<PAGE>
As filed with the Securities and Exchange Commission on January 22, 1998
REGISTRATION NO. 333-38383
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
TO
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CABOT INDUSTRIAL TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN GOVERNING INSTRUMENTS)
TWO CENTER PLAZA, SUITE 200
BOSTON, MASSACHUSETTS 02108
(617) 723-0900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
ROBERT E. PATTERSON
PRESIDENT
CABOT INDUSTRIAL TRUST
TWO CENTER PLAZA, SUITE 200
BOSTON, MASSACHUSETTS 02108
(617) 723-0900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
JAMES R. WALTHER, ESQ. GERALD S. TANENBAUM, ESQ.
MAYER, BROWN & PLATT CAHILL GORDON & REINDEL
350 SOUTH GRAND AVENUE 80 PINE STREET
LOS ANGELES, CALIFORNIA 90071-1503 NEW YORK, NEW YORK 10005
(213) 229-9597 (212) 701-3000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
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If this Form is filed to register additional securities for an offering pur-
suant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier effec-
tive registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
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.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGIS- +
+TRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECU- +
+RITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES +
+LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS Subject to Completion
7,500,000 Shares
January 22, 1998
[LOGO OF CABOT INDUSTRIAL APPEARS HERE]
Common Shares of Beneficial Interest
(par value $.01 per share)
Cabot Industrial Trust (the "Company") is an internally managed, fully inte-
grated real estate company formed to continue and expand the national indus-
trial real estate business of Cabot Partners Limited Partnership ("Cabot Part-
ners") and its affiliates. The Company will have a portfolio of 144 industrial
buildings (the "Properties") located in 21 states and containing approximately
22 million rentable square feet. The Company expects to qualify for taxation as
a real estate investment trust ("REIT") for federal income tax purposes.
The Common Shares offered hereby are being sold by the Company and will repre-
sent approximately 17.7% of the common equity of the Company on a fully diluted
basis. Concurrently with the sale of the Common Shares offered hereby, the Com-
pany will sell $20.0 million of Common Shares at the Offering Price (as
defined), representing approximately 2.4% of the Company's fully diluted common
equity, in a private placement (the "Concurrent Placement") to Morgan Stanley
Asset Management Inc., on behalf of certain of its institutional clients (the
"Concurrent Investor"). The remaining 79.9% of the Company's fully diluted
common equity will be beneficially owned by officers and Trustees of the Com-
pany, the Contributing Investors referred to herein and certain other investors
in the form of Common Shares or limited partnership interests ("Units") in
Cabot Industrial Properties, L.P. (the "Operating Partnership") that, subject
to certain limitations, will be exchangeable on a one-for-one basis for Common
Shares.
The Company expects to make regular quarterly cash distributions to its share-
holders, with the initial distribution expected to be at the quarterly rate of
$.325 per Common Share, or $1.30 per Common Share (6.5% of the Offering Price)
on an annual basis. See "Distribution Policy."
Prior to the Offering, there has been no public market for the Common Shares.
It is anticipated that the initial public offering price will be between $19.00
and $21.00 per Common Share. See "Underwriting" for a summary of factors that
will be considered in determining the initial public offering price. The Common
Shares have been approved for listing on the New York Stock Exchange (the
"NYSE") under the symbol "CTR," subject to official notice of issuance.
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR DESCRIPTIONS OF CERTAIN FACTORS
RELEVANT TO AN INVESTMENT IN THE COMMON SHARES, INCLUDING:
. The market value of the Common Shares may exceed the aggregate fair market
value of the proportionate interest in the Company's portfolio of Properties
and other assets they represent;
. The Company's expected initial level of distributions is based on assumptions
which could prove incorrect;
. Limitation of share ownership to 9.8% of the outstanding shares of beneficial
interest, staggered elections of Trustees and other provisions which may
deter third parties from seeking to acquire the Company;
. Taxation of the Company as a corporation if it fails to qualify as a REIT and
the reductions in distributable cash that would result;
. Management's lack of experience in operating the Company as a REIT;
. The Board of Trustee's ability to change the Company's investment, financing
and conflict of interest policies without shareholder approval;
. Industrial real estate investment risks, such as failure of tenants to make
lease payments, the effect of national and local economic and other condi-
tions on real estate values and environmental issues;
. Conflicts of interests involving management and Contributing Investors, which
could result in decisions that do not fully reflect the interests of all
shareholders; and
. Two Contributing Investors will own 24.2% and 14.1%, respectively, of the
Company's fully diluted common equity.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE
TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share $ $ $
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Total(3) $ $ $
</TABLE>
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(1)The Company and the Operating Partnership have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the Secu-
rities Act of 1933, as amended. See "Underwriting."
(2)Before deducting expenses payable by the Company estimated at $6,500,000.
(3)The Company has granted the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to an additional
1,125,000 Common Shares on the same terms as set forth above, solely to cover
over-allotments, if any. If such over-allotment option is exercised in full,
the total Price to Public, Underwriting Discount and Proceeds to Company will
be $ , $ and $ , respectively. See "Underwriting."
