2.14 hereof, Borrower
shall complete the entire Project within the Project Budget and operate the
Project within the applicable Annual Operating Budget. Unless Lender otherwise
consents in writing, Borrower shall not materially supplement, modify or amend
the approved Project Budget or applicable Annual Operating Budget other than as
permitted under Sections 2.06, 7.05 or 7.06(b) hereof.
(b) Borrower shall promptly notify Lender of any fact or
circumstance that may render the Project Budget inaccurate with respect to any
Project Costs reflected therein or render any Annual Operating Budget inaccurate
with respect to any operating expenses reflected therein. With respect to the
Annual Operating Budget only, the same shall not be deemed to have been rendered
inaccurate by any variation or variations which in the aggregate are equal to or
less than ten percent (10%) of the total amount of such budget.
Section 7.07. Contractors and Subcontractors.
------------------------------
(a) Borrower shall not permit the performance of any work on the
Project pursuant to any Contract or Subcontract (i) with a total payment in
excess of One Hundred Thousand Dollars ($100,000) or (ii) which Lender has
requested to review, until Lender shall have received copies of such Contract or
Subcontract.
(b) Borrower shall deliver to Lender from time to time not later
than five (5) Business Days after Lender's demand therefor correct lists of all
Contractors and Subcontractors employed in connection with the Project and
copies of such Contractors' and Subcontractors' contracts. Each such list shall
show the name, address and telephone number of each such Contractor or
Subcontractor, a general statement of the nature of the work to be done, the
labor and materials to be supplied, the names of materialmen, if known, the
approximate dollar value of such labor, work and materials itemized with respect
to each Contractor and Subcontractor, and the unpaid portion and status of such
work or whether such materials have been delivered. In the event that Lender
reasonably determines that any information provided to Lender
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is incomplete, Lender and its Consultants shall have the right, without either
the obligation or the duty, to contact directly each Contractor and
Subcontractor to verify the facts disclosed by such list or any other
information provided by Borrower or relating to the Project. In the event that
Borrower or General Contractor shall fail to maintain the same in respect of the
performance of any Contractor or Subcontractor, Lender may require that the
performance of any such Contractor or Subcontractor be secured by a payment and
performance bond in form, and issued by a surety company, reasonably acceptable
to Lender; provided, however, that Lender shall not be entitled to require that
-------- -------
the performance of any Subcontractor be bonded if the performance of another
Person retaining such Subcontractor has been bonded as to the portion of the
work to be performed by such Subcontractor.
Section 7.08. Permits and Warranties. Borrower shall deliver to
----------------------
Lender from time to time not later than five (5) days after Lender's demand
therefor, originals or copies of: (a) all building and other permits approvals,
and authorizations required in connection with the construction of the Project
or the operation or occupation of the Premises or any part thereof promptly upon
issuance and receipt by Borrower thereof, and in any event before any act is
done which requires the issuance of the respective permit, approval or
authorization, and (b) upon request of Lender, all warranties and guaranties
received from any person furnishing labor, materials, equipment, fixtures or
furnishings in connection with the Project.
Section 7.09. Protection Against Liens and Claims.
-----------------------------------
(a) Borrower shall take all reasonable steps to forestall the
assertion of claims of Lien against the Project or the Trust Estate or any part
thereof.
(b) In the event that any claim is asserted against Lender or the
Undisbursed Construction Funds by any Person furnishing labor, services,
equipment or material to the Project and the claim is not being contested in
accordance with the Deed of Trust, Lender may, in its sole discretion, file an
interpleader action requiring all claimants to interplead and litigate their
respective claims, and in any such action Lender shall be released and
discharged from all obligations with respect to any funds deposited in court,
and Lender's reasonable costs and expenses, including without limitation
reasonable attorneys fees, shall be paid from such funds or from any undisbursed
portion of the Loan. Any such funds deposited in court and all reasonable costs
and expenses of Lender in connection therewith shall be deemed to be
Disbursements under this Agreement and the Note.
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Section 7.10. Removal of Personalty. Borrower shall not:
---------------------
(a) Install in or otherwise use in connection with the Project
any materials, equipment or fixtures under any security agreement or similar
agreement however denominated whereby the right is reserved or accrues to anyone
to remove or repossess any such items or whereby any person other than Lender
reserves or acquires a Lien upon such items;
(b) Remove or permit the removal of any Personal Property located
on the Property or used in connection with the Project, except in compliance
with the terms of the Deed of Trust; or
(c) Without the consent of Lender, permit the storage of any
Personal Property at any location other than the Premises except for Personal
Property stored in a bonded warehouse facility, segregated and separately
identified to the Project, and insured to the reasonable satisfaction of Lender.
Section 7.11. Insurance. Borrower shall provide or cause to be
---------
provided the policies of insurance required by Section 1.08 of the Deed of
Trust.
Section 7.12. Title Reports. Borrower shall deliver or cause to be
-------------
delivered to Lender, in form and substance satisfactory to Lender: (a) such
endorsements and binders to the Title Policies and (b) such preliminary title
reports and other title searches as may be required by the terms of this
Agreement or as Lender may from time to time reasonably require in connection
with Disbursements hereunder.
Section 7.13. Entry and Inspection. Lender and its Consultants,
--------------------
including the Inspecting Engineer, shall, during normal construction and
business hours, upon notice to General Contractor (which may be telephonic) and
subject to Space Tenants' rights under any Space Leases, have the right of entry
and free access to the Premises and the right to inspect all work done, labor
performed, and materials furnished in and about the Project and to examine all
Plans, wherever located. Borrower will cooperate and will cause Architect,
General Contractor and all Contractors and Subcontractors to cooperate with
Lender and its Consultants to enable Lender and its Consultants to perform their
functions. At the time of each inspection by the Inspecting Engineer, Borrower
will make available to the Inspecting Engineer, on demand, daily log sheets
covering the construction period showing the date, weather, Contractors and
Subcontractors on the job, number of workers and status of construction.
Section 7.14. Physical Security of Project. Borrower shall provide
----------------------------
such watchmen and take such other measures to protect the physical security of
the Project and the Trust Estate as Lender may from time to time reasonably
require.
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Section 7.15. Information Covenants.
---------------------
(a) Borrower shall keep and maintain or will cause to be kept and
maintained, on a fiscal year basis in accordance with consistently applied
generally accepted accounting practices customarily used in the real estate
industry, complete and accurate books, accounts and records reflecting all of
the financial affairs of Borrower and all of the earnings and expenses in
connection with the operation of the Trust Estate or in connection with any
services, equipment or furnishings provided in connection with the operation of
the Trust Estate, and, without expense to Lender, shall deliver to Lender
annually, within ninety (90) days after the close of each of Borrower's fiscal
years (i) an operating statement (including, without limitation, the amount of
rent escalations under the Qualifying Space Leases for such fiscal year) and an
annual budget certified by a general Partner of Borrower or the chief financial
officer of the Person that directly or indirectly controls the day-to-day
operations and management of the Trust Estate showing in reasonable detail the
income and expenses of the operations of the Trust Estate, a statement of profit
and loss, and a balance sheet for the immediately preceding fiscal year of
Borrower, (ii) a complete copy of a financial statement of Borrower for the
immediately preceding fiscal year of Borrower certified to Lender by a general
partner or other principal of Borrower, containing a statement of surplus, and a
balance sheet of Borrower, and (iii) a rent roll current to within thirty (30)
days, showing the Space Tenants in occupancy, their square footage, their fixed
and basic rents, and their tax and operating escalations. Lender or its designee
will be permitted upon not less than ten (10) days prior notice to Borrower, to
examine such books and records and all supporting vouchers and data at the
office of Borrower with respect to the Trust Estate and make such copies or
extracts at Borrower's expense thereof as Lender or its designee shall
reasonably desire. Lender shall not have any duty to make any such inspection
and shall not incur any liability or obligation as a result of not making such
inspection. Lender agrees that any information obtained by Lender in its review
or examination of Borrower's books and records pursuant to this Section 7.15
shall be confidential and solely for the benefit of Lender and any Loan
Participant. Each participation agreement between Lender and any Loan
Participant shall require such Loan Participant to maintain the confidentiality
of any information obtained by Lender in its review of Borrower's books and
records; however, Lender shall have no liability to Borrower by reason of any
Loan Participant's breach of such covenant.
(b) Each annual statement shall be accompanied by a certificate
of Borrower, dated as of the delivery of such statement to Lender, stating that
Borrower, to the best of its knowledge, knows of no Event of Default that is
continuing, or,
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if any such Event of Default is continuing, specifying the nature and period of
existence thereof and what action Borrower has taken or proposes to take with
respect thereto, and, except as otherwise specified, stating that to the best of
its knowledge Borrower has fulfilled all its obligations under this Agreement
and the other Loan Documents that are required to be fulfilled on or prior to
the date of such certificate.
(c) Borrower shall deliver or cause to be delivered to Lender,
not later than ninety (90) days after the end of each calendar year during the
Loan Term a financial statement of each Guarantor, certified, respectively, by
each Guarantor.
(d) Borrower shall furnish to Lender within thirty (30) days
after request therefor such further detailed information covering the operation
of the Trust Estate and the financial affairs of Borrower and each Guarantor as
may be reasonably requested by Lender.
(e) Borrower shall deliver to Lender as soon as practicable and
in any event within ten (10) days of Borrower's learning thereof, notice of:
(i) Any dispute raised by the General Contractor under the
Construction Contract relating to an increase in the Contract Sum (as therein
defined) and any material delay in the progress of the Project, whether or not
constituting Force Majeure;
(ii) Any litigation affecting or relating to (A) Borrower,
(B) any Guarantor which would materially, adversely affect such Guarantor's
ability to perform its obligations under the Loan Documents, (C) the Trust
Estate or (D) the Project;
(iii) Any dispute involving any Governmental Authority
relating to the Trust Estate or the Project, the adverse determination of which
might materially adversely affect the Trust Estate or the Project;
(iv) Any threat or commencement of proceedings in
condemnation or eminent domain relating to the Trust Estate; and
(v) Any event which, with the giving of notice and/or the
passage of time, could become an Event of Default, together with a written
statement setting forth the nature of the event and the action Borrower proposes
to take with respect thereto.
(f) Borrower shall deliver or cause to be delivered to Lender, as
soon as available and in any event within thirty (30) days after the end of each
calendar quarter,
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<PAGE>
a report as to the status of construction and leasing of the Project including
leasing schedules and reports, executed copies of any Space Leases entered into
during such quarter, a list of all Space Leases then pending or the subject of
negotiation by Borrower and such other leasing information as Lender shall
reasonably request with respect to the Space Leases and the Trust Estate.
(g) Borrower shall deliver or cause to be delivered to Lender, on
the date on which Borrower submits its final Request for Disbursement of Hard
Costs under Section 5.08 and not later than sixty (60) days prior to the end of
each calendar year thereafter, an annual operating budget (the "Annual Operating
Budget") for the Project which shall be subject to approval by Lender in its
reasonable judgment. Lender's failure to disapprove a proposed Annual Operating
Budget within thirty (30) days after submission shall be deemed to be Lender's
approval of such submission.
Section 7.16. Management of Property. Borrower shall not enter into
----------------------
any agreement providing for the management, leasing or operation of all or any
part of the Premises without the prior; written consent of Lender, such consent
not to be unreasonably withheld or delayed. Lender hereby approves Boston
Properties, a Massachusetts business trust, as manager of the Premises provided
that Boston Properties is and remains an Affiliate of Mortimer B. Zuckerman
and/or Edward H. Linde. Each manager of the Project shall execute and deliver to
Lender a consent on Lender's standard form to the collateral assignment to
Lender of the management contract for the Project.
Section 7.17. Project Documents.
-----------------
(a) Except to the extent otherwise provided for herein, Borrower
shall maintain in full force and effect, and shall comply with all of its
obligations under, each of the Project Documents, including without limitation
the Architect Contract and the Construction Contract.
(b) Unless Lender otherwise consents in writing Borrower shall
not: (i) permit any of the Project Documents to be materially supplemented,
modified, amended or terminated excluding any supplements, modifications or
amendments in respect of Change Orders not requiring Lender's approval
hereunder; (ii) waive, or consent to any departure from, any of the material
provisions of any of the Project Documents; or (iii) transfer, convey, encumber,
assign or release any interest in any of the Project Documents (except under the
Loan Documents).
Section 7.18. Operation and Maintenance of Project. Borrower shall (i)
------------------------------------
use its best efforts to keep the Project and the Improvements fully leased in a
manner consistent with the
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highest commercial use thereof and at prevailing rates, (ii) enter into
appropriate leases, service contracts and maintenance or operating agreements in
accordance with the terms of this Agreement and the other Loan Documents, and
(iii) make all necessary and customary capital improvements, repairs,
replacements, additions, renovations or refurbishing of or to the Trust Estate.
Borrower shall incur and pay or cause to be paid all costs, expenses and charges
necessary or appropriate to comply with the requirements of this Section 7.18.
Section 7.19. Environmental. No Hazardous Material shall be used
-------------
during construction of the Project unless there exists no practical alternative
thereto and then such Hazardous Material shall be used and stored in strict
compliance with all Laws and shall be removed in its entirety from the Premises
promptly upon completion of such use. Borrower shall establish and maintain a
procedure to monitor the compliance of the Project with all applicable Laws
relating to Hazardous Materials.
Section 7.20. Other Business. Borrower shall not engage in any
--------------
business other than the developing, constructing, operating, owning, managing,
financing, and leasing of the Project and Phase II and the ownership of Lot 872.
Except with Lender's prior written approval, not to be unreasonably withheld,
Borrower will not change the height, bulk, location or use of Phase II or Lot
872 from that heretofore presented to Lender so as to materially adversely
affect the Premises.
Section 7.21. Further Encumbrance. Except as otherwise expressly
-------------------
permitted by this Section 7.21, Borrower shall not further mortgage, encumber
for debt or pledge the Project, Trust Estate, Revenues or any part thereof or
any interest therein (including, without limitation, any air or development
rights). Borrower shall be permitted to further encumber for debt, mortgage or
pledge the Trust Estate or a part thereof as security for additional
indebtedness ("Subordinate Financing") provided that all of the following
conditions have been met by Borrower to Lender's reasonable satisfaction or
Lender has waived the same in writing:
(a) Borrower has validly elected the Fixed Rate under the Note
for an Interest Period ending on the Maturity Date.
(b) The Debt Service Coverage Ratio (calculated as if the
Subordinate Financing had occurred and payments of principal and interest were
payable with respect thereto) for the month preceding the month in which the
Subordinate Financing is to occur, shall be equal to or greater than 1.15.
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(c) After taking the Subordinate Financing into account, the Loan
to Value Ratio as of the date of the Subordinate Financing shall be no greater
than eighty percent (80%) .
(d) Borrower shall give Lender telephonic notice, promptly
confirmed in writing, of Borrower's intention to engage in any such Subordinate
Financing at least twenty (20) days prior to Borrower's entering into such
Subordinate Financing. Not later than ten (10) days prior to the closing of such
Subordinate Financing, Borrower shall submit to Lender all documentation with
respect to such Subordinate Financing. Lender shall have ten (10) days from
receipt of such documentation to approve such documentation and if Lender shall
not have responded to Borrower's request for approval within ten (10) days after
receipt thereof, Lender shall be deemed to have approved the documentation with
respect to such Subordinate Financing. All documentation with respect to any
Subordinate Financing shall be approved by Lender if such documentation, in
Lender's reasonable judgment, (i) expressly provides that the Subordinate
Financing and all rights given to the lender under such Subordinate Financing
(..Subordinate Lender") shall be subject and subordinate to the Loan and all
Loan Documents (as then in effect) in all respects, and (ii) provides for the
following:
(A) The Subordinate Financing shall not contain any provisions
which conflict with the Deed of Trust or the Assignment of Rents with regard to
the collection and release and of insurance proceeds, distribution of
condemnation awards and collection of rents following an Event of Default or
shall expressly provide that the Deed of Trust and Assignment of Rents control
with respect to the foregoing. The Subordinate Financing shall not assign to the
Subordinate Lender any interest in the Rents payable under a Government Lease
(as those terms are defined in the Assignment of Rents).
(B) Any debt service or other payment paid on the Subordinate
Financing out of Revenues from the Trust Estate after an Event of Default has
occurred, shall be held in trust by the Subordinate Lender for the benefit of
Lender and shall be paid over to Lender upon request if Lender has given the
Subordinate Lender notice of such Event of Default and the Subordinate Lender
(i) has not cured such Event of Default within ten (10) days after receipt of
notice thereof, or (ii) with respect to non-monetary defaults, (A) the
Subordinate Lender has not commenced action to remedy such Event of Default
within thirty (30) days after notice and (B) the Subordinate Lender is not
pursuing such remedial action to completion with due diligence, provided in each
case that at the time of such action by the Subordinate Lender the Borrower
would be entitled to cure the applicable Event of Default.
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(C) The Subordinate Lender shall enter into non-disturbance
agreements with Space Tenants under Space Leases if Lender has entered into or,
after the date of the Subordinate Financing, Lender enters into such agreements
with such tenants.
(e) There shall exist at the time of such Subordinate Financing
no Event of Default nor any fact or circumstance, which with the passage of
time, giving of notice or action of third parties, could become an Event of
Default that is not then being cured in accordance with the terms of this
Agreement and the other Loan Documents.
(f) The Subordinate Lender shall be an Institutional Lender at
the time of entry into the Subordinate Financing.
(g) With respect to any Subordinate Financing permitted hereunder
and approved by Lender pursuant hereto, Lender shall, upon request and at
Borrower's sole cost, enter into an agreement with the Subordinate Lender
pursuant to which Lender shall agree to provide the Subordinate Lender with (i)
concurrent notices of any notice of default which could become an Event of
Default under any of the Loan Documents, and (ii) an opportunity to cure any
such default within the applicable notice and grace periods, if any, given to
Borrower under the applicable provisions of any of the Loan Documents.
Section 7.22. Transfers. Borrower will not cause, permit or suffer a
---------
Transfer, other than to a Permitted Transferee, a Subordinate Lender or a party
claiming by, through or under a Subordinate Lender (by virtue of foreclosure,
sale or by accepting a deed in lieu of foreclosure), without the prior written
consent of Lender, which consent shall not be unreasonably withheld or delayed.
For purposes of this Section 7.22, Lender shall consider, by way of illustration
and not in limitation, the following factors in its determination of granting
consent to any such Transfer: (i) the financial condition of the proposed
transferee; (ii) the general reputation in the community of the proposed
transferee; and (iii) the management and real estate experience of the proposed
transferee. For purposes of this Section 7.22, if Lender has not responded to
Borrower's request for approval or consent within ten (10) days following
receipt thereof, Lender's rights regarding prior approval or consent shall be
deemed waived; provided, however, Lender's right to consent or approve the
proposed transferee shall not be deemed waived if Lender has requested further
information concerning such proposed transferee as in its reasonable judgment is
necessary to evaluate Borrower's request. Lender shall have an additional ten
(10) day period following receipt of such additional information by Lender in
which to approve or disapprove the proposed transferee. If Lender has not
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responded within the ten (10) day period referred to in the preceding sentence,
Lender shall be deemed to have waived its right to so consent.
Section 7.23. Reimbursable Expenses. Borrower shall reimburse Lender
---------------------
for all Out-of-Pocket Costs in connection with (a) the preparation, negotiation,
execution and delivery of the Loan Documents and all certificates, agreements,
instruments and opinions delivered in connection herewith and therewith, (b) any
amendment, modification or supplement to any of the Loan Documents or any
agreement or instrument delivered in connection herewith or therewith, (c) any
waiver of any provision of this Agreement, any of the Loan Documents or any
agreement or instrument delivered in connection herewith or therewith, (d) any
restructuring of the terms of any of the Loan Documents or any agreement or
instrument delivered in connection herewith or therewith, and (e) the
administration and enforcement of the Loan Documents or any agreement or
instrument delivered in connection herewith or therewith from and after the
occurrence of an Event of Default or following an acceleration of the Loan. All
of the foregoing expenses shall be reimbursed by Borrower whether or not Lender
gives notice to Borrower of such Event of Default under this Agreement or takes
any other action to enforce the provisions of any of the Loan Documents or any
agreement or instrument delivered in connection herewith and therewith.
Borrower shall pay any and all stamp and other taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing,
recording and enforcement of any of the Loan Documents or any agreement or
instrument delivered in connection herewith or therewith and shall save Lender
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or failure to pay such taxes and fees. All amounts
payable pursuant to this Section 7.23 shall be due and payable not later than
ten (10) Business Days following written demand by Lender, together with
interest thereon (i) if Lender has actually paid such amount, at the Prime Rate
(as defined in the Note) from the date of demand therefor through the date which
is ten (10) Business Days after demand therefor (the "Due Date"), and (ii)
whether or not Lender has actually paid such amount, at the Involuntary Rate
from the Due Date through the date of payment by Borrower. The obligation to
pay such amounts shall survive the repayment of the Loan and shall continue in
full force and effect so long as the possibility of any such liability, claims
or losses pursuant to this Section 7.23 exists.
Section 7.24. Preservation of Existence. Borrower shall, as long as
-------------------------
any part of the Loan remains unpaid, do all things necessary to preserve and
keep in full force and effect its existence, franchises, rights and privileges
as a partnership under the laws of the state of its formation and will comply
with all regulations, rules, statutes, orders and
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decrees of all Governmental Authorities applicable to the Trust Estate or any
part thereof, subject, however, to Borrower's right to contest such regulations,
rules statutes, orders and decrees pursuant to Section 1.11 of the Deed of
Trust.
Section 7.25. Future Tenant Estoppel Certificates.
------------------------------------
(a) From time to time during the Loan Term upon Lender's request,
but not more often than once each calendar year other than following the
occurrence of an Event of Default, Borrower shall, within forty-five (45) days
following request by Lender, deliver to Lender estoppel certificates in the form
prepared by Lender with respect to all Major Leases and shall use all reasonable
efforts to deliver to Lender such estoppel certificates with respect to all
other of the Qualifying Space Leases, which estoppel certificates shall be
executed by Borrower and each other party to the appropriate Qualifying Space
Lease, stating (i) that the Qualifying Space Lease is unmodified and in full
force and effect or, if modified, stating the modification(s), if any, (ii)
whether or not, to the best knowledge of each party to such Qualifying Space
Lease, any other party to such Qualifying Space Lease is in default in any
respect under such Qualifying Space Lease and, if so, specifying such default,
and (iii) any other matters that may be reasonably requested by Lender. If
Borrower is unable to deliver any such estoppel certificate to Lender because,
despite Borrower's reasonable efforts, the Space Tenant from whom it has been
requested has not delivered it to Borrower, Borrower shall deliver Borrower's
certificate to Lender as to the matters set forth in Clauses (i)-(iii) and shall
deliver the Space Tenant's estoppel certificate to Lender within two (2)
Business Days after receiving it.
(b) At any time during the Loan Term, Borrower shall, within ten
(10) days after request by Lender, execute and deliver Borrower's certificate
stating (i) that the Qualifying Space Leases are unmodified and in full force
and effect as modified, stating the modification(s), and (ii) that all rents due
under Qualifying Space Leases have been paid when due, or if not, specifying the
Qualifying Space Leases under which rents have not been paid when due.
Section 7.26. Use of Proceeds. Borrower will use the proceeds of the
---------------
Loan and any Completion Deposit solely to pay Project Costs.
Section 7.27. Publicity. Promptly following the Initial Disbursement,
---------
Borrower shall, at its sole expense, publish in a publication of its choice a
"tombstone notice" of the Loan in form and substance mutually satisfactory to
Lender and Borrower.
Section 7.28. Name. Borrower shall not change its name without
----
Lender's prior consent.
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Section 7.29. Consultants' Fees. Borrower shall pay all fees and
-----------------
expenses of Lender's Consultants which are reasonable and customary, such
obligation on the part of Borrower to survive the repayment of the Loan. After a
default by Borrower in the payment of any of the fees, costs and other expenses
of Lender's Consultants or after any Event of Default, Lender, in its
discretion, may pay such fees, costs and other expenses at any time by a
Disbursement for Soft Costs under the Loan or from any Completion Deposit and
Borrower hereby authorizes Lender to make such payments.
Section 7.30. Partnership Agreement; No Partnership Distributions.
---------------------------------------------------
Borrower shall not amend its agreement of limited partnership so as to limit the
authority of the current general Partner of Borrower to control and act for
Borrower, shorten the term of such agreement, modify the permitted purposes of
Borrower, or adversely affect either the ability of Borrower to perform its
obligations under the Loan Documents or the interests of Lender thereunder.
Except as part of the Initial Disbursement to reimburse Land and related
acquisition costs, Borrower will not, without the prior written consent of
Lender, make any distribution of partnership assets or proceeds to any Partner
of Borrower in such Person's capacity as a Partner other than for reimbursement
of actual expenses incurred by a Partner of Borrower on behalf of Borrower,
whether or not such a partnership distribution is permitted under the terms of
Borrower's partnership agreement; provided, however, if (a) Completion of
Construction shall have occurred; (b) no monetary default or Event of Default
under the Loan Documents shall then exist or would exist after giving effect to
the proposed distribution, then, to the extent of Net Cash Flow excluding cash
from the Loan, Borrower, not more frequently than quarterly, may make
distributions of partnership assets or proceeds (other than Loan proceeds) to
any Partner of Borrower. Nothing in this Section 7.30 shall prohibit Borrower's
paying a development fee to a Partner or Affiliate of Borrower, provided that
such payment is pursuant to and in accordance with an agreement heretofor
approved by Lender or hereafter entered into with Lender's approval, which
approval shall not be withheld or delayed unreasonably provided that the fee to
be paid thereunder is within the amount of the Item established therefor in the
Project Budget.
Section 7.31. Major Leases. Borrower shall fully perform in a timely
------------
fashion all of its obligations under all Major Leases, including the OCC Lease.
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ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
------------------------------
Section 8.01. Events of Default. Each of the following specified
-----------------
events shall constitute an "Event of Default" under this Agreement whether the
occurrence of such event shall be voluntary or involuntary or come about or be
affected by operation of law or otherwise:
(a) If any representation, warranty or statement made by (i)
Borrower herein, in any other Loan Document or any Request for Disbursement,
certificate, document, financial or other statement given by Borrower in
connection with the Loan, or (ii) Guarantors in any of the Guarantees or any
certificate, document, financial or other statement given by Guarantors in
connection with the Loan, shall prove to have been untrue or incorrect in any
material respect when made and the existence of the facts constituting such
untruth or incorrectness shall have a material and adverse effect upon the value
of the Trust Estate or Lender's security for the Loan; or
(b) If any Lien Or security interest created by any Loan
Document, at any time after the execution and delivery thereof and for any
reason, ceases or fails to constitute a valid, perfected and subsisting first
lien or security interest in and to the property purported to be covered
thereby, subject only to the Permitted Exceptions; or
(c) If the Project or any portion thereof is not completed in
substantial conformity with the Plans in an orderly and expeditious manner
substantially in accordance with the time references set forth in the
Construction Schedule or before the Completion Date, subject to the provisions
of Section 7.01, or is not, through Completion of Construction, free and clear
of mechanics', materialmen's and other Liens asserted by suppliers of labor,
services, equipment or material to the Project, subject to Borrower's rights
under the Deed of Trust to contest Liens; provided, however, that Borrower's
failure to achieve Completion of Construction by the Completion Date (as same
may be extended by Force Majeure) shall not constitute an Event of Default if
(i) the requirements set forth in clauses (a), (b), and (f) of the definition of
Completion of Construction have by such date been satisfied, (ii) Borrower's
failure to satisfy the requirements in clauses (c), (d), and (e) of the
definition of Completion of Construction is due solely to Unavoidable Government
Delay, (iii) the written declaration required by Section 2.3 of the OCC Lease
has been executed, setting forth all information therein required, including the
Lease Commencement Date (as defined in the OCC Lease), and (iv) by July 1, 1992
either
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(A) Borrower shall have achieved Completion of Construction or (B) Lender shall
be and remain reasonably satisfied that Borrower's continuing failure to achieve
Completion of Construction is not reasonably likely to have a material adverse
effect on the security for the Loan; or
(d) If all or a substantial or material portion of the Trust
Estate is injured, damaged or destroyed by fire or other casualty or damaged
thereby to an extent that would, in Lender's reasonable judgment, prevent or
preclude Completion of Construction in an orderly and expeditious manner and in
any event before the Completion Date; provided, however, that such damage shall
not constitute an Event of Default if Borrower shall be entitled to restore the
Trust Estate in accordance with the terms of the Deed of Trust; or
(e) If Borrower is enjoined by any Governmental Authority from
constructing the Project or performing its obligations hereunder and such
injunction is not released or stayed within thirty (30) days after the granting
thereof, or such longer period of time, not to exceed sixty (60) days upon the
prior consent of Lender, not to be unreasonably withheld, unless Borrower
demonstrates to the reasonable satisfaction of Lender that such injunction will
be released or stayed and Lender reasonably determines that such injunction will
not prevent or preclude Completion of Construction in an orderly and expeditious
manner and in any event before the Completion Date; or
(f) If all or a substantial or material portion of the Trust
Estate is condemned, seized or appropriated by any Governmental Authority;
provided, however, that if such a taking is a partial taking and Borrower shall
be entitled to restore the Trust Estate in accordance with the Deed of Trust,
such taking shall not be deemed to be an Event of Default; or
(g) If Completion of Construction shall not occur by the
Completion Date; or
(h) If a default by Borrower shall occur under the Architect
Contract, Construction Contract or any Major Lease (including the OCC Lease),
which default Lender reasonably determines is likely to affect Borrower's
ability to complete construction of the Project before the Completion Date, and,
if such default is subject to cure, shall remain uncured on the date that is the
last day of the grace period applicable to such default; or
(i) If the General Contractor or any Architect shall fail to
perform or observe any term, covenant or agreement contained in the Construction
Contract or any
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Architect Contract, respectively, or in the consent signed by the General
Contractor or such Architect for the benefit of Lender and (i) Lender has
determined, in its reasonable judgment, that such failure would have a material
adverse effect on the Project or would prevent or preclude Completion of
Construction in an orderly and expeditious manner and in any event before the
Completion Date, (ii) such failure shall continue for a period of twenty (20)
calendar days from the date that notice of such determination is given to
Borrower, (iii) Borrower shall fail to submit to Lender the name of a proposed
successor General Contractor or Architect within twenty (20) calendar days
thereafter, (iv) Lender shall disapprove such proposed successor General
Contractor subsequent to such twenty (20) day period (provided that Lender's
approval shall not be unreasonably withheld), and (v) Borrower shall fail to
enter into a replacement Construction Contract or Architect Contract within
thirty (30) days after submission and approval of such replacement General
Contractor or Architect and such replacement Architect or General Contractor
shall fail to execute a consent in favor of Lender substantially in the form,
respectively, of Exhibit J or K within such time period; provided, however, that
if Lender fails to approve the first successor General Contractor or Architect
submitted by Borrower, then Borrower shall have an additional ten (10) days
between steps (iv) and (v) above to submit the name of a second proposed
successor General Contractor or Architect and Lender shall have an additional
ten (10) days after such subsequent submission to approve such proposed
successor; or
(j) The General Contractor or the Architect shall cease to act
as General Contractor or Architect for the Project, and (i) Borrower shall fail
to submit to Lender the name of a proposed successor General Contractor or
Architect within thirty (30) calendar days thereafter, or (ii) Lender shall
disapprove such proposed successor General Contractor or Architect subsequent to
such thirty-day period (provided that Lender's approval shall not be
unreasonably withheld) or (iii) Borrower shall fail to enter into a replacement
Construction Contract or Architect Contract within thirty (30) days after
submission and approval of such replacement General Contractor or Architect and
such replacement Architect or General Contractor shall fail to execute a consent
in favor of Lender substantially in the form, respectively, of Exhibit J or K
within such time period; provided, however, that if Lender fails to approve the
first successor General Contractor or Architect proposed by Borrower, Borrower
shall have an additional twenty (20) days between steps (ii) and (iii) above to
propose a second successor General Contractor or Architect, which Lender shall
expeditiously approve or disapprove, and there shall be no Event of Default if
Borrower enters into a
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replacement Construction Contract or Architect Contract within thirty (30) days
after submission and approval of such second replacement General Contractor or
Architect; or
(k) If the Loan is not in balance and the Contractor or
Subcontractor for the Item or Items out of balance have not provided payment and
performance bonds as provided in Section 2.14 within thirty (30) days after
notice from Lender;
(l) If Borrower shall fail to perform or observe any other
covenant, term or agreement on its part contained in this Agreement and not
otherwise provided for in this Section 8.01, which failure shall have continued
unremedied for thirty (30) days after notice thereof has been given to Borrower
by Lender, provided, however, that if in Lender's reasonable judgment the nature
of the failure referred to in this clause (1) is such that it is curable by
Borrower but cannot be cured within said thirty (30) days, then an Event of
Default shall not be deemed to have occurred hereunder so long as (x) Borrower
has commenced to cure said failure within said thirty (30) day period, and has
notified Lender of such commencement within said thirty (30) days, (y) Borrower
thereafter proceeds with diligence to cure the same in Lender's reasonable
judgment, and (z) sufficient progress is being made in curing such default, in
Lender's reasonable judgment; or
(m) If any Event of Default shall have occurred and remain
uncured under any other Loan Document; or
(n) If a default shall occur under any guaranty now or hereafter
provided in respect of the Loan, including without limitation the Guarantees,
and such default shall remain uncured beyond the applicable notice arid grace
period thereunder, if any; or
(o) If any of the Guarantees is not in effect, unless it has
lapsed pursuant to its terms, or the obligation to make payments of the
guaranteed obligations under any such guaranty is determined by a court of
competent jurisdiction to be unenforceable; or
(p) The termination, liquidation or dissolution or the
commencement of proceedings towards the liquidation or dissolution of Borrower,
or a general Partner of Borrower or a general partner of a general Partner of
Borrower (unless immediately reconstituted pursuant to the provisions of its
partnership agreement or applicable law or in connection with a Transfer to a
Permitted Transferee); or
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<PAGE>
(q) The occurrence, prior to Completion of Construction, of a
material and adverse change in the financial condition of Borrower or any
Guarantor which, in the sole judgment of Lender, renders it unable to fulfill
its financial obligations as they become due; or
(r) If Borrower is unable to satisfy or cause the satisfaction
of any condition for the receipt of a Disbursement, or to resolve the situation
to the reasonable satisfaction of Lender, for a period in excess of thirty (30)
days after written notice from Lender; or
(s) If any certificate of occupancy or building permit for the
Project or any portion thereof is revoked, cancelled or otherwise ceases to be
effective; provided, however, that such revocation, cancellation or suspension
shall not be an Event of Default if, prior to Completion of Construction,
Borrower is diligently proceeding to cure such default, such cure may be
effected within the Project Budget or with a Completion Deposit, and the time
required to cure such default does not materially adversely affect Borrower's
ability to meet the Construction Schedule or adversely affect any of Lender's
collateral security for the Loan, and after completion of Construction, such
revocation, cancellation or suspension shall not permit the OCC to cease paying
rent under the terms of the OCC Lease.
Section 8.02. Remedies.
--------
(a) If any Event of Default shall occur, all obligations of
Lender under this Agreement, including without limitation Lender's obligation to
make any further Disbursements or to advance funds from any Completion Deposit,
at the option of Lender, shall cease and terminate, and Lender may declare the
entire outstanding Loan, including interest thereon and any other fees, costs
and charges then payable under any of the Loan Documents, immediately due and
payable, whereupon the same shall become immediately due and payable, without
presentment, protest or further demand or notice of any kind, all of which are
hereby expressly waived by Borrower; and, upon such occurrence of an Event of
Default or at any time following Lender's declaration that the Loan is due and
payable as provided above, Lender, in addition to the foregoing, may immediately
exercise any and all other rights, remedies and recourse available to it at law
or in equity or under this or any of the other Loan Documents (including,
without limitation, the right to sell the Trust Estate and/or foreclose any and
all liens and security interests securing the repayment of the Loan under the
Deed of Trust and the other Loan Documents).
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<PAGE>
(b) Borrower hereby irrevocably constitutes and appoints Lender,
the Inspecting Engineer and/or any other independent contractor selected by
Lender as its true and lawful attorney-in-fact, with full power, of
substitution, for the purpose of performing Borrower's obligations in the name
of Borrower under the Loan Documents and completing construction of the Project,
whether or not substantially in accordance with the Plans (with such additions,
changes and corrections in the Plans as shall be necessary or desirable in
Lender's opinion to complete the Project), but Lender may act pursuant to this
power-of-attorney only after an Event of Default occurs. The foregoing power-of-
attorney shall be deemed coupled with an interest and shall be irrevocable until
payment in full of the Loans and all other sums due and owing to Lender under
any of the Loan Documents. Without limiting the generality of the foregoing,
said attorney-in-fact is hereby empowered by Borrower to do any one or more of
the following:
(i) To use any funds of Borrower in Lender's possession and
any Disbursements not yet approved or disbursed hereunder, for the purpose of
completing the Project in the manner called for by the Plans or as provided in
clause (ii) below and all sums advanced hereunder and any other amounts expended
by Lender to complete the Project shall be deemed to have been advanced to or
for the account of Borrower pursuant hereto;
(ii) To make such additions, changes and correction in the
Plans as shall be necessary or desirable in Lender's opinion to complete the
Project as contemplated by the Plans;
(iii) To employ any contractors, subcontractors, agents,
architects and inspectors required for said purposes;
(iv) To employ attorneys to defend against attempts to
interfere with the exercise of the powers granted hereby;
(v) To pay, settle or compromise all bills and claims which
are or may be liens against the Premises or Project or may be necessary or
desirable for the completion of the Project or the clearance of title;
(vi) To execute all applications and certificates in the
name of Borrower which may be required by any construction contract;
(vii) To prosecute and defend all actions or proceedings in
connection with tile construction of the Project
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on the Premises and to take such action, require such performance and do any and
every other act as is deemed reasonably necessary by Lender to complete the
Project;
(viii) To let new or additional contracts with the same
contractor(s) or others to the extent not prohibited by their existing
contracts;
(ix) To employ watchmen and erect security fences to
project the Project from injury; and/or
(x) To take such action and require such performance as
it deems necessary under any of the bonds which may be, or insurance policies to
be or which have been, furnished hereunder, to make settlements and compromises
with the sureties or insurers thereunder and, in connection therewith, to
execute instruments of release and satisfaction.
(c) Without limiting any other similar rights herein granted,
from and after the occurrence of an Event of Default, Borrower does irrevocably
permit and authorize Lender to advance any Disbursement directly to General
Contractor, Contractors, Subcontractors, materialmen, suppliers and other
persons to pay for the completion of the Project, but Lender is not under any
obligation so to do. No further direction or authorization from Borrower shall
be necessary to warrant such direct advances and all such advances shall satisfy
pro tanto the obligations of Lender hereunder as fully as if made to or for the
- --- -----
account of Borrower regardless of the disposition thereof by any contractors,
materialmen, suppliers or such other persons. Lender may impose any condition
for such direct payment including, but not limited to, receipt of estoppel
certificates, waivers of lien, releases and the like.
(d) Any and all costs and expenses (including attorneys' fees
and disbursements) incurred by Lender in pursuing its remedies hereunder and
exercising such power-of-attorney shall be additional indebtedness of Borrower
to Lender hereunder, and shall be secured by the Security Documents.
(e) Other than as may result from the negligence or willful
misconduct of Lender or its agents, servants or employees, Borrower does hereby
indemnify and hold Lender harmless from and against any and all liability,
claims, cost, damage, and Out-of-Pocket Costs which may be imposed upon or
incurred by Lender by reason of action taken by Lender hereunder, and from and
against any and all claims or demands whatsoever which may be asserted against
Lender by reason of any alleged obligation or undertaking on its part to perform
or discharge any of the terms, covenants and conditions of any
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obligation of Borrower, to the extent same (i) arise during or relate to the
period prior to Lender's taking possession of the Trust Estate following the
occurrence of an Event of Default or (ii) arise during or relate to the period
following Lender's taking possession of the Trust Estate and involve the acts or
failures to act of Borrower or its agents, servants or employees. In case any
action, suit or proceeding is brought against Lender by reason of any such
occurrence, as a condition of Borrower's indemnity obligation under this Section
8.02(c), (i) Lender shall give prompt notice to Borrower of any such action,
suit or proceeding, and (ii) Borrower may, at Borrower's sole cost and expense,
resist and defend such action, suit or proceeding by counsel reasonably
satisfactory to Lender and (iii) if Borrower elects to defend such action, suit,
or proceeding, Lender shall not compromise or settle any such action, suit or
proceeding without the consent of Borrower unless Borrower waives its right to
the foregoing indemnification. Lender may, however, engage its own counsel, at
its expense, to participate in said defense and in such case, the respective
counsel for Borrower and Lender shall cooperate with each other with respect
thereto (it being understood that at all times counsel for Borrower shall
control such defense) and shall provide each other with copies of all papers
filed in such case which, when practical, shall be delivered prior to filing
thereof, or otherwise contemporaneously with filing thereof, and with such other
papers as shall be reasonably requested by the other counsel which shall be
delivered promptly upon request therefor. All sums determined to be payable by
Borrower to Lender by reason of the foregoing indemnity pursuant to a non-
appealable order of a court of competent jurisdiction, shall be due and payable
by Borrower to Lender within ten (10) Business Days after demand therefor or on
such later date as specifically set forth in such demand, and if such sums are
not timely paid, said sums shall bear interest at the Involuntary Rate from the
date such payment was due through the date of payment.
(f) Notwithstanding anything to the contrary contained herein,
Lender is not and shall not be obligated to attempt to use, operate, occupy or
manage the Trust Estate or any part thereof or perform any of the terms
conditions and agreements herein or in any of the other Loan Documents or in any
other documents on the part of Borrower to be performed, and Lender shall have
no liability whatsoever to Borrower or, unless and until Lender takes possession
of the Trust Estate following the occurrence of an Event of Default, any other
person or entity (other than by reason of its gross negligence or wilful
misconduct) for failing, attempting or ceasing to perform the same, or for the
manner of performing or attempting to perform the same, or any part thereof.