The Common Shares offered by this Prospectus are being offered by the Under-
writers, subject to prior sale, when, as and if delivered to and accepted by
the Underwriters, and subject to approval of certain legal matters by Cahill
Gordon & Reindel, counsel for the Underwriters. It is expected that delivery of
certificates representing the Common Shares will be made against payment
therefor on or about , 1998 at the offices of J.P. Morgan Securities
Inc., 60 Wall Street, New York, New York.
J.P. MORGAN & CO.
GOLDMAN, SACHS & CO.
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY
, 1998
<PAGE>
[MAP SHOWING THE FIVE U.S. REGIONS
AND LOCATIONS OF PROPERTIES AND
PHOTOGRAPHS OF CERTAIN PROPERTIES]
<PAGE>
BULK DISTRIBUTION
CHICAGO, IL/ MIDWEST REGION
[Picture of Building] [Schematic of Building]
MULTI TENANT
ORLANDO, FL/SOUTH REGION
[Picture of Building] [Picture of Interior of Building]
WORKSPACE
SAN FRANCISCO, CA/WEST REGION
[Picture of Building] [Schematic of Building]
<PAGE>
[Schematic of Building] [Picture of Building] [Picture of Building]
[Picture of Building] [Picture of Building]
[Schematic of Building] [Picture of Building] [Picture of Building]
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON SHARES. SPECIF-
ICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING AND MAY
BID FOR, AND PURCHASE, COMMON SHARES IN THE OPEN MARKET. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."
No person has been authorized to give any information or to make any represen-
tations not contained in this Prospectus and, if given or made, such informa-
tion or representations must not be relied upon as having been authorized by
the Company or any Underwriter. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, the Common Shares in any jurisdic-
tion to any person to whom it is unlawful to make such offer or solicitation.
Neither the delivery of this Prospectus nor any sale made hereunder shall under
any circumstances create any implication that there has been no change in the
affairs of the Company subsequent to the date hereof.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary...................................... 1
The Company........................................... 1
Risk Factors.......................................... 2
Industrial Real Estate Business....................... 3
Business and Growth Strategies........................ 4
Properties............................................ 6
The Formation and Other Transactions.................. 7
Structure of the Company.............................. 9
Benefits to Related Parties........................... 10
The Offering.......................................... 11
Distributions......................................... 11
Tax Status of the Company............................. 12
Summary Financial and Other Data...................... 13
Risk Factors............................................ 16
Offering Price of Common Shares Does Not Reflect
Values of the Properties............................. 16
Risk of Inability to Sustain Distribution Level....... 16
Antitakeover Effects of Ownership Limit, Staggered
Board and Power to Issue Additional Shares........... 16
Taxation as a Corporation if the Company Fails to
Qualify as a REIT; Other Tax Risks................... 17
Possible Changes in Policies Without Shareholder
Approval; No Limitation on Debt....................... 18
Real Estate Investment Risks.......................... 18
Conflicts of Interest in the Formation Transactions
and the Business of the Company...................... 21
Absence of Prior Public Market for Common Shares Could
Affect Market Price of Common Shares................. 23
Possible Adverse Effect of Market Interest Rates on
Price of Common Shares............................... 23
Possible Adverse Effect on Price of Shares of Shares
Available for Future Sale............................ 23
ERISA Risks............................................. 23
Possible Unknown Adverse Characteristics of Recently
Acquired New Properties; Lack of Operating History..... 24
Real Estate Financing Risks........................... 24
Management Company Risks.............................. 24
Dependence on Key Personnel........................... 24
Risks Associated with Reliance on Forward-Looking
Statements........................................... 24
The Company............................................. 25
General............................................... 25
Industrial Real Estate Business....................... 27
Business Strategies................................... 28
Growth Strategies..................................... 29
Operations............................................ 30
Third-Party Investment Management..................... 31
Financial Strategies.................................. 31
Use of Proceeds......................................... 32
Distribution Policy..................................... 33
Capitalization.......................................... 36
Dilution................................................ 37
Cabot Industrial Trust Pro Forma Condensed Combined
Financial Statements (Unaudited)....................... 38
Selected Financial and Other Data....................... 49
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 52
General............................................... 52
Results of Operations................................. 52
Capital Resources and Liquidity....................... 55
Inflation............................................. 56
Funds from Operations................................. 56
Properties.............................................. 57
General............................................... 57
Property Overview..................................... 58
Industrial Property Market Information................ 64
Tenant Information.................................... 66
Lease Expirations--Portfolio Total.................... 67
Tenant Improvements and Leasing Commissions........... 67
Recurring Capital Expenditures........................ 67
Insurance............................................. 68
Environmental Matters................................. 68
Competition........................................... 68
Legal Proceedings..................................... 69
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
Policies with Respect to Certain Activities............. 69
Investment Policies................................... 69
Financing Policies.................................... 70
Conflict of Interest Policies......................... 70
Working Capital Reserves.............................. 71
Management.............................................. 72