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ARTICLE IX
MISCELLANEOUS
-------------
Section 9.01. Expenses. Borrower shall pay all Out-of-Pocket Costs
--------
and all costs and expenses incurred by Borrower in connection with the Loan and
any advance thereunder including, without limitation, the fees and expenses set
forth in Section 7.30 hereof, recording fees for any documents that Lender
reasonably deems it appropriate to record, recording taxes when required by the
terms of this Agreement to be paid by Borrower (including any such costs
associated with recording tax audits or investigations demanded or conducted by
a state or local tax authority with respect to the Deed of Trust) transfer
taxes, license and permit fees, appraisal fees, costs of environmental
inspections, filing fees, title premiums and other fees of the Title Company, as
and when appropriate.
Section 9.02. Entire Agreement. This Agreement, taken together with
----------------
all of the other Loan Documents and all certificates and other documents
delivered by Borrower to Lender, embodies the entire agreement with respect to
the subject matter hereof, and supercedes or incorporates all prior negotiations
or agreements written and oral.
Section 9.03. Counterparts. This Agreement may be executed in any
------------
number of counterparts with the same effect as if the parties hereto had signed
the same document. All such counterparts shall constitute one instrument.
Section 9.04. Governing Law/Venue/Jurisdiction. This Agreement and
--------------------------------
the other Loan Documents are to be governed by and construed in accordance with
the laws of the District of Columbia. By its execution and delivery of the Note
and this Agreement, Borrower shall be deemed to have agreed that the appropriate
venue and jurisdiction for any litigation pertaining to the Loan, the Note or
the Loan Documents shall be in the District of Columbia and that the appropriate
location for any foreclosure sale pertaining to the collateral described in the
Loan Documents shall be in the District of Columbia.
Section 9.05. Severability. If any of the terms and provisions
------------
specified herein is held by a court of law to be in violation of any applicable
local, state or federal ordinance, statute, law, administrative or judicial
decision, or public policy, and if such court should declare such term or
provision to be illegal, invalid, unlawful, void, voidable, or unenforceable as
written, then such provision shall be given full force and effect to the fullest
possible extent that it is legal, valid and enforceable, and the remainder of
the terms
- 70 -
<PAGE>
and provisions herein, shall be construed as if such illegal, invalid, unlawful,
void, voidable or unenforceable term or provision was not contained therein, and
that the rights, obligations and interest of Borrower and Lender under the
remainder of this Agreement, shall continue in full force and effect.
Section 9.06. Successors and Assigns. All covenants and agreements
----------------------
herein shall bind the respective successors and assigns of Borrower and Lender
(but this provision is not intended nor shall it be construed to permit Borrower
to transfer or assign its rights and obligations hereunder or under the Loan
Documents except as permitted by the provisions of the Loan Documents), whether
so expressed or not, and all such covenants shall inure to the benefit of Lender
and Borrower and their respective nominees, successors and assigns, whether so
expressed or not. All successors and assigns of Borrower, including all Persons
succeeding to Borrower's interest in the Trust Estate as permitted by the Loan
Documents or otherwise consented to by Lender, shall, prior to such succession
or assignment, expressly assume in writing all of Borrower's obligations under
the Loan Documents.
Section 9.07. Setoff. Borrower hereby waives any and all rights of
------
setoff with respect to principal and interest due on the Note and any other
payments due Lender under the Loan Documents, including rights of setoff with
respect to the Note and the Loan Documents which may arise from claims,
transactions or occurrences heretofore unknown to Borrower.
Section 9.08. Time of the Essence. Time is of the essence with regard
-------------------
to Borrower's performance under the terms and provisions of this Agreement, the
other Loan Documents and any amendment, modification or revision hereof or
thereof, subject, however, to the applicable grace periods, if any, set forth in
the Loan Documents. No extension of time for the payment of the Loan or any
installment thereof made by agreement with any person now or hereafter liable
for payment of the Loan shall operate to release, discharge, modify, change or
affect the original liability of Borrower under this Agreement, either in whole
or in part.
Section 9.09. Headings. The Table of Contents, and the titles and
--------
headings of Articles and Sections of this Agreement are intended for convenience
only, and shall not in any way affect the meaning or construction of any
provision of this Agreement.
Section 9.10. Notices. Each notice, request, demand, instruction or
-------
other communication required by the Note, this Agreement or the Loan Documents
to be given to Borrower or
- 71 -
<PAGE>
Lender shall be in writing and shall be either (a) personally delivered to the
parties named below by a commercial messenger service regularly retaining
receipts for such delivery (b) sent by registered or certified mail, return
receipt requested, or (c) delivered by a reputable air courier service such as
Federal Express, Express Mail, Airborne or Emery Air, shall be effective upon
delivery thereof to the addresses, and shall be addressed to the parties as set
forth below:
To Borrower: Southwest Market Limited Partnership
c/o Boston Properties
8 Arlington Street
Boston, Massachusetts 02116
Attention: Vice President-Treasurer
and Boston Properties
599 Lexington Street, Suite 1300
New York, New York 10022
Attention: Senior Vice President
and Boston Properties
500 E Street S.W.
Washington, D.C. 20024
Attention: Regional General Counsel
To Lender: The Sumitomo Bank Limited,
New York Branch
One World Trade Center
Suite 9651
New York, New York 10048
Attn: Real Estate Finance
Department
With a Copy to: Gibson, Dunn & Crutcher
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
Attn: Michael A. Barrett, Esq.
(Matter No: 88291-00038)
If Lender or Borrower desires to change its address for the purpose of receipt
of notice, or to change the other party to receive a copy of notice, such notice
or change of address or recipient shall be given in the manner specified herein.
However, unless and until such written notice of change is actually received,
the last address and addressee as stated by written notice, or provided herein
if no written notice of change has been received, shall be deemed to continue in
effect for all purposes hereunder. Any notice given in accordance with the terms
hereof, the delivery of which is refused by the addressee, shall be effective at
the time of such attempted delivery.
- 72 -
<PAGE>
Section 9.11. Successive Remedies. No power or remedy herein
-------------------
conferred is exclusive of or shall prejudice any other power or remedy of Lender
given by law or by the terms of any of the Loan Documents. Each such power or
remedy may be exercised by Lender from time to time as often as it deems
necessary.
Section 9.12. No-Waiver. No failure by Lender to insist, or election
---------
by Lender not to insist, upon the strict performance of any of the terms,
provisions or conditions of this Agreement or any of the Loan Documents shall be
deemed to be a waiver of the same or any other term, provision or condition
thereof and Lender shall have the right at any time thereafter to insist upon
strict performance of any and all of the same. If Lender advances any portion
of the Loan in the absence of strict compliance with any or all of the
conditions of Lender's obligations to make such advance, the same shall be
deemed to have been made in pursuance of this Agreement and not to be a
modification hereof.
Section 9.13. Estoppel Certificates/Non-disturbance/Other Agreements.
------------------------------------------------------
Within ten (10) Business Days after request by Borrower, (a) Lender shall
deliver to Borrower an estoppel certificate, duly executed and acknowledged by
Lender, stating the outstanding principal amount of the Loan and whether there
exists any Event of Default under any of the Loan Documents, and (b) Lender
shall execute and deliver a subordination, non-disturbance and attornment
agreement in substantially the form attached to the Deed of Trust as Schedule C,
for any Qualifying Space Lease entered into subsequent to the date hereof. If
Borrower shall pay, in full, the principal of and premium, if any, and interest
in the Note in accordance with the terms thereof and hereof and all other sums
payable hereunder and under the other Loan Documents by Borrower and shall fully
repay the Loan and shall comply with all the terms, conditions and requirements
hereof and the other Loan Documents, then upon prior notice to Lender, Lender
shall on such date of payment execute and deliver to Borrower such discharges,
assignments and/or satisfactions as Borrower may reasonably request and shall
accommodate Borrower by appearing at the closing of such assignment, discharge
or satisfaction or make such other arrangement with respect thereto mutually
satisfactory to Lender and Borrower, provided that Borrower shall pay all
Out-of-Pocket Costs with respect thereto.
Section 9.14. Cross-Default. Any Event of Default under this
-------------
Agreement shall be deemed to be an Event of Default under each of the Loan
Documents, entitling Lender to exercise any or all remedies available to Lender
under the terms of any or all Loan Documents.
- 73 -
<PAGE>
Section 9.15. Purpose of Loans. Borrower hereby represents and
----------------
warrants that the indebtedness evidenced by the Note is being obtained solely
for the purpose of carrying on a business or commercial enterprise. Nothing
contained in the preceding sentence shall be deemed to be a limitation of
Borrower's use of the proceeds of the Loan.
Section 9.16. Inconsistencies with Loan Documents. In the event of any
-----------------------------------
conflict between this Agreement and the provisions of any of the other Loan
Documents, the provisions of this Agreement shall control; provided, however,
that any provision of any other Loan Documents which imposes additional burdens
on Borrower or restricts the rights of Borrower or gives Lender additional
rights or remedies shall not be deemed to be in conflict or inconsistent with
this Agreement and shall be given full force and effect.
Section 9.17. Survival. All of the representations, warranties,
--------
terms, covenants, agreements and conditions contained in this Agreement shall
specifically survive the execution and delivery of this Agreement and the other
Loan Documents and the advance of the Loan and shall, unless otherwise expressly
provided, continue in full force and effect until the Loan or the portion
thereof which has been advanced, together with interest thereon, and all other
costs, charges and other sums payable hereunder or thereunder, are paid in full.
Section 9.18. Indemnification. Borrower shall indemnify Lender for
---------------
and hold Lender harmless from and against any and all claims, damages, losses,
liabilities, Out-of-Pocket Costs of any kind whatsoever (other than such Out-of-
Pocket Costs which are the responsibility of Lender pursuant to the terms of
this Agreement) which Lender may incur (or which may be claimed against Lender)
by reason of, or in connection with (a) the destruction of the Trust Estate (or
any part thereof in a casualty for which insurance was required under the Loan
Documents and was not obtained and kept in full force and effect by Borrower,
(b) all obligations, covenants, representations and warranties of Borrower under
the Trust Estate relating to Hazardous Material to the full extent of any losses
or damages (including those resulting from diminution in the value of the Trust
Estate incurred by Lender as a result of the existence of Hazardous Material to
the extent such Hazardous Material existed prior to the date Lender has taken
possession and has assumed control of the Trust Estate pursuant to the Deed of
Trust, and (c) any action or proceeding to which Lender is made a party by
reason of Lender's holding of an interest in the Trust Estate; provided,
however, Borrower shall have no obligation to indemnify Lender for any such
claims, damages, losses, liabilities, costs or expenses arising by
- 74 -
<PAGE>
reason of the negligence or willful misconduct of Lender or Lender's agents,
servants or employees. In case any action, suit or proceeding is brought against
Lender by reason of any such occurrence, as a condition to Borrower's indemnity
obligation under this Section 9.18 (i) Lender shall give prompt notice to
Borrower of any such action, suit or proceeding, (ii) Borrower may, at
Borrower's sole cost and expense, resist and defend such action, suit or
proceeding by counsel reasonably satisfactory to Lender, and (iii), if Borrower
elects to defend such action, suit or proceeding, Lender shall not compromise or
settle any such action, suit or proceeding without the consent of Borrower,
unless Lender waives its right to the foregoing indemnification. Lender may,
however, engage its own counsel, at its expense, to participate in said defense
and in such case, the respective counsel for Borrower and Lender shall cooperate
with each other with respect thereto (it being understood that at all times
counsel for Borrower shall control such defense) and shall provide each other
with copies of all papers filed in such case which, when practical, shall be
delivered prior to filing thereof, or otherwise contemporaneously with filing
thereof, and with such other papers as shall be reasonably requested by the
other counsel which shall be delivered promptly upon request therefor. All sums
determined to be payable by Borrower to Lender by reason of the foregoing
indemnity pursuant to a non-appealable order of a court of competent
jurisdiction shall be due and payable by Borrower to Lender within ten (10)
Business Days after demand therefor or on such later date as specifically set
forth in such demand, and if such sums are not timely paid, said sums shall bear
interest at the Involuntary Rate from the date such payment was due through the
date of payment. This Section 9.18 shall survive the payment in full of the
Indebtedness.
Section 9.19. No Agency, Partnership or Joint Venture: Nonliability
-----------------------------------------------------
of Lender.
- ---------
(a) Lender is not the agent or representative of Borrower, and
Borrower is not the agent or representative of Lender. Borrower and Lender
intend and agree that the relationship between them shall be solely that of
creditor and debtor. Nothing herein nor the acts of the parties hereto shall be
construed to create a partnership or joint venture between Borrower and Lender.
(b) All inspections of the construction of the Project made by
or through Lender are for purposes of administration of the Loan only and
Borrower is not entitled rely upon the same with respect to the quality,
adequacy or suitability of materials or workmanship, conformity to the Plans,
state of completion or otherwise. Borrower shall make its own inspections of
such construction to determine that the
- 75 -
<PAGE>
quality of the work and all other requirements of such construction are being
performed in a manner satisfactory to Borrower and in conformity with the Plans
and all other requirements.
(c) By accepting or approving anything required to be observed,
performed, fulfilled or given to Lender pursuant to the Loan Documents,
including any certificate, statement of profit and loss or other financial
statement, survey, appraisal, lease or insurance policy, Lender shall not be
deemed to have warranted or represented the sufficiency, legality, effectiveness
or legal effect of the same, or of any term, provision or condition thereof, and
such acceptance or approval thereof shall not constitute a warranty or
representation to anyone with respect thereto by Lender.
(d) Lender neither undertakes nor assumes any responsibility or
duty to Borrower to select, review, inspect, supervise, pass judgment upon or
inform Borrower of any matter in connection with the Project, including without
limitation matters relating to the quality, adequacy or suitability of: (i) the
Plans (ii) Architects, Contractors, Subcontractors and other Persons employed or
utilized in connection with the construction of the Improvements, or the
workmanship of or the materials used by any of them, or (iii) the progress or
course of construction and its conformity or nonconformity with the Plans.
(e) Lender owes no duty of care to protect Borrower against
negligent, faulty, inadequate or defective building or construction.
Section 9.20. Negotiated Document. Lender and Borrower acknowledge
-------------------
that the provisions and the language of this Agreement and the other Loan
Documents have been negotiated, and agree that no provision of this Agreement or
any other Loan Document shall be construed against either Lender or Borrower by
reason of either Lender or Borrower having drafted such provision, this
Agreement or any other Loan Document.
Section 9.21. Limitation on Recourse. Except for certain limited
----------------------
personal liability as specified below, it is expressly understood and agreed
that the extent of liability for payment by the Borrower of any sums due under
this Agreement, the Note, the Deed of Trust or any of the other Loan Documents
is limited to (a) the Trust Estate, and all Revenues therefrom received by the
Borrower after the occurrence of an Event of Default which are not applied to
the Loan or to Expenses of the Trust Estate, and (b) proceeds of insurance on
said Trust Estate or proceeds on account of condemnation
- 76 -
<PAGE>
thereof (to the extent such proceeds are not applied by the Lender in
restoration or repair of the Trust Estate pursuant to the terms of the Deed of
Trust), the Lender agreeing not to look personally to the Borrower, the general
partners of the Borrower (a "P-i"), the partners or shareholders of any general
partner of the Borrower (a "P-2"), or the owners of partnership or shareholder
interests, whether owned or held directly or indirectly, in partners of the
general partners of the Borrower (a "P-3"), for payment of any such sums. The
Lender, for itself and its successors, endorsees, participants and assigns,
hereby waives any right to enforce collection of any money judgment against any
assets of the Borrower, any P-1, P-2, or P-3, other than as set forth in clauses
(a) and (b) above, whether by reason of a judgment pursuant to an action brought
under the Note or any action in foreclosure or otherwise for a deficiency
judgment against the Borrower, and P-1, P-2, P-3, other than as set forth in
clauses (a) and (b) above. However, notwithstanding the foregoing, the Borrower
and each P-1, P-2 and P-3 shall be fully subject to personal liability (i) for
fraud, respectively, by Borrower or such P-1, P-2 or P-3 and (ii) to the extent
that the proceeds of insurance on the Trust estate, the proceeds on account of
condemnation thereof, or Revenues of the Trust Estate are received by the
Borrower or such P-1, P-2 or P-3 after the occurrence of an Event of Default and
are not applied to the Loan, the Expenses of the Trust Estate or, in respect of
insurance or condemnation proceeds, in restoration or repair of the Trust Estate
pursuant to the terms of the Deed of Trust. The foregoing provisions shall not
in any way be deemed to release, affect or impair the indebtedness and
obligations evidenced by the Note or the security therefor, or the Lender's
right to enforce its remedies under the Deed of Trust or any other of the Loan
Documents by any action, including, without limitation, an action brought under
the Note or any sale or foreclosure under the Deed of Trust. The foregoing
provisions shall not in any way be deemed to release, affect or impair the
indebtedness and obligations evidenced by the Note or the security therefor, or
the Lender's right to enforce its remedies under the Deed of Trust or any other
of the Loan Documents by any action, including, without limitation, an action
brought under the Note or any sale or foreclosure under the Deed of Trust.
Furthermore, none of the foregoing provisions shall in any way derogate from the
liability which any person has assumed by a separate instrument in the nature of
a guarantee of any obligation undertaken in connection with the Loan.
9.22 Actions on Behalf of Lender. Any consent, review, approval or
---------------------------
other similar act required of Lender under the terms of this Agreement or any
other Loan Document may, at Lender's option, be done by or in consultation with
any Consultant or Consultants to Lender. At Lender's direction,
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<PAGE>
Borrower shall provide such information to Consultants as may be required to be
provided to Lender hereunder.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the day and year first written above.
SOUTHWEST MARKET LIMITED PARTNERSHIP,
a District of Columbia limited partnership
By: Boston Southwest Associates
Limited Partnership, a
Massachusetts limited
partnership, General Partner
ATTEST: By: Independence Square, Inc.,
a Delaware corporation, its
managing general partner
/s/ Edward C. Wallace By: /s/ Mortimer B. Zuckerman
- ------------------------ ----------------------------------
Name: Edward C. Wallace Mortimer B. Zuckerman
------------------- President
THE SUMITOMO BANK, LIMITED, a
Japanese banking institution, acting
through its NEW YORK BRANCH
ATTEST:
/s/ Lawrence Henry By: /s/ Kozo Yoneda
- ------------------------ ----------------------------------
Name: Lawrence Henry Name: Kozo Yoneda
------------------- -----------------------------
Title: Joint General Manager
----------------------------
<PAGE>
EXHIBIT 10.20
- --------------------------------------------------------------------------------
CONSTRUCTION LOAN AGREEMENT
by and between
THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH
and
SOUTHWEST MARKET LIMITED PARTNERSHIP
for
TWO INDEPENDENCE SQUARE
Dated as of February 22, 1991
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
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<S> <C>
ARTICLE I DEFINITIONS....................................... 1
Section 1.01 Definitions.................................... 1
Section 1.02 Accounting Terms............................... 18
ARTICLE II TERMS OF THE LOAN AND DISBURSEMENT
OF PROCEEDS..................................... 18
Section 2.01 Agreement to Lend.............................. 18
Section 2.02 Repayment...................................... 18
Section 2.03 Loan Documents................................. 19
Section 2.04 Payment of Principal
and Interest................................. 19
Section 2.05 Disbursements - General........................ 19
Section 2.06 Project Budget................................. 20
Section 2.07 Timing of Disbursements........................ 20
Section 2.08 Lender's Right to Condition
Disbursements................................ 21
Section 2.09 Disbursements for Project Costs................ 21
Section 2.10 Disbursement of Contingency
Funds........................................ 24
Section 2.11 Disbursements of Interest...................... 24
Section 2.12 Disbursement of Tenant
Improvement Costs............................ 25
Section 2.13 Modifications to Project Budget................ 28
Section 2.14 Balancing...................................... 29
Section 2.15 Automatic Debit and Credit; Wire
Transfers.................................... 29
ARTICLE III BORROWER'S FIXED RATE OPTION...................... 30
Section 3.01 Borrower's Fixed Rate Option................... 30
Section 3.02 Exercise of Conversion Option.................. 30
Section 3.03 Interest Rate Management
Arrangement.................................. 31
Section 3.04 Conditions to Lender's Obligation
to Enter Into an Interest Rate
Management Arrangement....................... 33
</TABLE>
i
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<TABLE>
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<S> <C>
ARTICLE IV CONDITIONS TO THE INITIAL
DISBURSEMENT........................................ 34
Section 4.01 Loan Documents..................................... 34
Section 4.02 Title Policies..................................... 34
Section 4.03 Survey............................................. 35
Section 4.04 Insurance.......................................... 35
Section 4.05 Flood Insurance.................................... 35
Section 4.06 Existence and Authorization........................ 36
Section 4.07 Opinion of Borrower's Counsel...................... 37
Section 4.08 Opinion from Counsel to Each
Guarantor........................................ 37
Section 4.09 UCC Search......................................... 37
Section 4.10 Hazardous Material................................. 37
Section 4.11 Streets and Utilities.............................. 38
Section 4.12 Project Budget..................................... 38
Section 4.13 Base Building Construction Schedule................ 38
Section 4.14 Permits............................................ 38
Section 4.15 Plans.............................................. 39
Section 4.16 Stored Materials................................... 39
Section 4.17 Architects' Materials.............................. 39
Section 4.18 General Contractor's Materials..................... 39
Section 4.19 Contractor and Subcontractor
Materials........................................ 39
Section 4.20 Engineer's Certificate............................. 39
Section 4.21 Other Project Documents............................ 40
Section 4.22 Consultants' Report................................ 40
Section 4.23 Cost to Complete................................... 40
Section 4.24 Government Materials............................... 40
Section 4.25 Appraisal.......................................... 40
Section 4.26 Fees............................................... 40
Section 4.27 General Conditions................................. 41
Section 4.28 Construction-Related Conditions.................... 41
Section 4.29 Bid Protest Litigation............................. 42
Section 4.30 Land Use Agreements................................ 42
ARTICLE V CONDITIONS TO ALL SUBSEQUENT
DISBURSEMENTS....................................... 42
Section 5.01 Initial Disbursement............................... 42
Section 5.02 General Conditions................................. 42
Section 5.03 Request for Disbursement Documents................. 43
Section 5.04 Title Endorsements................................. 45
Section 5.05 Plans; Permit Approval............................. 45
Section 5.06 Stored Materials................................... 45
Section 5.07 Contractors and Subcontractors..................... 46
Section 5.08 Final Construction Disbursement.................... 46
Section 5.09 Advances Without Requests.......................... 47
Section 5.10 Surveys............................................ 48
Section 5.11 Final Disbursement of Loan Proceeds................ 49
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE VI REPRESENTATIONS AND WARRANTIES....................... 51
Section 6.01 Existence........................................ 51
Section 6.02 Authorization; Enforceable
Obligation..................................... 51
Section 6.03 Conflicting Agreements........................... 51
Section 6.04 Required Documents............................... 52
Section 6.05 No Material Litigation........................... 52
Section 6.06 Bid Protest Litigation........................... 52
Section 6.07 Margin Regulations............................... 52
Section 6.08 Compliance With Applicable Laws.................. 53
Section 6.09 Government Leases................................ 53
Section 6.10 No Brokers....................................... 53
Section 6.11 Project Documents................................ 54
Section 6.12 Plans............................................ 54
Section 6.13 Project Budget and Construction
Schedule....................................... 54
Section 6.14 Streets and Utilities............................ 54
Section 6.15 ERISA............................................ 55
Section 6.16 Environmental.................................... 55
Section 6.17 Whole Tax Parcel................................. 55
Section 6.18 Casualty......................................... 55
Section 6.19 True Statements.................................. 55
ARTICLE VII AFFIRMATIVE AND NEGATIVE COVENANTS.................. 56
Section 7.01 Commencement and Completion of
Construction................................... 56
Section 7.02 Encroachments.................................... 57
Section 7.03 Plans............................................ 57
Section 7.04 Compliance with Laws
and Other Requirements......................... 58
Section 7.05 Change Orders.................................... 58
Section 7.06 Project Budget; Annual Operating
Budget......................................... 59
Section 7.07 Contractors and Subcontractors................... 59
Section 7.08 Permits and Warranties........................... 60
Section 7.09 Protection Against Liens and Claims.............. 60
Section 7.10 Removal of Personalty............................ 60
Section 7.11 Insurance........................................ 61
Section 7.12 Title Reports.................................... 61
Section 7.13 Entry and Inspection............................. 61
Section 7.14 Physical Security of Project..................... 61
Section 7.15 Information Covenants............................ 62
Section 7.16 Management of Property........................... 64
Section 7.17 Project Documents................................ 65
Section 7.18 Operation and Maintenance of
Project........................................ 65
Section 7.19 Environmental.................................... 65
Section 7.20 Other Business................................... 65
</TABLE>
iii
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<TABLE>
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<S> <C>
Section 7.21 Further Encumbrance................................. 66
Section 7.22 Transfers........................................... 68
Section 7.23 Reimbursable Expenses............................... 68
Section 7.24 Preservation of Existence........................... 69
Section 7.25 Future Tenant Estoppel
Certificates...................................... 69
Section 7.26 Use of Proceeds..................................... 70
Section 7.27 Publicity........................................... 70
Section 7.28 Name................................................ 70
Section 7.29 Consultants' Fees................................... 70
Section 7.30 Partnership Agreement; No
Partnership Distributions......................... 70
Section 7.31 Space Leases........................................ 71
Section 7.32 Tenant Improvements Schedule........................ 71
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES......................... 71
Section 8.01 Events of Default................................... 71
Section 8.02 Remedies............................................ 76
ARTICLE IX MISCELLANEOUS.......................................... 79
Section 9.01 Expenses............................................ 79
Section 9.02 Entire Agreement.................................... 79
Section 9.03 Counterparts........................................ 80
Section 9.04 Governing Law/Venue/Jurisdiction.................... 80
Section 9.05 Severability........................................ 80
Section 9.06 Successors and Assigns.............................. 80
Section 9.07 Setoff.............................................. 81
Section 9.08 Time of the Essence................................. 81
Section 9.09 Headings............................................ 81
Section 9.10 Notices............................................. 81
Section 9.11 Successive Remedies................................. 82
Section 9.12 No Waiver........................................... 82
Section 9.13 Estoppel Certificates/Non-disturbance/
Other Agreements.................................. 83
Section 9.14 Cross-Default....................................... 83
Section 9.15 Purpose of Loans.................................... 83
Section 9.16 Inconsistencies with Loan
Documents......................................... 83
Section 9.17 Survival............................................ 83
Section 9.18 Indemnification..................................... 84
Section 9.19 No Agency, Partnership or
Joint Venture; Nonliability
of Lender......................................... 85
Section 9.20 Negotiated Document................................. 86
Section 9.21 Limitation on Recourse.............................. 86
Section 9.22 Actions on Behalf of Lender......................... 87
</TABLE>
iv
<PAGE>
EXHIBITS
Exhibit A - Form of Request for Disbursement
Exhibit B - Form of Lien Waiver and Affidavit of
Payment
SCHEDULES
Schedule 4.12 - Project Budget
Schedule 4.13 - Base Building Construction Schedule
Schedule 6.11 - Project Documents
Schedule 6.12 - Plans
v
<PAGE>
CONSTRUCTION LOAN AGREEMENT
THIS CONSTRUCTION LOAN AGREEMENT made as of the 22 day of February,
1991 by and between SOUTHWEST MARKET LIMITED PARTNERSHIP, a limited partnership
organized and existing under the laws of the District of Columbia, having an
office at c/o Boston Properties, 500 E Street, S.W., Washington, D.C., 20024
("Borrower"), and THE SUMITOMO BANK, LIMITED, a Japanese banking institution
acting through its NEW YORK BRANCH, having an office at One World Trade Center,
Suite 9651, New York, New York 10048 ("Lender");
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, pursuant to that certain commitment letter dated September 28,
1990 from Lender to Borrower, as amended by that certain letter from Lender to
Borrower dated December 12, 1990 (collectively, the "Commitment"), and on the
terms and conditions hereinafter set forth, Lender is willing to lend to
Borrower the aggregate sum of up to ONE HUNDRED TWENTY-FIVE MILLION DOLLARS
($125,000,000), to be evidenced by a promissory note and secured by, among other
things, a lien upon certain real property located in the District of Columbia;
NOW, THEREFORE, for and in consideration of the mutual covenants
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lender hereby agree
as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.01. Definitions. As used in this Agreement, the capitalized
-----------
terms set forth in this Article I shall have the meanings given them in this
Article I. Capitalized terms used in this Agreement but not defined in this
Article I shall have the meanings set forth elsewhere in this Agreement.
Capitalized terms used but not defined in this Agreement shall have the meanings
given such terms in the Note or, if not defined therein, in the Deed of Trust
(as those terms are hereinafter defined).
Affiliate. As used herein, "Affiliate" shall mean each of: (a) any
---------
general Partner, (b) any Guarantor, and
<PAGE>
(c) any other Person which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
Borrower, any general Partner or any Guarantor. For purposes of this and all
other definitions, the term "control" shall mean the possession, directly or
indirectly, of the power to cause the direction of the management and policies
of a Person, whether through the ownership of voting securities or equity
interests, by contract, mutual understanding, family relationship or otherwise.
Agent. As used herein, "Agent" shall mean Commercial Settlements,
-----
Inc., a District of Columbia corporation, an authorized agent of the Title
Companies.
Agreement. As used herein, "Agreement" shall mean this Construction
---------
Loan Agreement, including all schedules and exhibits hereto, as the same may be
amended or otherwise modified from time to time.
Annual Operating Budget. As used herein, "Annual Operating Budget"
-----------------------
shall have the meaning given such term in Section 7.15(h) hereof.
Appraisal. As used herein, "Appraisal" shall mean an appraisal of the
---------
fair market value of the Project performed by the Appraiser in accordance with
the rules and guidelines of the American Institute of Real Estate Appraisers.
Appraised Value of the Trust Estate. As used herein, "Appraised Value
-----------------------------------
of the Trust Estate" shall mean the fair market value of Borrower's estate in
the Trust Estate as set forth (a) as of the date hereof in the Appraisal
performed and prepared by the Appraiser dated November 2, 1990, and delivered to
Lender in connection with the making of the Loan or (b) thereafter, from time to
time, in a current Appraisal prepared by the Appraiser.
Appraiser. As used herein, "Appraiser" shall mean Leggat McCall &
---------
Werner Appraisal and Consulting Company, Inc., or another appraiser designated
by Borrower and approved by Lender, such approval not to be unreasonably
withheld or delayed.
Architect. As used herein, "Architect" shall mean each of the
---------
following: (a) with respect to all of the Project other than the Tenant
Improvements, Kohn Pedersen Fox Associates P.C.; (b) with respect to the GSA
Tenant Improvements only, Greenwell Goetz Architects, P.C. ("Greenwell Goetz");
and (c) with respect to the Retail Tenant Improvements to be constructed
pursuant to a Space Lease, the Person
- 2 -
<PAGE>
designated by Borrower or the Space Tenant to perform the design services for
such Retail Tenant Improvements. Architect also shall mean, with respect to the
successor or successors to each Architect in (a), (b) and (c) above, each such
other Person as may hereafter be designated by Borrower or a Space Tenant and
reasonably approved by Lender in accordance with the terms hereof to act in the
place of any of the foregoing Persons as architect for such Person's respective
portion of the Project; provided, however, that Lender shall have such approval
right only to the extent that Borrower has the right to designate and/or approve
such successor Architect in accordance with the terms of such Person's contract
with Borrower or a Space Tenant.
Architect Contract. As used herein, "Architect Contract" shall mean
------------------
each of the following: (a) with respect to Kolin Pedersen Fox Associates P.C.,
that certain agreement with Borrower dated December 18, 1989; (b) with respect
to Greenwell Goetz, that certain agreement dated July 1, 1990 providing for
interior design services for the GSA Tenant Improvements, (c) with respect to a
Person designated by Borrower or a retail Tenant to perform the design services
for Retail Tenant Improvements, the contract between Borrower and such Person
for such services; and (d) the contract between Borrower and any subsequent
Architect similarly providing for architectural services for the Project.
Assignment of Project Documents. As used herein, "Assignment of
-------------------------------
Project Documents" shall mean the Collateral Assignment of Project Documents
from Borrower to Lender of even date herewith in a form mutually agreed to by
Borrower and Lender.
Assignment of Rents. As used herein, "Assignment of Rent" shall mean
-------------------
the Collateral Assignment of Leases, Rents, Profits and Income and Pledge of
Accounts with an effective date the same as the date hereof in a form mutually
agreed to by Borrower and Lender.
Base Building. As used herein, "Base Building" shall mean the
-------------
structure, built in accordance with the Plans, as it exists at the completion of
all work shown on the Two Independence Square Preliminary Schedule, dated August
15, 1990, and after the issuance of a certificate of occupancy by the
appropriate Governmental Authority for all work shown on the Preliminary
Schedules.
Base Building Construction Schedule. As used herein, Base Building
-----------------------------------
Construction Schedule shall mean the schedule of dates upon which completion of
certain portions of the Base Building is anticipated to occur, which schedule
is, pursuant to Section 4.13, attached hereto as Schedule 4.13.
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<PAGE>
Bid Protest Guaranty. As used herein, "Bid Protest Guaranty" shall
--------------------
mean the joint and several guaranty of even date herewith made by Guarantors in
favor of Lender in a form mutually agreed to by Borrower and Lender guaranteeing
payment to Lender of the entire Indebtedness.
Bid Protest Litigation. As used herein, "Bid Protest Litigation" shall
----------------------
mean that certain civil action No. 90-2951, filed December 4, 1990 in the United
States District Court for the District of Columbia (the "District Court")
challenging the award of the GSA Building Lease to Borrower for which the
District Court issued an order dated January 11, 1991, dismissing plaintiff's
suit and confirming the award of the GSA Building Lease to Borrower, and from
which plaintiff has outstanding rights to request a modification from the
District Court or to appeals.
Business Day. As used herein, a "Business Day" shall mean a day on
------------
which (a) commercial banks in New York City are open for business, (b)
commercial banks in London, England are open for business, and (c) dealings in
U.S. Dollar deposits are carried on in the London Interbank Eurodollar Market
(as defined in the Note).
Change Order. As used herein, "Change Order" shall mean a change in
------------
the Plans, or in the Construction Contracts.
Completion Date. As used herein, "Completion Date" shall mean January
---------------
1, 1994, subject to extension for Force Majeure and Unavoidable Government Delay
as provided in this Agreement.
Completion Guaranty. As used herein, "Completion Guaranty" shall mean
-------------------
the joint and several guaranty of even date herewith made by Guarantors in favor
of Lender in a form mutually agreed to by Borrower and Lender, guaranteeing
Lien-free completion of the entire Project.
Completion of Construction. As used herein, "Completion of
--------------------------
Construction" shall mean that (a) the core, shell and other portions of the
Project (other than Tenant Improvements) have been constructed in a good and
workmanlike manner substantially in accordance with the Plans and with all Laws
and all requirements of the National Fire Protection Association (or its
successor); (h) all required inspections by Governmental Authorities have been
completed and either a permanent certificate of occupancy or a temporary
certificate of occupancy subject to no conditions that cannot be satisfied
within the Project Budget and Construction Schedule has been obtained covering
all of the core, shell and other "base building" portions of the Project such
that (without limiting the foregoing), upon construction of the Tenant
Improvements, the entire Project may lawfully be occupied for its intended
- 4 -
<PAGE>
purpose; (c) all conditions to the Final Construction Disbursement as set forth
in Section 5.08 have been satisfied or, in Lender's sole discretion, waived; (d)
all Tenant Improvements required to be constructed by Borrower under the
Government Leases shall have been constructed in a good and workmanlike manner
substantially in accordance with the plans and specifications therefor and with
all Laws and all requirements of the National Fire Protection Association (or
its successor); (e) Borrower shall have obtained either a permanent certificate
of occupancy or a temporary certificate of occupancy subject to no conditions
that cannot be satisfied within the Project Budget and Construction Schedule
covering the entire Leased Premises; and (f) the GSA shall have commenced paying
Base Rent on the entire Leased Premises without protest and as required by the
terms of the GSA Building Lease.
Construction Contract. As used herein, "Construction Contract" shall
----------------------
mean (a) that certain Agreement Between Owner and General Contractor dated as of
October 12, 1990, made by and between Borrower and McDevitt & Street Company, a
Florida corporation, providing for the construction of the Project or (b) the
lump-sum contract between Borrower and any subsequent General Contractor
similarly providing for construction of the Project.
Construction Schedule. As used herein, "Construction Schedule" shall
---------------------
mean the schedule of dates upon which completion of certain portions of the
Project is anticipated to occur, which schedule shall be comprised of the Base
Building Construction Schedule and the Tenant Improvements Schedule.
Consultants. As used herein, "Consultants" shall mean all independent
------------
third-party consultants, including the Inspecting Engineer, that Lender
reasonably deems necessary and selects to provide the following services to
Lender: (a) review the Plans; (b) review Project Cost breakdowns and the
Construction Schedule; (c) conduct compliance inspections with respect to the
progress of construction of the Project and approve each element of a Request
for Disbursement; and (d) perform such other services as may, from time to time,
reasonably be required by Lender in connection with the performance of any
undertaking of Lender contemplated hereunder or to protect or assess the value
of Lender's security or to assist in enforcing Lender's rights under any of the
Loan Documents.
Contract and Contractor. As used herein, "Contract" shall mean a
-------- ----------
contract, other than the Construction Contract or Architect Contract, to which
Borrower or Boston Properties, as Borrower's agent on behalf of Borrower, is a
party for the supply of materials, labor, services or a combination thereof
- 5 -
<PAGE>
in connection with the Project. As used herein, "Contractor" shall mean the
Person who, as a party to a Contract, is to supply materials, labor, services or
a combination thereof.
Conversion Date. As used herein, "Conversion Date" shall have the
----------------
meaning ascribed to such term in Subsection 3.03(b) hereof.
Debt Service Coverage Ratio. As used herein, "Debt Service Coverage
---------------------------
Ratio" shall mean the ratio obtained by dividing (a) Net Cash Flow for the
pertinent period by (b) Project Debt Service for the pertinent period.
Deed of Trust. As used herein, "Deed of Trust" shall mean the
-------------
Construction Loan Deed of Trust and Security Agreement with an effective date
the same as the date hereof, by and among Borrower, Lender and Gerald R. Perras
and Stuart S. Levin as trustees for Lender, as the same may be modified,
consolidated or restated from time to time.
Designated Representative. As used herein, "Designated Representative"
-------------------------
shall mean an individual authorized, from time to time, in writing by Borrower,
with approval of Lender, to deliver Requests for Disbursements, certificates,
and other documents and material to Lender pursuant to this Agreement and the
other Loan Documents.
Disbursement. As used herein, "Disbursement" shall mean each of the
------------
disbursements of the proceeds of the Loan made pursuant to this Agreement.
Environmental Guaranty. As used herein, "Environmental Guaranty" shall
----------------------
mean the joint and several guaranty of even date herewith made by Guarantors in
favor Lender in a form mutually agreed to by Borrower and Lender guaranteeing
Borrower's performance of certain obligations under the Deed of Trust relating
to Hazardous Material.
Environmental Report. As used herein, "Environmental Report" shall
--------------------
mean the Geotechnical Environmental Site Assessment dated December 2, 1987 by
Briggs Associates, Inc., the Report of Underground Storage Tank Removal dated
March 20, 1990 (Proj. No. 5057 MD 20) by Briggs Associates, Inc., and the
Environmental Report, Two Independence Square dated October 24, 1990 by Briggs
Associates, Inc.
Event of Default. As used herein, "Event of Default" shall have the
----------------
meaning ascribed to such term in Section 8.01 hereof.
- 6 -
<PAGE>
Exercise Period. As used herein, "Exercise Period" shall have the
---------------
meaning ascribed to such term in Subsection 3.02(c) hereof.
Expenses. As used herein, "Expenses" shall mean the actual costs
--------
incurred by Borrower with respect to or allocable to a given period in
connection with the operation or ownership of the Trust Estate; provided,
however, that in the case of capital expenditures, Expenses shall mean the total
amount of such expenditures allocated over the useful life of the property for
which the expenditure was made, and in the case of prepaid expenditures, the
total amount of such prepaid expenditures allocated over the period for which
the expenditure was prepaid. Expenses shall not include (a) payments of
interest and other charges required to be made in respect of the Note, the Deed
of Trust or any other Loan Document, and (b) payments of principal, interest and
other charges required to be made by Borrower in respect of any other
indebtedness secured by all or any part of the Trust Estate or the Revenues, and
(c) distributions to Partners. Expenses shall include, without limitation: (i)
real property taxes; (ii) utility charges; (iii) premiums on insurance policies;
(iv) maintenance and cleaning expenses; (v) legal, accounting, brokerage, and
other professional fees attributable to the operation of the Trust Estate; and
(vi) all other expenses, fees, charges and costs incurred in connection with the
ownership or operation of the Trust Estate that are usually and customarily
incurred by owners of first-class commercial office buildings of a size and
usage comparable to the Trust Estate in the District of Columbia area, provided,
however, that no Item included in the Project Budget as an item to be financed
by the Loan shall be deemed part of "Expenses."
Final Construction Disbursement. As used herein, "Final Construction
-------------------------------
Disbursement" shall have the meaning ascribed to such term in Section 5.08
hereof.
Final Disbursement of Loan Proceeds. As used herein, "Final
-----------------------------------
Disbursement of Loan Proceeds" shall have the meaning ascribed to such term in
Section 5.11 hereof.
Force Majeure. As used herein, "Force Majeure" shall mean the
-------------
occurrence of any of the following events which results in the delay of some
performance mandated by this Agreement: the enactment of any law or issuance of
any governmental order, rule or regulation establishing rationing or priorities
in the use of materials or restricting the use of labor; labor strikes or
lockouts; acts of God; enemy action; civil commotion or fire; or other similar
unavoidable casualties or events.
- 7 -
<PAGE>
Funding Costs. As used herein, "Funding Costs" shall have the meaning
-------------
ascribed to such term in the Note.
General Contractor. As used herein, "General Contractor" shall mean
------------------
McDevitt & Street Company, a Florida corporation, or such other party as may
hereafter be designated by Borrower and reasonably approved by Lender in
accordance with the terms hereof to act as the general contractor for the
Project.
Government Leases. As used herein, "Government Leases" shall mean the
-----------------
GSA Building Lease and the Parking Agreement.
Governmental Authority. As used herein, "Governmental Authority" shall
----------------------
have the meaning ascribed to such term in the Deed of Trust.
GSA. As used herein, "GSA" shall mean the General Services
---
Administration, an agency of the United States government.
GSA Building Lease. As used herein, "GSA Building Lease" shall mean
------------------
that certain U.S. Government Lease for Real Property No. GS-llB-00l1l
"Negotiated," dated June 1, 1990, by and between Borrower as lessor and the
United States of America as lessee, and all attachments, exhibits and schedules
thereto, as the same hereafter may be amended, modified or supplemented in
accordance with the terms of the Loan Documents, the space covered by which
lease is intended to be used for office space and related facilities for NASA.
GSA Tenant Improvements. As used herein, "GSA Tenant Improvements"
-----------------------
shall have the meaning ascribed to such term in Section 2.12(b) hereof.
Guarantees. As used herein, "Guarantees" shall mean the Completion
----------
Guaranty, the Interest Guaranty, the Environmental Guaranty and the Bid Protest
Guaranty.
Guarantors and Guarantor. As used herein "Guarantors" shall mean
---------- ---------
Mortimer B. Zuckerman and Edward H. Linde, and "Guarantor" shall mean one of the
Guarantors.
Hard Costs. As used herein, "Hard Costs" shall mean those Project
----------
Costs set forth on the Project Budget under the headings "Land Equity" and
"Building Construction", including without limitation costs of labor, materials,
equipment, and fixtures.
- 8 -
<PAGE>
Hazardous Material. As used herein, "Hazardous Material" shall have
------------------
the meaning ascribed to such term in the Deed of Trust.
Improvements. As used herein, "Improvements" shall have the meaning
------------
ascribed to such term in the Deed of Trust.
Indebtedness. As used herein, "Indebtedness" shall have the meaning
------------
ascribed to such term in the Deed of Trust.
Initial Disbursement. As used herein, "Initial Disbursement" shall
--------------------
mean the first disbursement of proceeds of the Loan made hereunder.
Inspecting Engineer. As used herein, "Inspecting Engineer" shall mean
-------------------
EMJ Construction Consultants or such other party as shall hereafter be appointed
by Lender to act as the Inspecting Engineer.
Institutional Lender. As used herein, "Institutional Lender" shall
--------------------
mean (a) a savings and loan association, a savings bank, a commercial bank or
trust company, an insurance company, an educational, religious or charitable
institution, an endowment fund, a federal, state, municipal or private, foreign
or domestic employees' welfare pension or retirement fund or system, an
investment banking firm, a real estate investment trust or other financial
institution provided that any such entity (i) is subject to or submits to
service of process within the State of New York and the District of Columbia,
(ii) has total assets of at least One Billion Dollars ($1,000,000,000), (iii)
either (A) reports to or is subject to the supervision of the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, the Department of Labor,
the Federal Reserve Board, the Office of Thrift Supervision or any similar state
or federal regulatory agency or official, or any successor to any of the
foregoing agencies, entities or officials, or (B) is subject to public financial
reporting requirements or oversight jurisdiction of the Securities and Exchange
Commission; (iv) is financially sound in Lender's sole discretion; and (v) is
acting in its own interest and capacity or as a fiduciary or trustee for any of
the foregoing; (b) an Affiliate of Borrower; or (c) any other Person approved by
Lender.
Interest Guaranty. As used herein, "Interest Guaranty" shall mean the
-----------------
joint and several guaranty and indemnity of even date herewith made by
Guarantors in favor of Lender in a form mutually agreed to by Borrower and
Lender guaranteeing the payment of interest on the Note and indemnifying Lender
against certain liabilities.
- 9 -
<PAGE>
Interest Rate Management Arrangement. As used herein, "Interest Rate
------------------------------------
Management Arrangement" shall mean an interest rate swap agreement, an agreement
providing for an interest rate ceiling (commonly known as a "cap") or an
interest rate floor and ceiling (commonly known as a "collar"), or any other
contractual protection against interest rate increases that is generally
accepted in the financial industry and is in such form and on such terms as are
customary in the ordinary conduct of Lender's business or are otherwise
acceptable to Lender in its reasonable discretion.
Involuntary Rate. As used herein, "Involuntary Rate" shall have the
----------------
meaning ascribed to such term in the Note.
Item. As used herein, "Item" shall mean any identified line item set
----
forth in either the Project Budget or the Annual Operating Budget, as
applicable.
Land. As used herein, "Land" shall have the meaning ascribed to such
----
term in the Deed of Trust.
Laws. As used herein, "Laws" shall mean all laws, rules, regulations,
----
codes, and ordinances of Governmental Authorities, and all rulings, orders,
decisions and interpretations issued by Governmental Authorities in respect
thereof.
Leased Premises. As used herein, "Leased Premises" shall mean all of
---------------
the space demised by the Government Leases.
Lien. As used herein, "Lien" shall mean any charge, lien (including
----
mechanics, materialmen and other liens), mortgage, deed of trust, pledge,
security interest or other encumbrance of any nature whatsoever upon, of, or in
property or other assets of a Person, whether absolute or conditional, voluntary
or involuntary, whether created by agreement, assignment, statute, judicial
proceedings or otherwise.
Loan. As used herein, "Loan" shall mean the aggregate of all principal
----
amounts advanced to Borrower pursuant to the terms hereof or pursuant to the
other Loan Documents and all interest required by the terms hereof, by the terms
of the Note or by the terms of the other Loan Documents to be paid by Borrower
to Lender.
Loan Documents. As used herein, "Loan Documents" shall mean and include
--------------
this Agreement, the Note, the Deed of Trust, the Interest Guaranty, the
Completion Guaranty, the Environmental Guaranty, the Bid Protest Guaranty, the
Assignment of Rents, the Assignment of Project Documents, all UCC-l Financing
Statements given by Borrower to Lender, and any
- 10 -
<PAGE>
and all other documents given from time to time as security for, or in evidence
of, or to provide the terms of or otherwise in connection with the Loan and the
Indebtedness.
Loan Participant. As used herein, "Loan Participant" shall have the
----------------
meaning ascribed to such term in the Note.
Loan Term. As used herein, "Loan Term" shall have the meaning ascribed
---------
to such term in the Note.
Loan to Value Ratio. As used herein, "Loan to Value Ratio" shall mean
-------------------
the ratio (expressed as a percentage) obtained at any particular time by
dividing (a) the sum of (i) the then-outstanding principal balance of the Note
and (ii) the then-outstanding principal balance of any other indebtedness
secured by all or any part of the Trust Estate or the Revenues, by (b) the
Appraised Value of the Trust Estate at the time.
Lot 872. As used herein, "Lot 872" shall mean that portion of Square
-------
538, Lot 49, Assessment and Tax Lot 872, subject to a long-term leasehold
interest of John Mandis, Inc., and improved as of the date hereof by a
restaurant commonly known as the Market Inn.
Major Change Order. As used herein, "Major Change Order" shall have
------------------
the meaning ascribed to such term in Section 7.05(e) hereof.
Major Lease. As used herein, "Major Lease" shall mean any Space Lease
-----------
or other agreement demising thirty thousand (30,000) rentable square feet of
space or more, including without limitation the Space Leases and other
agreements set forth on Schedule B attached to the Deed of Trust.
Maturity Date. As used herein, "Maturity Date" shall have the meaning
-------------
ascribed to such term in the Note.
NASA. As used herein, "NASA" shall mean the National Aeronautics and
----
Space Administration, an agency of the United States government.
Net Cash Flow. As used herein, "Net Cash Flow" shall mean an amount
-------------
equal to Revenues for a particular period minus Expenses for such period.
Note. As used herein, "Note" shall mean the Promissory Note made by
----
Borrower to the order of Lender in the principal amount of One Hundred Twenty-
Five Million Dollars ($125,000,000) or such lesser amount as may be advanced by
Lender to Borrower under this Agreement, and otherwise in the form mutually
agreed to by Borrower and Lender.
- 11 -
<PAGE>
Out-of-Pocket Costs. As used herein, "Out-of-Pocket Costs" shall have
-------------------
the meaning ascribed to such term in the Deed of Trust.
Parking Agreement. As used herein, "Parking Agreement" shall mean that
-----------------
certain Contract No. NASW-4580, dated February 26, 1991 by and between Borrower
and NASA and all attachments, exhibits and schedules thereto, as the same
hereafter may be amended, modified or supplemented in accordance with the terms
of the Loan Documents, the space covered by which agreement is intended to be
used for parking space for NASA.
Partner. As used herein, "Partner" shall mean those Persons identified
-------
as limited or general partners in the limited partnership agreement of Borrower
in effect on the date hereof, and any other Person hereafter holding legal
and/or beneficial title to an equity interest in Borrower.
Permitted Exceptions. As used herein, "Permitted Exceptions" shall
--------------------
have the meaning ascribed to such term in the Deed of Trust.
Permitted Transferee. As used herein, "Permitted Transferee" shall
--------------------
mean a Person (a) in which Mortimer B. Zuckerman and Edward H. Linde in the
aggregate or either alone shall have an indirect or direct ownership interest of
at least twenty-five percent (25%) in the aggregate, (b) which shall be
controlled by Mortimer B. Zuckerman and Edward H. Linde or by either alone, and
(c) which (i) shall control Borrower or a Person that is the successor to
Borrower and the day-to-day operations and management of the Trust Estate and
(ii) shall have the right to make all significant economic and management
decisions on behalf of Borrower (or such successor) without the need for the
vote, approval or consent of any other Person other than a Permitted Transferee.
Person. As used herein, "Person" shall mean any natural person or
------
entity, including without limitation, any trustee, corporation, partnership,
joint stock company, trust, association, unincorporated organization, bank,
business association or firm, or Governmental Agency.
Personal Property. As used herein, "Personal Property" shall mean all
-----------------
of Borrower's right, title and interest, whether now existing or hereafter
acquired, in and to all furniture, furnishings, fixtures, machinery, equipment,
inventory and other personal property of every kind, tangible or intangible, now
or hereafter located at, upon or about the Premises and used or to be used in
connection with or related or arising with respect to the Trust Estate and/or
the Project,
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<PAGE>
excluding that personal property owned by any Space Tenant and located at, upon
or about the Premises that does not become the property of Borrower under the
terms of the applicable Space Lease.
Phase I. As used herein, "Phase I" shall mean the building on that
-------
portion of Square 538, Lot 49 designated as Assessment and Tax Lot 873, known as
One Independence Square, being built by Borrower in accordance with the loan
agreement heretofore entered into by and between Borrower and Lender.
Plans. As used herein, "Plans" shall mean all preliminary and, as they
-----
are developed in accordance with the provisions hereof, final drawings, plans,
specifications and other documents (including but not limited to architectural,
structural, mechanical, electrical, and safety), prepared by Borrower,
Architect, General Contractor, any Contractor or Subcontractor, GSA, NASA or any
other architect and/or engineer reasonably acceptable to Lender, which Plans
shall be subject to Lender's prior written approval to the extent required by
this Agreement, and which shall describe and show the construction and labor,
materials, equipment and fixtures necessary for the completion of the Project.
Portion of Principal. As used herein, "Portion of Principal" shall
--------------------
have the meaning ascribed to such term in the Note.
Premises. As used herein, "Premises" shall have the meaning ascribed
--------
to such term in the Deed of Trust.
Project. As used herein, "Project" shall mean (a) the development of
-------
the Premises in accordance with the Plans, including, without limitation, the
construction of the Improvements and all Tenant Improvements and the performance
of all other work required by the Plans or applicable Laws, whether on or off
the Land, including without limitation (i) constructing parking, curbs, gutters,
sidewalks, and public areas and amenities, (ii) providing landscaping, (iii)
repairing, constructing or modifying streets, alleys and other passageways or
connections with or support for the foregoing, (iv) repairing or constructing
utilities, and (v) otherwise repairing or modifying existing improvements on or
near the Land; and (b) the ownership and operation of the Premises developed as
aforesaid.
Project Budget. As used herein, "Project Budget" shall mean the budget
--------------
now or, pursuant to Section 4.12, hereafter attached hereto as Schedule 4.12,
prepared by Borrower, as the same may be modified from time to time in
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<PAGE>
accordance with the terms hereof, setting forth a projection of all Project
Costs.
Project Costs. As used herein, "Project Costs" shall mean (a) the
-------------
costs identified on the Project Budget to be funded with the proceeds of the
Loan; (b) all amounts payable to or for the benefit of the GSA, NASA or other
government agency under the terms of the Government Leases, including amounts
payable as liquidated damages, tenant improvement allowances, contributions for
signs, logos and/or other mediums naming the Improvements, and contributions for
improving the vicinity of the Premises; and (c) all other costs necessary to
construct or otherwise payable in connection with the construction of the entire
Project.
Project Debt Service. As used herein, "Project Debt Service" shall
--------------------
mean the sum of (a) all payments of interest and other charges which must be
made by Borrower during a particular period in respect of the Loan, plus (b) all
payments of principal, interest, and other charges which must be made by the
Borrower during such period in connection with all other indebtedness of the
Borrower secured by the Project or revenues therefrom.
Project Development Agreement. As used herein, "Project Development
-----------------------------
Agreement" shall mean the Development Agreement, dated as of December 1, 1989,
between Borrower and Boston Properties, a Massachusetts business trust.
Project Documents. As used herein, "Project Documents" shall mean,
-----------------
collectively, all agreements, documents, instruments and materials of whatever
nature now or hereafter existing which relate to the Project or the Trust
Estate, including but not limited to: (a) the Plans and all other plans,
specifications, and drawings and all soil, environmental and engineering test
reports relating to the Project, (b) all approvals, consents, licenses and
permits issued by any Governmental Authority in connection with the Project, (c)
the Construction Contract, the Architect Contract, all Contracts and
Subcontracts, and all other agreements relating to the Project between Borrower
and any consultant, architect, engineer, Contractor, Subcontractor, project
manager or supervisor, laborer or supplier of materials, (d) all development,
management and brokerage agreements, and (e) all payment or performance bonds,
warranties, and guaranties with respect to any portion of the Project. Project
Documents shall not include Space Leases.
Qualifying Space Lease. As used herein, a "Qualifying Space Lease"
----------------------
shall mean a bona fide lease agreement pursuant to
- 14 -
<PAGE>
which all or a portion of the Premises is or is intended to be occupied;
provided, however, that (a) such lease is then in full force and effect; (b)
such lease, if entered into after the date hereof, has been created
substantially in accordance with all requirements applicable to leases as set
forth in the Deed of Trust, Assignment of Rents, and other Loan Documents; and
(c) either (i) the tenant under such lease is paying all the rent and other
charges due thereunder or (ii) as to a tenant not yet paying rent, such tenant
is obligated to pay all of such rent, costs, and other charges thereunder,
subject only to satisfaction of conditions precedent to such obligation set
forth in such lease and evidenced by an estoppel certificate in form and
substance reasonably satisfactory to Lender. Lender hereby acknowledges and
agrees that, subject to their remaining in full force and effect, the Government
Leases shall be deemed to be Qualifying Space Leases.
Request for Disbursement. As used herein, "Request for Disbursement"
------------------------
shall mean a written request for a Disbursement signed by the Designated
Representative on behalf of Borrower in substantially the form of Exhibit A
hereto.
Restaurant Improvements. As used herein, "Restaurant Improvements"
-----------------------
shall have the meaning ascribed to such term in Section 2.12(c) hereof.
Restaurant Lease. As used herein, "Restaurant Lease" shall have the
----------------
meaning ascribed to such term in the Deed of Trust.
Retail Tenant Improvements. As used herein, "Retail Tenant
--------------------------
Improvements" shall have the meaning ascribed to such term in Section 2.12(c)
hereof.
Revenues. As used herein, "Revenues" shall mean all cash revenues
--------
actually received by Borrower under Qualifying Space Leases and all binding and
effective written licenses, concessions and other agreements providing for the
use of space in the Premises entered into in accordance with the terms of the
Loan Documents and assigned to Lender pursuant to one or more of the Loan
Documents with respect to or allocable to a particular period; provided,
however, that (a) Revenues shall not include payments made by a Space Tenant to
Borrower for (i) a security deposit or (ii) Tenant Improvements to the extent
such payments are transmitted to a contractor installing such Tenant
Improvements or are retained by Borrower as reimbursement for the cost of
installing such Tenant Improvements; and (b) with respect to percentage rent or
other payments based on the revenues or income of a Space Tenant or other Person
which Borrower proposes to include in the determination of Revenues, Revenues
shall mean the monthly
- 15 -
<PAGE>
average of percentage rent or such other payments received by Borrower for the
previous twelve (12) months and to the extent Borrower has not received
percentage rent or such other payments under such Qualifying Space Leases or
other agreements for the previous twelve-month period, the percentage rent or
such other payments for such Qualifying Space Leases or other agreements shall
not be included in the calculation of Revenues.
Soft Costs. As used herein, "Soft Costs" shall mean all Project Costs
----------
set forth on the Project Budget under the headings "Architect and Engineer",
"Financing", "Marketing", "Carrying Costs", "Legal", and "Overhead", including
without limitation fees for the Architect and the Lender's attorneys and
Consultants, interest on the Loan, real estate taxes, transfer and recordation
taxes, survey costs, and title insurance premiums.
Space Lease. As used herein, "Space Lease" shall have the meaning
-----------
ascribed to such term in the Deed of Trust.
Space Tenant. As used herein, "Space Tenant" shall have the meaning
------------
ascribed to such term in the Deed of Trust.
Stored Materials. As used herein, "Stored Materials" shall mean
----------------
materials purchased by Borrower and stored at the Premises or at an off-site
location reasonably acceptable to Lender for use in the Project, but not yet
installed or incorporated into the Project.
Subcontract and Subcontractor. As used herein, "Subcontract" shall
-----------------------------
mean a contract to which Borrower is not a party for the supply of materials,
labor, services or a combination thereof in connection with the Project. As
used herein, "Subcontractor" shall mean the Person who, as a party to a
Subcontract, is to supply materials, labor, services or a combination thereof.
Subordinate Financing. As used herein, "Subordinate Financing" shall
---------------------
have the meaning ascribed to such term in Section 7.21 hereof.
Subordinate Lender. As used herein, "Subordinate Lender" shall have
------------------
the meaning ascribed to such term in Section 7.21 hereof.
Survey. As used herein, "Survey" shall have the meaning ascribed to
------
such term in Section 4.03.
Tenant Improvement Costs. As used herein, "Tenant Improvement Costs"
------------------------
shall mean those Hard Costs and Soft Costs attributable to construction of the
Tenant Improvements as set
- 16 -
<PAGE>
forth on the Project Budget under the headings "Tenant Work (NASA)" and "Tenant
Work (Spec)"
Tenant Improvements. As used herein, "Tenant Improvements" shall mean,
-------------------
with respect to each and every portion of space in the Improvements, all
improvements, alterations, and tenant finish work required to be constructed by
Borrower pursuant to a Space Lease, including, without limitation, GSA Tenant
Improvements, Retail Tenant Improvements and Restaurant Improvements.
Tenant Improvements Schedule. As used herein, "Tenant Improvements
----------------------------
Schedule" shall mean the schedule required by Section 7.32 hereof to be provided
to Lender of the dates upon which completion of Tenant Improvements is estimated
to occur.
Termination Event. As used herein, "Termination Event" shall have the
-----------------
meaning ascribed to such term in the Bid Protest Guaranty.
Timing Notice. As used herein, "Timing Notice" shall have the meaning
-------------
ascribed to such term in Section 3.02(b) hereof.
Title Companies. As used herein, "Title Companies" shall mean Chicago
---------------
Title Insurance Company, Ticor Title Insurance Company, Commonwealth Land Title
Insurance Company and Lawyers Title Insurance Corporation, as coinsurers under
agreements acceptable to Lender.
Title Policies. As used herein, "Title Policies" shall have the
--------------
meaning ascribed to such term in Section 4.02 hereof.
Transfer. As used herein, "Transfer" shall mean any or all of the
--------
following events, whether effected voluntarily, involuntarily, by operation of
law or otherwise: (i) the assignment, sale or other transfer of the Trust Estate
or any part thereof or any interest therein (including, without limitation, any
air or development rights), (ii) subject to the rights of tenants under the
Government Leases, the lease or sublease of all or substantially all of the
space in the Improvements, in a single or successive transactions to any single
lessee or related lessees, and (iii) the transfer of any interest in Borrower or
any interest in a Person which has a direct or indirect ownership interest in
Borrower, other than the assignment or collateral assignment by a limited
partner of such limited partner's interest in Borrower, provided the general
partners of Borrower have consented to such assignment and that the interests so
assigned do not exceed, in the aggregate, forty-nine percent (49%) of the
partnership interests in Borrower.
- 17 -
<PAGE>
Trust Estate. As used herein, "Trust Estate" shall have the meaning
------------
ascribed to such term in the Deed of Trust.
Unavoidable Government Delay. As used herein, "Unavoidable Government
----------------------------
Delay" shall mean the actual delay of some performance mandated by this
Agreement (other than a monetary obligation) due to any act or failure to act of
the GSA or NASA or any person or firm exclusively employed or retained by, or
under the exclusive direction of the GSA or NASA (including the issuance of a
stop work order or an order suspending work other than a stop work order in
connection with the Bid Protest Litigation) which extends the dates for the
performance of Borrower's obligations under the GSA Building Lease by an equal
period or, pursuant to Paragraph 4S.VIII. of Solicitation for Qffers No. 89-047
(which is an attachment to and incorporated into the GSA Building Lease), would
require the GSA Tenant Improvements to be deemed to be substantially complete
prior to actual substantial completion thereof and as to which Borrower, to the
extent required, has preserved its rights under Paragraph 45.1 of Solicitation
for Offers No. 89-047.
Undisbursed Construction Funds. As used herein, "Undisbursed
------------------------------
Construction Funds" shall mean, as of any time of determination, the undisbursed
principal portion of the Loan.
Section 1.02. Accounting Terms. All accounting terms not specifically
----------------
defined in this Agreement shall be construed in conformity with, and all
financial data required to be submitted by this Agreement shall be prepared in
conformity with, generally accepted accounting principles customarily used in
the real estate industry, applied on a consistent basis.
ARTICLE II
TERMS OF THE LOAN AND DISBURSEMENT OF PROCEEDS
----------------------------------------------
Section 2.01. Agreement to Lend. Subject to and on the terms and
-----------------
conditions of this Agreement and the other Loan Documents, Lender shall lend to
Borrower and Borrower shall borrow from Lender the principal amount of up to ONE
HUNDRED TWENTY-FIVE MILLION DOLLARS ($125,000,000), such amount being the
aggregate maximum principal amount that Lender shall under any circumstances be
required to advance to Borrower.
Section 2.02. Repayment. On (a) the Maturity Date, (b) such earlier
---------
date upon which the Loan becomes due and payable pursuant to the terms of the
Loan Documents or (c) the occurrence of a Termination Event, Borrower shall
fully repay to Lender the Loan and all other Indebtedness owed to Lender.
- 18 -
<PAGE>
Section 2.03. Loan Documents. This Agreement, the Note, the Deed of
--------------
Trust, and the other Loan Documents provide the terms of, evidence, and secure
the Loan.
Section 2.04. Payment of Principal and Interest. The Loan shall bear
---------------------------------
interest at the rate or rates of interest calculated in accordance with the
terms of the Note and shall be payable at the place and in the time and manner
provided and more particularly set forth in the Note.
Section 2.05. Disbursements - General.
-----------------------
(a) Unless Lender otherwise agrees in writing:
(i) The principal amount of each Disbursement, including any
portion thereof advanced for the payment of interest, shall not be less than the
lesser of One Hundred Thousand Dollars ($100,000.00) or an amount equal to the
Undisbursed Construction Funds;
(ii) Not more than one Disbursement shall be made in any calendar
month; and
(iii) Disbursements shall be made in accordance with and on the
terms and conditions of this Article II and the other provisions of this
Agreement.
(b) Borrower acknowledges and agrees that Lender may make
Disbursements to Guarantors for Project Costs pursuant to, and in accordance
with, the terms of the Completion Guaranty.
(c) Notwithstanding any other provision of this Agreement to the
contrary, including, without limitation, Section 2.06 hereof, prior to the
termination of the Bid Protest Guaranty Borrower shall not request and Lender
shall not make any disbursement or reallocation of Loan proceeds for the Item
designated "Land Equity" in an amount in excess of Seven Million Dollars
($7,000,000) without Lender's prior written approval, which may be withheld in
Lender's absolute discretion and which will not be deemed given after the
passage of time. After the termination of the Bid Protest Guaranty, Borrower may
request Disbursements for Land Equity in accordance with disbursements proposed
for such Item in the Project Budget and Construction Schedule as previously
approved by Lender.
(d) (i) If Borrower is enjoined or prevented by issuance of a stop
work order or suspension of work by any Governmental Authority or court of
competent jurisdiction from constructing the Project or performing its
obligations hereunder, other than in connection with the Bid Protest Litigation,
Lender shall make Disbursements for Project Costs incurred prior to the issuance
of such injunction, stop work
- 19 -
<PAGE>
order or suspension of work on and subject to the terms and conditions of this
Agreement; provided, however, that in no event shall Lender be required, while
any such injunction, stop work order or suspension of work remains in effect, to
make any Disbursement for Project Costs incurred subsequent to such injunction,
stop work order or suspension of work.
(ii) Lender shall not be required to make any Disbursements for
Project Costs, without regard to when such Project Costs were incurred, during
any period in which, in connection with the Bid Protest Litigation, Borrower is
enjoined or prevented by issuance of a stop work order or suspension of work by
any Governmental Authority or court of competent jurisdiction from constructing
the Project or performing its obligations hereunder.
Section 2.06. Project Budget. The proceeds of the Loan shall be
--------------
disbursed to pay Project Costs in accordance with the Project Budget and this
Agreement. The amount set forth in the Project Budget opposite each Item of
Project Cost shall be the maximum amount of Loan funds which Lender shall
disburse in payment of such Item, subject to any increase in the amount of such
Item in accordance with the terms of this Section 2.06 and Section 2.10.
Borrower, upon prior written notice to Lender, may reduce the amount remaining
to be disbursed with respect to any Item to reflect actual or anticipated
savings in Project Costs with respect thereto and allocate such savings to
increase the amount remaining to be disbursed with respect to any other Item,
provided, however, that the application of funds from such savings (i) among
Items of Hard Costs, (ii) between an Item of Hard Costs and an Item of Soft
Costs, or (iii) between the major Project Budget categories of Architecture and
Engineer, Marketing, Legal, Overhead and Operating Costs shall not exceed ten
percent (10%) of the cost Item, or with respect to clause (iii) above the major
Project Budget category, to which such funds are applied without Lender's prior
consent, which consent will not be unreasonably withheld or delayed and which
will be deemed given if Borrower does not receive written objection from Lender
within ten (10) Business Days after Borrower's notice to Lender; provided,
however, that any reallocation made necessary by a unilateral change order by
GSA under the GSA Building Lease shall not be subject to the ten percent (10%)
limitation set forth herein. Borrower shall retain a numbered, sequential record
of all such reallocations.
Section 2.07. Timing of Disbursements. No later than the tenth (10th)
-----------------------
Business Day of each calendar month (except in the case of the Initial
Disbursement), and at such other times as Lender may agree, Borrower shall
submit to Lender a Request for Disbursement accompanied by the information,
documents and materials required pursuant to the provisions of this Agreement.
Lender will not review and approve any Request for Disbursement
- 20 -
<PAGE>
not submitted by the date set forth in the preceding sentence until the next
succeeding month and no Loan funds will be disbursed other than pursuant to a
Request for Disbursement that has been reviewed and approved by Lender. Each
Request for Disbursement by Borrower shall constitute a representation and
warranty by Borrower that, (i) at such time, each of the conditions precedent to
Disbursements specified in Articles IV and V of this Agreement is satisfied, and
(ii) all of the representations and warranties contained in Articles IV and V
are true and correct in all material respects on the date of such Request for
Disbursement. Lender shall make each Disbursement within the time period set
forth in Section 2.09(i).
Section 2.08. Lender's Right to Condition Disbursements. In addition
-----------------------------------------
to the conditions set forth in Articles IV and V of this Agreement, Lender shall
have the right to condition any Disbursement upon Lender's use or receipt and
approval of the following:
(a) Bills, invoices, documents of title, vouchers, statements,
payroll records, receipts and any other documents reasonably necessary to enable
Lender to confirm to its reasonable satisfaction the total amount expended,
incurred or due for any requested or paid Item;
(b) Use of a voucher or joint check system acceptable to Lender
for payments of Disbursements directly to any Contractor or Subcontractor if (i)
there shall have occurred an Event of Default, or (ii) Borrower shall be in
default on any obligation to pay such Contractor or Subcontractor and Lender
reasonably believes the default will have a material adverse effect on the
Project or Lender's security, or (iii) there shall have occurred a material
adverse change in the financial condition of Borrower, any General Partner of
Borrower or any Guarantor; or
(c) Any other documents, requirements, evidence or information
that Lender may reasonably request under any provision of the Loan Documents.
Section 2.09. Disbursements for Project Costs. The amounts set forth
-------------------------------
on the Project Budget shall be disbursed as follows:
(a) Each Request for Disbursement for each Item of Hard Costs
and Soft Costs shall show this total amount incurred for work performed or
material or equipment furnished for the periods since the last Request for
Disbursement and from the inception of the Project and the percentage of
materials provided and/or work completed for each such Item
- 21 -
<PAGE>
from the inception of the Project to the date of the Request for Disbursement.
The Request for Disbursement shall be in sufficient detail to show that the
amount of the Disbursement requested is within the limits for each Item of
Project Costs as shown in the Project Budget.
(b) Each Disbursement shall be in the amount requested by
Borrower in the Request for Disbursement, which amount: shall not exceed, (i)
with respect to Hard Costs, the Hard Costs incurred by Borrower as of the date
of a Request for Disbursement, plus, subject to Section 5.06 hereinbelow, the
----
cost of Stored Materials not as yet installed or incorporated in the Project,
less "retained amounts" provided for under the terms of the Construction
- ----
Contract and/or relevant Contracts or Subcontracts and (ii) with respect to Soft
Costs, those Soft Costs incurred by Borrower as of the date of the Request for a
Disbursement. Retainage shall be disbursed upon satisfaction of the conditions
for the final disbursement of Hard Costs set forth in Section 5.08. However,
retainage due a Contractor or Subcontractor (including the General Contractor to
the extent that it is acting in the capacity of a Subcontractor) may be released
upon completion of such Contractor's or Subcontractor's work, in accordance with
the terms of the Construction Contract or applicable Contract or Subcontract,
provided that (i) the labor and/or materials to be provided have been
substantially completed or supplied pursuant to the Construction Contract or
such applicable Contract or Subcontract and the Plans applicable to the
Construction Contract or such Contract or Subcontract, (ii) the Contractor or
Subcontractor has executed and delivered a final Lien waiver and affidavit of
payment in the form of Exhibit B hereto, modified to state that all work and
materials to be performed and supplied by such Contractor or Subcontractor have
been performed and supplied and upon payment only of such retainage, all amounts
owing to such Contractor or Subcontractor will be paid in full, and otherwise
satisfactory to Lender and in compliance with the lien law of the District of
Columbia, (iii) all requirements of all Governmental Authorities have been
satisfied with respect to the Contractor's or Subcontractor's work, and (iv)
Inspecting Engineer has confirmed in writing that such Contractor or
Subcontractor has complied with clause (i) and (iii). Tenant Improvement Costs
shall be disbursed subject to the additional conditions and limitations set
forth in Section 2.12 hereof.
(c) There shall be deducted from each Disbursement and it shall
not include: (i) any amounts previously disbursed hereunder, (ii) any costs
covered by the Request for Disbursement not approved, certified or verified as
required by this Agreement, (iii) any Soft Costs covered by the Initial Request
for Disbursement and, thereafter, a previous
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<PAGE>
Request for Disbursement for which proof of payment has been requested but not
received by Lender, (iv) any Hard Costs for which Lien waivers have not been
received by Lender for the Initial Request for Disbursement to the extent
required by Section 4.27(c) hereinbelow and, thereafter, all Requests for
Disbursement submitted prior to the then-pending Request for Disbursement;
and/or (v) any real estate taxes, mechanics Liens, security interests, claims or
other charges against the Premises or Project and any interest, fees or other
costs which Borrower may have failed to pay in accordance with this Agreement or
the other Loan Documents.
(d) Except as may otherwise be expressly provided for herein
with respect to Stored Materials, for purposes of this Section 2.09, Project
Costs shall be deemed to have been "incurred" by Borrower at the following
times: (i) Hard Costs--when the labor has been performed or the materials have
been supplied and incorporated into the Project, payment therefor has been
requested by the General Contractor or a Contractor and the Subcontractor, if
any, therefor, and the General Contractor or Contractor and the Subcontractor,
if any, therefor is entitled to payment pursuant to the Construction Contract
and the applicable Contract or Subcontract; and (ii) Soft Costs--when such costs
are due and payable (or have been paid by Borrower) and the services relating
thereto have been rendered or the value thereof has been received by Borrower.
(e) All Hard Costs shall be certified by General Contractor (or
the Contractor providing the labor or materials related to such Hard Costs) and
Borrower in the manner provided in this Section 2.09 and in Section 5.03 and
shall be verified by the Inspecting Engineer as having been incurred.
Verification of the monthly progress and Hard Costs which have been incurred by
Borrower from time to time and the estimated total Hard Costs from time to time
may be made by Lender and/or Inspecting Engineer in its or their reasonable
judgment.
(f) If (i) Borrower shall have requested an acceleration of
payments under this Agreement or (ii) there shall have occurred an Event of
Default or (iii) Borrower shall be in default on any obligation to pay money in
any way related to the Project and Lender has reason to believe this default
will have an adverse effect on the Project or Lender's security or (iv) Lender
shall be entitled under any other Loan Document to advance funds or make
payments in respect of the Project, and if Lender considers that its best
interests and the best interests of the Project lie in accelerating the amounts
to be advanced pursuant to this Article II, it shall be entitled to do so in
amounts not more than was required under the applicable underlying contract and
no person dealing with
- 23 -
<PAGE>
Borrower or General Contractor or any other Person shall have standing to demand
any different performance from Lender.
(g) Subject to the provisions of Section 2.11 governing
disbursement of interest and Section 2.12 governing Tenant Improvement Costs,
(i) all other Hard Costs incurred but not advanced during the course of
construction of the Project shall be advanced upon the satisfaction of the
conditions for the receipt of the Final Construction Disbursement set forth in
Section 5.08 hereof, (ii) all other Soft Costs not advanced prior to Completion
of Construction shall be advanced not more frequently than once a month for Soft
Costs as incurred after completion of Construction and (iii) all Soft Costs arid
other savings not disbursed in (i) and (ii) above shall be disbursed in
accordance with Section 5.11 hereof.
(h) If Lender is entitled and deems it appropriate to make
Disbursements directly to the third parties entitled to payment as provided in
Sections 2.08(b) and 2.09(f) hereof, all sums so advanced by direct payment
shall satisfy pro tanto the obligations of Lender under this Agreement and
--- -----
Lender shall have no obligation to see to the disposition by any such Person of
any direct payments made to such Person.
(i) Each Disbursement shall be payable within five (5) Business
Days after satisfaction of all conditions to the requested Disbursement.
Sect ion 2.10. Disbursement of Contingency Funds. Any amount set
---------------------------------
forth in the Project Budget for "Contingency" or "Change Orders" ("Contingency")
may be used to pay any Project Costs not specifically included in the Project
Budget, including excess costs on specific Items or costs associated with
permitted Change Orders relating to specific Items. Contingency amounts may be
disbursed upon the written request of Borrower to Lender and upon compliance
with the conditions precedent applicable to the Item or Items for which
contingency funds are requested. Use of Contingency funds (other than for
application to Change Orders not subject to Lender's prior approval pursuant to
Section 7.05 hereof) shall be subject to the prior reasonable approval of
Lender. Prior to completion of the Base Building, no Contingency funds may be
used to pay interest on the Loan. After completion of the Base Building, but
prior to Completion of Construction, an amount not to exceed fifty percent (50%)
of the balance of the Contingency funds available as of the date of completion
of the Base Building may be used to pay interest on the Loan.
Section 2.11. Disbursement of Interest. The amount set forth under the
------------------------
Item "Interest" shall be periodically disbursed directly to Lender in order to
pay interest. No
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<PAGE>
amounts under the Item "Interest" shall be disbursed from Loan proceeds
subsequent to the date of Completion of Construction until Lender makes the
Final Disbursement of Loan Proceeds pursuant to the terms of Section 5.11
hereof. Pursuant to Section 2.15 hereinbelow, Lender is authorized to credit to
Borrower's demand deposit account with Lender and to make Disbursements
automatically from such demand deposit account to pay interest without request
from or prior notice to Borrower. The amount of such Disbursements shall be
added to the principal amount of the Loan, and Lender will provide Borrower with
a monthly statement showing the total amount of such Disbursements. Depletion
of the amounts set forth for the Item "Interest" shall not release Borrower from
any of Borrower's obligations under the Loan Documents, including but not
limited to its obligation to pay interest on the Loan.
Section 2.12. Disbursement of Tenant Improvement Costs.
----------------------------------------
(a) Tenant Improvement Costs shall be disbursed in the manner
and on the terms and conditions provided in this Agreement for the disbursement
of all other Project Costs, modified only as set forth in this Section 2.12.
(b) Lender's disbursement of Tenant Improvement Costs for Tenant
Improvements required to be constructed under the GSA Building Lease (the "GSA
Tenant Improvements") shall, in addition to the other terms and conditions of
this Agreement, be subject to the following terms and conditions:
(i) Lender shall not be required to make any Disbursement with
respect to the GSA Tenant Improvements unless and until (A)
Borrower has provided Lender with a detailed breakdown of
the Project Costs included in the Project Budget under the
heading "Tenant Work (NASA)" in form and substance
reasonably satisfactory to Lender, (B) Borrower and
Greenwell Goetz have executed a valid and binding contract,
reasonably acceptable to Lender, for the planning and design
of the GSA Tenant Improvements, which contract requires
Greenwell Goetz to execute a certificate and consent in a
form mutually satisfactory to Lender and Greenwell Goetz, to
the extent applicable to the services to be provided by
Greenwell Goetz and (c) Borrower has delivered to Lender a
Tenant Improvements Schedule.
- 25 -
<PAGE>
(ii) Each Request for Disbursement that includes any Tenant
Improvement Costs for the GSA Tenant Improvements ("GSA Tenant
Improvement Costs") shall be accompanied by a copy of (A) any
invoice to be submitted to the GSA under Paragraph 103,
Attachment I to the GSA Building Lease in respect of such GSA
Tenant Improvement Costs, together with copies of all related
materials and information to be submitted with such invoice,
and (B) evidence of payment by the GSA of all prior invoices
submitted for prior and current phases of construction, to the
extent payment has been made.
(iii) In addition to all other limitations set forth in this
Agreement, Lender will not make any Disbursement for GSA Tenant
Improvement Costs for those items required under the GSA
Building Lease to be paid for directly by GSA.
(c) Lender's disbursement of Tenant Improvement Costs for Tenant
Improvements constructed in space in the Project other than that demised by the
GSA Building Lease, designated in the Project Budget as "Tenant Work (Spec)"
(the "Retail Tenant Improvements"), shall, in addition to the other terms and
conditions of this Agreement, be subject to the following terms and conditions:
(i) In addition to all other limitations set forth in this Agreement
the following limitations shall apply to Disbursements that
include any Tenant Improvement Costs for Retail Tenant
Improvements ("Retail Tenant Improvement Costs"):
(A) The aggregate of disbursements for Retail Tenant
Improvements for space designated for food service (the
"Restaurant Improvements") shall not exceed the lesser of
(1) if such Restaurant Improvements are being constructed
pursuant to a Space Lease, the actual aggregate allowance
provided by Borrower for such Restaurant Improvements under
such Space Lease and (2) whether or not such Restaurant
Improvements are being constructed pursuant to a Space
Lease, Five Hundred Thousand Dollars ($500,000).
- 26 -
<PAGE>
(B) The aggregate of Disbursements for particular Retail Tenant
Improvements for space other than the Restaurant
Improvements shall not exceed the lesser of (1) if such
Retail Tenant Improvements are being constructed pursuant to
a Space Lease, the actual aggregate allowance provided by
Borrower for such Retail Tenant Improvements under such
Space Lease and (2) whether or not such Retail Tenant
Improvements are being constructed pursuant to a Space
Lease, One Hundred Thousand Dollars ($100,000).
(C) Notwithstanding Sections 2.12(c)(i)(A) and (B) above, to the
extent that there are "savings" (as defined in the next
sentence) with respect to the cost of constructing
particular Retail Tenant Improvements, the amount of such
savings may be applied by Borrower to increase the maximum
amount of the Loan available for Retail Tenant Improvement
Costs under clause (2) of Sections 2.12(c)(i)(A) and (B).
"Savings" as used in the preceding sentence shall mean (Y)
the amount by which the aggregate cost of constructing the
Restaurant Improvements is less than Five Hundred Thousand
Dollars ($500,000) and (Z) the amount by which the aggregate
cost of constructing the Retail Tenant Improvements
excluding the Restaurant Improvements is less than One
Hundred Thousand Dollars ($100,000).
(D) No Disbursement shall exceed the "Borrower's Share" (as
hereinafter defined) multiplied by the then incurred but
unpaid Retail Tenant Improvement Costs. The "Borrower's
Share", shall be a fraction, the numerator of which shall be
the aggregate maximum of all Disbursements available for
particular Retail Tenant Improvements Costs, determined
pursuant to Sections 2.12(c)(i)(A), (B) and (C) above, and
the denominator of which shall be the total of such Retail
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<PAGE>
Tenant Improvement Costs, as reasonably estimated by
Lender in consultation with Borrower.
(ii) Prior to the first Disbursement for Retail Tenant Improvement
Costs for particular Retail Tenant Improvements, Lender shall
have received and approved (such approval not to be withheld
or delayed unreasonably) the following:
(A) With respect to Retail Tenant Improvements to be designed
by an architect, engineer, designer or space planner
other than the Architect and/or to be constructed by a
contractor other than the General Contractor, copies of
the agreements with such Persons providing for the
performance of all work required to complete such Retail
Tenant Improvements;
(B) Copies of the Plans for such Retail Tenant Improvements;
and
(C) A budget and construction schedule for the completion
of such Retail Tenant Improvements.
If Borrower or an Affiliate is not required to design or
construct the Retail Tenant Improvements for which a
Disbursement is being requested, then the items identified in
this Section 2.12(c)(ii) shall be provided by Borrower only
to the extent required to be or, if not so required, actually
made available to Borrower by the tenant under the pertinent
Space Lease.
(iii) Prior to the final Disbursement for Tenant Improvement Costs
for particular Retail Tenant Improvements, Lender shall have
received and approved certificates, letters, waivers,
affidavits and endorsements to the effect set forth in
Section 5.08, but limited to such Retail Tenant Improvements.
Section 2.13. Modifications to Project Budget. From time to time,
-------------------------------
Borrower or Lender may determine that increases or decreases are necessary to
the amounts set forth in the Project Budget because of actual or anticipated
changes in
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<PAGE>
Project Costs (including unilateral GSA change orders). If, after due
consultation and consideration of the views of Borrower and supporting
documentation, Borrower and Lender do not agree on what increases or decreases
need to be made to the Project Budget amounts set forth in the Project Budget,
the determination of Lender shall control, unless Borrower delivers an
acceptable letter of credit or other security to the Lender for the disputed
amount, to the extent that the disputed amount increases the overall Project
Budget.
Section 2.14. Balancing. Disbursements to pay Project Costs shall
---------
only be made at such times as the Loan is "in balance." The Loan shall be
deemed to be "in balance" only at such times as Lender shall determine, after
consultation with Borrower, that the sum of (a) the portion of the Loan not yet
disbursed for each Item of Project Costs (including Retainage on funds
previously advanced on account of such Item), plus (b) any excess amounts from
savings on any other Items to be applied to the Item in question plus (c) the
portion of such Item to be paid by the GSA or another Space Tenant under the
Government Leases or another Space Lease, is equal to or greater than the full
cost of such Item. If the Loan is not in balance, Lender shall have no
obligation to make, and Borrower shall not be entitled to receive, Disbursements
pursuant hereto (excluding Disbursements for interest drawn by and paid to
Lender) with respect to that portion of the Loan for each Item which is out of
balance. When the Loan is again in balance, Lender shall resume funding the
portion of the Loan for the Item in question in accordance with the terms of
this Loan Agreement. With respect to those Items covered by the Construction
Contract or other fixed price Contracts, if an Item or Items under the
Construction Contract or such other Contract is or are out of balance by an
aggregate amount of Five Hundred Thousand Dollars ($500,000) or more, Lender
shall have the right to require that the Contractor or Subcontractor performing
the work for the Item or Items which is or are out of balance provide a payment
and performance bond to guarantee the completion of the work for the Item or
Items, to the extent the Contractor or Subcontractor has not already provided
such bond.
2.15. Automatic Debit and Credit: Wire Transfers. Subject to Section
------------------------------------------
2.08(b), Disbursements of the Loan proceeds shall be made in immediately
available funds by Lender creditinq the Disbursement Account established by
Borrower with Lender pursuant to the Assignment of Rents. Upon Borrower's
request, Lender will wire such Loan proceeds from the Disbursement Account to
such account(s) as Borrower shall designate in the related Request for
Disbursement. Alternatively, upon Borrower's request, Lender shall wire such
Loan proceeds directly to such accounts as Borrower shall
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<PAGE>
designate in the related Request for Disbursement without first depositing such
proceeds into the Disbursement Account. Borrower hereby authorizes Lender to
automatically debit the Disbursement Account for all interest, fees and other
charges payable to Lender pursuant to the Note, this Agreement and/or any of the
Loan Documents; provided, however, that the failure of Lender to so debit the
Disbursement Account shall not relieve Borrower of any of its obligations under
the Note, this Agreement and/or any of the Loan Documents.
ARTICLE III
BORROWER'S FIXED RATE OPTION
----------------------------
Section 3.01. Borrower's Fixed Rate Option. At any time after
----------------------------
Completion of Construction has occurred, Borrower shall have the right, on and
subject to the terms and conditions hereinafter set forth (the "Conversion
Option"), to cause the interest rate on a Portion of Principal to be converted
from the floating rate or rates then in effect pursuant to the terms of the Note
to the Fixed Rate for an Interest Period designated by Borrower.
Section 3.02. Exercise of Conversion Option.
------------------------------
(a) Borrower may exercise the Conversion Option on any Business Day by
(i) giving Lender an Interest Rate Notice in accordance with the Note
designating the Fixed Rate and the desired Interest Period and (ii) thereafter
accepting a Fixed Rate in the manner provided in this Article III.
(b) Upon or after delivery of an Interest Rate Notice designating the
Fixed Rate, but in no event later than 5:00 p.m. New York time on the Business
Day immediately preceding the last day of the ensuing Exercise Period (as
defined in Section 3.02(c) below), Borrower shall deliver to Lender written
notice ("Timing Notice") identifying one or more representatives of Borrower
(and their telephone numbers), each of whom (i) is individually authorized to
accept or reject the Fixed Rate obtainable by Lender and offered to Borrower, as
hereinafter provided, and (ii) will be available to Lender by telephone until
5:00 p.m. New York time on the Business Day said timing Notice is given and from
9:00 a.m. New York time until 3:00 p.m. New York time on the next following
Business Day.
(c) An "Exercise Period" shall mean a period commencing at 9:00 a.m.
New York time on the Monday (or, if such Monday is not a Business Day, the next
following Business
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<PAGE>
Day) next following the date on which an Interest Rate Notice designating the
Fixed Rate is given to Lender and continuing through and including 3:00 p.m. New
York time on the next following Thursday (or, if such Thursday is not a Business
Day, the next preceding Business Day).
Section 3.03. Interest Rate Management Arrangement.
------------------------------------
(a) Lender shall, by no later than 3:00 p.m. on the Business Day next
following Borrower's giving of a Timing Notice during an Exercise Period, use
all reasonable efforts to obtain an offer for an Interest Rate Management
Arrangement having a term equal to the Interest Period designated in the
Interest Rate Notice that will enable Lender to convert the interest rate on the
affected Portion of Principal on Lender's books from a floating to a fixed rate
of interest (subject, however, to adjustment as provided in the Note). Prior to
accepting such offer for an Interest Rate Management Arrangement, Lender shall
telephonically quote to Borrower the fixed per annum interest rate together with
all Funding Costs that will result from effectuating such an Interest Rate
Management Arrangement, which rate Borrower shall immediately either accept or
reject. If Lender is able to contact Borrower and Borrower fails to immediately
accept or reject the offered Fixed Rate, Lender shall have no obligation to
further attempt to effectuate such an Interest Rate Management Arrangement. The
Fixed Rate offered by Lender shall be the sum of the fixed rate of interest
obtainable in the offered Interest Rate Management Arrangement plus five hundred
twenty-five one-thousandths of one percent (0.525%).
(b) If Borrower accepts the Fixed Rate quoted by Lender, Lender shall
use all reasonable efforts to accept and enter into the offered Interest Rate
Management Arrangement. If Lender is able to enter into the offered Interest
Rate Management Arrangement then, commencing on the third (3rd) Business Day
after Lender enters into the offered Interest Rate Management Arrangement (the
"Conversion Date"), the interest rate on the Portion of Principal to which the
Fixed Rate is to apply shall, without further notice to or action by Borrower or
Lender, bear Interest at the Fixed Rate for the designated Interest Period.
Borrower's acceptance of a Fixed Rate shall be irrevocable for the designated
interest Period.
(c) If Borrower rejects the Fixed Rate quoted by Lender pursuant to
Subsection 3.03(a) or if Lender is unable to contact Borrower to obtain
Borrower's election as to such Fixed Rate, Lender shall not accept the offered
Interest Rate Management Arrangement and shall, until 3:00 p.m. on the final
Business Day of the Exercise Period then in effect, continue to use all
reasonable efforts to seek an Interest Rate Management
- 31 -
<PAGE>
Arrangement that will result in a Fixed Rate acceptable to Borrower. If
Borrower fails to accept a Fixed Rate by 3:00 p.m. on such date, Borrower shall
have no further right during such Exercise Period to convert the interest rate
on the Note from a floating to a fixed rate. Borrower shall nonetheless retain
the right, subject to the same terms and conditions hereof, to give another
Interest Rate Notice designating the Fixed Rate and, during the ensuing Exercise
Period, to give the Timing Notice and accept a Fixed Rate.
(d) If Borrower accepts the Fixed Rate, Borrower shall reimburse Lender
for all Funding Costs incurred by Lender as a result of Borrower's exercise of
the Conversion Option and acceptance of a Fixed Rate.
(e) Notwithstanding anything to the contrary contained in this
Agreement or any other Loan Document, the following limitations shall apply to
Borrower's rights in respect of the Conversion Option:
(i) In exercising the Conversion Option, Borrower may
designate an Interest Period that expires on or before,
but not after the Maturity Date. If Borrower designates
the Fixed Rate for an Interest Period that expires prior
to the Maturity Date, then the applicable rate or rates
of interest for the remainder of the Loan Term shall be
that or those rates from time to time in effect by reason
of Borrower's election of such rate or rates pursuant to
Section 3(b) of the Note or by operation of the other
provisions of the Note.
(ii) In exercising the Conversion Option, Borrower must
designate as the Portion of Principal to bear interest at
the Fixed Rate the entire principal balance of the Loan
outstanding at such time. Amounts thereafter advanced
under the Note shall bear interest at the Eurodollar Rate
or Prime Rate in accordance with the terms of the Note,
but shall not be entitled to bear interest at the Fixed
Rate unless and until (A) the Interest Period for the
Fixed Rate as previously selected by Borrower expires
prior to the Maturity Date and Borrower thereafter again
exercises the Conversion Option or (B) the entire
remaining balance of the Loan still available to be drawn
has been drawn and Lender, upon Borrower's
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<PAGE>
delivery of an appropriate Interest Rate Notice, is able to
obtain an Interest Rate Management Arrangement that will
permit Lender, on terms reasonably acceptable to Lender and
Borrower, to convert the interest rate on the amount of such
entire remaining balance to a fixed rate of interest.
Section 3.04. Conditions to Lender's Enter Into an Interest Rate
--------------------------------------------------
Management Arrangement. Lender's obligation to enter into an Interest Rate
- ----------------------
Management Arrangement and thereby convert the interest rate on the Note to the
Fixed Rate shall in all respects be conditioned upon the satisfaction (or waiver
by Lender) of all of the following conditions:
(a) Borrower shall have delivered to Lender Borrower's certificate that
no material adverse change in the financial condition of Borrower and
Guarantors' certificate that no material adverse change in the financial
condition of Guarantors has occurred since the date hereof.
(b) There shall exist at the Conversion Date (i) no uncured Event of
Default and (ii) no fact or circumstance, which, with the passage of time,
giving of notice or action of third parties, could become an Event of Default
that is not then being cured in accordance with the terms of this Agreement and
the Loan Documents.
(c) All of the representations and warranties set forth in this
Agreement, the Loan Documents and other documents delivered to Lender in
connection with the funding of the Loan shall be true and correct in all
material respects as of the Conversion Date, and Borrower shall have recertified
such representations and warranties to Lender as of such date.
(d) As of the Conversion Date, there shall be (i) no litigation pending
nor shall litigation have been threatened in writing by a potential claimant or
a potential claimant's counsel with respect to the Trust Estate, and (ii) no
condemnation or similar proceeding shall be pending nor shall same have been
threatened by a duly authorized official of a Governmental Authority acting in
his official capacity with respect to all or ally part of the Trust Estate,
either of which, if determined adversely to Borrower, would materially and
adversely affect the Trust Estate or the priority of Lender's lien thereon or
the financial condition of Borrower or Guarantors.
(e) Borrower shall have complied in all respects with the applicable
terms and conditions of this Article III.
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<PAGE>
ARTICLE IV
CONDITIONS TO THE INITIAL DISBURSEMENT
--------------------------------------
The obligation of Lender to make the Initial Disbursement to or for
this account of Borrower shall be subject to the satisfaction of all the
conditions set forth in this Article IV and, absent satisfaction or Lender's
written waiver of the same, Lender shall have no obligation to make the Initial
Disbursement.
Section 4.01. Loan Documents. The following Loan Documents shall have
--------------
been duly executed by all parties thereto other than Lender, acknowledged as
required, and delivered either to Lender or, as to Loan Documents that are to be
recorded or filed, to the Agent with written instructions satisfactory to Lender
that such Loan Documents be filed or recorded prior to the funding of the
Initial Disbursement:
(a) this Agreement;
(b) the Note;
(c) the Deed of Trust;
(d) such Form UCC-l Financing Statements as Lender may require
naming Borrower as debtor;
(e) the Assignment of Rents;
(f) Notices of Assignment of the Government Lease in form and
substance satisfactory to Lender as required by the Assignment of Rents;
(g) the Assignment of Project Documents; and
(h) the Guarantees.
Section 4.02. Title Policies. Lender shall have received ALTA extended
--------------
coverage mortgagee form of title insurance policies 1987 form B (the "Title
Policies") (with proof of the payment of the premiums therefor) or commitments
therefor in form and substance acceptable to Lender issued by the Agent on
behalf of the Title Companies, together with (a) an executed coinsurance
agreement in form and substance satisfactory to Lender and (b) reinsurance from
other title insurance companies approved by Lender and evidenced by executed
reinsurance agreements satisfactory to Lender containing a right of direct
access, insuring the lien of the Deed of Trust to be a first lien against the
Premises, free and
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<PAGE>
clear of all defects, encumbrances and exceptions, including mechanics' Liens
and claims of Liens, other than the Permitted Exceptions, together with such
affirmative insurance as Lender may require. The aggregate amount of the Title
Policies shall be not less than the maximum amount of the Loan, the coverage
then provided by the Title Policies shall be in the amount of the Initial
Disbursement, and the Title Policies shall contain a "pending disbursements"
clause in substantially the following form:
"Pending disbursement of the full proceeds of the loan secured
by the mortgage set forth under Schedule A hereof, this policy insures
only to the extent of the amount actually disbursed but increases as
each disbursement is made in good faith and without knowledge of any
defects in, or objections to, the title up to the face amount of the
policy. At the time of each disbursement of the proceeds of the loan,
the title must be continued down to such time for possible liens or
objections intervening between the date hereof and the date of such
disbursement."
Section 4.03. Survey. Lender shall have received a current survey
------
(the "Survey") of the Premises prepared by a surveyor acceptable to Lender who
is qualified as a land surveyor in the District of Columbia, which shall be
satisfactory, in form and substance, to Lender and which survey shall (a) on its
face set forth (i) the legal description of the Premises and (ii) a
certification from the surveyor to Lender and the Title Companies that it was
prepared in compliance with standards of the American Land Title Association and
otherwise containing such certifications of fact as Lender may require; (b) show
the locations of the Improvements then constructed on the Premises; (c) show
that the Improvements, to the extent then constructed, are located entirely
within the Land property lines and do not encroach upon any easement or breach
or violate any Law or any covenant, condition or restriction of record, or any
building or zoning ordinance; and (d) otherwise satisfy the reasonable
requirements of Lender and the Title Companies.
Section 4.04. Insurance. Lender shall have received evidence that the
---------
insurance required under Section 1.08 of the Deed of Trust is in full force and
effect with all annual premiums paid.
Section 4.05. Flood Insurance. Lender shall have been provided with
---------------
satisfactory evidence, which may be in the form of a letter from an insurance
broker, municipal engineer, or other knowledgeable source unaffiliated with
Borrower, as to whether (a) the Premises is located in an area designated by
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<PAGE>
the Department of Housing and Urban Development as having special flood or mud
slide hazards, and (b) the community in which the Project is located is
participating in the National Flood Insurance Program. If both of the aforesaid
conditions exist, Lender shall have received evidence that satisfactory policies
of flood insurance covering the Project are in full force and effect with all
annual premiums paid and that such policies have been endorsed to name Lender as
a loss payee pursuant to the standard mortgage clause without contribution.
Section 4.06. Existence and Authorization. Lender shall have received
---------------------------
true, correct, arid complete executed copies of the following documents:
(a) With respect to each Guarantor, each general Partner of
Borrower, and each general Partner of a general Partner of Borrower that is a
corporation:
(i) The certificate of incorporation of such corporation
and all amendments thereof, certified by the Secretary of State of the state of
such corporation's incorporation, together with a certificate of said Secretary
of State to the effect that the corporation is in good standing therein;
(ii) A certificate from the Secretary of State or
comparable official of the jurisdiction in which the Premises are located (if
other than such corporation's state of incorporation) to the effect that the
corporation is in good standing and qualified to do business therein;
(iii) Bylaws certified to Lender by the secretary of the
corporation; and
(iv) A certificate of the secretary of the corporation
certifying (A) resolutions of the shareholders and directors of the corporation
authorizing the consummation of the transactions contemplated by the Loan
Documents to which such corporation is a party or a signatory and the execution,
delivery, and performance of each of the Loan Documents to which such
corporation is a party or a signatory and (B) the incumbency and signature of
each of the officers of the corporation to execute any Loan Documents; and
(b) With respect to Borrower and each Guarantor, each general
Partner of Borrower, and each general partner of a general partner of Borrower
that is a partnership:
(i) The partnership or joint venture agreement and all
amendments, attachments and agreements
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<PAGE>
related thereto certified to Lender by all general Partners thereof;
(ii) All certificates filed or required to be filed by the
partnership in the jurisdiction of its formation and the jurisdiction where the
Premises are located in order for it to do business in those jurisdictions; and
(iii) Such evidence as may be available from the Secretary
of State or comparable official of the jurisdiction of the partnership's
formation to the effect that the partnership continues to exist and is in good
standing.
Section 4.07. Opinion of Borrower's Counsel. Lender shall have received
-----------------------------
a favorable opinion of Borrower's counsel to the following effect:
(a) Borrower is duly organized, validly existing, in good
standing, and authorized to do business in the District of Columbia.
(b) All Loan Documents to which the Borrower is a party have
been duly authorized, executed and delivered by Borrower and constitute legal,
valid, binding and enforceable agreements in accordance with their respective
terms under federal and District of Columbia law, subject only to any applicable
bankruptcy, insolvency, reorganization, moratorium law, or other laws affecting
creditors rights generally, and do not breach or violate any agreement, court
order, or law of which such counsel has knowledge and by or under which Borrower
is bound or affected.
(c) Such other matters as Lender may require.
Section 4.08. Opinion from Counsel to Each Guarantor. Lender shall
--------------------------------------
have received a favorable opinion from counsel to each Guarantor to the same
effect as the opinion of Borrower's counsel (to the extent applicable).
Section 4.09. UCC Search. Lender shall have received current searches
----------
of the UCC filing offices in such jurisdictions as Lender may require and the
land records in the District of Columbia showing no security interests affecting
the Premises, the Project, Borrower, the general Partners of Borrower, the
general Partners of the general Partners of Borrower or Guarantors other than
those expressly permitted by the Loan Documents.
Section 4.10. Hazardous Material. (a) Borrower shall have furnished
------------------
Lender with a report or reports satisfactory to Lender showing no Hazardous
Material present at the Premises,
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<PAGE>
except to the extent used in construction of the Project and for which there is
no practical alternative and which will be used in strict compliance with all
Laws and removed in its entirety from the Project promptly upon completion of
such use. (b) Borrower shall have furnished Lender with a report that no
Hazardous Material was present at the site in the past, or if it was, that all
such materials were removed and disposed of in strict compliance with all
applicable federal, state and local environmental statutes, regulations and
requirements. (c) Borrower shall have furnished Lender with evidence
satisfactory to Lender that no Hazardous Material will be knowingly incorporated
into the Project by Borrower or, following Completion of Construction, present
at or conveyed from or to the Premises except for petroleum products, cleaning
solvents, paint and other similar materials necessary in the ordinary operation
of the Premises and which are stored, handled and disposed of in strict
compliance with all Laws applicable thereto.
Section 4.11. Streets and Utilities. Borrower shall have furnished
---------------------
evidence satisfactory to Lender that (a) all utility services necessary for the
construction of the Project and the operation thereof for its intended purposes
are available at the boundaries of the Premises and in adequate supply at the
boundaries of the Premises and (b) the Project has lawful, adequate,
unobstructed, and unimpaired access to public streets.
Section 4.12. Project Budget. Lender shall have received and approved
--------------
a detailed budget of all Project Costs, together with supporting documentation
reasonably requested by Lender, which budget shall, upon approval by Lender, be
initialed by Borrower and Lender and attached hereto as Schedule 4.12.
Section 4.13. Base Building Construction Schedule. Lender shall have
-----------------------------------
received and approved a detailed schedule for construction of the Base Building
and corresponding expenditures, which schedule shall show, among other things, a
trade-by-trade breakdown of the estimated periods of commencement and completion
of the work of each such trade. Upon approval by Lender, the schedule shall be
initialed by Borrower and Lender and attached hereto as Schedule 4.13.
Section 4.14. Permits. Lender shall have received evidence (a) that
-------
Borrower has obtained all approvals, permits, licenses and other authorization
of Governmental Authorities (i) for that portion of construction of the Project
covered by the Plans for which the Initial Disbursement is being requested and
(ii) for future construction to the extent then obtainable and (b) that there is
no basis to believe that any and all
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<PAGE>
approvals, permits, licenses and other authorizations of Governmental
Authorities needed for Completion of Construction will not be forthcoming in a
timely manner consistent with the Construction Schedule.
Section 4.15. Plans. Lender shall have received and approved the Plans
-----
for the Project, to the extent available as of the date the Initial Disbursement
is funded. Plans shall be scheduled by sheet number, title, date and revised
date, which schedule shall be true and correct, and such Plans shall include the
filed plans referred to in any permit for the Project.
Section 4.16. Stored Materials.
----------------
(a) Lender shall have received and approved a list of all
Stored Materials currently stored on or off-site indicating actual cost of the
Stored Materials, not including profit or overhead.
(b) If Borrower requests any payment for Stored Materials in
the Initial Disbursement request, Borrower shall have provided all of the
information required by Section 5.06 of this Agreement with respect to the
Stored Materials for which payment as part of the Initial Disbursement is
sought.
Section 4.17. Architects' Materials. Lender shall have received and
---------------------
approved (a) a true, correct and complete copy of the fully executed Architect
Contract for each Architect and (b) a consent and certificate executed by each
Architect in a form mutually acceptable to Lender and such Architect. Lender
shall have received and approved copies of all inspection and test records and
reports made by or for each Architect with respect to the Project.
Section 4.18. General Contractor's Materials. Lender
------------------------------
shall have received and approved a true, correct and complete copy of the fully
executed Construction Contract, together with a consent and certificate executed
by the General Contractor in a form mutually acceptable to Lender and the
General Contractor.
Section 4.19. Contractor and Subcontractor Materials. Lender shall
--------------------------------------
have received (a) a list of all Contractors and Subcontractors and (b) copies of
all Contracts and Subcontracts as executed or as then being negotiated.
Section 4.20. Engineer's Certificate. Lender shall have received
----------------------
from Flack & Kurtz, Consulting Engineers, and from any other engineer providing
services on the Project, an executed certificate in a form mutually acceptable
to Lender and such engineer.
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<PAGE>
Section 4.21. Other Project Documents. Lender shall have received
-----------------------
true, correct and complete copies of any and all Project Documents not elsewhere
identified herein and reasonably requested by Lender, and such additional
information as Lender may require relative to the development, construction,
use, occupancy, and management of the Project.
Section 4.22. Consultants' Report. Lender shall have received reports
-------------------
from Lender's Consultants, including the Inspecting Engineer, addressed to
Lender regarding such matters as Lender requests and, without limiting the
foregoing, to the effect that (a) the Plans conform with generally acceptable
building construction practice, including architectural, structural, mechanical
and electrical aspects thereof, (b) the Inspecting Engineer concurs with (i) the
Hard Costs shown in the Project Budget, and (ii) the Base Building Construction
Schedule prepared by Borrower, (c) based upon the information submitted by
Borrower or such other Person as the Inspecting Engineer may deem necessary or
appropriate, all permits, licenses and approvals required for the construction
of the Project have been obtained to the extent applicable to the state of
construction or no impediment exists to further required permits, licenses and
approvals being timely obtained, (d) Contracts and Subcontracts are in effect
which satisfactorily provide for the construction of the Project, (e) all roads
and utilities necessary for the full utilization of the Project for its intended
purposes have been completed or there are sufficient amounts budgeted for such
improvements, (f) the construction of the Project theretofore performed has been
completed substantially in accordance with the Plans reviewed by Inspecting
Engineer and approved by Lender, and (g) the Project has, in the aggregate,
reached a stated percentage of completion.
Section 4.23. Cost to Complete. Lender shall have determined in the
----------------
exercise of its sole discretion that the Project can be built for not more than
the amount specified therefore in the Project Budget.
Section 4.24. Government Materials. Lender shall have received
--------------------
executed attornment agreements and estoppel certificates from GSA and NASA
relating to their respective Government Leases in a form reasonably satisfactory
to Lender.
Section 4.25. Appraisal. Lender shall have approved the Appraisal
---------
heretofore delivered by Borrower.
Section 4.26. Fees. Borrower shall have made arrangements reasonably
----
satisfactory to Lender for the payment from the Initial Disbursement of the
following fees, costs and expenses:
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<PAGE>
(a) A commitment fee of Four Hundred Sixty-Eight Thousand Seven
Hundred Fifty Dollars ($468,750.00), to be retained by Lender whether or not any
further Disbursements are made under this Agreement;
(b) The fees, costs and other expenses then due and payable to
Lender's Consultants under their agreements with Lender,
(c) Reimbursement to Lender for monies it has heretofore paid
to its Consultants in connection with the transactions contemplated by the Loan
Documents; and
(d) Lender's counsel's fees and disbursements incurred in
connection with the Loan.
Section 4.27. General Conditions.
-------------------
(a) On the date of funding of the Initial Disbursement, there
shall exist (i) no Event of Default and (ii) no fact or circumstance, which,
with the passage of time, giving of notice or action of third parties, could
become an Event of Default.
(b) All representations and warranties contained herein and in
the other Loan Documents and in any document delivered to Lender by Borrower in
connection with the Loan shall be true and correct in all material respects.
(c) Lender shall have received such additional agreements,
certificates, reports, approvals, instruments, documents, financing statements,
consents and opinions as Lender may reasonably request, all in form and
substance reasonably satisfactory to Lender.
Section 4.28. Construction-Related Conditions. Lender shall have
-------------------------------
received all of the following documents, materials and information with respect
to the Initial Disbursement:
(a) A Request for Disbursement;
(b) All information required by Section 5.06 (to the extent the
Initial Disbursement is for Stored Materials);
(c) Partial Lien waivers and affidavits of payment in the form
of Exhibit B hereto from the General Contractor and all Contractors and
Subcontractors for the full amount (less actual retainage) of all Hard Costs due
and owing to the General Contractor, Contractors and Subcontractors as of
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the date of the last payment from Borrower (or an Affiliate) to such Persons;
(d) A certificate from each Architect with responsibility for
work being paid for from the Initial Disbursement to the effect set forth in
Section 5.03(c);
(e) A certificate from the General Contractor to the effect set
forth in Section 5.03(d); and
(f) As to any phase of construction that has been completed,
the information and materials set forth in Section 5.03(f).
Section 4.29. Bid Protest Litigation. The Bid Protest Litigation
----------------------
shall have been terminated as set forth in Section 2.12(b) of the Bid Protest
Guaranty, or, if not, Borrower shall have executed and delivered the Bid Protest
Guaranty.
Section 4.30. Land Use Agreements. Borrower and Lender shall have
--------------------
executed in a form mutually acceptable to the parties the Multiple Lot Agreement
and Floor-Area-Ratio Agreement (both as defined in the Deed of Trust) relating
to the operation and use of the Property, Phase I and Lot 872.
ARTICLE V
CONDITIONS TO ALL SUBSEQUENT DISBURSEMENTS
------------------------------------------
The obligation of Lender to make each Disbursement after the Initial
Disbursement to or for the account of Borrower shall be subject to the
satisfaction of all the conditions set forth in this Article V and, absent
satisfaction or Lender's written waiver of the same, Lender shall have no
obligation to make such Disbursement.
Section 5.01. Initial Disbursement. All conditions to making the
--------------------
Initial Disbursement shall have been satisfied or waived in writing by Lender
and the Initial Disbursement shall have been made.
Section 5.02. General Conditions.
-------------------
(a) All representations and warranties contained herein and in
the other Loan Documents and in any document delivered to Lender by Borrower in
connection with the Loan,
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including without limitation all Requests for Disbursement, shall be true and
correct in all material respects on and as of the date of the Disbursement then
to be made as though made on and as of that date, except to the extent otherwise
disclosed by Borrower to Lender in writing, provided that the facts set forth in
such disclosures are acceptable to Lender in its sole discretion.
(b) On the date of funding the Disbursement, there shall exist
(i) no Event of Default and (ii) no fact or circumstance which, with the passage
of time, giving of notice or action of third parties, could become an Event of
Default.
Section 5.03. Request for Disbursement Documents. Prior to each
----------------------------------
Disbursement, Borrower shall have furnished to Lender and Lender shall have
received and approved all of the following documents, materials, and
information:
(a) A Request for Disbursement;
(b) Partial Lien waivers in the form of Exhibit B hereto from
the General Contractor and all Contractors and Subcontractors for the full
amount (less actual retainage) of all Hard Costs covered by all prior Requests
for Disbursement, except that Borrower shall not be required to obtain Lien
waivers (i) with respect to (and shall not be entitled to any Disbursement for)
any claim for labor, service, equipment or material that is being actively
contested in accordance with the requirements of the Deed of Trust and (ii) with
respect to any Contractor or Subcontractor that only supplies materials to the
Project and whose Contract or Subcontract requires the payment of less than One
Hundred Thousand Dollars ($100,000.00) in the aggregate, except to the extent
Lender has given Borrower not less than fifteen (15) days' prior written notice
that a Lien waiver will be required from such Contractor or Subcontractor for a
subsequent Disbursement;
(c) A certificate from each Architect with responsibility for
work being paid for from that Disbursement, in the form set forth in Exhibit A,
with respect to that portion of the Project for which such Architect has design
responsibility, to the effect that, in the Architect's professional opinion: (i)
all new Plans and revisions to the existing Plans since the date of the last
Disbursement are in conformity with all applicable Laws, (ii) the work completed
to the date of the Disbursement is in substantial conformity with the Plans,
Construction Contract and applicable Contract if any, and (iii) stating the
percentage of completion of the work on such portion of the Project;
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(d) A certificate from the General Contractor or appropriate
Contractor, if any (with respect to Hard Costs only), in the form set forth in
Exhibit A, setting forth all incurred Items of Project Costs for the periods
since the last Request for Disbursement and from the inception of the Project
(or, as appropriate, the Retail Tenant Improvements), all Items of Project Costs
projected to complete the Project (or, as appropriate, the Retail Tenant
Improvements), any variance between actual and projected Project Costs and the
amounts set forth in the Project Budget, the percentage of materials provided
and/or work completed for each Item from the inception of the Project (or, as
appropriate, the Retail Tenant Improvements) to the date of the certification,
and all changes from the previous certificate which are known or reasonably
anticipated by the General Contractor or appropriate Contractor, if any;
(e) A report from the Inspecting Engineer with respect to any
new or revised Plans, Project Budget and Construction Schedule stating (i) that
in the opinion of Inspecting Engineer, all new Plans, Change Orders and
modifications or amendments to the Plans, Project Budget and Construction
Schedule required hereby to be approved by Lender have been approved by Lender;
(ii) that, in the opinion of Inspecting Engineer, based on a review of the
partial Lien waivers, certificates and other reports submitted to substantiate
the Request for Disbursement, the construction of the Project (or, as
appropriate, the Retail Tenant Improvements) theretofore performed has been
completed substantially in accordance with the Plans, Construction Contract and
applicable Contract, if any, reviewed by Inspecting Engineer and approved by
Lender; (iii) what percentage of completion in the aggregate has been reached in
the construction of the Project; (iv) the extent to which, if any, the
Disbursements for the Hard Costs not yet approved are not sufficient to complete
construction of the Project; (v) whether completion of the portions of the
Project not yet completed can, in Inspecting Engineer's opinion, be completed
prior to the Completion Date and (vi) that Inspecting Engineer has approved the
items referred to in Sections 5.03(b), (c), and (d) hereof; and
(f) As to a phase of construction which has been completed, any
required reports or approvals covering structural and mechanical work and
certifications or other appropriate written statements from the appropriate
Governmental Authorities for electrical work with respect to such stage to the
extent reasonably obtainable.
(g) At Lender's reasonable discretion, an affidavit of
subcontractor in the form of Exhibit C attached
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<PAGE>
hereto from each Major Subcontractor which sets forth the amounts owed to such
Subcontractor's subcontractors, materialmen, and laborers.
Section 5.04. Title Endorsements. Immediately prior to each
------------------
Disbursement and, in connection therewith, upon Borrower's election of the
Eurodollar Rate as the Interest Rate Option in accordance with the terms of the
Note, Lender shall have received from the Agent on behalf of the Title Companies
endorsements to the Title Policies extending the coverage to be provided thereby
to the date and to the full amount of the requested Disbursement, without
exception for mechanics Liens or claims of Liens, or any other matter not
previously approved by Lender in writing. Such endorsements will insure the Deed
of Trust to be a first lien on the Project, subject only to the Permitted
Exceptions.
Section 5.05. Plans; Permit Approval. Lender shall have received and
----------------------
approved all new Plans and all changes to the Plans (to the extent required by
Section 7.05(e) hereof. Borrower shall have received and delivered to Lender
evidence of receipt of all permits, licenses, approvals and other authorizations
from Governmental Authorities necessary to complete the work contemplated by
such Plans, to the extent then required or obtainable, for the development,
construction, use and occupancy of the Project in respect of which the
Disbursement is requested.
Section 5.06. Stored Materials. Lender will make Disbursements for the
----------------
cost of Stored Materials (not including any profit or overhead of General
Contractor or any Contractor or Subcontractor (other than the manufacturer or
supplier of such materials) payable in respect of such Stored Materials, for
which a Disbursement shall be made only after incorporation of the Stored
Materials into the Project) subject to the other provisions of this Agreement,
and further provided that Lender shall have received the following, in form and
substance satisfactory to Lender:
(a) for materials stored on the Premises, invoices indicating
actual cost of the Stored Materials, not including profit and overhead;
(b) evidence that the Stored Materials are appropriate for
purchase during the then current stage of construction;
(c) evidence that the Stored Materials have been paid for and
are owned by (or upon payment of the amount to be disbursed pursuant to the
applicable Request for Disbursement
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<PAGE>
shall be paid for and owned by) Borrower free of all lien rights or claims of
the vendor or any third party;
(d) evidence that (i) the Stored Materials are easily and readily
identifiable for use as intended in the Project and (ii) are securely stored on-
site or in a bonded warehouse or storage yard approved by Lender and, if stored
in a warehouse or storage yard, the warehouse or storage yard has been notified
that Lender has a security interest in the subject stored materials and the
original warehouse receipt;
(e) for those stored materials stored off-site, a certificate or
binder of insurance from Borrower or the supplier, fabricator or other
subcontractor, covering the Stored Materials against loss, theft and damage in a
manner and amount satisfactory to Lender, naming Lender as a loss-payee; and
(f) evidence of filing of any UCC-1 financing statement or
statements required to perfect Lender's lien with respect to such Stored
Materials, and satisfactory assurance to Lender that such materials are covered
by the security agreement provisions of the Deed of Trust and' that Lender has a
perfected security interest in such materials.
Section 5.07. Contractors and Subcontractors. To the extent required
------------------------------
by Section 7.07 hereof, Lender shall have received copies of all Contracts and
Subcontracts not theretofore reviewed by Lender.
Section 5.08. Final Construction Disbursement. The final Disbursement
-------------------------------
of Hard Costs incurred but not advanced during the course of construction for
all portions of the Project and the release of related retainage (to the extent
not theretofore released pursuant to Section 2.09(b)) (the "Final Construction
Disbursement") shall be made subject to satisfaction of all of the foregoing as
well as the following conditions:
(a) Lender shall have received a certification by Borrower and a
letter from each Architect that all work for which such Architect has design
responsibility on the Project has been finished and made available for use
substantially in accordance with the Plans, Construction Contract, other
applicable Contract if any, and Government Leases;
(b) Lender shall have received a certificate of Inspecting
Engineer stating, in effect, that all of the Project, except for Punch List
Items (as defined in Section 5.11 hereof) and any remaining Retail Tenant
Improvements for space other than Restaurant Improvements, has been completed in
a good and workmanlike manner substantially in accordance with
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the Plans, Construction Contract, other applicable Contract if any, and
Government Leases;
(c) Lender shall have received Lien waivers and affidavits of
payment from the General Contractor and all Contractors and Subcontractors who
have performed work, labor or services or furnished supplies in connection with
the construction of the Project substantially in the form of Exhibit B hereto,
modified to state that all work, labor, services and materials to be performed
or provided by such Person, except for Punch List Items and any remaining Retail
Tenant Improvements for space other than Restaurant Improvements, have been
performed and provided and, upon payment of a specified sum, all amounts owing
to such Person in respect of the Project will then be paid in full; and
(d) Lender shall have received final and comprehensive
endorsements to the Title Policies or evidence satisfactory to Lender that the
Title Companies are in a position to issue to Lender final policies of title
insurance with such endorsements thereto as Lender may reasonably require,
insuring the Deed of Trust as a first lien, subject only to the Permitted
Exceptions and providing coverage in the full amount of the Loan.
Section 5.09. Advances Without Requests. Notwithstanding anything to
-------------------------
the contrary and without regard to the minimum Disbursement amount set forth in
Section 2.05(a), Borrower hereby authorizes Lender to disburse proceeds of the
Loan to pay (a) interest and fees on the dates when interest and fees are due
and owing in accordance with Section 2.11 hereof and the terms of the Note and
the other Loan Documents and (b) upon the occurrence of an Event of Default, or
upon Borrower's default on any obligation to pay money in any way related to the
Project which default Lender reasonably believes may have a material adverse
effect on the Project, (i) all costs of title searches or abstracts, document
taxes, stamp taxes and recording expenses; (ii) the Inspecting Engineer's fees
and expenses reasonably incurred; (iii) reasonable fees and expenses for any
services of a Consultant which may be required for purposes contemplated by this
Agreement; and (iv) notwithstanding that Borrower may not have requested a
Disbursement of such amount, subject to the further provisions of the Deed of
Trust, all costs, fees and expenses due to (A) contractors, subcontractors,
laborers, materialmen or other persons furnishing labor, services or materials
used or to be used on or in connection with the Project, (B) taxing authorities
or insurers in payment of taxes or hazard, liability or title insurance premiums
when due, and/or (C) the holder of any Lien on the Premises or Project or
Borrower's interest therein, as necessary to discharge such Lien. The
authorization hereby granted shall be irrevocable, and no further direction or
authorization from Borrower shall be
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necessary for Lender to make such Disbursements. However, the provisions of this
Article V shall neither require Lender to make such Disbursements, nor prevent
Borrower from paying interest and fees from its own funds. Any Disbursement so
made shall be deemed made to and received by Borrower and shall be added to the
unpaid principal balance of the Note. Lender will promptly advise Borrower of
the making of any Disbursement pursuant to this Section 5.09, and such notice
shall set forth, in reasonable detail, a description of those Items which were
paid with the proceeds of such Disbursement.
Section 5.10. Surveys.
--------
(a) Within thirty (30) days after completion of the foundation of
the Improvements, Borrower shall provide Lender with a surveyor's report which
shows (i) the location of the foundations of the Improvements, (ii) that the
foundations have been built within the boundaries of the Land, and (iii) that
the foundations have been built without encroachments or violations of any
easements, covenants, conditions or restrictions of record.
(b) If necessary in the reasonable judgment of Lender or if
required by either of the Title Companies, Borrower, within thirty (30) days
after written notice from Lender or such Title Company, shall from time to time
furnish to Lender updates of the Survey certified to Lender and the Title
Companies and updated by inspection with respect to all relevant requirements
and giving current information as described in Section 4.03.
(c) Within thirty (30) days after Completion of Construction,
Borrower shall deliver to Lender a final, "as-built" version of the Survey which
shall show: (i) the Project as completed in accordance with the Plans and
otherwise in accordance with the provisions of this Agreement, (ii) all
easements affecting the Premises, whether benefiting or burdening same, rights
of way and existing utility lines, whether recorded or disclosed by a physical
inspection of the Premises, (iii) a calculation of the dimensions of the
Premises, (iv) the lines of the public streets abutting the Premises and the
widths thereof, (v) encroachments and the extent thereof in feet and inches onto
the Premises and all encroachments by any buildings, structures or improvements
located on the Premises onto any easements over, and onto property adjacent to,
the Premises, and (vi) all Improvements, and any other physical matters on the
ground which may
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adversely affect the Premises or title thereto and the relationship of such
Improvements and other physical matters by distances to the perimeter of the
Premises, established building lines and street lines.
Section 5.11. Final Disbursement of Loan Proceeds.
-----------------------------------
(a) Provided that there exists no uncured Event of Default nor
fact or circumstance which, with the passage of time, giving of notice or action
of third parties, could become an Event of Default that is not being cured in
accordance with the terms of this Agreement and the Loan Documents, Lender shall
disburse, either simultaneously with or after, and upon compliance with all the
requirements of, (y) the Final Construction Disbursement (pursuant to Section
5.08 hereof) and (z) the disbursement of any Soft Costs after Completion of
Construction (pursuant to Section 2.09(g) hereof) ("Final Disbursement of Loan
Proceeds") so much of the Loan proceeds remaining as Borrower may request,
subject to the escrow requirements set forth in subsection (b) of this Section
5.11, upon receipt of the following, which shall be satisfactory to Lender in
Lender's reasonable discretion:
(i) a certification from Borrower that (A) all construction
except for Punch List Items and any remaining Retail Tenant Improvements for
space other than Restaurant Improvements has been completed and all Project
Costs have been paid in full in accordance with the Project Documents, and (B)
all representations and warranties contained herein and in the other Loan
Documents and in any document delivered to Lender by Borrower in connection with
the Loan are true and correct in all material respects as of the date of the
certification except as to such changes as may have been previously approved by
Lender in writing;
(ii) a certification from the surveyor that the "as-built"
survey delivered pursuant to Section 5.10 hereof has not changed from the date
delivered, or, if it has changed, an updated survey showing all of the
information required in Section 5.10(c) hereof;
(iii) estoppel certificates from all Space Tenants certifying
that (A) such Space Tenant is currently paying rent under a Space Lease, (B) no
notice of default has been given by either Borrower or the Space Tenant under
such Space Lease, and (C) all conditions to the effectiveness and continuing
effectiveness of such Space Lease required to be satisfied as of the date
thereof have been satisfied;
(iv) a certificate from each Architect that, in the
Architect's professional opinion, the portion of the Project for which such
Architect has design responsibility has been completed but for any Punch List
Items;
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(v) a "punch list" agreed to by Borrower, the General
Contractor, each Architect and the appropriate Space Tenant, and approved by
Lender (which approval will not be unreasonably withheld, delayed or
conditioned) setting forth only those details of finish work and adjustments
which do not interfere with the use of the affected Premises and which remain to
be completed (the "Punch List Items") and a cost estimate for each such Punch
List Item;
(vi) lien waivers and affidavits of payment from the General
Contractor and all Contracts and Subcontractors who have performed work, labor
or services or furnished supplies in connection with the construction of the
Project in the same form and substance as required by Section 5.08(c) hereof;
(vii) a Request for Disbursement, setting forth the amount
of remaining Loan proceeds to be disbursed in the Final Disbursement of Loan
Proceeds; and
(viii) a letter from the Appraiser, dated within thirty (30)
days prior to the Final Disbursement of Loan Proceeds, which (A) confirms that,
upon disbursement of so much of the remaining Loan proceeds as Borrower may
request, the Loan to Value Ratio will not exceed seventy-five percent (75%) and
(B) explains any changes in the Appraised Value of the Trust Estate or the
methodology used to determine such updated Appraised Value of the Trust Estate.
(b) In the event that there are any Punch List Items or Retail
Tenant Improvements for space other than Restaurant Improvements remaining to be
completed when Borrower requests the Final Disbursement of Loan Proceeds,
Borrower shall deposit with Lender in an interest-bearing escrow account an
amount equal to two hundred percent (200%) of the estimated cost of such Punch
List Items plus the entire amount of the undisbursed Loan proceeds designated in
the Project Budget for the Retail Tenant Improvements for space other than
Restaurant Improvements, to be held as additional security for the Loan and
disbursed by Lender for the completion of the Punch List Items or Retail Tenant
Improvements for space other than Restaurant Improvements upon application by
Borrower in accordance with the Disbursement procedures set forth in this Loan
Agreement. Borrower shall execute such documents as may be necessary to give
Lender a perfected security interest in such escrow account.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Lender to enter into this Agreement and to make the Initial
Disbursement and each subsequent Disbursement under the Loan, Borrower makes the
following representations and warranties which shall survive the execution and
delivery of this Agreement, the Note and the other Loan Documents and shall be
remade from time to time as elsewhere provided in this Agreement.
Section 6.01. Existence. Borrower is a limited partnership duly
---------
organized and validly existing under the laws of the District of Columbia.
Borrower has the authority, rights and franchises to own its properties, to
carry on its business as now conducted, to perform its obligations hereunder and
under the other Loan Documents, to complete the Project in accordance with the
Plans, and to own and operate the Project as a first-class commercial office
building. Borrower has made all filings in each jurisdiction in which the
character of its business or nature of its properties makes such filings
necessary and where not filing could have a material adverse impact on its
business. Borrower conducts no business, directly or indirectly, except for the
development, construction, ownership, and operation of the Project and of Phase
I, and the ownership of Lot 872.
Section 6.02. Authorization; Enforceable Obligation. Borrower has the
-------------------------------------
authority and legal right to execute, deliver and perform the Loan Documents to
which Borrower is a party, to borrow under the Loan Documents arid to grant the
liens and security interests contemplated thereby, and has taken all necessary
action to authorize the borrowings on the terms and conditions hereof and the
execution, delivery and performance of the Loan Documents to which Borrower is a
party. No consent, license, permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or declaration with any
Governmental Authority which has not been obtained is required for the
execution, delivery and performance by Borrower of the Loan Documents to which
it is a party. Each of the Loan Documents to which Borrower is a party has been
executed and delivered by a Person duly authorized to execute and deliver such
documents on behalf of Borrower and constitutes the legal, valid and binding
obligation of Borrower, enforceable against Borrower in accordance with its
terms.
Section 6.03. Conflicting Agreements. Neither the execution nor
----------------------
delivery of this Agreement or any other Loan Document or any amendments thereto,
nor fulfillment of or compliance with the terms and provisions hereof or
thereof, nor the consummation of the transactions contemplated hereby or by
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any of the other documents referred to herein, will conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default under,
or result in any violation of, or result in the creation of any lien (other than
the lien of the Loan Documents) upon any of the properties or assets of Borrower
pursuant to its partnership agreement, any award of any arbitrator or any
agreement (including any Project Document and any agreement with Borrower's
partners), instrument, order, judgment, decree, statute, law, ordinance,
franchise, certificate, permit, rule, regulation or the like to which Borrower
is subject, or to or by which its properties or its assets or the Trust Estate
are bound or affected.
Section 6.04. Required Documents. Borrower has furnished Lender true,
------------------
correct and complete certified copies of all documents and materials to be
furnished under Section 4.06 hereof.
Section 6.05. No Material Litigation. Except for the Bid Protest
----------------------
Litigation, no litigation, investigation or administrative proceeding of or
before any court, arbitrator or governmental authority is pending or has been
threatened in writing by or on behalf of a potential claimant against Borrower,
the general Partners of Borrower or assets of Borrower or that would, if
determined adversely, be likely to have a material adverse effect on (a)
Borrower's ability to perform its obligations under the Loan Documents in
accordance with the terms thereof, (b) the validity of this Agreement or any
other Loan Document, or (c) Lender's security under this Agreement or any other
Loan Document. No notice has been received by Borrower of any proceeding to
condemn, purchase or otherwise acquire the Trust Estate or any part thereof or
interest therein, and, to the best of Borrower's knowledge, no such proceeding
has been threatened by a duly authorized official of a Governmental Authority
acting in his official capacity.
Section 6.06. Bid Protest Litigation. (a) Borrower has received a
----------------------
notice to proceed with construction under the terms of the GSA Building Lease
and has not received and is not operating in violation of any "stop-work" order
or injunction (preliminary or permanent) issued in connection with the Bid
Protest Litigation. (b) Borrower has furnished Lender true, complete and
correct copies of all documents and materials requested by Lender that are in
Borrower's possession and are pertinent to the Bid Protest Litigation.
Section 6.07. Margin Regulations. No part of the proceeds of the Loan
------------------
will be used to purchase or carry any margin stock (as such term is defined in
Regulations G, U and X of the Board of Governors of the Federal Reserve System).
Borrower is not engaged, principally or as one of its important
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activities, in the business of extending credit for the purpose of purchasing or
carrying any margin stock.
Section 6.08. Compliance With Applicable Laws. Each of Borrower, the
-------------------------------
Project, and the Trust Estate is in compliance with the requirements of all
Laws, the failure to comply with which would materially and adversely affect
Borrower's ability to perform its obligations under this Agreement or any of the
other Loan Documents, and no written notice of noncompliance with any of the
foregoing has been received by Borrower from any Governmental Authority. No
consent, approval or authorization, or registration, declaration or filing with
any Governmental Authority or any other Person is required for the valid
execution, delivery and performance by Borrower of this Agreement or any other
Loan Document, or the carrying out of the transactions contemplated hereby or
thereby. All approvals, permits, licenses and other authorizations of
Governmental Authorities required for the current stage of construction of the
Project and for future stages to the extent now obtainable have been obtained
and are in full force and effect and true and complete copies thereof have been
furnished to Lender. Borrower has no basis to believe that any and all
approvals, permits, licenses and other authorizations of Governmental
Authorities needed for Completion of Construction will not be forthcoming in a
timely manner consistent with the Construction Schedule.
Section 6.09. Government Leases. Borrower has furnished to Lender
-----------------
true and complete copies of the Government Leases currently in effect with all
amendments and supplements thereto. Such leases are in full force and effect
and (a) no notice of default has been given by either Borrower or the
appropriate governmental agency thereunder, (b) there are no material defaults
under any of the provisions thereof and (c) all conditions to the effectiveness
and continuing effectiveness thereof required to be satisfied as of the date
hereof have been satisfied.
Section 6.10. No Brokers. Borrower and Lender each represent to the
----------
other that they have not dealt with any mortgage or other broker or finder in
connection with the Loan. Borrower and Lender agree to indemnify, defend and
hold the other harmless from and against any claim for brokerage fees or
commissions or other compensation in connection with the Loan by reason of an
alleged misrepresentation of the statement made by it in the immediately
preceding sentence. In case any action, suit or proceeding is brought against
Lender by reason of such alleged misrepresentation by Borrower (a) Lender shall
give prompt notice thereof to Borrower, (b) Borrower may, at Borrower's sole
cost and expense, resist and defend such action, suit or proceeding by counsel
reasonably satisfactory to Lender, and (c) if Borrower elects to defend such
action, suit or proceeding, Lender shall not compromise or settle any such
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action, suit or proceeding without the consent of Borrower unless Lender waives
its right to indemnification under this Section. In case any action, suit or
proceeding is brought against Borrower by reason of such alleged
misrepresentation by Lender, (i) Borrower shall give prompt notice thereof to
Lender, (ii) Lender may, at Lender's sole cost and expense, resist and defend
such action, suit or proceeding by counsel reasonably satisfactory to Borrower,
and (iii) if Lender elects to defend such action, suit or proceeding, Borrower
shall not compromise or settle any such action, suit or proceeding without the
consent of Lender, unless Borrower waives its right to indemnification under
this Section.
Section 6.11. Project Documents. All material Project Documents,
-----------------
excluding the Plans, Construction Contract, and the Architect Contract for each
Architect, and, to the best of Borrower's knowledge after due inquiry, all other
Project Documents, are listed in Schedule 6.11 annexed hereto and made a part
hereof, and, to the extent required by the provisions of this Agreement or to
the extent Lender has so requested, true and complete copies of all Project
Documents, including the Plans, Construction Contract, and the Architect
Contract for each Architect, together with all amendments thereof and
modifications thereto, have been delivered to Lender. All Project Documents are
in full force and effect in accordance with their respective terms, and no party
to any Project Document has asserted any claim of default or offset against the
other with respect thereto that remains uncured.
Section 6.12. Plans. All Plans for the Project required as of the
-----
date hereof under the terms of the GSA Building Lease are listed in Schedule
6.12 hereto. The Plans listed therein have been approved, and all amendments
and supplements to the Plans listed therein (a) will be approved by (i) the
General Contractor (to the extent required by the Construction Contract), (ii)
the beneficiary of any restrictive covenant requiring such approval, and (iii)
the Space Tenant that will occupy the space covered by the Plans and (b) will be
submitted to all Governmental Authorities with jurisdiction over the Project, to
the extent required, in a form such Governmental Authorities are anticipated to
approve.
Section 6.13. Project Budget and Construction Schedule. The Project
----------------------------------------
Budget accurately reflects, to the best of Borrower's knowledge and belief, all
Project Costs which have been and will be incurred by Borrower in the
acquisition, development and construction of the Project. The Construction
Schedule accurately reflects, to the best of Borrower's knowledge and belief,
the time required to complete the entire Project and each portion thereof.
Section 6.14. Streets and Utilities. All utility services necessary
---------------------
for the construction of the Project and the
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operation thereof for its intended purposes are available at the boundaries of
the Premises, including water supply, fire protection, storm and sanitary sewer,
gas, electricity, and telephone facilities. The Project has lawful, adequate,
unobstructed, and unimpaired access to public streets.
Section 6.15. ERISA. Borrower does not have a defined benefit pension
-----
plan under the Employee Retirement Income Security Act of 1974, as amended, the
unfunded liabilities of which could, upon termination of the plan, be held to be
a liability of Borrower by the Pension Benefit Guaranty Corporation.
Section 6.16. Environmental. Except as disclosed in the Environmental
-------------
Report, there are not now and, to Borrower's best knowledge after due inquiry,
never have been any Hazardous Materials present at or conveyed from or to the
Premises or incorporated into the Project, except for Hazardous Materials used
in the normal course of construction of the Project, as to which there exists no
practical alternative and which have been used or are being used in strict
compliance with all Laws and have been or will be removed in their entirety from
the Premises promptly upon completion of such use.
Section 6.17. Whole Tax Parcel. The Land constitutes a single, whole
----------------
tax parcel and is assessed separately from any other real property.
Section 6.18. Casualty. The Project has not been materially damaged
--------
by fire or other casualty, or if damaged, Lender as loss payee has received
insurance proceeds and, if necessary, a Completion Deposit in the manner, amount
and as otherwise contemplated by Section 1.09 of the Deed of Trust and such
proceeds and Completion Deposit are sufficient to effect the satisfactory
restoration of the Project and to permit Completion of Construction on or prior
to the Completion Date and in accordance with all of the terms and provisions of
this Agreement.
Section 6.19. True Statements. Neither this Agreement, any other Loan
---------------
Document nor any other document delivered to Lender in connection with the Loan
(including without limitation all Requests for Disbursements) contains, or will
contain when made, any untrue statement of a material fact and by this reference
all representations and warranties made in any of the Loan Documents are hereby
made a part of this Agreement to the same extent as if fully set forth herein.
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ARTICLE VII
AFFIRMATIVE AND NEGATIVE COVENANTS
----------------------------------
Section 7.01. Commencement and Completion of Construction.
--------------------------------------------
(a) Borrower shall proceed with the construction of the Project
with due diligence, substantially in accordance with the Construction Schedule,
and subject to the terms of this Section 7.01, shall effect Completion of
Construction on or prior to the Completion Date.
(b) The Completion Date may be extended for a period not to
exceed sixty (60) days by Force Majeure, provided that (i) Borrower shall
promptly, but in no event later than ten (10) days after the occurrence of Force
Majeure circumstances, notify Lender of the existence of such Force Majeure
circumstances, which notice shall set forth the date upon which such
circumstance began, (ii) Borrower shall provide Lender with such evidence of the
Force Majeure circumstances as Lender shall reasonably request, including any
information provided by General Contractor to Borrower in General Contractor's
request for extension of the Completion Date pursuant to the terms of the
Construction Contract or by Borrower to the GSA under the GSA Building Lease and
(iii) dates for the performance of Borrower's obligations under the GSA Building
Lease shall be extended by an equal period pursuant to Paragraph 45.VIII. of the
Solicitation for Offers of the GSA Building Lease.
(c) The Completion Date may be extended for a period not to
exceed ninety (90) days by Unavoidable Government Delay, provided that (i)
Borrower shall promptly, but in no event later than ten (10) days after the
occurrence of the Unavoidable Government Delay circumstances, notify Lender of
the existence of such circumstances, which notice shall set forth the date on
which such circumstances began and (ii) Borrower shall provide Lender with such
evidence of the Unavoidable Government Delay circumstances as Lender shall
reasonably request, including any information or notice provided by the GSA to
Borrower under the GSA Building Lease.
(d) The progress of construction of the Project shall be deemed
to be substantially in accordance with the Construction Schedule so long as
target dates set forth in such schedule have been met or, if such target dates
have not been met, Lender has determined in its reasonable discretion that
Completion of Construction will occur not later than the Completion Date as
extended in compliance with this Section 7.01.
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(e) Borrower shall not permit construction to cease for more
than ten (10) consecutive days or for more than twenty (20) days in the
aggregate, subject, however, to delays for Force Majeure and Unavoidable
Government Delay as permitted by this Section 7.01. During any discontinuance of
construction, Borrower shall make adequate provision, acceptable to Lender, for
the protection of the Project to the extent then constructed, against
deterioration and against other loss, damage or theft.
Section 7.02. Encroachments. Borrower shall construct the
-------------
Improvements entirely on the Land without encroachment upon any lot line or
boundary, easement or right-of-way or any other land, except as required or
irrevocably permitted by any Governmental Authorities. Borrower shall (a)
provide evidence of such requirement and (b) furnish Lender with affirmative
title insurance coverage with respect to such required or irrevocably permitted
encroachment.
Section 7.03. Plans.
------
(a) Borrower shall provide to Lender all Plans necessary for the
construction of the Project as they are prepared and shall have all such Plans
approved by all necessary entities as set forth in Section 6.12.
(b) Borrower shall construct the Project in substantial
conformity with the Plans and in a good and workmanlike manner with new
materials of good quality. If at any time construction of the Improvements is
not in compliance with the foregoing requirements, Borrower shall promptly give
notice thereof to Lender and Lender shall have the right to stop such
nonconforming construction and order repair or reconstruction in accordance with
the foregoing requirements and to withhold all further Disbursements until
construction is in satisfactory compliance therewith. Upon notice from Lender to
Borrower, or Borrower's discovery irrespective of such notice, that construction
is not in substantial conformity with such requirements, Borrower shall commence
correcting the deviation as promptly as practical and, in any event, within
fifteen (15) days after such notice or discovery and shall prosecute such work
diligently to completion, which in no event shall be later than sixty (60) days
after such notice or discovery. If Lender reasonably determines that the
corrective work is not proceeding satisfactorily, Lender may, upon not less than
fifteen (15) days' notice to Borrower, prosecute such corrective work to
completion at Borrower's expense. Lender's approval of any Disbursement shall
not constitute a waiver of Lender's right to require correction of any such
defects or departures from the Plans not theretofore discovered by, or called to
the attention, of Lender.
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Section 7.04. Compliance with Laws and Other Requirements. Borrower
-------------------------------------------
shall comply in all material respects with all conditions, covenants,
restrictions, Space Leases, easements, reservations, rights and rights of way
and all applicable Laws and other requirements relating to the Trust Estate and
the Project, and obtain in a timely fashion all necessary approvals, consents,
licenses and permits of all Governmental Authorities.
Section 7.05. Change Orders. Change Orders:
-------------
(a) Shall all be in writing, numbered in sequence, and signed by
Borrower and General Contractor or the appropriate Contractor;
(b) Shall all, as part of each Request for Disbursement, be
certified by Borrower and each Architect, the Architect's professional opinion,
with respect to that portion of the Project for which such Architect has design
responsibility, to be in compliance with all applicable Laws and other
requirements;
(c) Shall all contain an estimate by Borrower and General
Contractor or the appropriate Contractor of the increase or decrease in each
Item of Project Costs that would be caused by the change (or, if the Change
Order involves changes both increasing or decreasing estimated Project Costs,
the amount of each change either increasing or decreasing Project Costs shall be
stated), as well as the aggregate amount of changes in estimated Project Costs,
both increases and decreases, previously made;
(d) Shall, if a Major Change Order (as hereinafter defined), be
submitted to Lender not later than five (5) Business Days prior to the proposed
effectiveness thereof; and
(e) Shall, to the extent not a unilateral change order required
by the GSA, be subject to the prior written approval of Lender where (i) the
change affects the structural aspects or intended use of the Improvements, (ii)
the Change Order includes any change that, regardless of the net effect of the
aggregate Change Order, increases or decreases any estimated Project Costs by
One Hundred Thousand Dollars ($100,000.00) or more, or (iii) together with prior
Change Orders, whether or not approved, the change involves an aggregate amount,
whether for increases or decreases, of over Seven Hundred Fifty Thousand Dollars
($750,000.00) or (iv) the change would cause any Governmental Authority to
suspend or revoke any license, approval, permit or other authorization. (All
such Change Orders are herein referred to as "Major Change Orders".) If any
Change Order involves a net increase in estimated Project Costs the payment of
which increase is not
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the sole obligation of the GSA or another Space Tenant under its respective
Space Lease, whether or not such Change Order is subject to Lender's prior
approval, Lender shall have no obligation to make any further Disbursements
unless the Loan, taking such Change Order into account, remains in balance.
Section 7.06. Project Budget; Annual Operating Budget.
---------------------------------------
(a) Subject to the provisions of Section 2.14 hereof, Borrower
shall complete the entire Project within the Project Budget and operate the
Project within the applicable Annual Operating Budget. Unless Lender otherwise
consents in writing, Borrower shall not materially supplement, modify or amend
the approved Project Budget or applicable Annual Operating Budget other than as
permitted under Sections 2.06, 7.05 or 7.06(b) hereof.
(b) Borrower shall promptly notify Lender of any fact or
circumstance that may render the Project Budget inaccurate with respect to any
Project Costs reflected therein or render any Annual Operating Budget inaccurate
with respect to any operating expenses reflected therein. With respect to the
Annual Operating Budget only, the same shall not be deemed to have been rendered
inaccurate by any variation or variations which in the aggregate are equal to or
less than ten percent (10%) of the total amount of such budget.
Section 7.07. Contractors and Subcontractors.
-------------------------------
(a) Borrower shall not permit the performance of any work on the
Project pursuant to any Contract or Subcontract (i) with a total payment in
excess of One Hundred Thousand Dollars ($100,000) or (ii) which Lender has
requested to review, until Lender shall have received copies of such Contract or
Subcontract.
(b) Borrower shall deliver to Lender from time to time not later
than five (5) Business Days after Lender's demand therefor correct lists of all
Contractors and Subcontractors employed in connection with the Project and
copies of such Contractors' and Subcontractors' contracts. Each such list shall
show the name, address and telephone number of each such Contractor or
Subcontractor, a general statement of the nature of the work to be done, the
labor and materials to be supplied, the names of materialmen, if known, the
approximate dollar value of such labor, work and materials itemized with respect
to each Contractor and Subcontractor, and the unpaid portion and status of such
work or whether such materials have been delivered. In the event that Lender
reasonably determines that any information provided to Lender is incomplete,
Lender and its Consultants shall have the right, without either the obligation
or the duty, to contact directly each Contractor and Subcontractor to verify the
facts disclosed
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by such list or any other information provided by Borrower or relating to the
Project. In the event that Borrower or General Contractor shall fail to maintain
the same in respect of the performance of any Contractor or Subcontractor,
Lender may require that the performance of any such Contractor or Subcontractor
be secured by a payment and performance bond in form, and issued by a surety
company, reasonably acceptable to Lender; provided, however, that Lender shall
not be entitled to require that the performance of any Subcontractor be bonded
if the performance of another Person retaining such Subcontractor has been
bonded as to the portion of the work to be performed by such Subcontractor.
Section 7.08. Permits and Warranties. Borrower shall
----------------------
deliver to Lender from time to time originals or copies of: (a) all building and
other permits, approvals, and authorizations required in connection with the
construction of the Project or the operation or occupation of the Premises or
any part thereof promptly upon issuance and receipt by Borrower thereof, and in
any event before any act is done which requires the issuance of the respective
permit, approval or authorization, and (b) upon request of Lender, all
warranties and guaranties received from any person furnishing labor, materials,
equipment, fixtures or furnishings in connection with the Project.
Section 7.09. Protection Against Liens and Claims.
------------------------------------
(a) Borrower shall take all reasonable steps to forestall the
assertion of claims of Lien against the Project or the Trust Estate or any part
thereof.
(b) In the event that any claim is asserted against Lender or
the Undisbursed Construction Funds by any Person furnishing labor, services,
equipment or material to the Project and the claim is not being contested in
accordance with the Deed of Trust, Lender may, in its sole discretion, file an
interpleader action requiring all claimants to interplead and litigate their
respective claims, and in any such action Lender shall be released and
discharged from all obligations with respect to any funds deposited in court,
and Lender's reasonable costs and expenses, including without limitation
reasonable attorneys fees, shall be paid from such funds or from any undisbursed
portion of the Loan. Any such funds deposited in court and all reasonable costs
and expenses of Lender in connection therewith shall be deemed to be
Disbursements under this Agreement and the Note.
Section 7.10. Removal of Personalty. Borrower shall not:
---------------------
(a) Install in or otherwise use in connection with the Project
any materials, equipment or fixtures under any
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security agreement or similar agreement however denominated whereby the right is
reserved or accrues to anyone to remove or repossess any such items or whereby
any person other than Lender reserves or acquires a Lien upon such items;
(b) Remove or permit the removal of any Personal Property located on
the Property or used in connection with the Project, except in compliance with
the terms of the Deed of Trust; or
(c) Without the consent of Lender, permit the storage of any Personal
Property at any location other than the Premises except for Personal Property
stored in a bonded warehouse facility, segregated and separately identified to
the Project, and insured to the reasonable satisfaction of Lender.
Section 7.11. Insurance. Borrower shall provide or cause to be
---------
provided the policies of insurance required by Section 1.08 of the Deed of
Trust.
Section 7.12. Title Reports. Borrower shall deliver or cause to be
-------------
delivered to Lender, in form and substance satisfactory to Lender: (a) such
endorsements and binders to the Title Policies and (b) such preliminary title
reports and other title searches as may be required by the terms of this
Agreement or as Lender may from time to time reasonably require in connection
with Disbursements hereunder.
Section 7.13. Entry and Inspection. Lender and its Consultants,
--------------------
including the Inspecting Engineer, shall, during normal construction and
business hours, upon notice to General Contractor (which may be telephonic) and
subject to Space Tenants' rights under any Space Leases, have the right of entry
and free access to the Premises and the right to inspect all work done, labor
performed, and materials furnished in and about the Project and to examine all
Plans, wherever located. Borrower will cooperate and will cause Architect,
General Contractor and all Contractors and Subcontractors to cooperate with
Lender and its Consultants to enable Lender and its Consultants to perform their
functions. At the time of each inspection by the Inspecting Engineer, Borrower
will make available to the Inspecting Engineer, on demand, daily log sheets
covering the construction period showing the date, weather, Contractors and
Subcontractors on the job, number of workers and status of construction.
Section 7.14. Physical Security of Project. Borrower shall provide
----------------------------
such watchmen and take such other measures to protect the physical security of
the Project and the Trust Estate as Lender may from time to time reasonably
require.
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Section 7.15. Information Covenants.
----------------------
(a) Borrower shall keep and maintain or will cause to be kept and
maintained, on a fiscal year basis in accordance with consistently applied
generally accepted accounting practices customarily used in the real estate
industry, complete and accurate books, accounts and records reflecting all of
the financial affairs of Borrower and all of the earnings and expenses in
connection with the operation of the Trust Estate or in connection with any
services, equipment or furnishings provided in connection with the operation of
the Trust Estate, and, without expense to Lender, shall deliver to Lender
annually, within ninety (90) days after the close of each of Borrower's fiscal
years (i) an operating statement (including, without limitation, the amount of
rent escalations under the Qualifying Space Leases for such fiscal year) and an
annual budget certified by a general Partner of Borrower or The chief financial
officer of the Person that directly or indirectly controls the day-to-day
operations and management of the Trust Estate showing in reasonable detail the
income and expenses of the operations of the Trust Estate, a statement of profit
and loss, and a balance sheet for the immediately preceding fiscal year of
Borrower, (ii) a complete copy of a financial statement of Borrower for the
immediately preceding fiscal year of Borrower certified to Lender by a general
partner or other principal of Borrower, containing a statement of surplus, and a
balance sheet of Borrower, and (iii) a rent roll current to within thirty (30)
days, showing the Space Tenants in occupancy, their square footage, their fixed
and basic rents, and their tax and operating escalations. Lender or its
designee will be permitted upon not less than ten (10) days prior notice to
Borrower, to examine such books and records and all supporting vouchers and data
at the office of Borrower with respect to the Trust Estate and make such copies
or extracts at Borrower's expense thereof as Lender or its designee shall
reasonably desire. Lender shall not have any duty to make any such inspection
and shall not incur any liability or obligation as a result of not making such
inspection. Lender agrees that any information obtained by Lender in its review
or examination of Borrower's books and records pursuant to this Section 7.15
shall be confidential and solely for the benefit of Lender and any Loan
Participant. Each participation agreement between Lender and any Loan
Participant shall require such Loan Participant to maintain the confidentiality
of any information obtained by Lender in its review of Borrower's books and
records; however, Lender shall have no liability to Borrower by reason of any
Loan Participant's breach of such covenant.
(b) Each annual statement shall be accompanied by a certificate of
Borrower, dated as of the delivery of such statement to Lender, stating that
Borrower, to the best of its knowledge, knows of no Event of Default that is
continuing, or,
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if any such Event of Default is continuing, specifying the nature and period of
existence thereof and what action Borrower has taken or proposes to take with
respect thereto, and, except as otherwise. specified, stating that to the best
of its knowledge Borrower has fulfilled all its obligations under this Agreement
and the other Loan Documents that are required to be fulfilled on or prior to
the date of such certificate.
(c) Borrower shall deliver or cause to be delivered to Lender, not
later than ninety (90) days after the end of each calendar year during the Loan
Term a financial statement of each Guarantor, certified, respectively, by each
Guarantor.
(d) Borrower shall furnish to Lender within thirty (30) days after
request therefor such further detailed information covering the operation of the
Trust Estate and the financial affairs of Borrower arid each Guarantor as may be
reasonably requested by Lender.
(e) Borrower shall deliver to Lender as soon as practicable and in any
event within ten (10) days of Borrower's learning thereof, notice of:
(i) Any dispute raised by the General Contractor under the
Construction Contract relating to an increase in the Contract Sum (as therein
defined) and any material delay in the progress of the Project, whether or not
constituting Force Majeure;
(ii) Any litigation affecting or relating to (A) Borrower, (B) any
Guarantor which would materially, adversely affect such Guarantor's ability to
perform its obligations under the Loan Documents, (C) the Trust Estate, (D) the
Project or (E) the Government Leases;
(iii) Any dispute involving any Governmental Authority relating to
the Trust Estate, the Project or the Government Leases, the adverse
determination of which might materially adversely affect the Trust Estate or the
Project;
(iv) Any threat or commencement of proceedings. in condemnation or
eminent domain relating to the Trust Estate;
(v) Any event which, with the giving of notice and/or the passage
of time, could become an Event of Default, together with a written statement
setting forth the nature of the event and the action Borrower proposes to take
with respect thereto; and
(vi) Any event which is or could become a Termination Event under
the terms of the Bid Protest Guaranty.
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(f) Borrower shall deliver to Lender as soon as practicable and in any
event within ten (10) days of Borrower's receipt or delivery thereof a copy of
each report, statement, certification, claim, data or notice received, made or
delivered by Borrower in connection with the Government Leases that relates to
events that will materially affect Borrower's performance under the terms of the
Government Leases, including, without limitation, notices relating to the
progress of construction of the Improvements, the imposition by the government
of any penalties or damages, the exercise by the government of any termination
or cancellation rights, the exercise by the government of any right to audit the
Government Leases, the filing of any dispute or litigation or the failure of
Borrower to comply with any of the requirements of the Government Leases,
including, without limitation, such notices as are required under the following
sections of the Government Leases: (i) of the GSA Building Lease, Sections 5,
26, 28, 31, 32, 45, 78 and 105 of the Solicitation for Offers, Exhibit III
(relating to the Parking Agreement), and all Sections of the General Clauses,
and (ii) relevant sections of the Parking Agreement.
(g) Borrower shall deliver or cause to be delivered to Lender, as soon
as available and in any event within thirty (30) days after the end of each
calendar quarter, a report as to the status of construction and leasing of the
Project including leasing schedules and reports, executed copies of any Space
Leases entered into during such quarter, a list of all Space Leases then pending
or the subject of negotiation by Borrower and such other leasing information as
Lender shall reasonably request with respect to the Space Leases and the Trust
Estate.
(h) Borrower shall deliver or cause to be delivered to Lender, on the
date on which Borrower submits its final Request for Disbursement of Hard Costs
under Section 5.08 and not later than sixty (60) days prior to the end of each
calendar year thereafter, an annual operating budget (the "Annual Operating
Budget") for the Project which shall be subject to approval by Lender in its
reasonable judgment. Lender's failure to disapprove a proposed Annual Operating
Budget within thirty (30) days after submission shall be deemed to be Lender's
approval of such submission.
Section 7.16. Management of Property. Borrower shall not enter into
----------------------
any agreement providing for the management, leasing or operation of all or any
part of the Premises without the prior written consent of Lender, such consent
not to be unreasonably withheld or delayed. Lender hereby approves Boston
Properties, a Massachusetts business trust, as manager of the Premises provided
that Boston Properties is and remains an Affiliate of Mortimer B. Zuckerman
and/or Edward H. Linde.
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<PAGE>
Each manager of the Project shall execute and deliver to Lender a consent on
Lender's standard form to the collateral assignment to Lender of the management
contract for the Project.
Section 7.17. Project Documents.
-----------------
(a) Except to the extent otherwise provided for herein, Borrower
shall maintain in full force and effect, and shall comply with all of its
obligations under, each of the Project Documents, including without limitation
the Architect Contract and the Construction Contract.
(b) Unless Lender otherwise consents in writing Borrower shall
not: (i) permit any of the Project Documents to be materially supplemented,
modified, amended or terminated excluding any supplements, modifications or
amendments in respect of Change Orders not requiring Lender's approval
hereunder; (ii) waive, or consent to any departure from, any of the material
provisions of any of the Project Documents; or (iii) transfer, convey, encumber,
assign or release any interest in any of the Project Documents (except under the
Loan Documents).
Section 7.18. Operation and Maintenance of Project. Borrower shall (i)
------------------------------------
use its best efforts to keep the Project and the Improvements fully leased in a
manner consistent with the highest commercial use thereof and at prevailing
rates, (ii) enter into appropriate leases, service contracts and maintenance or
operating agreements in accordance with the terms of this Agreement and the
other Loan Documents, and (iii) make all necessary and customary capital
improvements, repairs, replacements, additions, renovations or refurbishing of
or to the Trust Estate. Borrower shall incur and pay or cause to be paid all
costs, expenses and charges necessary or appropriate to comply with the
requirements of this Section 7.18.
Section 7.19. Environmental. No Hazardous Material shall be used
-------------
during construction of the Project unless there exists no practical alternative
thereto and then such Hazardous Material shall be used and stored in strict
compliance with all Laws and shall be removed in its entirety from the Premises
promptly upon completion of such use. Borrower shall establish and maintain a
procedure to monitor the compliance of the Project with all applicable Laws
relating to Hazardous Materials.
Section 7.20. Other Business. Borrower shall not engage in any
--------------
business other than the developing, constructing, operating, owning, managing,
financing, and leasing of the Project and Phase I and the ownership of Lot 872.
Without Lender's prior written approval Borrower will not change the height,
bulk, location or use (a) of Lot 872 from that
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heretofore presented to Lender so as to materially adversely affect the Premises
or (b) of Phase I except as permitted under the documents providing for,
evidencing, securing or otherwise relating to the loan made by Lender to
Borrower in respect of Phase I.
Section 7.21. Further Encumbrance. Except as otherwise expressly
-------------------
permitted by this Section 7.21, Borrower shall not further mortgage, encumber
for debt or pledge the Project, Trust Estate, Revenues or any part thereof or
any interest therein (including, without limitation, any air or development
rights). Borrower shall be permitted to further encumber for debt, mortgage or
pledge the Trust Estate or a part thereof as security for additional
indebtedness ("Subordinate Financing") provided that all of the following
conditions have been met by Borrower to Lender's reasonable satisfaction or
Lender has waived the same in writing:
(a) Borrower has validly elected the Fixed Rate under the Note
for an Interest Period ending on the Maturity Date.
(b) The Debt Service Coverage Ratio (calculated as if the
Subordinate Financing had occurred and payments of principal and interest were
payable with respect thereto) for the month preceding the month in which the
Subordinate Financing is to occur, shall be equal to or greater than 1.15.
(c) After taking the Subordinate Financing into account, the
Loan to Value Ratio as of the date of the Subordinate Financing shall be no
greater than eighty percent (80%).
(d) Borrower shall give Lender telephonic notice, promptly
confirmed in writing, of Borrower's intention to engage in any such Subordinate
Financing at least twenty (20) days prior to Borrower's entering into such
Subordinate Financing. Not later than ten (10) days prior to the closing of such
Subordinate Financing, Borrower shall submit to Lender all documentation with
respect to such Subordinate Financing. Lender shall have ten (10) days from
receipt of such documentation to approve such documentation and if Lender shall
not have responded to Borrower's request for approval within ten (10) days after
receipt thereof, Lender shall be deemed to have approved the documentation with
respect to such Subordinate Financing. All documentation with respect to any
Subordinate Financing shall be approved by Lender if such documentation, in
Lender's reasonable judgment, (i) expressly provides that the Subordinate
Financing and all rights given to the lender under such Subordinate Financing
("Subordinate Lender") shall be subject and subordinate to the
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Loan and all Loan Documents (as then in effect) in all respects, and (ii)
provides for the following:
(A) The Subordinate Financing shall not contain any provisions which
conflict with the Deed of Trust or the Assignment of Rents with regard to the
collection and release and of insurance proceeds, distribution of condemnation
awards arid collection of rents following an Event of Default or shall expressly
provide that the Deed of Trust and Assignment of Rents control with respect to
the foregoing. The Subordinate Financing shall not assign to the Subordinate
Lender any interest in the Rents payable under a Government Lease (as those
terms are defined in the Assignment of Rents).
(B) Any debt service or other payment paid on the Subordinate Financing
out of Revenues from the Trust Estate after an Event of Default has occurred,
shall be held in trust by the Subordinate Lender for the benefit of Lender and
shall be paid over to Lender upon request if Lender has given the Subordinate
Lender notice of such Event of Default and the Subordinate Lender (i) has not
cured such Event of Default within ten (10) days after receipt of notice
thereof, or (ii) with respect to non-monetary defaults, (A) the Subordinate
Lender has not commenced action to remedy such Event of Default within thirty
(30) days after notice and (B) the Subordinate Lender is not pursuing such
remedial action to completion with due diligence, provided in each case that at
the time of such action by the Subordinate Lender the Borrower would be entitled
to cure the applicable Event of Default.
(C) The Subordinate Lender shall enter into non-disturbance agreements
with Space Tenants under Space Leases if Lender has entered into or, after the
date of the Subordinate Financing, Lender enters into such agreements with such
tenants.
(e) There shall exist at the time of such Subordinate Financing no
Event of Default nor any fact or circumstance, which with the passage of time,
giving of notice or action of third parties, could become an Event of Default
that is not then being cured in accordance with the terms of this Agreement and
the other Loan Documents.
(f) The Subordinate Lender shall be an Institutional Lender at the time
of entry into the Subordinate Financing.
(g) With respect to any Subordinate Financing permitted hereunder and
approved by Lender pursuant hereto, Lender shall, upon request and at Borrower's
sole cost, enter into an agreement with the Subordinate Lender pursuant to which
Lender shall agree to provide the Subordinate Lender with (i) concurrent notices
of any notice of default which could
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become an Event of Default under any of the Loan Documents, and (ii) an
opportunity to cure any such default within the applicable notice and grace
periods, if any, given to Borrower under the applicable provisions of any of the
Loan Documents.
Section 7.22. Transfers. Borrower will not cause, permit or suffer a
---------
Transfer, other than to a Permitted Transferee, a Subordinate Lender or a party
claiming by, through or under a Subordinate Lender (by virtue of foreclosure
sale or by accepting a deed in lieu of foreclosure) without the prior written
consent of Lender, which consent shall not be unreasonably withheld or delayed.
For purposes of this Section 7.22, Lender shall consider, by way of illustration
and not in limitation, the following factors in its determination of granting
consent to any such Transfer: (i) the financial condition of the proposed
transferee; (ii) the general reputation in the community of the proposed
transferee; and (iii) the management and real estate experience of the proposed
transferee. For purposes of this Section 7.22, if Lender has not responded to
Borrower's request for approval or consent within ten (10) days following
receipt thereof, Lender's rights regarding prior approval or consent shall be
deemed waived; provided, however, Lender's right to consent or approve the
proposed transferee shall not be deemed waived if Lender has requested further
information concerning such proposed transferee as in its reasonable judgment is
necessary to evaluate Borrower's request. Lender shall have an additional ten
(10) day period following receipt of such additional information by Lender in
which to approve or disapprove the proposed transferee. If Lender has not
responded within the ten (10) day period referred to in the preceding sentence,
Lender shall be deemed to have waived its right to so consent.
Section 7.23. Reimbursable Expenses. Borrower shall reimburse Lender
---------------------
for all Out-of-Pocket Costs in connection with (a) the preparation, negotiation,
execution and delivery of the Loan Documents and all certificates, agreements,
instruments and opinions delivered in connection herewith and therewith, (b) any
amendment, modification or supplement to any of the Loan Documents or any
agreement or instrument delivered in connection herewith or therewith, (c) any
waiver of any provision of this Agreement, any of the Loan Documents or any
agreement or instrument delivered in connection herewith or therewith, (d) any
restructuring of the terms of any of the Loan Documents or any agreement or
instrument delivered in connection herewith or therewith, and (e) the
administration and enforcement of the Loan Documents or any agreement or
instrument delivered in connection herewith or therewith from and after the
occurrence of an Event of Default or following an acceleration of the Loan. All
of the foregoing expenses shall be reimbursed by Borrower whether or not Lender
gives notice to Borrower of such Event of Default under this Agreement or takes
any other action to enforce the provisions of any of the Loan
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Documents or any agreement or instrument delivered in connection herewith and
therewith. Borrower shall pay any and all stamp and other taxes and fees
payable or determined to be payable in connection with the execution, delivery,
filing, recording and enforcement of any of the Loan Documents or any agreement
or instrument delivered in connection herewith or therewith and shall save
Lender harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or failure to pay such taxes and fees. All
amounts payable pursuant to this Section 7.23 shall be due and payable not later
than ten (10) Business Days following written demand by Lender, together with
interest thereon (i) if Lender has actually paid such amount, at the Prime Rate
(as defined in the Note) from the date of demand therefor through the date which
is ten (10) Business Days after demand therefor (the "Due Date"), and (ii)
whether or not Lender has actually paid such amount, at the Involuntary Rate
from the Due Date through the date of payment by Borrower. The obligation to
pay such amounts shall survive the repayment of the Loan and shall continue in
full force and effect so long as the possibility of any such liability, claims
or losses pursuant to this Section 7.23 exists.
Section 7.24. Preservation of Existence. Borrower shall, as long as
-------------------------
any part of the Loan remains unpaid, do all things necessary to preserve and
keep in full force and effect its existence, franchises, rights and privileges
as a partnership under the laws of the state of its formation and will comply
with all regulations, rules, statutes, orders arid decrees of all Governmental
Authorities applicable to the Trust Estate or any part thereof, subject,
however, to Borrower's right to contest such regulations, rules statutes, orders
and decrees pursuant to Section 1.11 of the Deed of Trust.
Section 7.25. Future Tenant Estoppel Certificates.
-----------------------------------
(a) From time to time during the Loan Term upon Lender's request,
but not more often than once each calendar year other than following the
occurrence of an Event of Default, Borrower shall, within forty-five (45) days
following request by Lender, deliver to Lender estoppel certificates in the form
prepared by Lender with respect to all Qualifying Space Leases, which estoppel
certificates shall be executed by Borrower and each other party to the
appropriate Qualifying Space Lease, stating (i) that the Qualifying Space Lease
is unmodified and in full force and effect or, if modified, stating the
modification(s), if any, (ii) whether or not, to the best knowledge of each
party to such Qualifying Space Lease, any other party to such Qualifying Space
Lease is in default in any respect under such Qualifying Space Lease, and, if
so, specifying such default, and (iii) any other matters that may be reasonably
requested by Lender. If Borrower is unable to deliver any such estoppel
certificate to Lender
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because, despite Borrower's reasonable efforts, the Space Tenant from whom it
has been requested has not delivered it to Borrower, Borrower shall deliver
Borrower's certificate to Lender as to the matters set forth in Clauses (i)-
(iii) and shall deliver the Space Tenant's estoppel certificate to Lender within
two (2) Business Days after receiving it.
(b) At any time during the Loan Term, Borrower shall, within ten
(10) days after request by Lender, execute and deliver Borrower's certificate
stating (i) that the Qualifying Space Leases are unmodified and in full force
and effect as modified, stating the modification(s), and (ii) that all rents due
under Qualifying Space Leases have been paid when due, or if not, specifying the
Qualifying Space Leases under which rents have not been paid when due.
Section 7.26. Use of Proceeds. Borrower will use the proceeds of the
---------------
Loan solely to pay Project Costs.
Section 7.27. Publicity. Promptly following the Initial Disbursement,
---------
Borrower shall, at its sole expense, publish in a publication of its choice a
"tombstone notice" of the Loan in form and substance mutually satisfactory to
Lender and Borrower.
Section 7.28. Name. Borrower shall not change its name without
----
Lender's prior consent.
Section 7.29. Consultants' Fees. Borrower shall pay all fees and
-----------------
expenses of Lender's Consultants which are reasonable and customary, such
obligation on the part of Borrower to survive the repayment of the Loan. After
a default by Borrower in the payment of any of the fees, costs and other
expenses of Lender's Consultants or after any Event of Default, Lender, in its
discretion, may pay such fees, costs and other expenses at any time by a
Disbursement for Soft Costs under the Loan or from any Completion Deposit and
Borrower hereby authorizes Lender to make such payments.
Section 7.30. Partnership Agreement; No Partnership Distributions.
---------------------------------------------------
Borrower shall not amend its agreement of limited partnership so as to limit the
authority of the current general Partner of Borrower to control and act for
Borrower, shorten the term of such agreement, modify the permitted purposes of
Borrower, or adversely affect either the ability of Borrower to perform its
obligations under the Loan Documents or the interests of Lender thereunder.
Borrower will not, without the prior written consent of Lender, make any
distribution of partnership assets or proceeds to any Partner of Borrower in
such Person's capacity as a Partner other than for reimbursement of actual
expenses incurred by a Partner of Borrower on behalf of Borrower, whether or not
such a partnership distribution is permitted under the terms of
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Borrower's partnership agreement; provided, however, that so long as no monetary
default or Event of Default under the Loan Documents shall then exist or would
exist after giving effect to the proposed distribution, then (a) at any point
while the Loan is outstanding, Borrower, pursuant to Section 2.05 hereof, shall
be permitted to make one or more distributions from the Item designated in the
Project Budget as "Land Equity" in amounts totalling, in the aggregate, not more
than Seven Million Dollars ($7,000,000), (b) upon termination of the Bid Protest
Guaranty in accordance with its terms, Borrower shall be permitted in accordance
with Section 2.05 hereof to disburse the amount remaining under the Item
designated in the Project Budget as "Land Equity" in accordance with the Project
Budget and Construction Schedule provided to Lender in connection with the Loan,
and (c) if Completion of Construction shall have occurred, then, to the extent
of Net Cash Flow excluding cash from the Loan, Borrower, not more frequently
than quarterly, may make distributions of partnership assets or proceeds (other
than Loan proceeds) to any Partner of Borrower. Nothing in this Section 7.30
shall prohibit Borrower's paying a development fee to a Partner or Affiliate of
Borrower, provided that such payment is pursuant to and in accordance with an
agreement heretofore approved by Lender or hereafter entered into with Lender's
approval, which approval shall not be withheld or delayed unreasonably provided
that the fee to be paid thereunder is within the amount of the Item established
therefor in the Project Budget.
Section 7.31. Space Leases. Borrower shall fully perform in a timely
------------
fashion all of its obligations under all Space Leases, including the Government
Leases.
Section 7.32. Tenant Improvements Schedule. Borrower shall provide to
----------------------------
Lender a Tenant Improvements Schedule immediately upon becoming available and in
any event prior to commencing construction of any Tenant Improvements.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
------------------------------
Section 8.01. Events of Default. Each of the following specified
-----------------
events shall constitute an "Event of Default" under this Agreement whether the
occurrence of such event shall be voluntary or involuntary or come about or be
affected by operation of law or otherwise:
(a) If any representation, warranty or statement made by (i)
Borrower herein, in any other Loan Document or any Request for Disbursement,
certificate, document, financial or other statement given by Borrower in
connection with the Loan,
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or (ii) Guarantors in any of the Guarantees or any certificate, document,
financial or other statement given by Guarantors in connection with the Loan,
shall prove to have been untrue or incorrect in any material respect when made
and the existence of the facts constituting such untruth or incorrectness shall
have a material and adverse effect upon the value of the Trust Estate or
Lender's security for the Loan; or
(b) If any Lien or security interest created by any Loan
Document, at any time after the execution and delivery thereof and for any
reason, ceases or fails to constitute a valid, perfected and subsisting first
lien or security interest in and to the property purported to be covered
thereby, subject only to the Permitted Exceptions; or
(c) If the Project or any portion thereof is not completed in
substantial conformity with the Plans in an orderly and expeditious manner
substantially in accordance with the time references set forth in the
Construction Schedule or before the Completion Date, subject to the provisions
of Section 7.01, or is not, through Completion of Construction, free and clear
of mechanics', materialmen's and other Liens asserted by suppliers of labor,
services, equipment or material to the Project, subject to Borrower's rights
under the Deed of Trust to contest Liens; or
(d) If all or a substantial or material portion of the Trust
Estate is injured, damaged or destroyed by fire or other casualty or damaged
thereby to an extent that would, in Lender's reasonable judgment, prevent or
preclude Completion of Construction in an orderly and expeditious manner and in
any event before the Completion Date; provided, however, that such damage shall
not constitute an Event of Default if Borrower shall be entitled to restore the
Trust Estate in accordance with the terms of the Deed of Trust; or
(e) If Borrower, in connection with the Bid Protest Litigation,
is enjoined or prevented by issuance of a stop work order or suspension of work
by any Governmental Authority or court of competent jurisdiction from
constructing the Project or performing its obligations hereunder and such
injunction, stop work order or suspension of work is not released or stayed (i)
within sixty (60) days after the granting thereof, or (ii) within an additional
period of time after such sixty (60) days, not to exceed an additional sixty
(60) days, upon the prior consent of Lender, not to be unreasonably withheld if
Borrower demonstrates to the reasonable satisfaction of Lender that such
injunction, stop work order or suspension of work will be released or stayed and
Lender in good faith determines that such injunction, stop work order or
suspension of work will not prevent or preclude Completion of Construction in an
orderly and expeditious manner and in any event before the Completion Date; or
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(f) If all or a substantial or material portion of the Trust
Estate is condemned, seized or appropriated by any Governmental Authority;
provided, however, that if such a taking is a partial taking and Borrower shall
be entitled to restore the Trust Estate in accordance with the Deed of Trust,
such taking shall not be deemed to be an Event of Default; or
(g) If Completion of Construction shall not occur by the
Completion Date; or
(h) If a default by Borrower shall occur under the Architect
Contract, Construction Contract or any Space Lease (including the Government
Leases), which default Lender reasonably determines is likely to affect
Borrower's ability to complete construction of the Project before the Completion
Date, and, if such default is subject to cure, shall remain uncured on the date
that is the last day of the grace period applicable to such default; or
(i) If the General Contractor or any Architect shall fail to
perform or observe any term, covenant or agreement contained in the Construction
Contract or any Architect Contract, respectively, or in the consent signed by
the General Contractor or such Architect for the benefit of Lender and (i)
Lender has determined, in its reasonable judgment, that such failure would have
a material adverse effect on the Project or would prevent or preclude Completion
of Construction in an orderly and expeditious manner and in any event before the
Completion Date, (ii) such failure shall continue for a period of twenty (20)
calendar days from the date that notice of such determination is given to
Borrower, (iii) Borrower shall fail to submit to Lender the name of a proposed
successor General Contractor or Architect within twenty (20) calendar days
thereafter, (iv) Lender shall disapprove such proposed successor General
Contractor subsequent to such twenty (20) day period (provided that Lender's
approval shall not be unreasonably withheld), and (v) Borrower shall fail to
enter into a replacement Construction Contract or Architect Contract within
thirty (30) days after submission and approval of such replacement General
Contractor or Architect and such replacement Architect or General Contractor
shall fail to execute a consent in favor of Lender, in a form mutually
acceptable to Lender and such replacement Architect or General Contractor,
within such time period; provided, however, that if Lender fails to approve the
first successor General Contractor or Architect submitted by Borrower, then
Borrower shall have an additional ten (10) days between steps (iv) and (v) above
to submit the name of a second proposed successor General Contractor or
Architect and Lender shall have an additional ten (10) days after such
subsequent submission to approve such proposed successor; or
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(j) The General Contractor or the Architect shall cease to act as
General Contractor or Architect for the Project, and (i) Borrower shall fail to
submit to Lender the name of a proposed successor General Contractor or
Architect within thirty (30) calendar days thereafter, or (ii) Lender shall
disapprove such proposed successor General Contractor or Architect subsequent to
such thirty-day period (provided that Lender's approval shall not be
unreasonably withheld) or (iii) Borrower shall fail to enter into a replacement
Construction Contract or Architect Contract within thirty (30) days after
submission and approval of such replacement General Contractor or Architect and
such replacement Architect or General Contractor shall fail to execute a consent
in favor of Lender, in a form mutually acceptable to Lender and such replacement
Architect or General Contractor, within such time period; provided, however,
that if Lender fails to approve the first successor General Contractor or
Architect proposed by Borrower, Borrower shall have an additional twenty (20)
days between steps (ii) and (iii) above to propose a second successor General
Contractor or Architect, which Lender shall expeditiously approve or disapprove,
and there shall be no Event of Default if Borrower enters into a replacement
Construction Contract or Architect Contract within thirty (30) days after
submission and approval of such second replacement General Contractor or
Architect; or
(k) If the Loan is not in balance and the Contractor or
Subcontractor for the Item or Items out of balance have not provided payment and
performance bonds as provided in Section 2.14 within thirty (30) days after
notice from Lender; or
(l) If Borrower shall fail to perform or observe any other
covenant, term or agreement on its part contained in this Agreement and not
otherwise provided for in this Section 8.01, which failure shall have continued
unremedied for thirty (30) days after notice thereof has been given to Borrower
by Lender, provided, however, that if in Lender's reasonable judgment the nature
of the failure referred to in this clause (1) is such that it is curable by
Borrower but cannot be cured within said thirty (30) days, then an Event of
Default shall not be deemed to have occurred hereunder so long as (i) Borrower
has commenced to cure said failure within said thirty (30) day period, and has
notified Lender of such commencement within said thirty (30) days, (ii) Borrower
thereafter proceeds with diligence to cure the same in Lender's reasonable
judgment, and (iii) sufficient progress is being made in curing such default, in
Lender's reasonable judgment; or
(m) If any Event of Default shall have occurred under any other
Loan Document and shall remain uncured under the terms of any other Loan
Document; or
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(n) If a default shall occur under any guaranty now or hereafter
provided in respect of the Loan, including without limitation the Guarantees,
and such default shall remain uncured beyond the applicable notice and grace
period thereunder, if any; or
(o) If any of the Guarantees is not in effect, unless it has
lapsed pursuant to its terms, or the obligation to make payments of the
guaranteed obligations under any such guaranty is determined by a court of
competent jurisdiction to be unenforceable; or
(p) The termination, liquidation or dissolution or the
commencement of proceedings towards the liquidation or dissolution of Borrower,
or a general Partner of Borrower or a general partner of a general Partner of
Borrower (unless immediately reconstituted pursuant to the provisions of its
partnership agreement or applicable law or in connection with a Transfer to a
Permitted Transferee); or
(q) The occurrence, prior to Completion of Construction, of a
material and adverse change in the financial condition of Borrower or any
Guarantor which,' in the sole judgment of Lender, renders it unable to fulfill
its financial obligations as they become due; or
(r) If Borrower is unable to satisfy or cause the satisfaction of
any condition for the receipt of a Disbursement, or to resolve the situation to
the reasonable satisfaction of Lender, for a period in excess of thirty (30)
days after written notice from Lender; or
(s) If any certificate of occupancy or building permit for the
Project or any portion thereof is revoked, cancelled or otherwise ceases to be
effective; provided, however, that such revocation, cancellation or suspension
shall not be an Event of Default if, prior to Completion of Construction,
Borrower is diligently proceeding to cure such default, such cure may be
effected within the Project Budget or with a Completion Deposit, and the time
required to cure such default does not materially adversely affect Borrower's
ability to meet the Construction Schedule or adversely affect any of Lender's
collateral security for the Loan, and after Completion of Construction, such
revocation, cancellation or suspension shall not permit the GSA or other
contracting party to cease paying rent or making payments under the terms of the
Government Leases; or
(t) The GSA Building Lease shall have been terminated or
cancelled for any reason.
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Section 8.02. Remedies.
--------
(a) If any Event of Default shall occur, all obligations of
Lender under this Agreement, including without limitation Lender's obligation to
make any further Disbursements, at the option of Lender, shall cease and
terminate, and Lender may declare the entire outstanding Loan, including
interest thereon and any other fees, costs and charges then payable under any of
the Loan Documents, immediately due and payable, whereupon the same shall become
immediately due and payable, without presentment, protest or further demand or
notice of any kind, all of which are hereby expressly waived by Borrower; and,
upon such occurrence of an Event of Default or at any time following Lender's
declaration that the Loan is due and payable as provided above, Lender, in
addition to the foregoing, may immediately exercise any and all other rights,
remedies and recourse available to it at law or in equity or under this or any
of the other Loan Documents (including, without limitation, the right to sell
the Trust Estate and/or foreclose any and all liens and security interests
securing the repayment of the Loan under the Deed of Trust and the other Loan
Documents).
(b) Borrower hereby irrevocably constitutes and appoints Lender,
the Inspecting Engineer and/or any other independent contractor selected by
Lender as its true and lawful attorney-in-fact, with full power, of
substitution, for the purpose of performing Borrower's obligations in the name
of Borrower under the Loan Documents and completing construction of the Project,
whether or not substantially in accordance with the Plans (with such additions,
changes and corrections in the Plans as shall be necessary or desirable in
Lender's opinion to complete the Project), but Lender may act pursuant to this
power-of-attorney only after an Event of Default occurs. The foregoing power-of-
attorney shall be deemed coupled with an interest and shall be irrevocable until
payment in full of the Loans and all other sums due and owing to Lender under
any of the Loan Documents. Without limiting the generality of the foregoing,
said attorney-in-fact is hereby empowered by Borrower to do any one or more of
the following:
(i) To use any funds of Borrower in Lender's possession and
any Disbursements not yet approved or disbursed hereunder, for the purpose of
completing the Project in the manner called for by the Plans or as provided in
clause (ii) below and all sums advanced hereunder and any other amounts expended
by Lender to complete the Project shall be deemed to have been advanced to or
for the account of Borrower pursuant hereto;
(ii) To make such additions, changes and correction in the
Plans as shall be necessary or desirable in
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Lender's opinion to complete the Project as contemplated by the Plans;
(iii) To employ any contractors, subcontractors, agents,
architects and inspectors required for said purposes;
(iv) To employ attorneys to defend against attempts to
interfere with the exercise of the powers granted hereby;
(v) To pay, settle or compromise all bills and claims which
are or may be liens against the Premises or Project or may be necessary or
desirable for the completion of the Project or the clearance of title;
(vi) To execute all applications and certificates in the
name of Borrower which may be required by any construction contract;
(vii) To prosecute and defend all actions or proceedings in
connection with the construction of the Project on the Premises and to take such
action, require such performance and do any and every other act as is deemed
reasonably necessary by Lender to complete the Project;
(viii) To let new or additional contracts with the same
contractor(s) or others to the extent not prohibited by their existing
contracts;
(ix) To employ watchmen and erect security fences to project
the Project from injury; and/or
(x) To take such action and require such performance as it
deems necessary under any of the bonds which may be, or insurance policies to be
or which have been, furnished hereunder, to make settlements and compromises
with the sureties or insurers thereunder and, in connection therewith, to
execute instruments of release and satisfaction.
(c) Without limiting any other similar rights herein granted,
from and after the occurrence of an Event of Default, Borrower does irrevocably
permit and authorize Lender to advance any Disbursement directly to General
Contractor, Contractors, Subcontractors, materialmen, suppliers and other
persons to pay for the completion of the Project, but Lender is not under any
obligation so to do. No further direction or authorization from Borrower shall
be necessary to warrant such direct advances and all such advances shall satisfy
pro tanto the obligations of Lender hereunder as fully as if made to or for the
- --- -----
account of Borrower regardless of the disposition thereof by any contractors,
materialmen, suppliers or such other persons. Lender may impose any condition
for such direct
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payment including, but not limited to, receipt of estoppel certificates, waivers
of lien, releases and the like.
(d) Any and all costs and expenses (including attorneys' fees
and disbursements) incurred by Lender in pursuing its remedies hereunder and
exercising such power-of-attorney shall be additional indebtedness of Borrower
to Lender hereunder, and shall be secured by the Deed of Trust.
(e) Other than as may result from the negligence or willful
misconduct of Lender or its agents, servants or employees, Borrower does hereby
indemnify and hold Lender harmless from and against any and all liability,
claims, cost, damage, and Out-of-Pocket Costs which may be imposed upon or
incurred by Lender by reason of action taken by Lender hereunder, and from and
against any and all claims or demands whatsoever which may be asserted against
Lender by reason of any alleged obligation or undertaking on its part to perform
or discharge any of the terms, covenants and conditions of any obligation of
Borrower, to the extent same (i) arise during or relate to the period prior to
Lender's taking possession of the Trust Estate following the occurrence of an
Event of Default or (ii) arise during or relate to the period following Lender's
taking possession of the Trust Estate and involve the acts or failures to act of
Borrower or its agents, servants or employees. In case any action, suit or
proceeding is brought against Lender by reason of any such occurrence, as a
condition of Borrower's indemnity obligation under this Section 8.02(e), (i)
Lender shall give prompt notice to Borrower of any such action, suit or
proceeding, and (ii) Borrower may, at Borrower's sole cost and expense, resist
and defend such action, suit or proceeding by counsel reasonably satisfactory to
Lender and (iii) if Borrower elects to defend such action, suit, or proceeding,
Lender shall not compromise or settle any such action, suit or proceeding
without the consent of Borrower unless Borrower waives its right to the
foregoing indemnification. Lender may, however, engage its own counsel, at its
expense, to participate in said defense and in such case, the respective counsel
for Borrower and Lender shall cooperate with each other with respect thereto (it
being understood that at all times counsel for Borrower shall control such
defense) and shall provide each other with copies of all papers filed in such
case which, when practical, shall be delivered prior to filing thereof, or
otherwise contemporaneously with filing thereof, and with such other papers as
shall be reasonably requested by the other counsel which shall be delivered
promptly upon request therefor. All sums determined to be payable by Borrower to
Lender by reason of the foregoing indemnity pursuant to a non-appealable order
of a court of competent jurisdiction, shall be due and payable
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by Borrower to Lender within ten (10) Business Days after demand therefor or on
such later date as specifically set forth in such demand, and if such sums are
not timely paid, said sums shall bear interest at the Involuntary Rate from the
date such payment was due through the date of payment.
(f) Notwithstanding anything to the contrary contained herein,
Lender is not and shall not be obligated to attempt to use, operate, occupy or
manage the Trust Estate or any part thereof or perform any of the terms
conditions and agreements herein or in any of the other Loan Documents or in any
other documents on the part of Borrower to be performed, and Lender shall have
no liability whatsoever to Borrower or, unless and until Lender takes possession
of the Trust Estate following the occurrence of an Event of Default, any other
person or entity (other than by reason of its gross negligence or wilful
misconduct) for failing, attempting or ceasing to perform the same, or for the
manner of performing or attempting to perform the same, or any part thereof.
ARTICLE IX
MISCELLANEOUS
-------------
Section 9.01. Expenses. Borrower shall pay all Out-of-Pocket Costs
--------
and all costs and expenses incurred by Borrower in connection with the Loan and
any advance thereunder including, without limitation, the fees and expenses set
forth in Section 7.29 hereof, recording fees for any documents that Lender
reasonably deems it appropriate to record, recording taxes when required by the
terms of this Agreement to be paid by Borrower (including any such costs
associated with recording tax audits or investigations demanded or conducted by
a state or local tax authority with respect to the Deed of Trust) transfer
taxes, license and permit fees, appraisal fees, costs of environmental
inspections, filing fees, title premiums and other fees of the Title Company, as
and when appropriate.
Section 9.02. Entire Agreement. This Agreement, taken together with
----------------
all of the other Loan Documents and all certificates and other documents
delivered by Borrower to Lender, embodies the entire agreement with respect to
the subject matter hereof, and supercedes or incorporates all prior negotiations
or agreements written and oral.
- 79 -
<PAGE>
Section 9.03. Counterparts. This Agreement may be executed in any
------------
number of counterparts with the same effect as if the parties hereto had signed
the same document. All such counterparts shall constitute one instrument.
Section 9.04. Governing Law/Venue/Jurisdiction. This Agreement and
--------------------------------
the other Loan Documents are to be governed by arid construed in accordance with
the laws of the District of Columbia. By its execution and delivery of the Note
and this Agreement, Borrower shall be deemed to have agreed that the appropriate
venue and jurisdiction for any litigation pertaining to the Loan, the Note or
the Loan Documents shall be in the District of Columbia and that the appropriate
location for any foreclosure sale pertaining to the collateral described in the
Loan Documents shall be in the District of Columbia.
Section 9.05. Severability. If any of the terms and provisions
------------
specified herein is held by a court of law to be in violation of any applicable
local, state or federal ordinance, statute, law, administrative or judicial
decision, or public policy, and if such court should declare such term or
provision to be illegal, invalid, unlawful, void, voidable, or unenforceable as
written, then such provision shall be given full force and effect to the fullest
possible extent that it is legal, valid and enforceable, and the remainder of
the terms and provisions herein shall be construed as if such illegal, invalid,
unlawful, void, voidable or unenforceable term or provision was not contained
herein, and that the rights, obligations and interest of Borrower and Lender
tinder the remainder of this Agreement shall continue in full force and effect .
Section 9.06. Successors and Assigns. All covenants and agreements
----------------------
herein shall bind the respective successors and assigns of Borrower and Lender
(but this provision is not intended nor shall it be construed to permit Borrower
to transfer or assign its rights and obligations hereunder or under the Loan
Documents except as permitted by the provisions of the Loan Documents), whether
so expressed or not, and all such covenants shall inure to the benefit of Lender
and Borrower and their respective nominees, successors and assigns, whether so
expressed or not. All successors and assigns of Borrower, including all Persons
succeeding to Borrower's interest in the Trust Estate as permitted by the Loan
Documents or otherwise consented to by Lender, shall, prior to such succession
or assignment, expressly assume in writing all of Borrower's obligations under
the Loan Documents.
- 80 -
<PAGE>
Section 9.07. Setoff. Borrower hereby waives any and all rights of
------
setoff with respect to principal and interest due on the Note and any other
payments due Lender under the Loan Documents, including rights of setoff with
respect to the Note and the Loan Documents which may arise from claims,
transactions or occurrences heretofore unknown to Borrower.
Section 9.08. Time of the Essence. Time is of the essence with regard
-------------------
to Borrower's performance under the terms amid provisions of this Agreement, the
other Loan Documents and any amendment, modification or revision hereof or
thereof, subject, however, to the applicable grace periods, if any, set forth in
the Loan Documents. No extension of time for the payment of the Loan or any
installment thereof made by agreement with any person now or hereafter liable
for payment of the Loan shall operate to release, discharge, modify, change or
affect the original liability of Borrower under this Agreement, either in whole
or in part.
Section 9.09. Headings. The Table of Contents, and the titles and
--------
headings of Articles and Sections of this Agreement are intended for convenience
only, and shall not in any way affect the meaning or construction of any
provision of this Agreement.
Section 9.10. Notices. Each notice, request, demand, instruction or
-------
other communication required by the Note, this Agreement or the Loan Documents
to be given to Borrower or Lender shall be in writing and shall be either (a)
personally delivered to the parties named below by a commercial messenger
service regularly retaining receipts for such delivery, (b) sent by registered
or certified mail, return receipt requested, or (c) delivered by a reputable air
courier service such as Federal Express, Express Mail, Airborne or Emery Air,
shall be effective upon delivery thereof to the addressees, and shall be
addressed to the parties as set forth below:
To Borrower: Southwest Market Limited Partnership
c/o Boston Properties
8 Arlington Street
Boston, Massachusetts 02116
Attention: Vice President-Treasurer
and Boston Properties
599 Lexington Street, Suite 1300
New York, New York 10022
Attention: Senior Vice President
- 81 -
<PAGE>
and Boston Properties
500 E Street S.W.
Washington, D.C. 20024
Attention: Regional General Counsel
To Lender: The Sumitomo Bank Limited,
New York Branch
One World Trade Center
Suite 9651
New York, New York 10048
Attn: Real Estate Finance
Department
With a Copy to: Gibson, Dunn & Crutcher
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
Attn: Michael A. Barrett, Esq.
(Matter No: 88291-00041)
If Lender or Borrower desires to change its address for the purpose of receipt
of notice, or to change the other party to receive a copy of notice, such notice
or change of address or recipient shall be given in the manner specified herein.
However, unless and until such written notice of change is actually received,
the last address and addressee as stated by written notice, or provided herein
if no written notice of change has been received, shall be deemed to continue in
effect for all purposes hereunder. Any notice given in accordance with the terms
hereof, the delivery of which is refused by the addressee, shall be effective at
the time of such attempted delivery.
Section 9.11. Successive Remedies. No power or remedy herein
-------------------
conferred is exclusive of or shall prejudice any other power or remedy of Lender
given by law or by the terms of any of the Loan Documents. Each such power or
remedy may be exercised by Lender from time to time as often as it deems
necessary.
Section 9.12. No Waiver. No failure by Lender to insist, or election
---------
by Lender not to insist, upon the strict performance of any of the terms,
provisions or conditions of this Agreement or any of the Loan Documents shall be
deemed to be a waiver of the same or any other term, provision or condition
thereof and Lender shall have the right at any time thereafter to insist upon
strict performance of any and all of the same. If Lender advances any portion of
the Loan in the absence of strict compliance with any or all of the conditions
of Lender's obligations to make such advance, the same shall be deemed to have
been made in pursuance of this Agreement and not to be a modification hereof.
- 82 -
<PAGE>
Section 9.13. Estoppel Certificates/Non-disturbance/Other Agreements.
------------------------------------------------------
Within ten (10) Business Days after request by Borrower,. (a) Lender shall
deliver to Borrower an estoppel certificate, duly executed and acknowledged by
Lender, stating the outstanding principal amount of the Loan and whether there
exists any Event of Default under any of the Loan Documents, and (b) Lender
shall execute and deliver a subordination, non-disturbance and attornment
agreement in substantially the form attached to the Deed of Trust as Schedule C,
for any Qualifying Space Lease entered into subsequent to the date hereof. If
Borrower shall pay, in full, the principal of and premium, if any, and interest
in the Note in accordance with the terms thereof and hereof and all other sums
payable hereunder and under the other Loan Documents by Borrower and shall fully
repay the Loan and shall comply with all the terms, conditions and requirements
hereof and the other Loan Documents, then upon prior notice to Lender, Lender
shall on such date of payment execute and deliver to Borrower such discharges,
assignments and/or satisfactions as Borrower may reasonably request and shall
accommodate Borrower by appearing at the closing of such assignment, discharge
or satisfaction or make such other arrangement with respect thereto mutually
satisfactory to Lender and Borrower, provided that Borrower shall pay all
Out-of-Pocket Costs with respect thereto.
Section 9.14. Cross-Default. Any Event of Default under this
-------------
Agreement shall be deemed to be an Event of Default under each of the Loan
Documents, entitling Lender to exercise any or all remedies available to Lender
under the terms of any or all Loan Documents.
Section 9.15. Purpose of Loans. Borrower hereby represents and
----------------
warrants that the indebtedness evidenced by the Note is being obtained solely
for the purpose of carrying on a business or commercial enterprise. Nothing
contained in the preceding sentence shall be deemed to be a limitation of
Borrower's use of the proceeds of the Loan.
Section 9.16. Inconsistencies with Loan . In the event of any conflict
-------------------------
between this Agreement and the provisions of any of the other Loan Documents,
the provisions of this Agreement shall control; provided, however, that any
provision of any other Loan Documents which imposes additional burdens on
Borrower or restricts the rights of Borrower or gives Lender additional rights
or remedies shall not be deemed to be in conflict or inconsistent with this
Agreement and shall be given full force and effect.
Section 9.17. Survival. All of the representations, warranties,
--------
terms, covenants, agreements and conditions contained in this Agreement shall
specifically survive the execution and delivery of this Agreement and the other
Loan Documents and the advance of the Loan and shall, unless
- 83 -
<PAGE>
otherwise expressly provided, continue in full force and effect until the Loan
or the portion thereof which has been advanced, together with interest thereon,
and all other costs, charges and other sums payable hereunder or thereunder, are
paid in full.
Section 9.18. Indemnification. Borrower shall indemnify Lender for
---------------
and hold Lender harmless from and against any and all claims, damages, losses,
liabilities, Out-of-Pocket Costs of any kind whatsoever (other than such Out-of-
Pocket Costs which are the responsibility of Lender pursuant to the terms of
this Agreement) which Lender may incur (or which may be claimed against Lender)
by reason of, or in connection with (a) the destruction of the Trust Estate (or
any part thereof) in a casualty for which insurance was required under the Loan
Documents and was not obtained and kept in full force and effect by Borrower,
(b) all obligations, covenants, representations and warranties of Borrower under
the Trust Estate relating to Hazardous Material to the full extent of any losses
or damages, including those resulting from diminution in the value of the Trust
Estate incurred by Lender as a result of the existence of Hazardous Material to
the extent such Hazardous Material existed prior to the date Lender has taken
possession and has assumed control of the Trust Estate pursuant to the Deed of
Trust, and (c) any action or proceeding to which Lender is made a party by
reason of Lender's holding of an interest in the Trust Estate; provided,
however, Borrower shall have no obligation to indemnify Lender for any such
claims, damages, losses, liabilities, costs or expenses arising by reason of the
negligence or willful misconduct of Lender or Lender's agents, servants or
employees. In case any action, suit or proceeding is brought against Lender by
reason of any such occurrence, as a condition to Borrower's indemnity obligation
under this Section 9.18 (i) Lender shall give prompt notice to Borrower of any
such action, suit or proceeding, (ii) Borrower may, at Borrower's sole cost and
expense, resist and defend such action, suit or proceeding by counsel reasonably
satisfactory to Lender, and (iii), if Borrower elects to defend such action,
suit or proceeding, Lender shall not compromise or settle any such action, suit
or proceeding without the consent of Borrower, unless Lender waives its right to
the foregoing indemnification. Lender may, however, engage its own counsel, at
its expense, to participate in said defense and in such case, the respective
counsel for Borrower and Lender shall cooperate with each other with respect
thereto (it being understood that at all times counsel for Borrower shall
control such defense) and shall provide each other with copies of all papers
filed in such case which, when practical, shall be delivered prior to filing
thereof, or otherwise contemporaneously with filing thereof, and with such other
papers as shall be reasonably requested by the other counsel which shall be
delivered promptly upon request therefor. All sums determined to be payable by
Borrower to Lender by reason
- 84 -
<PAGE>
of the foregoing indemnity pursuant to a non-appealable order of a court of
competent jurisdiction shall be due and payable by Borrower to Lender within ten
(10) Business Days after demand therefor or on such later date as specifically
set forth in such demand, and if such sums are not timely paid, said sums shall
bear interest at the Involuntary Rate from the date such payment was due through
the date of payment. This Section 9.18 shall survive the payment in full of the
Indebtedness.
Section 9.19. No Agency, Partnership or Joint Venture; Nonliability of
--------------------------------------------------------
Lender.
- ------
(a) Lender is not the agent or representative of Borrower, and
Borrower is not the agent or representative of Lender. Borrower and Lender
intend and agree that the relationship between them shall be solely that of
creditor and debtor. Nothing herein nor the acts of the parties hereto shall be
construed to create a partnership or joint venture between Borrower and Lender.
(b) All inspections of the construction of the Project made by
or through Lender are for purposes of administration of the Loan only and
Borrower is not entitled to rely upon the same with respect to the quality,
adequacy or suitability of materials or workmanship, conformity to the Plans,
state of completion or otherwise. Borrower shall make its own inspections of
such construction to determine that the quality of the work and all other
requirements of such construction are being performed in a manner satisfactory
to Borrower and in conformity with the Plans and all other requirements.
(c) By accepting or approving anything required to be observed,
performed, fulfilled or given to Lender pursuant to the Loan Documents,
including any certificate, statement of profit and loss or other financial
statement, survey, appraisal, lease or insurance policy, Lender shall not be
deemed to have warranted or represented the sufficiency, legality, effectiveness
or legal effect of the same, or of any term, provision or condition thereof, and
such acceptance or approval thereof shall not constitute a warranty or
representation to anyone with respect thereto by Lender.
(d) Lender neither undertakes nor assumes any responsibility or
duty to Borrower to select, review, inspect, supervise, pass judgment upon or
inform Borrower of any matter in connection with the Project, including without
limitation matters relating to the quality, adequacy or suitability of: (i) the
Plans (ii) Architects, Contractors, Subcontractors and other Persons employed or
utilized in connection with the construction of the Improvements, or the
workmanship of or the materials used by any of them, or (iii) the progress or
course
- 85 -
<PAGE>
of construction and its conformity or nonconformity with the Plans.
(e) Lender owes no duty of care to protect Borrower against
negligent, faulty, inadequate or defective building or construction.
Section 9.20. Negotiated Document. Lender and Borrower acknowledge
-------------------
that the provisions and the language of this Agreement and the other Loan
Documents have been negotiated, and agree that no provision of this Agreement or
any other Loan Document shall be construed against either Lender or Borrower by
reason of either Lender or Borrower having drafted such provision, this
Agreement or any other Loan Document.
Section 9.21. Limitation on Recourse. Except for certain limited
----------------------
personal liability as specified below, it is expressly understood and agreed
that the extent of liability for payment by the Borrower of any sums due under
this Agreement, the Note, the Deed of Trust or any of the other Loan Documents
is limited to (a) the Trust Estate, and all Revenues therefrom received by the
Borrower after the occurrence of an Event of Default which are not applied to
the Loan or to Expenses of the Trust Estate, and (b) proceeds of insurance on
said Trust Estate or proceeds on account of condemnation thereof (to the extent
such proceeds are not applied by the Lender in restoration or repair of the
Trust Estate pursuant to the terms of the Deed of Trust), the Lender agreeing
not to look personally to the Borrower, the general partners of the Borrower (a
"p-1"), the partners or shareholders of any general partner of the Borrower (a
"P-2"), or the owners of partnership or shareholder interests, whether owned or
held directly or indirectly, in partners of the general partners of the Borrower
(a "P-3"), for payment of any such sums. The Lender, for itself and its
successors, endorsees, participants and assigns, hereby waives any right to
enforce collection of any money judgment against any assets of the Borrower, any
P-1, P-2, or p-3, other than as set forth in clauses (a) and (b) above, whether
by reason of a judgment pursuant to an action brought under the Note or any
action in foreclosure or otherwise for a deficiency judgment against the
Borrower, and P-1, P-2, P-3, other than as set forth in clauses (a) and (b)
above. However, notwithstanding the foregoing, the Borrower and each P-1, P-2
and P-3 shall be fully subject to personal liability (i) for fraud,
respectively, by Borrower or such P-1, P-2 or P-3 and (ii) to the extent that
the proceeds of insurance on the Trust Estate, the proceeds on account of
condemnation thereof, or Revenues of the Trust Estate are received by the
Borrower or such P-1, P-2 or P-3 after the occurrence of an Event of Default and
are not applied to the Loan, the Expenses of the Trust Estate or, in respect of
insurance or condemnation proceeds, in restoration or repair of the Trust Estate
pursuant
- 86 -
<PAGE>
to the terms of the Deed of Trust. The foregoing provisions shall not in any
way be deemed to release, affect or impair the indebtedness and obligations
evidenced by the Note or the security therefor, or the Lender's right to enforce
its remedies under the Deed of Trust or any other of the Loan Documents by any
action, including, without limitation, an action brought under the Note or any
sale or foreclosure under the Deed of Trust. The foregoing provisions shall not
in any way be deemed to release, affect or impair the indebtedness and
obligations evidenced by the Note or the security therefor, or the Lender's
right to enforce its remedies under the Deed of Trust or any other of the Loan
Documents by any action, including, without limitation, an action brought under
the Note or any sale or foreclosure under the Deed of Trust. Furthermore, none
of the foregoing provisions shall in any way derogate from the liability which
any person has assumed by a separate instrument in the nature of a guaranty of
any obligation undertaken in connection with the Loan.
Section 9.22. Actions on Behalf of Lender. Any consent, review,
---------------------------
approval or other similar act required of Lender under the terms of this
Agreement or any other Loan Document may, at Lender's option, be done by or in
consultation with any Consultant or Consultants to Lender. At Lender's
direction, Borrower shall provide such information to Consultants as may be
required to be provided to Lender hereunder.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first written above.
SOUTHWEST MARKET LIMITED PARTNERSHIP,
a District of Columbia limited
partnership
By: Boston Southwest Associates Limited
Partnership, a Massachusetts limited
partnership, General Partner
ATTEST: By: Independence Square, Inc.,
a Delaware corporation,
its Managing General
Partner
/s/ Edward C. Wallace By: /s/ Motimer B. Zuckerman
- ----------------------------- ------------------------------
Name: Edward C. Wallace Motimer B. Zuckerman
----------------------- President
- 87 -
<PAGE>
THE SUMITOMO BANK, LIMITED, a
Japanese banking institution, acting
through its NEW YORK BRANCH
ATTEST:
By:
- ------------------------------- -------------------------------
Name: Name:
-------------------------- ----------------------------
Title:
----------------------------
- 88 -
<PAGE>
EXHIBIT 10.23
AMENDED AND RESTATED
LOAN AGREEMENT
by and between
SQUARE 36 OFFICE JOINT VENTURE,
a District of Columbia General Partnership,
and
THE SANWA BANK LIMITED,
a Japanese banking corporation acting
through its NEW YORK BRANCH
Dated as of June __, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
- ----
<S> <C> <C>
ARTICLE I
CERTAIN DEFINITIONS............................................................................. 2
Section 1.1 Certain Definitions...................................................... 2
Section 1.2 Accounting Terms......................................................... 8
Section 1.3 Certain Interpretations.................................................. 9
ARTICLE II
THE LOAN................................................................................... 9
Section 2.1 Agreement to Lend........................................................ 9
Section 2.2 Repayment................................................................ 10
Section 2.3 Payment of Principal and Interest........................................ 10
Section 2.4 Security................................................................. 10
Section 2.5 Interest Guaranty........................................................ 10
ARTICLE III
CONDITIONS PRECEDENT....................................................................... 11
Section 3.1 Conditions Precedent..................................................... 11
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND AGREEMENTS................................................. 15
Section 4.1 Existence and Ownership.................................................. 15
Section 4.2 Authorization, Enforceable Obligation.................................... 16
Section 4.3 Conflicting Agreements................................................... 16
Section 4.4 Copies of Documents;
Consummation of Transactions........................................... 17
Section 4.5 No Material Litigation................................................... 17
Section 4.6 Margin Regulations....................................................... 18
Section 4.7 Compliance With Applicable Laws.......................................... 18
Section 4.8 Space Leases............................................................. 18
Section 4.9 No Brokers............................................................... 19
Section 4.10 Service Contracts........................................................ 19
Section 4.11 Liens.................................................................... 19
Section 4.12 Condition of Premises.................................................... 20
Section 4.13 Financial Information.................................................... 20
Section 4.14 Permits.................................................................. 21
Section 4.15 True Statements.......................................................... 21
Section 4.16 Representations in Loan Documents........................................ 21
</TABLE>
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
- ----
<S> <C> <C>
ARTICLE V
COVENANTS OF BORROWER...................................................................... 21
Section 5.1 Covenants in Loan Documents.............................................. 21
Section 5.2 No Further Encumbrance................................................... 21
Section 5.3 Single Purpose........................................................... 22
Section 5.4 Information Covenants.................................................... 22
Section 5.5 Reimbursable Expenses.................................................... 24
Section 5.6 Preservation of Existence................................................ 24
Section 5.7 Future Tenant Estoppel Certificates...................................... 25
Section 5.8 Transfers of Premises.................................................... 25
Section 5.9 Amendments to Leases..................................................... 26
ARTICLE VI
EVENTS OF DEFAULT; REMEDIES................................................................ 26
Section 6.1 Events of Default........................................................ 26
Section 6.2 Remedies................................................................. 28
Section 6.3 Interest Guaranty........................................................ 29
ARTICLE VII
MISCELLANEOUS.............................................................................. 30
Section 7.1 Expenses................................................................. 30
Section 7.2 Entire Agreement......................................................... 30
Section 7.3 Counterparts............................................................. 30
Section 7.4 Assignability and Participation.......................................... 30
Section 7.5 Governing Law; Venue; Jurisdiction....................................... 31
Section 7.6 Severability............................................................. 31
Section 7.7 Successors and Assigns................................................... 31
Section 7.8 Setoff................................................................... 32
Section 7.9 Time of the Essence...................................................... 32
Section 7.10 Headings................................................................. 32
Section 7.11 Notices.................................................................. 32
Section 7.12 Successive Remedies...................................................... 34
Section 7.13 No-Waiver................................................................ 34
Section 7.14 Estoppel Certificates/Nondisturbance/Other
Agreements............................................................ 34
Section 7.15 Cross-Default............................................................ 34
Section 7.16 Purpose of Loans......................................................... 35
Section 7.17 Inconsistencies with Loan Documents...................................... 35
Section 7.18 Survival................................................................. 35
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
- ----
<S> <C> <C>
Section 7.19 Indemnification.......................................................... 35
Section 7.20 No Agency, Partnership or Joint Venture.................................. 36
Section 7.21 Negotiated Document...................................................... 36
Section 7.22 Limitation on Recourse................................................... 36
Section 7.23 Construction............................................................. 37
Section 7.24 Survival of Accrued Amounts.............................................. 37
Section 7.25 Confidentiality.......................................................... 38
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT (the "AGREEMENT") made as of
the __ day of June, 1997, by and between SQUARE 36 OFFICE JOINT VENTURE, a
general partnership organized and existing under the laws of the District of
Columbia, having an office c/o Boston Properties, Inc., 8 Arlington Street,
Boston, Massachusetts 02116 ("BORROWER"), and THE SANWA BANK LIMITED, a Japanese
banking corporation acting through its NEW YORK BRANCH, having an office at 55
East 52nd Street, New York, New York 10166 ("LENDER");
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS:
A. Borrower and Lender are parties to a Loan Agreement dated as of
August 3, 1988 (the "ORIGINAL LOAN AGREEMENT"), pursuant to which Lender made a
loan to Borrower in the principal amount of One Hundred Million ($100,000,000)
Dollars (the "LOAN");
B. Borrower has requested that Lender amend and restate the Original
Loan Agreement to permit and reflect, inter alia (i) the amendment and
----- ----
restatement of Borrower's constituent partnership documents, the admission of
new partners to Borrower, and the withdrawal of Borrower's prior general
partners, (ii) the indirect ownership of a portion of Borrower by a real estate
investment trust, (iii) the reduction of the principal amount of the Loan to
Sixty-Six Million ($66,000,000) Dollars, (iv) the reduction of the interest rate
applicable to the Loan, (v) the extension of the term of the Loan, and (vi)
certain other changes; and
C. Lender is willing to amend and restate the Original Loan
Agreement and consent to the related transactions as provided above subject to
the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants hereinafter
set forth and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and subject to and upon the terms and
conditions herein set forth, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE I
CERTAIN DEFINITIONS
-------------------
SECTION 1.1 Certain Definitions.
-------------------
As used in this Agreement, the capitalized terms set forth below shall
have the meanings given them in this Article I.
Affiliate - any Entity that, directly or indirectly, controls, is
---------
controlled by or is under common control with, Borrower, or any other Entity
which is controlled by BP LLC, the Operating Partnership or the REIT. For
purposes of this definition of Affiliate, "control" shall mean the right to make
or veto significant economic and management decisions without the need for the
vote, approval or consent of any other Entity.
Amended and Restated Assignment of Rents - the Amended and Restated
----------------------------------------
Assignment of Leases, Rents, Profits and Other Income dated as of the date
hereof (as it may hereafter be amended, modified, supplemented or restated) made
by Borrower for the benefit of Lender securing certain Obligations (for purposes
of this definition, as defined therein) including the indebtedness evidenced by
the Replacement Note, which Amended and Restated Assignment of Rents amends and
restates the Original Assignment of Rents.
Amended and Restated Deed of Trust - the Amended and Restated Deed of
----------------------------------
Trust and Security Agreement dated as of the date hereof (as it may hereafter be
amended, modified, supplemented, consolidated or restated) made by Borrower in
favor of certain individuals for the benefit of Lender, securing certain
Indebtedness (for purposes of this definition, as defined therein) including the
indebtedness evidenced by the Replacement Note, which Amended and Restated Deed
of Trust amends and restates the Original Deed of Trust.
Amended and Restated Interest Guaranty - the Amended and Restated
--------------------------------------
Interest Guaranty dated as of the date hereof (as it may hereafter be amended,
modified, supplemented or restated), made by Guarantors in favor of Lender,
guaranteeing payment, in certain circumstances, of interest when due and payable
under the Original Note and the Replacement Note, which Amended and Restated
Interest Guaranty amends and restates the Original Interest Guaranty.
2
<PAGE>
BP LLC - Boston Properties LLC, a limited liability company formed and
------
existing under the laws of the State of Delaware and a general partner of
Borrower having a 1% ownership interest therein.
Business Day - a day other than a Saturday or Sunday, or a day on
------------
which banking institutions located in New York, New York are required or
authorized by law or other government action to be closed.
Closing Date - June __, 1997.
------------
Debt Service - in any period, the aggregate of all regularly scheduled
------------
principal, interest or other amounts required to be paid by Borrower in respect
of the Replacement Note (including, but not limited to any mandatory prepayments
of principal and interest), the Amended and Restated Deed of Trust, and any
other Loan Documents.
Debt Service Coverage Ratio - the ratio obtained by dividing (a) Net
---------------------------
Cash Flow for any given month by (b) Debt Service for such month.
Due Date - as defined in Section 5.5 hereof.
--------
Entity - any natural person, corporation, limited liability company,
------
firm, trust, partnership, association, government, governmental agency or any
other entity, whether acting in an individual, fiduciary, or other capacity.
Event of Default - as defined in Section 6.1 hereof.
----------------
Expenses - with respect to a given period, operating costs actually
--------
incurred by Borrower with respect to or allocable to such period in connection
with the operation or ownership of the Trust Estate calculated in accordance
with generally accepted accounting principles applicable to real estate.
Expenses shall not include: (a) Debt Service, (b) depreciation and amortization
of the Trust Estate and (c) capitalized expenditures. Expenses shall include,
without limitation: (a) real property taxes; (b) utility charges; (c) premiums
on insurance policies; (d) non-capital maintenance and cleaning expenses; and
(e) legal, accounting, brokerage, and other professional fees attributable to
the operation of the Trust Estate.
Funding Costs - all out-of-pocket fees, costs and expenses incurred by
-------------
Lender or any Loan Participant arising from or relating to the payment or
prepayment by Borrower (whether or not after the occurrence of an Event of
Default) of any principal amount of the
3
<PAGE>
Original Note on the Closing Date or the Replacement Note at any time other than
on the Maturity Date.
Governmental Authority - as defined in the Amended and Restated Deed
----------------------
of Trust.
Guarantors - Mortimer B. Zuckerman and Edward H. Linde, together;
----------
"GUARANTOR" shall mean either one of the Guarantors, individually.
Hazardous Material - as defined in the Amended and Restated Deed of
------------------
Trust.
Improvements - as defined in the Amended and Restated Deed of Trust.
------------
Involuntary Rate - as defined in the Amended and Restated Deed of
----------------
Trust.
Lead Lender - as defined in Section 7.4 hereof.
-----------
Loan - as defined in the preamble hereto.
----
Loan Amount - the aggregate of (a) all principal amounts advanced to
-----------
Borrower pursuant to the Original Loan Agreement, this Agreement and the other
Loan Documents; (b) all interest required by the Original Loan Agreement, this
Agreement, the Original Note, the Replacement Note and the other Loan Documents
to be paid by Borrower to Lender; (c) all Out-of-Pocket Costs, to the extent not
reimbursed to Lender; (d) all Funding Costs, and (e) any and all additional
amounts required to be paid by Borrower to Lender under the Original Loan
Agreement, this Agreement or any other Loan Document including, without
limitation, advances made by Lender to protect or preserve the Trust Estate or
the security interests created by the Loan Documents.
Loan Documents - this Agreement, the Supplemental Guaranty, the
--------------
Amended and Restated Interest Guaranty, the Amended and Restated Deed of Trust,
the Amended and Restated Assignment of Rents, the Replacement Note, and any and
all other documents given from time to time as security for, or in evidence of,
the Loan and the Loan Amount. References to the Loan Documents or to any
particular Loan Document shall be deemed references to such document as the same
may be renewed, modified, consolidated, replaced and/or restated from time to
time in accordance with the provisions of the Loan Documents; provided, however,
-------- -------
that this sentence shall not be construed to permit any renewal, modification,
consolidation, replacement and/or restatement that is prohibited by or
inconsistent with the provisions of this Loan Agreement or any other document to
which Lender is a party.
4
<PAGE>
Loan Participant - any assignee of or participant in any portion of
----------------
Lender's interest in the Loan.
Loan Term - the period commencing on the Closing Date through and
---------
including the Maturity Date.
Maturity Date - August 3, 2003.
-------------
Net Cash Flow - for any given month, an amount equal to Revenues for
-------------
such month minus the Expenses for such month.
Obligations - except as specified herein, as defined in the Amended
-----------
and Restated Interest Guaranty.
Offering - the public offering of shares of common stock of the REIT
--------
pursuant to a registration statement on Form S-11 filed with and declared
effective by the Securities and Exchange Commission in accordance with the
Securities Act of 1933, as amended, and the regulations issued in accordance
therewith.
Offering Documents - the registration statement on form S-11 filed by
------------------
the REIT with the Securities and Exchange Commission in connection with the
Offering and all Exhibits, supplements and amendments thereto.
Operating Partnership - Boston Properties Limited Partnership, a
---------------------
limited partnership formed under the laws of the State of Delaware which owns a
99% general partner interest in Borrower and a 99% managing member interest in
BP LLC.
Original Assignment of Rents - the Collateral Assignment of Leases,
----------------------------
Rents, Profits and Other Income dated as of the Original Closing Date, between
Borrower and Lender.
Original Closing Date - August 3, 1988.
---------------------
Original Deed of Trust - the Deed of Trust, Consolidation,
----------------------
Modification and Security Agreement dated as of the Original Closing Date, made
by Borrower in favor of Edward C. Berkowitz and Bruce E. Parmley for the benefit
of Lender.
Original Interest Guaranty - the Interest Guaranty dated as of the
--------------------------
Original Closing Date made by Guarantors in favor of Lender guaranteeing
payment, in certain circumstances, of interest when due and payable under the
Original Note.
5
<PAGE>
Original Loan Agreement - as defined in the preamble hereto.
-----------------------
Original Note - that certain Consolidated and Restated Note dated the
-------------
Original Closing Date made by Borrower in favor of Lender in the original
principal amount of One Hundred Million ($100,000,000) Dollars evidencing the
Loan, which Original Note has been superseded, reduced and replaced by the
Replacement Note.
Out-of-Pocket Costs - all reasonable costs, fees and expenses
-------------------
(including, without limitation, reasonable attorneys' fees) actually paid or
payable by Lender to unaffiliated third parties under any of the Loan Documents,
including without limitation, judgments, settlements or compromises (to the
extent such settlements or compromises have been consented to by Borrower where
such consent is required under the Loan Documents) and reasonable attorneys'
fees incurred by Lender in any suit, action, legal proceeding or dispute of any
kind in which Lender is a party or appears as a party, plaintiff or defendant,
arising from or related to the Loan, the Loan Documents or the Premises, but not
including Lender's overhead.
Permitted Exceptions - as defined in the Amended and Restated Deed of
--------------------
Trust.
Permitted Transferee - an Affiliate of Borrower or any of its
--------------------
constituent partners or partnerships or any other transferee reasonably
satisfactory to Lender.
Premises - as defined in the Amended and Restated Deed of Trust.
--------
Prime Rate - as defined in the Replacement Note.
----------
Projected Debt Service Coverage Ratio - the ratio obtained by dividing
-------------------------------------
(a) Net Cash Flow as set forth in a Projection by (b) Debt Service as set forth
in the same Projection.
Projection - a pro forma statement, prepared by Borrower and in form
----------
and substance reasonably satisfactory to Lender, setting forth in reasonable
detail Borrower's projections of Expenses, Revenues, Net Cash Flow and Debt
Service for the twelve (12) month period following the date of the Projection,
and accompanied by all such supporting materials, including without limitation,
a schedule of Qualifying Space Leases, current as of the date of such statement,
and by such certifications relating to such supporting materials as Lender may
reasonably require.
Qualifying Space Lease - a bona fide lease agreement pursuant to which
----------------------
all or a portion of the Improvements is or is intended to be occupied; provided,
--------
however, (a) such
- -------
6
<PAGE>
lease is then in full force and effect; (b) such lease, if entered into after
the Closing Date, has been created substantially in accordance with all
requirements applicable to leases as set forth in the Amended and Restated Deed
of Trust and all other Loan Documents; and (c) either (i) the tenant under such
lease is paying all the rent and other charges due thereunder or (ii) as to a
tenant not yet paying rent, such tenant is obligated to pay all of such rent,
costs, and other charges thereunder, subject only to satisfaction of conditions
precedent to such obligation set forth in such lease and evidenced by an
estoppel certificate in form and substance reasonably satisfactory to Lender.
Lender hereby acknowledges and agrees that, subject to their remaining in full
force and effect, the leases of the Improvements set forth in Exhibit A hereto
shall be deemed to be Qualifying Space Leases.
Reconstitution - the amendment and restatement of Borrower's
--------------
partnership agreement.
Reconstitution Documents - the Borrower's amended and restated
------------------------
partnership agreement.
REIT - Boston Properties, Inc., a Delaware corporation and a publicly
----
traded real estate investment trust (as defined by Sections 856 through 860 of
the Internal Revenue Code of 1986, as amended, and applicable Treasury
regulations), which owns a 1% interest in BP LLC and a majority interest (as
both a limited partner and the general partner) in the Operating Partnership.
Replacement Note - that certain Replacement Note dated the Closing
----------------
Date made by Borrower in favor of Lender in the original principal amount of
Sixty-Six Million ($66,000,000) Dollars, in replacement of and substitution for,
and evidencing the same indebtedness as, the Original Note and secured by the
Loan Documents, as the same may be amended, modified, supplemented or restated
from time to time.
Requirements of Law - as defined in the Amended and Restated Deed of
-------------------
Trust.
Revenues - with respect to a given period, the cash revenues actually
--------
received by Borrower under Qualifying Space Leases with respect to or allocable
to such period, provided, however, with respect to percentage rent received
-------- -------
under any Qualifying Space Lease, "Revenues" shall mean the monthly average of
percentage rent received by Borrower for the previous twelve months and to the
extent Borrower has not received percentage rent under any Qualifying Space
Leases for the previous twelve-month period, the percentage rent for such
Qualifying Space Lease shall not be included in the calculation of Revenues.
7
<PAGE>
Sanwa - The Sanwa Bank Limited, New York Branch, and its legal
-----
successors.
Service Contracts - as defined in Section 4.10 hereof.
-----------------
Shaw Pittman Lease - the Amended and Restated Lease dated September
------------------
29, 1986, between Borrower, as landlord, and Shaw, Pittman, Potts and
Trowbridge, as tenant, covering space in the Improvements.
Significant Entity - as defined in Section 6.1(e) hereof.
------------------
Space Leases - as defined in the Amended and Restated Deed of Trust.
------------
Supplemental Guaranty - one or more guaranty agreements dated as of
---------------------
the date hereof (as it may hereafter be amended, modified, supplemented or
restated) made by each of the Guarantors and certain other Entities in favor of
Lender guaranteeing payment, in certain circumstances, of a portion of the Loan
Amount.
Transfer of Borrower - any sale, assignment or other transfer, whether
--------------------
by operation of law or otherwise, voluntarily or involuntarily, by BP LLC or the
Operating Partnership of any direct ownership interest in Borrower.
Transfer of Premises - any (a) assignment, sale or other transfer by
--------------------
Borrower of the Trust Estate or any part thereof or any interest therein
(including, without limitation, any air or development rights) either
voluntarily or involuntarily, by operation of law or otherwise, or (b) lease or
sublease of all or substantially all of the space in the Premises, in a single
or successive transactions to any single lessee or related lessees.
Trust Estate - as defined in the Amended and Restated Deed of Trust.
------------
SECTION 1.2 ACCOUNTING TERMS.
----------------
Any accounting terms used in this Agreement that are not specifically
defined herein shall have the meanings customarily given to them in accordance
with generally accepted accounting principles as in effect on the date of this
Agreement, except that references in Section 5.4 to such principles shall be
deemed to refer to generally accepted accounting principles as in effect on the
date of the financial statements delivered pursuant thereto.
8
<PAGE>
SECTION 1.3 CERTAIN INTERPRETATIONS.
-----------------------
The definitions set forth in Section 1.1 shall be equally applicable
to both the singular and plural forms of the defined terms. The words "herein",
"hereof" and words of similar import as used in this Agreement shall refer to
this Agreement as a whole and not to any particular provision in this Agreement.
Unless specifically stated to the contrary, all references to "Sections,"
"subsections," "paragraphs," "Exhibits" and "Schedules" in this Agreement shall
refer to Sections, subsections, paragraphs, Exhibits and Schedules of this
Agreement unless otherwise expressly provided; references to Entities include
their respective permitted successors and assigns or, in the case of
governmental Entities, Entities succeeding to the relevant functions of such
persons; and all references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations.
ARTICLE II
THE LOAN
--------
SECTION 2.1 AGREEMENT TO LEND.
-----------------
Pursuant to the Original Loan Agreement, Lender made the Loan to
Borrower on the Original Closing Date in the original principal amount of One
Hundred Million ($100,000,000) Dollars as evidenced by the Original Note.
Subject to the terms and conditions of this Agreement, (a) on the Closing Date,
Borrower shall repay a portion of the outstanding principal amount of such Loan
equal to Thirty Four Million ($34,000,000) Dollars, together with accrued
interest thereon and such other amounts (including but not limited to Funding
Costs) as may be due in connection therewith, and (b) Lender shall continue to
make the Loan to Borrower in the principal amount, as of the Closing Date, of
Sixty-Six Million ($66,000,000) Dollars. Borrower's obligation to pay the
principal of and interest on the Loan shall be evidenced by the Replacement
Note, duly executed and delivered by Borrower, which Replacement Note shall
replace and supersede the Original Note (which Original Note shall be marked
"Replaced by Replacement Note" and returned to Borrower on the Closing Date) and
shall mature on the Maturity Date.
9
<PAGE>
SECTION 2.2 REPAYMENT.
---------
On the Maturity Date Borrower shall (a) fully repay the then-
outstanding principal amount of the Loan to Lender, and (b) pay any other
portion of the Loan Amount (including, but not limited to accrued interest,
fees, Funding Costs, and Out-of-Pocket Costs) then due and payable.
SECTION 2.3 PAYMENT OF PRINCIPAL AND INTEREST.
---------------------------------
The Loan shall bear interest at the rate of interest set forth in the
Replacement Note, which interest shall be payable in the place, time and manner
as provided in the Replacement Note.
SECTION 2.4 SECURITY.
--------
The Loan and the Loan Amount is and shall continue to be secured by
the Loan Documents.
SECTION 2.5 INTEREST GUARANTY.
-----------------
(a) If, as of the Closing Date, the Projected Debt Service Coverage
Ratio for the twelve (12) month period immediately following the Closing Date,
is:
(i) equal to or greater than 1.05:1, then Guarantors shall not be
liable for the Obligations unless and until the circumstances described in
Section 2.5(b) occur; or
(ii) less than 1.05:1, then Guarantors shall be liable for the
Obligations, and the Amended and Restated Interest Guaranty shall continue in
full force and effect, until such time as the Debt Service Coverage Ratio shall
be equal to or greater than 1.05:1 for three (3) consecutive calendar months, in
which event Guarantors shall not be liable for the Obligations from and after
the expiration of such three-month period unless and until the circumstances
described in Section 2.5(b) occur.
(b) If for any reason at any time when any part of the Loan Amount
remains outstanding or unpaid, the Shaw Pittman Lease shall terminate, then
Guarantors' liability with respect to the Obligations shall continue or shall be
reinstated, as applicable, until such time as a lease or leases demising the
same space as is demised under the Shaw Pittman Lease and upon terms and
conditions reasonably satisfactory to Lender shall have been executed and shall
be in effect.
10
<PAGE>
ARTICLE III
CONDITIONS PRECEDENT
--------------------
SECTION 3.1 CONDITIONS PRECEDENT.
--------------------
The effectiveness of this Amended and Restated Loan Agreement shall be
subject to the fulfillment by Borrower on the Closing Date, in a manner
satisfactory to Lender, of all the conditions precedent set forth in this
Article III.
(a) Borrower shall repay the Loan, together with all accrued interest
thereon and all other fees and costs then due and payable with respect thereto
(which fees and expenses may include, but shall not be limited to, Out-of Pocket
Costs, if any, and such Funding Costs as may be incurred by Lender as a result
of such repayment), in such principal amount as shall cause the outstanding
principal amount of the Loan, as of the Closing Date, to be not more than Sixty-
Six Million ($66,000,000) Dollars.
(b) For and in consideration of Lender's entering into this Amended
and Restated Loan Agreement, Borrower shall pay to Lender on the Closing Date a
fee as set forth in the letter dated May 22, 1997 from Lender to Borrower.
(c) Borrower and each other party thereto shall have duly executed and
Lender shall have received each of the following, each of which shall be
satisfactory to Lender in form and substance:
(i) the Replacement Note;
(ii) the Amended and Restated Deed of Trust; and
(iii) the Amended and Restated Assignment of Rents.
(d) (i) Each Guarantor shall have executed and delivered to Lender
the Amended and Restated Interest Guaranty and (ii) each Guarantor and each
other party thereto shall have executed and delivered to Lender the Supplemental
Guaranty, each of which shall be satisfactory to Lender in form and substance.
(e) The Amended and Restated Deed of Trust and the Amended and
Restated Assignment of Rents shall have been delivered to Lender's title
insurance company for
11
<PAGE>
recordation, and any other documents required in connection with the recording
of the Amended and Restated Deed of Trust and the Amended and Restated
Assignment of Rents, including, but not limited to, form UCC-1 financing
statements or amendment filings on form UCC-3 to all filed UCC-1 financing
statements, shall have been executed and delivered and/or filed, as appropriate,
and all taxes, fees and other charges payable in connection therewith shall have
been paid in full by Borrower.
(f) Lender shall have received UCC search results (which results shall
be satisfactory to Lender) with respect to Borrower, BP LLC and the Operating
Partnership.
(g) Lender shall have received, at Borrower's sole cost and expense
and in form and substance satisfactory to Lender, a "down-dated" title insurance
policy or endorsement to the existing title insurance policy, which shall show,
inter alia, (i) that the lien of the Amended and Restated Deed of Trust shall be
- ----- ----
a first priority lien subject to no superior or equal lien on the Premises or
the Revenues derived therefrom other than the Permitted Exceptions, (ii) that
the Trust Estate is subject only to the Permitted Exceptions, and (iii)
consummation of the Reconstitution.
(h) Lender shall have received a FIRREA-compliant appraisal prepared
by such appraisers as Lender shall find reasonably acceptable which appraisal
shall be satisfactory to Lender in form and substance.
(i) There shall have been delivered to Lender evidence of insurance
covering the Trust Estate as required by the Amended and Restated Deed of Trust,
accompanied by evidence of the payment of the premiums therefor.
(j) On the Closing Date there shall exist (i) no Event of Default and
(ii) no fact or circumstance, which, with the passage of time, giving of notice
or action of third parties, could become an Event of Default that is not then
being cured, in a manner satisfactory to Lender, in accordance with this
Agreement and the other Loan Documents.
(k) All representations and warranties contained herein and in the
other Loan Documents and in any document delivered to Lender by Borrower in
connection with the Loan shall be true and correct in all material respects.
(l) There shall be no litigation or other proceedings pending or to
Borrower's knowledge threatened with respect to the Trust Estate which, if
determined adversely to Borrower, would materially and adversely affect the
Trust Estate or the priority of Lender's lien
12
<PAGE>
thereon or the financial condition of Borrower or Guarantors, and no
condemnation or similar proceeding pending or threatened with respect to all or
any part of the Trust Estate.
(m) Lender shall have received a certificate dated the Closing Date
signed by a general partner of Borrower stating that the conditions set forth in
the foregoing paragraphs (j), (k) and (l) shall have been satisfied as of the
Closing Date.
(n) Lender shall have received final copies of each of the
Reconstitution Documents, together with copies of all consents and approvals, if
any, required thereby, certified by a general partner of Borrower as being true
and correct.
(o) The Reconstitution shall have been consummated substantially in
accordance with the Reconstitution Documents and there shall be no litigation or
governmental action or other proceeding pending or threatened with respect
thereto, and Lender shall have received a certificate executed by a general
partner of Borrower attesting to the foregoing.
(p) There shall have been delivered to Lender a full and complete copy
of each of the following:
(i) the partnership agreement and all amendments thereto of
Borrower and of the Operating Partnership, certified as being true and
correct by a general partner of Borrower and the general partner of the
Operating Partnership, respectively;
(ii) such consents of Borrower's partners to the execution and
delivery of this Amended and Restated Loan Agreement and the transactions
contemplated hereby, including the Reconstitution, as may be required by
Lender and/or Lender's title insurance company;
(iii) the constituent limited liability company documents of BP
LLC (of which the certificate of formation shall be certified by the
Secretary of State of the State of Delaware), together with all action
taken by BP LLC as general partner of Borrower to authorize the
Reconstitution and the execution and delivery of each of the Loan Documents
being executed and delivered by Borrower on the Closing Date, certified as
being true and correct by the secretary of such general partner; and
(iv) long form good standing certificates as of dates not more
than thirty (30) days prior to the Closing Date, with respect to Borrower
and each of
13
<PAGE>
the partners of Borrower, from the Secretary of State of each
such Entity's state of incorporation or formation, as the case may be.
(q) Lender shall have received copies of each of the following, each
certified as true and correct by an officer of the REIT:
(i) the constituent corporate documents of the REIT (of which the
charter shall be certified by the Secretary of State of its state of
incorporation), together with all corporate action taken by its board of
directors to authorize the execution and delivery and/or filing of the
Offering Documents and the consummation of the transactions contemplated
thereby; and
(ii) a long form good standing certificate as of a date not more
than thirty (30) days prior to the Closing Date with respect to the REIT
from the Secretary of State of its state of incorporation.
(r) reserved.
(s) Lender shall have received final copies of each of the Offering
Documents as filed with the Securities and Exchange Commission, together with
copies of all consents and approvals, if any, required thereby, certified by the
secretary of the REIT as being true and correct.
(t) The Offering shall have been consummated substantially in
accordance with the terms of the Offering Documents as delivered to Lender, and
there shall be no material litigation, or governmental action or other
proceeding pending or threatened with respect thereto.
(u) Lender shall have received and approved all financial information
reasonably requested by Lender concerning Borrower, the partners of Borrower,
the REIT, the Offering and the Guarantors.
(v) Lender shall have received an opinion from Borrower's counsel,
addressed to Lender and dated the Closing Date, in form and substance
satisfactory to Lender and Lender's counsel, together with such local counsel
opinions as Lender may reasonably request.
(w) Lender shall have received an opinion from counsel to the REIT,
addressed to Lender and dated the Closing Date, in form and substance
satisfactory to Lender and Lender's counsel.
14
<PAGE>
(x) All legal proceedings and all instruments and agreements in
connection with the transactions contemplated by this Agreement, the other Loan
Documents, the Reconstitution Documents and the Offering Documents shall be
reasonably satisfactory in form and substance to Lender and its counsel, and
Lender shall have received all information and copies of all documents and
papers, including records of governmental approvals, if any, that Lender may
have reasonably requested in connection therewith, each of such documents and
papers to be certified by proper governmental authorities, where appropriate.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
------------------------------------------
In order to induce Lender to enter into this Agreement, Borrower makes
the following representations, warranties and agreements, which shall survive
the execution and delivery of this Agreement.
SECTION 4.1 EXISTENCE AND OWNERSHIP.
-----------------------
(a) Each of Borrower, a general partnership, BP LLC, a general partner
of Borrower and a limited liability company, the Operating Partnership, a
general partner of Borrower and a limited partnership, and the REIT, a
corporation and a member of BP LLC and a partner of the Operating Partnership:
(i) has been duly formed or organized and is validly existing under the laws of
the District of Columbia, with respect to the Borrower, and the State of
Delaware with respect to such other Entities, (ii) has adequate authority,
rights and franchises to own its properties, to carry on its business as now
conducted and to perform its obligations hereunder and under the other Loan
Documents, and (iii) has made all filings in each jurisdiction in which the
character of its business or nature of its properties makes such filings
necessary and where not filing could have a material adverse impact on its
business.
(b) Borrower has no subsidiaries and no ownership interests in any
Entities. Borrower has no material assets or other material properties other
than the Premises and properties and assets directly related thereto. Borrower
conducts no business, directly or indirectly, except as contemplated by Section
5.3 of this Agreement.
(c) As of the Closing Date, BP LLC is a general partner of Borrower
having a 1% ownership interest therein, and the Operating Partnership is the
only other general partner of Borrower having a 99% ownership interest therein.
BP LLC is owned 1% by the REIT and 99% by the Operating Partnership. As of the
Closing Date, the Operating Partnership is
15
<PAGE>
majority owned by the REIT (which has a general and limited partnership interest
therein), and by certain other limited partners.
(d) The REIT is a publicly traded real estate investment trust duly
formed and existing under the corporate laws of the State of Delaware and
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, in
which, as of the Closing Date, Mortimer B. Zuckerman and Edward H. Linde and
their respective Affiliates have an aggregate ownership interest of not less
than 7%.
SECTION 4.2 AUTHORIZATION, ENFORCEABLE OBLIGATION.
-------------------------------------
(a) Borrower and the general partners of Borrower have the authority
and legal right to execute, deliver and perform each of this Agreement and the
Replacement Note, and each of the other Loan Documents and each of the
Reconstitution Documents to which they are parties, to borrow under the Loan
Documents and to grant the liens and security interests contemplated thereby,
and to have taken all necessary action to authorize the borrowings on the terms
and conditions hereof and the execution, delivery and performance of the Loan
Documents to which they are parties.
(b) Each of this Agreement, the Replacement Note, the other Loan
Documents and Reconstitution Documents executed or to be executed by Borrower
has been or will be executed and delivered by an officer or partner of Borrower
duly authorized to execute and deliver such documents on behalf of Borrower, and
constitutes or will constitute the legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms.
(c) To the Borrower's knowledge, no consent, license, permit, approval
or authorization of, exemption by, notice or report to, or registration, filing
or declaration with, any Governmental Authority or any other Entity which has
not been obtained is required for the execution, delivery and performance by
Borrower of this Agreement and the Replacement Note, and the other Loan
Documents and the Reconstitution Documents to which it is a party, or the
consummation of the transactions contemplated hereby or thereby (including,
without limitation, the Offering).
SECTION 4.3 CONFLICTING AGREEMENTS.
----------------------
The execution and delivery by Borrower of this Agreement and the
Replacement Note, and the other Loan Documents and the Reconstitution Documents
to which it is a party, and performance by it hereunder and thereunder, will not
violate any provision of law and will not conflict with or result in a breach of
any order, writ, injunction, ordinance, resolution,
16
<PAGE>
decree, or other similar document or instrument of any court or governmental
authority, bureau or agency, domestic or foreign, or any certificate of limited
partnership, partnership agreement, certificate of formation or limited
liability company agreement of Borrower or any other Affiliate of Borrower party
to any of the foregoing agreements, or create (with or without the giving of
notice or lapse of time, or both) a default under or breach of any agreement,
bond, note or indenture to which Borrower is a party, or by which it is bound or
any of its properties or assets, including the Trust Estate, is affected, or
result in the imposition of any lien of any nature whatsoever upon any of the
properties or assets owned by or used in connection with the business of
Borrower including the Trust Estate, except for the liens and security interests
created and granted pursuant to the Amended and Restated Deed of Trust and the
Amended and Restated Assignment of Rents.
SECTION 4.4 COPIES OF DOCUMENTS;
--------------------
CONSUMMATION OF TRANSACTIONS.
----------------------------
(a) Borrower and each of BP LLC, the Operating Partnership and the
REIT has furnished Lender with true, correct and complete certified copies of
its organizational agreements, together with all amendments thereto, if any, as
in effect at the Closing Date.
(b) Borrower has delivered or caused to be delivered to Lender true
and correct copies of each of the Reconstitution Documents and Offering
Documents.
(c) Each of the Reconstitution and the Offering was consummated
substantially in accordance with the Reconstitution Documents and the Offering
Documents, respectively, previously delivered to Lender.
SECTION 4.5 NO MATERIAL LITIGATION.
----------------------
No litigation, investigation or administrative proceeding of or before
any court, arbitrator or Governmental Authority is pending or, to Borrower's
knowledge or the knowledge of any general partner of Borrower, threatened
against Borrower, any partner thereof, against the REIT, or any of Borrower's or
any such other Entities' assets, or with respect to the Reconstitution or the
Offering, that would, if determined adversely, be likely to have a material
adverse effect on (a) Borrower's ability to perform its obligations under the
Loan Documents in accordance with the terms thereof, (b) the validity of this
Agreement or any other Loan Document, or (c) Lender's security under this
Agreement or any other Loan Document. No notice has been received by Borrower
of any proceeding to condemn, purchase or otherwise acquire the Trust Estate or
any part thereof or interest therein, and, to the best of Borrower's knowledge,
no such proceeding is contemplated.
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SECTION 4.6 MARGIN REGULATIONS.
------------------
Borrower is not engaged, principally or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying any margin stock.
SECTION 4.7 COMPLIANCE WITH APPLICABLE LAWS.
-------------------------------
(a) To the best of Borrower's knowledge and belief, except as
otherwise specifically disclosed in writing by Borrower to Lender, each of
Borrower, BP LLC, the Operating Partnership and the REIT is in compliance with
the requirements of all applicable laws, rules, regulations, ordinances and
orders, including those applicable to the Trust Estate and the use thereof, the
failure to comply with which would materially and adversely affect Borrower's
ability to perform its obligations under this Agreement and/or any of the other
Loan Documents, and no written notice of noncompliance with any of the foregoing
has been received by Borrower, BP LLC, the Operating Partnership, or the REIT
from any Governmental Authority.
(b) Each of the Reconstitution and the Offering was consummated in
accordance with all applicable law and regulations, and no consent, approval or
authorization, or registration, declaration or filing with any Governmental
Authority or any other Entity by Borrower or any Affiliate of Borrower is or was
required for the valid execution, delivery and performance by the parties
thereto of the Reconstitution Documents, and the Offering Documents or the
carrying out of the transactions contemplated thereby which was not properly
obtained and maintained in effect by Borrower or an Affiliate of Borrower.
SECTION 4.8 SPACE LEASES.
------------
The Qualifying Space Leases described in Exhibit A hereto are in full
force and effect according to the terms and conditions thereof as contained in
the copies thereof previously furnished to Lender. Except as may be set forth
in estoppel certificates of Borrower or the tenants under such Qualifying Space
Leases delivered concurrently herewith, to the best of Borrower's knowledge, (a)
no notice of default has been given by any party to any such Qualifying Space
Lease which remains uncured, (b) there are no material defaults under any of the
provisions thereof and (c) all conditions to the effectiveness and continuing
effectiveness thereof required to be satisfied as of the Closing Date have been
satisfied. As of the Closing Date, Borrower is the holder of the Landlord's
interest under all such Qualifying Space Leases, which are the only Space Leases
in effect to which Borrower is a party. Whenever, pursuant to Section 1.12(b)
or otherwise under the Amended and Restated Deed of Trust, a
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subordination, nondisturbance and attornment agreement is required with respect
to a Space Lease, such agreement shall be in substantially the form of Exhibit C
hereto.
SECTION 4.9 NO BROKERS.
----------
Borrower has not dealt with any mortgage or other broker or finder in
connection with the Loan. Borrower agrees to indemnify, defend and hold Lender
harmless from and against any claim for brokerage fees or commissions or other
compensation in connection with the Loan by reason of an alleged
misrepresentation of the statement made by it in the immediately preceding
sentence. In case any action, suit or proceeding is brought against Lender by
reason of an alleged misrepresentation by Borrower set forth in this Section
4.9, (a) Lender shall give prompt notice thereof to Borrower, (b) Borrower may,
at Borrower's sole cost and expense, resist and defend such action, suit or
proceeding by counsel reasonably satisfactory to Lender, and (c) if Borrower
elects to defend such action, suit or proceeding, Lender shall not compromise or
settle any such action, suit or proceeding without the consent of Borrower
unless Lender waives its right to indemnification under this Section. This
provision shall survive the repayment of the Loan and shall continue in full
force and effect so long as the possibility of such liability, claims or losses
exists.
SECTION 4.10 SERVICE CONTRACTS.
-----------------
All management, leasing, service or maintenance contracts
(collectively "SERVICE CONTRACTS") relating to or affecting the Trust Estate
and/or the Premises are listed in Exhibit B annexed hereto and made a part
hereof, and true and complete copies of all Service Contracts, including all
agreements, amendments, and other documents relating thereto have been made
available to Lender. To the best of Borrower's knowledge, all Service Contracts
are in full force and effect in accordance with their respective terms, and no
party to any Service Contract has asserted any claim of default or offset
against Borrower with respect thereto.
SECTION 4.11 LIENS.
-----
(a) No chattel mortgage, bill of sale, security agreement, financing
statement or other title retention agreement, except those in favor of Lender,
which has not been satisfied or terminated as of the Original Closing Date has
been executed with respect to any materials, fixtures, machinery, equipment, or
articles of personal property of Borrower used in connection with the
construction, renovation, operation or maintenance of the Premises.
(b) Without the taking of any further action (other than as may be
specifically described herein), including, without limitation, the filing of any
Uniform
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Commercial Code financing statements or any such similar filing by or on behalf
of any Person, including, without limitation, Lender or Borrower, the liens
confirmed, created and granted by the Amended and Restated Deed of Trust and the
Amended and Restated Assignment of Rents shall, after giving effect to this
Agreement, continue, uninterrupted and unimpaired, to constitute valid first
perfected liens on the properties and assets covered by the Amended and Restated
Deed of Trust and the Amended and Restated Assignment of Rents, subject to no
prior or equal lien except the Permitted Exceptions.
(c) The liens and security interests confirmed, created and granted
pursuant to the Amended and Restated Deed of Trust and the Amended and Restated
Assignment of Rents secure, without limitation, the indebtedness, liabilities
and obligations of Borrower to Lender hereunder, under the Replacement Note, and
under the other Loan Documents, whether or not so stated in such documents.
SECTION 4.12 CONDITION OF PREMISES
---------------------
To the best of Borrower's knowledge, there are no structural defects
in the Improvements or violations of any Requirements of Law which materially
and adversely affect the Premises. The Premises are not now damaged or injured
as a result of any fire, explosion, accident, flood or other casualty, and there
have been no material structural exterior modifications to the Premises since
the date of the survey delivered by Borrower to Lender in connection with the
Original Loan Agreement. To the best of Borrower's knowledge, the Premises
comply with all private easements and restrictions affecting the Premises. To
the best of Borrower's knowledge, there are no restrictions, easements,
limitations or conditions of any sort whatsoever affecting the use of the
Premises not set forth as Permitted Exceptions. Borrower has received no
written notice from any insurance company of any defects or inadequacies in
connection with the Premises or the operation thereof that, if not corrected,
would result in the cancellation of the relevant policy or an increase in the
premium payable with respect to the relevant policy.
SECTION 4.13 FINANCIAL INFORMATION.
---------------------
The financial information delivered to Lender in accordance with
Section 3.1(u) hereof is true and correct in all material respects and fairly
presents Borrower's assets and liabilities as of March 31, 1997; and no
materially adverse change has occurred in the financial condition reflected
therein since the date thereof and no additional borrowings have been made by
Borrower since such date.
SECTION 4.14 PERMITS.
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All material permits (including, without limitation, occupancy and
other permits and licenses) required for the ownership, use, occupancy,
possession, operation or maintenance of the Improvements as a first-class office
building have been obtained and are in full force and effect.
SECTION 4.15 TRUE STATEMENTS.
---------------
Neither this Agreement, any other Loan Document, nor to the best of
Borrower's knowledge, any other document delivered to Lender in connection with
the Loan contains, or will contain when made, any untrue statement of a material
fact.
SECTION 4.16 REPRESENTATIONS IN LOAN DOCUMENTS.
---------------------------------
The representations and warranties of Borrower contained in the Loan
Documents to which it is a party are true and correct, and by this reference all
such representations and warranties are hereby made a part of this Agreement to
the same extent as if fully set forth herein.
ARTICLE V
COVENANTS OF BORROWER
---------------------
During the period the Loan remains in effect and any part of the Loan
Amount remains outstanding or unpaid, or any other amount or obligation is owing
to Lender hereunder or under any of the Loan Documents, Borrower shall keep and
perform fully each and all of the following covenants:
SECTION 5.1 COVENANTS IN LOAN DOCUMENTS.
---------------------------
Borrower shall observe and perform or shall cause to be observed and
performed all of the covenants contained in the Amended and Restated Deed of
Trust and the other Loan Documents, and by this reference all of such covenants
are hereby made a part of this Agreement to the same extent as if fully set
forth herein.
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SECTION 5.2 NO FURTHER ENCUMBRANCE.
----------------------
Borrower shall not further mortgage, encumber for debt, or pledge the
Trust Estate or any part thereof or any interest therein (including, without
limitation, any air or development rights).
SECTION 5.3 SINGLE PURPOSE.
--------------
Borrower shall not engage in any business other than the designing,
operating, owning, managing, developing, financing and leasing of the Trust
Estate.
SECTION 5.4 INFORMATION COVENANTS.
---------------------
(a) Borrower shall maintain, on a fiscal year basis in accordance with
consistently applied generally accepted accounting practices customarily used in
the real estate industry, complete and accurate books, accounts and records
reflecting all of the financial affairs of Borrower and all of the earnings and
expenses in connection with the operation of the Trust Estate or in connection
with any services, equipment or furnishings provided in connection with the
operation of the Trust Estate.
(b) Without expense to Lender, Borrower shall deliver to Lender
annually, within ninety (90) days after the close of each of Borrower's fiscal
years:
(i) an operating statement (including, without limitation, the
amount of rent escalations under the Qualifying Space Leases for such
fiscal year) and annual budget certified by a general partner, the chief
financial officer of the REIT or such other principal of the REIT familiar
with the Trust Estate and acceptable to Lender showing in reasonable detail
the income and expenses of the operations of the Trust Estate;
(ii) a statement of profit and loss for the immediately
preceding fiscal year of Borrower;
(iii) a complete copy of Borrower's financial statements
containing a balance sheet together with the related statement of surplus
and income statement for the immediately preceding fiscal year (A)
certified to Lender by a general partner or other principal of Borrower
acceptable to Lender and (B) reviewed by a firm of independent certified
public accountants satisfactory to Lender;
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(iv) a complete copy of the REIT's financial statements
containing a balance sheet together with the related statement of surplus
and income statement for the immediately preceding fiscal year certified to
Lender by (A) the chief financial officer of the REIT and (B) a firm of
independent certified public accountants satisfactory to Lender; and
(v) a rent roll current to within thirty (30) days, showing the
tenants in occupancy, their square footage, their fixed and basic rents,
and their tax and operating escalations.
(c) Borrower's annual financial statements shall be accompanied by a
certificate of Borrower, dated as of the delivery of such statements to Lender,
stating that Borrower, to the best of its knowledge, knows of no Event of
Default that is continuing, or, if any such Event of Default is continuing,
specifying the nature and period of existence thereof and what action Borrower
has taken or proposes to take with respect thereto, and, except as otherwise
specified, stating that Borrower has fulfilled all its obligations under this
Agreement and the other Loan Documents that are required to be fulfilled on or
prior to the date of such certificate.
(d) Borrower shall deliver or cause to be delivered to Lender, no
later than ninety (90) days after the end of (i) Borrower's first three fiscal
quarters, a balance sheet as of the last day of such quarter and a statement of
profit and loss for such quarter, in each case reviewed by a firm of independent
certified public accountants acceptable to Lender, and (ii) the REIT's first
three fiscal quarters, a balance sheet as of the last day of such quarter and a
statement of profit and loss for such quarter.
(e) Lender or its designee will be permitted (but shall in no event be
required) upon not less than ten (10) days' prior notice to Borrower (but in no
event more often than once each calendar quarter unless an Event of Default
shall have occurred, in which event the foregoing limitation shall not apply) to
examine such books and records and all supporting vouchers and data at the
office of Borrower with respect to the Trust Estate and make such copies or
extracts thereof at Borrower's expense as Lender or its designee shall
reasonably desire. All information obtained by Lender in its review or
examination of Borrower's books and records pursuant to this Section 5.4 shall
be confidential and solely for the benefit of Lender and any Loan Participant.
(f) Borrower shall furnish to Lender (i) within thirty (30) days after
request therefor such further detailed information covering the operation of the
Trust Estate and the financial affairs of Borrower, its partners and the REIT as
may be reasonably requested by
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Lender, and (ii) promptly upon their becoming available, copies of any
registration statements and any amendments and supplements thereto, and any
regular and periodic reports, if any, filed by the REIT with any securities
exchange or with the Securities and Exchange Commission or any governmental
authority succeeding to any or all of the functions of the said Commission.
SECTION 5.5 REIMBURSABLE EXPENSES.
---------------------
(a) Borrower shall reimburse Lender for all Out-of-Pocket Costs in
connection with (i) any amendment, modification or supplement to any of the Loan
Documents or any agreement or instrument delivered in connection herewith or
therewith, (ii) any waiver of any provision of this Agreement, any of the Loan
Documents or any agreement or instrument delivered in connection herewith or
therewith, (iii) any restructuring of the terms of any of the Loan Documents or
any agreement or instrument delivered in connection herewith or therewith, (iv)
any nondisturbance agreements or other documents delivered by Borrower to Lender
for review and approval, and (v) the enforcement of the Loan Documents or any
agreement or instrument delivered in connection herewith or therewith from and
after the occurrence and during the continuance of an Event of Default or
following an acceleration of the Loan. All of the foregoing expenses shall be
reimbursed by Borrower whether or not Lender gives notice to Borrower of any
Event of Default under this Agreement or takes any other action to enforce the
provisions of any of the Loan Documents or any agreement or instrument delivered
in connection herewith and therewith.
(b) Borrower shall pay any and all stamp and other taxes and fees
payable or determined to be payable in connection with the execution, delivery,
filing, recording and enforcement of any of the Loan Documents or any agreement
or instrument delivered in connection herewith or therewith and shall save
Lender harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or failure to pay such taxes and fees.
(c) All amounts payable pursuant to this Section 5.5 shall be due and
payable not later than ten (10) Business Days following written demand by
Lender, together with interest thereon (i) if Lender has actually paid such
amount, at the Prime Rate from the date of demand therefor through the date
which is ten (10) Business Days after demand therefor (the "DUE DATE"), and (ii)
whether or not Lender has actually paid such amount, at the Involuntary Rate
from the Due Date through the date of payment by Borrower. The obligation to
pay such amounts shall survive the repayment of the Loan and shall continue in
full force and effect so long as the possibility of any such liability, claims
or losses pursuant to this Section 5.5 exists.
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SECTION 5.6 PRESERVATION OF EXISTENCE.
-------------------------
(a) Each of Borrower, BP LLC and the Operating Partnership shall do
all things necessary to preserve and keep in full force and effect its
existence, franchises, rights and privileges as a business or partnership under
the laws of the District of Columbia or the State of Delaware, as applicable,
and will comply with all regulations, rules, statutes, orders and decrees of any
Governmental Authority or court applicable to the Trust Estate or any part
thereof, subject, however, to Borrower's right to contest such regulations,
rules, statutes, orders and decrees pursuant to Section 1.11 of the Amended and
Restated Deed of Trust.
(b) Borrower shall maintain in good repair, working order and
condition, subject to normal wear and tear, the Trust Estate and all material
properties and assets from time to time owned by it and used in or necessary for
the operation of its business, and make all reasonable repairs, replacements,
additions and improvements thereto.
SECTION 5.7 FUTURE TENANT ESTOPPEL CERTIFICATES.
-----------------------------------
(a) Once during the Loan Term, Borrower shall, within forty-five (45)
days following request by Lender, deliver to Lender estoppel certificates
prepared by Lender with respect to any Major Lease (as defined in the Amended
and Restated Deed of Trust) and shall use all reasonable efforts to deliver to
Lender such estoppel certificates with respect to any or all of the Qualifying
Space Leases, which estoppel certificates shall be executed by Borrower and each
other party to the appropriate Qualifying Space Lease, stating (i) that the
Qualifying Space Lease is unmodified (or stating the modification(s), if any)
and in full force and effect, (ii) whether or not, to the best knowledge of each
party to such Qualifying Space Lease, any party to such Qualifying Space Lease
is in default in any respect under such Qualifying Space Lease, and, if so,
specifying such default, and (iii) any other matters that may be reasonably
requested by Lender. If, after reasonable efforts, Borrower is unable to obtain
an estoppel certificate from any of its tenants, Borrower shall deliver
Borrower's certificate to Lender as to the matters set forth in clauses (i),
(ii) and (iii) and shall deliver such tenant's estoppel certificate to Lender
within two (2) Business Days after receiving it.
(b) On not more than three (3) occasions during the Loan Term,
Borrower shall, within ten (10) days after receipt in writing of a request by
Lender, execute and deliver Borrower's certificate stating that (i) the
Qualifying Space Leases are unmodified (or stating the modification(s)if any)
and in full force and effect, and (ii) all rents due under Qualifying Space
Leases have been paid when due, or if not, specifying the Qualifying Space
Leases under which rents have not been paid when due.
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SECTION 5.8 TRANSFERS OF PREMISES.
---------------------
Borrower will not cause, permit or suffer a Transfer of Premises,
other than to a Permitted Transferee, without the prior written consent of
Lender, which consent shall not be unreasonably withheld or delayed. For
purposes of this Section 5.8, Lender shall consider, by way of illustration and
not in limitation, the following factors in its determination of granting
consent to any such Transfer of Premises: (a) the financial condition of the
proposed transferee; (b) the general reputation in the community of the proposed
transferee; and (c) the management and real estate experience of the proposed
transferee. For purposes of this Section 5.8, if Lender has not responded to
Borrower's request for consent within fifteen (15) Business Days following
receipt thereof, Lender's rights regarding prior consent shall be deemed waived
unless, prior to the expiration of such fifteen (15) day period, Lender has
requested further information concerning such proposed transferee as in its
reasonable judgment is necessary to evaluate Borrower's request, in which event
Lender shall have an additional fifteen (15) day period following receipt of
such additional information by Lender in which to approve or disapprove the
proposed transferee. If Lender has not responded within the first fifteen (15)
Business Day period or the additional fifteen (15) day period referred to in the
preceding sentence, Lender shall be deemed to have waived its right to so
consent.
SECTION 5.9 AMENDMENTS TO LEASES.
--------------------
Borrower will not, without the prior written consent of Lender, enter
into, or agree to enter into, any material amendments, modifications or
supplements, or any agreement which would have the effect of a material
amendment, modification or supplement, to any Qualifying Space Lease.
ARTICLE VI
EVENTS OF DEFAULT; REMEDIES
---------------------------
SECTION 6.1 EVENTS OF DEFAULT.
-----------------
Each of the following specified events shall constitute an "EVENT OF
DEFAULT" under this Agreement whether the occurrence of such event shall be
voluntary or involuntary or come about or be affected by operation of law or
otherwise:
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(a) Any representation, warranty or statement made by Borrower in any
Loan Document or any certificate, document, financial or other statement given
in connection with the Loan, shall prove to have been untrue or incorrect in any
material respect when made and the existence of the facts constituting such
untruth or incorrectness shall have a material and adverse effect upon the value
of the Trust Estate or Lender's security for the Loan or the Loan Amount; or
(b) Borrower shall fail (i) to make any payment of principal of the
Replacement Note when due, or (ii) to make any payment of interest or any other
sum required to be paid by Borrower under the Replacement Note within five (5)
Business Days following written notice from Lender to Borrower, or (iii) to make
any other payment to Lender required to be made hereunder or under any other
Loan Document within ten (10) days following written notice from Lender to
Borrower; or
(c) Borrower shall mortgage, encumber for debt or pledge the Trust
Estate in violation of Section 5.2 hereof, the Amended and Restated Deed of
Trust or any other Loan Document; or
(d) Except as otherwise specified in this Section 6.1, Borrower shall
fail to perform or observe any other covenant, term or agreement on its part
contained in this Agreement, which failure shall have continued unremedied for
thirty (30) days after notice thereof shall have been given to Borrower by
Lender, provided, however, that if, in Lender's reasonable judgment, the failure
-------- -------
referred to in this paragraph (d) is curable by Borrower but not within said
thirty (30) day period, then an Event of Default shall not be deemed to have
occurred hereunder so long as (i) Borrower commences remedial action promptly
after notice and (ii) Borrower pursues such remedial action to completion with
due diligence and dispatch in Lender's reasonable judgment; or
(e) Any of Borrower, BP LLC or the Operating Partnership or any such
Entity's successors or assigns, or the REIT (collectively, a "SIGNIFICANT
ENTITY") shall file a voluntary petition seeking an order for relief under Title
11 of the United States Code, or any Significant Entity shall be adjudicated a
debtor, bankrupt or insolvent, or shall file any petition or answer seeking,
consenting to or acquiescing in any order for relief, reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the present or any future federal bankruptcy act or any other
present or future applicable federal, state or other statute or law (foreign or
domestic), or shall file an answer admitting or failing to deny the material
allegations of a petition against it for any such relief or shall admit in
writing its inability to pay its debts as they mature, or shall make an
assignment for the benefit of creditors, or shall seek or consent to or
acquiesce in the appointment of any trustee, receiver,
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examiner, sequestrator, custodian or liquidator or similar official of any
Significant Person; or if, within sixty (60) days after the commencement of any
such proceeding, whether by the filing of a petition or otherwise, seeking any
order for relief, reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future federal
bankruptcy act or any other present or future applicable federal, state or other
statute or law (foreign or domestic), such proceeding shall not have been
dismissed, or if, within sixty (60) days after the appointment (without the
consent or acquiescence of such Significant Entity) of any trustee, receiver or
liquidator of any Significant Entity, such appointment shall not have been
vacated or otherwise discharged, or if any execution or attachment issued
against such Significant Entity shall not have been discharged or removed within
sixty (60) days of its issuance; or
(f) The termination, liquidation or dissolution or the commencement of
proceedings for the liquidation or dissolution of any Significant Entity (unless
immediately reconstituted pursuant to the provisions of its partnership
agreement or applicable law or in connection with a Transfer of Borrower to a
Permitted Transferee) shall occur; or
(g) Borrower shall, in violation of this Agreement, the Amended and
Restated Deed of Trust or any other Loan Document, cause or permit any Transfer
of Premises to occur or shall enter into any agreement to effect the same; or
(h) (i) Either of BP LLC or the Operating Partnership shall
cease to be general partners of Borrower, or (ii) Borrower shall admit any
partners in addition to BP LLC and the Operating Partnership as general
partners, or (iii) the Operating Partnership and the REIT shall together own
less than 100% of the membership interests in BP LLC, or (iv) the REIT directly
or indirectly shall cease to be the sole general partner of the Operating
Partnership.
SECTION 6.2 REMEDIES.
--------
(a) If any Event of Default shall occur and be continuing, all
obligations of Lender under this Agreement, at the option of Lender, shall cease
and terminate, and Lender may declare the entire outstanding principal amount of
the Loan, including interest thereon and any other fees, costs and charges then
payable under any of the Loan Documents, immediately due and payable, whereupon
the same shall become immediately due and payable, without presentment, protest
or further demand or notice of any kind, all of which are hereby expressly
waived by Borrower; and, upon the occurrence and continuance of an Event of
Default or at any time following Lender's acceleration of the Loan, Lender may
immediately exercise any and all other rights, remedies and recourse available
to it at law or in equity or under any of the other Loan Documents including,
without limitation, the right to foreclose on any and
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all liens and security interests securing repayment of the Loan Amount under the
Amended and Restated Deed of Trust and the other Loan Documents.
(b) Notwithstanding anything to the contrary contained herein, if
Borrower shall fail, refuse or neglect to make any payment or perform any act
required under the Loan Documents, Lender may, at its option and without any
obligation, at any time (including prior to the expiration of any grace period
related thereto), and without waiving or releasing any other right, remedy or
recourse Lender may have in connection therewith, make such payments or perform
such acts for the account of and at the expense of Borrower, and shall have the
right (to the extent Borrower has the power to grant such right), to enter upon
the Trust Estate and to take all action with respect to the Trust Estate as
Lender may deem desirable.
(c) Borrower hereby indemnifies Lender against all liability incurred
or accruing by reason of any acts performed by Lender pursuant to the Loan
Documents, except to the extent that the same shall have been caused by the
wilful misconduct or gross negligence of Lender or its employees and agents and
shall not be covered by the insurance required to be carried by Borrower under
the Loan Documents. Lender shall give Borrower reasonably prompt notice of any
threatened or actual liability giving rise to the right of indemnification set
forth herein and upon the receipt of such notice, Borrower shall diligently
defend Lender against such liability by counsel reasonably satisfactory to
Lender, at Borrower's sole cost and expense, provided, however, that Lender may
-------- -------
engage its own counsel, at its expense, to participate in said defense, and in
such event, the respective counsel for Borrower and Lender shall cooperate with
each other with respect thereto (it being understood that Borrower's counsel
shall control such defense) and shall promptly provide each other with copies of
all papers filed in such case or otherwise requested. Lender shall not
compromise or settle any action, suit or proceeding against which Lender is
indemnified hereunder without the consent of Borrower unless Lender waives its
right to indemnification under this Section. All sums determined to be payable
by Borrower to Lender by reason of the foregoing indemnity pursuant to a final
non-appealable order of a court of competent jurisdiction or otherwise shall be
due and payable by Borrower to Lender within five (5) Business Days after demand
therefor or on such later date as may be specifically set forth in such demand,
and if such sums are not timely paid, said sums shall bear interest at the
Involuntary Rate from the date such payment was due through the date of payment.
(d) Notwithstanding anything to the contrary contained herein, in no
event shall Lender be obligated to attempt to use, operate, occupy or manage the
Trust Estate or any part thereof or to perform any of the terms, conditions and
agreements herein or in any of the other Loan Documents or in any other
documents on the part of Borrower to be
29
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performed, and Lender shall have no liability whatsoever to Borrower or any
other person or Entity (other than by reason of its gross negligence or wilful
misconduct) for failing, attempting or ceasing to perform the same, or for the
manner of performing or attempting to perform the same, or any part thereof.
SECTION 6.3 INTEREST GUARANTY.
-----------------
Notwithstanding any other provision of this Amended and Restated Loan
Agreement or any other Loan Document, in no event shall any default or event of
default under the Amended and Restated Interest Guaranty or the Supplemental
Guaranty, or any other breach thereof by any party thereto, be a default or
Event of Default under this Agreement or any of the other Loan Documents (other
than the Amended and Restated Interest Guaranty or the Supplemental Guaranty).
ARTICLE VII
MISCELLANEOUS
-------------
SECTION 7.1 EXPENSES.
--------
Borrower shall pay, as and when due, all Out-of-Pocket Costs and all
costs and expenses incurred by Borrower or Lender in connection with the Loan
and the preparation, amendment, administration and enforcement of the Loan
Documents including, without limitation, the fees and expenses set forth in
Section 5.5 hereof, document recording fees, mortgage recording taxes (including
any such costs associated with recording tax audits or investigations demanded
or conducted by a state or local tax authority with respect to the Amended and
Restated Deed of Trust) transfer taxes, license and permit fees, appraisal fees,
costs of environmental inspections, filing fees, title premiums and other fees
of Lender's title insurance company.
SECTION 7.2 ENTIRE AGREEMENT.
----------------
This Agreement, taken together with all of the other Loan Documents
and all certificates and other documents delivered by Borrower to Lender,
embodies the entire agreement with respect to the subject matter hereof, and
supersedes or incorporates all prior negotiations or agreements written and
oral.
SECTION 7.3 COUNTERPARTS.
------------
30
<PAGE>
This Agreement may be executed in any number of counterparts with the
same effect as if the parties hereto had signed the same document. All such
counterparts shall constitute one instrument.
SECTION 7.4 ASSIGNABILITY AND PARTICIPATION.
-------------------------------
Lender may assign the Replacement Note, this Agreement, and/or the
other Loan Documents, in whole or in part, and Lender may grant to others such
participatory rights and interests herein and therein as Lender, in its sole
discretion, may elect, provided that (a) Sanwa shall, at all times, administer
--------
the Loan and retain the authority, either as agent or otherwise, to exercise or
direct the exercise of Lender's rights under the Loan Documents (as such, Sanwa
shall be defined as the "LEAD LENDER"), and (b) Borrower shall not be required
to obtain consents or approvals or otherwise deal directly with any party other
than Sanwa with respect to the Loan or the provisions of any of the Loan
Documents. Lender shall give notice to Borrower of any such assignment or
grant, and Borrower shall pay to Lender increased costs actually incurred by any
such participating institution subject to the provisions and limitations more
particularly set forth in the Replacement Note.
SECTION 7.5 GOVERNING LAW; VENUE; JURISDICTION.
----------------------------------
The Replacement Note, this Agreement and the other Loan Documents are
to be governed by and construed in accordance with the laws of the District of
Columbia, but without consideration of the conflicts of law provisions thereof.
By its execution and delivery of the Replacement Note and this Agreement,
Borrower shall be deemed to have agreed that the appropriate venue and
jurisdiction for any litigation pertaining to the Loan, the Replacement Note or
the Loan Documents shall be in the District of Columbia, and that the
appropriate location for any foreclosure sale pertaining to the collateral
described in the Loan Documents shall be in the District of Columbia.
SECTION 7.6 SEVERABILITY.
------------
If any of the terms and provisions specified herein is held by a court
of law to be in violation of any applicable local, state or federal ordinance,
statute, law, administrative or judicial decision, or public policy, and if such
court should declare such term or provision to be illegal, invalid, unlawful,
void, voidable, or unenforceable as written, then such provision shall be given
full force and effect to the fullest possible extent that it is legal, valid and
enforceable, and the remainder of the terms and provisions herein, shall be
construed as if such illegal, invalid, unlawful, void, voidable or unenforceable
term or provision was not
31
<PAGE>
contained therein, and that the rights, obligations and interests of Borrower
and Lender under the remainder of this Agreement, shall continue in full force
and effect.
SECTION 7.7 SUCCESSORS AND ASSIGNS.
----------------------
All covenants and agreements herein shall bind the respective
successors and assigns of Borrower and Lender (provided, that Borrower shall not
--------
be permitted to transfer or assign its rights and obligations hereunder or under
the other Loan Documents except as expressly permitted by the provisions of the
Loan Documents), and all such covenants shall inure to the benefit of Lender and
Borrower and their respective nominees, successors and assigns.
SECTION 7.8 SETOFF.
------
Borrower hereby waives any and all rights of setoff with respect to
principal and interest due on the Replacement Note and any other payments due
Lender under the Loan Documents, including rights of setoff with respect to the
Replacement Note and the Loan Documents which may arise from claims,
transactions or occurrences heretofore unknown to Borrower.
SECTION 7.9 TIME OF THE ESSENCE.
-------------------
Time is of the essence with regard to Borrower's performance under the
terms and provisions of this Agreement, the other Loan Documents and any
amendment, modification or revision hereof or thereof, subject, however, to the
applicable grace periods, if any, set forth in the Loan Documents. No extension
of time for the payment of the Loan made by agreement with any person now or
hereafter liable for payment of the Loan Amount shall operate to release,
discharge, modify, change or affect the original liability of Borrower under
this Agreement, either in whole or in part.
SECTION 7.10 HEADINGS.
--------
The Table of Contents, and the titles and headings of Articles and
Sections of this Agreement are intended for convenience only, and shall not in
any way affect the meaning or construction of any provision of this Agreement.
SECTION 7.11 NOTICES.
-------
32
<PAGE>
Except as may otherwise be provided herein, any notice, request,
demand, instruction or other communication required by the Loan Documents to be
given to Borrower or Lender shall be in writing and shall be either (a)
personally delivered to the parties named below by A messenger service regularly
retaining receipts for such delivery, (b) sent by registered or certified mail,
return receipt requested, or (c) delivered by a reputable air courier service
such as Federal Express, Express Mail, Airborne or Emery Air, shall be effective
upon delivery thereof to the addressees and shall be addressed to the parties as
set forth below:
To Borrower:
c/o Boston Properties, Inc.
500 E Street, S.W.
Washington, D.C. 20024
Attn: Office of Regional Counsel
Telecopier No.: (202) 488-8644
With a copy to:
Boston Properties, Inc.
8 Arlington Street
Boston Massachusetts, 02116
Attn: General Counsel
Telecopier No.: (617) 536-5087
And:
Goodwin, Procter & Hoar, LLP
Exchange Place
Boston, Massachusetts 02109
Attn: Ross D. Gillman, Esq.
Telecopier No.: (617) 227-8591
To Lender:
The Sanwa Bank Limited,
New York Branch
Park Avenue Plaza
55 East 52nd Street
33
<PAGE>
New York, NY 10055
Attn: Mr. Tony S. Choi
Telecopier No.: (212) 754-2360
With a copy to:
Winston & Strawn
200 Park Avenue
New York, NY 10166
Attn: Marc C. Lewis, Esq.
Telecopier No.: (212) 294-4700
If Lender or Borrower desires to change its address for the purpose of receipt
of notice, or to change the other party to receive a copy of notice, such notice
or change of address or recipient shall be given in the manner specified herein.
However, unless and until such written notice of change is actually received,
the last address and addressee as stated by written notice, or provided herein
if no written notice of change has been received, shall be deemed to continue in
effect for all purposes hereunder. Any notice given in accordance with the
terms hereof, the delivery of which is refused by the addressee, shall be
effective at the time of such attempted delivery.
SECTION 7.12 SUCCESSIVE REMEDIES.
-------------------
No power or remedy herein conferred is exclusive of or shall prejudice
any other power or remedy of Lender given by law or by the terms of any of the
other Loan Documents. Each such power or remedy may be exercised by Lender from
time to time as often as it deems necessary.
SECTION 7.13 NO-WAIVER.
---------
Any waiver by Lender of any of the terms, provisions or conditions of
this Agreement or any of the other Loan Documents shall not be deemed to be a
waiver of the same or any other term, provision or condition thereof and Lender
shall have the right at any time thereafter to insist upon strict performance of
any and all of the same.
SECTION 7.14 ESTOPPEL CERTIFICATES/NONDISTURBANCE/OTHER AGREEMENTS.
-----------------------------------------------------
34
<PAGE>
Within ten (10) Business Days after request by Borrower, Lender shall
execute and deliver to Borrower (a) an estoppel certificate stating the
outstanding principal amount of the Loan and whether there exists any Event of
Default under any of the Loan Documents, and (b) a subordination, nondisturbance
and attornment agreement in substantially the form attached to the Amended and
Restated Deed of Trust as Schedule B, for any Qualifying Space Lease entered
into subsequent to the Closing Date. Upon repayment of the Loan Amount in full
and payment of all interest accrued thereon and any other fees, expenses, and
Out-of-Pocket Costs, incurred hereunder or under the other Loan Documents, then
upon Borrower's request, Lender shall execute and deliver to Borrower such
discharges, assignments and/or satisfactions as Borrower may reasonably request
and shall, upon reasonably notice, appear at the closing of such assignment,
discharge or satisfaction or make such other arrangements with respect thereto
as may be mutually satisfactory, provided that Borrower shall pay all Out-of-
--------
Pocket Costs with respect thereto.
SECTION 7.15 CROSS-DEFAULT.
-------------
Any Event of Default under this Agreement shall be deemed to be an
Event of Default under each of the Loan Documents, entitling Lender to exercise
any or all remedies available to Lender under the terms of any or all Loan
Documents.
SECTION 7.16 PURPOSE OF LOANS.
----------------
Borrower represents and warrants that the indebtedness evidenced by
the Replacement Note was obtained solely for the purpose of carrying on a
business or commercial activity. Nothing contained in the preceding sentence
shall be deemed to be a limitation of Borrower's use of the proceeds of the
Loan.
SECTION 7.17 INCONSISTENCIES WITH LOAN DOCUMENTS.
-----------------------------------
In the event of any conflict between this Agreement and the provisions
of any of the other Loan Documents, the provisions of this Agreement shall
control; provided, however, that any provision of any other Loan Documents which
-------- -------
imposes additional burdens on Borrower or restricts the rights of Borrower or
gives Lender additional rights or remedies shall not be deemed to be in conflict
or inconsistent with this Agreement and shall be given full force and effect.
35
<PAGE>
SECTION 7.18 SURVIVAL.
--------
All of the representations, warranties, terms, covenants, agreements
and conditions contained in this Agreement shall survive the execution and
delivery of this Agreement and the other Loan Documents, and shall, unless
otherwise expressly provided, continue in full force and effect until the Loan,
together with interest thereon, and all other costs, charges and other sums
payable hereunder or thereunder, are paid in full.
SECTION 7.19 INDEMNIFICATION.
---------------
Borrower shall indemnify Lender for and hold Lender harmless from and
against, any and all claims, damages, losses, liabilities, Out-of-Pocket Costs
of any kind whatsoever (other than such Out-of-Pocket Costs which are the
responsibility of Lender pursuant to the terms of this Agreement) which Lender
may incur (or which may be claimed against Lender) by reason of, or in
connection with (a) the destruction of the Trust Estate (or any part thereof) in
a casualty for which insurance was required under the Loan Documents and was not
obtained and kept in full force and effect by Borrower, (b) all obligations,
covenants, representations and warranties of Borrower under the Amended and
Restated Deed of Trust relating to Hazardous Material to the full extent of any
losses or damages (including those resulting from diminution in the value of the
Trust Estate) incurred by Lender as a result of the existence of Hazardous
Material to the extent such Hazardous Material existed prior to the date Lender
has taken possession and has assumed control of the Trust Estate pursuant to the
Amended and Restated Deed of Trust, and (c) any action or proceeding to which
Lender is made a party by reason of Lender's holding of an interest in the Trust
Estate; provided, however, Borrower shall have no obligation to indemnify Lender
-------- -------
for any such claims, damages, losses, liabilities, costs or expenses arising by
reason of the gross negligence or willful misconduct of Lender. In case any
action, suit or proceeding is brought against Lender by reason of any such
occurrence, as a condition to Borrower's indemnity obligation under this Section
7.19, (a) Lender shall give prompt notice to Borrower of any such action, suit
or proceeding, (b) Borrower may, at Borrower's sole cost and expense, resist and
defend such action, suit or proceeding by counsel reasonably satisfactory to
Lender, and (c) if Borrower elects to defend such action, suit or proceeding,
Lender shall not compromise or settle any such action, suit or proceeding
without the consent of Borrower, unless Lender waives its right to the foregoing
indemnification.
SECTION 7.20 NO AGENCY, PARTNERSHIP OR JOINT VENTURE.
---------------------------------------
Lender is not the agent or representative of Borrower, and Borrower is
not the agent or representative of Lender. Borrower and Lender intend and agree
that the relationship
36
<PAGE>
between them shall be solely that of creditor and debtor. Nothing herein nor the
acts of the parties hereto shall be construed to create a partnership or joint
venture between Borrower and Lender.
SECTION 7.21 NEGOTIATED DOCUMENT.
-------------------
Lender and Borrower acknowledge that the provisions and the language
of this Agreement and the other Loan Documents have been negotiated and are
reasonable in light of all circumstances attendant to the execution and delivery
of this Agreement, and agree that no provision of this Agreement or any other
Loan Document shall be construed against either Lender or Borrower by reason of
either Lender or Borrower having drafted such provision, this Agreement or any
other Loan Document.
SECTION 7.22 LIMITATION ON RECOURSE.
----------------------
Except for certain limited personal liability as specified below, it
is expressly understood and agreed that the extent of liability for payment by
Borrower of any sums due under this Agreement, the Replacement Note, the Amended
and Restated Deed of Trust or any of the other Loan Documents is limited to (a)
the Trust Estate, and all Revenues therefrom received by Borrower after the
occurrence of an Event of Default which are not applied to the Loan Amount or to
Expenses of the Trust Estate, and (b) proceeds of insurance on said Trust Estate
or proceeds on account of condemnation thereof (to the extent such proceeds are
not applied by Lender in restoration or repair of the Trust Estate pursuant to
the terms of the Amended and Restated Deed of Trust), Lender agreeing not to
look personally to Borrower, the general partners of Borrower (a "P-L"), the
partners, members, or shareholders of any general partner of Borrower (a "P-2"),
or the owners of partnership or membership interests, whether owned or held
directly or indirectly, as general or limited partners or members of a limited
liability company, in partners or members of the general partners of Borrower (a
"P-3"), for payment of any of such sums. Lender, for itself and its successors,
endorsees, participants and assigns, hereby waives any right to enforce
collection of any money judgment against any assets of Borrower, any P-1, P-2 or
P-3, other than as set forth in clauses (a) and (b) above, whether by reason of
a judgment pursuant to an action brought under the Replacement Note or any
action in foreclosure or otherwise for a deficiency judgment against Borrower,
any P-1, P-2 or P-3, other than as set forth in clauses (a) and (b) above.
However, notwithstanding the foregoing, Borrower and the general partners of
Borrower shall be fully subject to personal liability (a) for fraud and (b) to
the extent that the proceeds of insurance on the Trust Estate, the proceeds on
account of condemnation thereof, or Revenues of the Trust Estate are received by
Borrower or its partners after the occurrence of an Event of Default and are not
applied to the Loan Amount, the Expenses of the Trust Estate or, in respect of
insurance or
37
<PAGE>
condemnation proceeds, in restoration or repair of the Trust Estate pursuant to
the terms of the Amended and Restated Deed of Trust. The foregoing provisions
shall not in any way be deemed to release, affect or impair the indebtedness and
obligations evidenced by the Replacement Note or the security therefor, or
Lender's right to enforce its remedies under the Amended and Restated Deed of
Trust or any other of the Loan Documents by any action, including, without
limitation, an action brought under the Replacement Note or any foreclosure
under the Amended and Restated Deed of Trust. Furthermore, none of the foregoing
provisions shall in any way limit the liability of the Guarantors under the
Amended and Restated Interest Guaranty or which any person has assumed by a
separate instrument in the nature of a guarantee of any obligation undertaken in
connection with the Loan.
SECTION 7.23 CONSTRUCTION.
------------
Except as Lender may otherwise agree in writing or as may otherwise be
provided under applicable law, any default or other condition upon which the
existence of an Event of Default shall be predicated (and, thus, the Event of
Default predicated thereon) shall be deemed to be "continuing" for all purposes
of this Loan Agreement as provided in Section 4.20(b) of the Amended and
Restated Deed of Trust.
SECTION 7.24 SURVIVAL OF ACCRUED AMOUNTS.
---------------------------
Any and all Out-of-Pocket Costs, costs, expenses, fees or other
amounts, including without limitation any principal or accrued interest with
respect to the Loan and all accrued Funding Costs, which shall be due and
payable under the terms of the Original Loan Agreement, the Original Note, or
any of the other Loan Documents which shall not be paid in full on the Closing
Date, shall survive and continue to be due and payable by Borrower under and in
respect of this Agreement, the Replacement Note or such of the other Loan
Documents as may be applicable.
SECTION 7.25 CONFIDENTIALITY.
---------------
The Projections supplied to Lender by Borrower are solely for the use
of Lender and Lender agrees to keep the Projections confidential and shall not
supply the Projections or any part thereof to any person not employed or
affiliated with Lender; provided, however, that Lender and the Loan Participants
-------- -------
may supply the Projections to any bank or financial institution which has
purchased or is considering purchasing a participation in the Loan.
Notwithstanding anything to the contrary set forth herein, the confidentiality
obligations referred to in this Section 7.25 shall not apply to (i) information
publicly known through no
38
<PAGE>
wrongful act of Lender and (ii) information required to be disclosed by
applicable law, regulation or judicial or regulatory process.
[End of Text]
39
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first written above.
SQUARE 36 OFFICE JOINT VENTURE,
a District of Columbia General Partnership
By: Boston Properties LLC
By:_________________________________
THE SANWA BANK LIMITED,
NEW YORK BRANCH, a Japanese
banking institution
By:_________________________________
Name:
Title:
<PAGE>
Exhibit 10.24
INDEMNIFICATION AGREEMENT
This Agreement is made as of June ___, 1997 by and among Mortimer B.
Zuckerman of New York, New York ("Zuckerman"), Edward H. Linde of Weston,
Massachusetts ("Linde") and Boston Properties Limited Partnership, a Delaware
limited partnership ("BPLP").
WHEREAS, Zuckerman and Linde and their affiliates intend to cause an
initial public offering (the "Offering") of the common stock of Boston
Properties, Inc. ("Boston Properties"), the sole general partner of BPLP, and
thereafter to conduct its business as a publicly traded real estate investment
trust employing the so-called "UPREIT" structure through BPLP as the operating
partnership (the "Business");
WHEREAS, in connection with the Offering, Zuckerman and Linde intend to
transfer or cause to be transferred to BPLP certain real property interests (the
"Properties") currently owned or held by Zuckerman, Linde or certain of their
affiliates, as described in the Registration Statement on Form S-11 (No. 333-
25279) filed with the Securities and Exchange Commission relating to the
Offering (the "Registration Statement");
WHEREAS, in connection with the Offering, Zuckerman and Linde also intend
to transfer or cause to be transferred to BPLP various assets, rights and
interests, including without limitation, obligations and benefits under various
contracts and other agreements, all of which relate to the Properties or the
Business; and
WHEREAS, the parties hereto desire that, following the consummation of the
Offering (the "IPO Closing Date"), Zuckerman and Linde shall no longer be
responsible for any liabilities or obligations arising out of or resulting from
events or occurrences relating to the Properties or the Business that accrue or
occur (a) after the IPO Closing Date or (b) prior to the IPO Closing Date but
which occurred in the ordinary course of the Business or the operation of the
Properties.
NOW, THEREFORE, in consideration of and in order to fulfill the foregoing,
the parties hereby agree as follows:
1. Indemnification. From and after the IPO Closing Date, BPLP shall
----------------
indemnify and hold harmless Zuckerman and Linde from and against any and all
claims, losses, obligations, liabilities, damages, penalties, fines, costs and
expenses of any kind or nature whatsoever (including but not limited to interest
which may be imposed in connection therewith) and reasonable fees and
disbursements of counsel and other experts incurred in connection with any of
the foregoing, or in connection with enforcing any rights to
<PAGE>
indemnification under this Agreement with respect to any of the foregoing
(collectively, "Losses," but which term shall specifically not include the
incurrence of personal federal and state income taxes or the loss of any
deduction against taxable income) which may be sustained or suffered by
Zuckerman or Linde arising out of or resulting from (x) the ownership of any of
the Properties after the IPO Closing Date, (y) the failure of BPLP after the IPO
Closing Date to perform any obligation required to be performed pursuant to any
contract or obligation assigned to and assumed by BPLP, or (z) the operation of
the Business subsequent to the IPO Closing Date, including in any such case and
without limitation any and all Losses arising from undertakings given by
Zuckerman and Linde (i) pursuant to the Development Agreement between the
Cambridge Redevelopment Authority (the "Authority") and Cambridge Center
Associates ("CCA") dated June 11, 1979, as amended by the amendments referenced
in Schedule A attached hereto, as assigned by CCA to BPLP, and as further
amended by Amendment No. 11 to Parcel 3 and 4 Development Agreement dated as of
even date herewith between the Authority and BPLP (as so amended and assigned,
the "Parcel 3 and 4 Development Agreement"), (ii) pursuant to the Development
Agreement dated April 14, 1982 by and between the Authority and CCA, as amended
by amendments referenced in Schedule B attached hereto, as assigned by CCA to
BPLP, and as further amended by Amendment No. 7 to Parcel 2 Development
Agreement of even date herewith by and between the Authority and BPLP (as so
amended and assigned, the "Parcel 2 Development Agreement"), (iii) pursuant to
any Supplemental Land Disposition Contract entered into under the Parcel 3 and 4
Development Agreement or the Parcel 2 Development Agreement, as such Development
Agreements were constituted at any time, and (iv) pursuant to any other
documentation under any such Supplemental Land Disposition Contract, including
but not limited to the undertakings referred to on Schedule C attached hereto,
to the extent in force and effect.
2. Gross Negligence, Willful Misconduct. Notwithstanding anything in
------------------------------------
this Agreement to the contrary, BPLP shall have no obligation under this
Agreement to indemnify or hold harmless Zuckerman or Linde from (i) any Losses
arising as a direct result of his gross negligence or willful misconduct or (ii)
any Losses arising as a result of the operation of the Business or the ownership
and operation of the Properties, in each case out of the ordinary course of
business and prior to the IPO Closing Date.
3. Further Assurances.
-------------------
(a) In the event that any property, right, interest or other asset owned or
held by any of Zuckerman, Linde or any of their affiliates prior to the IPO
Closing Date was contemplated in the Registration Statement to be transferred to
BPLP but was not, in fact, so transferred or such transfer was not perfected for
any reason whatsoever, then each of Zuckerman and Linde hereby covenants and
agrees to use commercially reasonable efforts to effectuate or perfect such
transfer as soon as reasonably practicable following BPLP's request for the
same.
(b) In the event that Zuckerman and Linde are not explicitly released from
liability
<PAGE>
under any contract which is part of the Business and which is assigned to BPLP
in connection with the Offering (or of which arrangements are made for the
benefits to be transferred to BPLP) (including, without limitation, the
contracts specified in Section 1) then, at Zuckerman or Linde's request, BPLP
will use reasonable efforts to cooperate with Zuckerman and Linde to have
Zuckerman and Linde released as obligors thereunder and have BPLP substituted as
sole obligor thereunder.
4. Governing Law. This Agreement shall be governed by and interpreted
-------------
in accordance with the laws of the Commonwealth of Massachusetts, without giving
effect to its principles of conflicts of laws.
5. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same Agreement.
[Remainder of this page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first set forth above.
____________________________________
Mortimer B. Zuckerman
____________________________________
Edward H. Linde
BOSTON PROPERTIES LIMITED PARTNERSHIP
By: Boston Properties, Inc., its General Partner
By:___________________________________
Edward H. Linde
President
DOCSC\522581.1
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF BOSTON PROPERTIES, INC.
<TABLE>
<CAPTION>
Name Jurisdiction of Formation/Incorporation
- ---- ---------------------------------------
<S> <C>
Boston Properties Limited Partnership Delaware
Boston Properties Management, Inc. Delaware
Boston Properties LLC Delaware
BP Lex LLC Delaware
Ocean View Development Company District of Columbia
Limited Partnership
School Street Associates Limited Partnership District of Columbia
Square 36 Office Joint Venture District of Columbia
Southwest Market Limited Partnership District of Columbia
Montgomery Village Avenue Joint Venture Maryland
Limited Partnership
Democracy Associates Limited Partnership Maryland
Maryland 50 Building I Associates Massachusetts
Limited Partnership
Maryland 50 Building II Associates Massachusetts
Limited Partnership
Maryland 50 Building III Associates Massachusetts
Limited Partnership
Maryland 50 Associates Limited Partnership Maryland
The Double B Partnership Massachusetts
Lexreal Associates Limited Partnership New York
90 Church Street Limited Partnership Delaware
Cambridge Center West Associates Limited Massachusetts
Partnership
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name Jurisdiction or Formation/Incorporation
- ---- ---------------------------------------
<S> <C>
Reston VA 939, L.L.C. Delaware
</TABLE>