Trustees and Executive Officers....................... 72
Board of Trustees..................................... 75
Committees of the Board of Trustees................... 75
Compensation of Trustees.............................. 75
Executive Compensation................................ 76
Employment Agreements................................. 77
Long Term Incentive Plan.............................. 77
Savings Plan.......................................... 78
Indemnification....................................... 78
Formation and Other Transactions........................ 79
Formation Transactions................................ 79
Concurrent Placement.................................. 81
Company Acquisitions.................................. 81
Limitations on Representations and Warranties......... 81
Effects of the Formation Transactions and the
Offering............................................. 81
Contribution Amounts of the Properties and Cabot
Partners............................................. 81
Certain Relationships and Related Transactions.......... 83
Repayment of Debt..................................... 83
Options Granted....................................... 83
Principal and Management Shareholders................... 84
Description of Shares of Beneficial Interest............ 86
General............................................... 86
Common Shares......................................... 86
Classification or Reclassification of Common Shares
or Preferred Shares.................................. 87
Restrictions on Transfer.............................. 87
Certain Provisions of Maryland Law and of the Company's
Declaration of Trust and Bylaws........................ 90
Classification of the Board of Trustees............... 90
Vacancies............................................. 90
Removal of Trustees................................... 90
Business Combinations................................. 90
Control Share Acquisitions............................ 90
Shareholders' Meetings................................ 91
Annual Report......................................... 91
Amendment............................................. 91
Limitation of Liability and Indemnification........... 92
Operations............................................ 92
Termination of the Trust and REIT Status.............. 93
Advance Notice of Trustee Nominations and New
Business............................................. 93
Possible Antitakeover Effect of Certain Provisions
of Maryland Law and of the Declaration of Trust
and Bylaws........................................... 93
Maryland Asset Requirements........................... 93
Shares Available for Future Sale........................ 93
Partnership Agreement of Operating Partnership.......... 94
General............................................... 94
Management............................................ 95
Indemnification....................................... 96
Capital Contributions................................. 96
Tax Matters........................................... 96
Operations............................................ 96
Duties and Conflicts.................................. 96
Term.................................................. 96
Federal Income Tax Consequences......................... 97
Taxation of the Company............................... 97
Tax Aspects of the Company's Investments in
Partnerships......................................... 101
Taxation of Shareholders.............................. 102
Other Tax Considerations.............................. 104
ERISA Considerations.................................... 105
General Fiduciary Considerations...................... 105
Prohibited Transactions............................... 105
Plan Assets Issues.................................... 105
Underwriting............................................ 107
Legal Matters........................................... 108
Experts................................................. 109
Additional Information.................................. 109
Glossary................................................ 110
Index to Financial Statements........................... F-1
</TABLE>
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON SHARES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PRO-
SPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS
OR SUBSCRIPTIONS.
INFORMATION CONTAINED IN THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS
RELATING TO, WITHOUT LIMITATION, FUTURE ECONOMIC PERFORMANCE, PLANS AND OBJEC-
TIVES OF MANAGEMENT FOR FUTURE OPERATIONS AND PROJECTIONS OF REVENUE AND OTHER
FINANCIAL ITEMS, WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMI-
NOLOGY SUCH AS "MAY," "WILL," "SHOULD," "EXPECT," "ANTICIPATE," "ESTIMATE,"
"BELIEVE" OR "CONTINUE" OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR
COMPARABLE TERMINOLOGY. THE CAUTIONARY STATEMENTS SET FORTH UNDER THE CAPTION
"RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS IDENTIFY IMPORTANT FACTORS WITH
RESPECT TO SUCH FORWARD-LOOKING STATEMENTS, INCLUDING CERTAIN RISKS AND UNCER-
TAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE SET
FORTH IN SUCH FORWARD-LOOKING STATEMENTS.
The Company intends to furnish its shareholders with annual reports containing
audited consolidated financial statements and a report thereon by its indepen-
dent certified public accountants.
ii
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed infor-
mation and financial statements, including the notes thereto, appearing else-
where in this Prospectus. Unless otherwise indicated, the information contained
in this Prospectus assumes (i) the consummation of the transactions relating to
the formation of the Company, the acquisition of the Properties and certain
other assets described under the heading "The Formation and Other Transactions"
(the "Formation Transactions") and the Concurrent Placement , (ii) the Under-
writers' over-allotment option is not exercised, and (iii) the initial public
offering price (the "Offering Price") is $20.00 per Common Share (the midpoint
of the range set forth on the cover page of this Prospectus). Unless the con-
text otherwise requires, all references in this Prospectus to (i) the "Company"
means Cabot Industrial Trust and its operating subsidiaries, including the
Operating Partnership, of which the Company is the sole general partner, and
Cabot Advisors, Inc., a Delaware corporation (the "Management Company"), (ii)
"Cabot Partners" means Cabot Partners Limited Partnership, and (iii) the "Con-
tributing Investors" means those Cabot Partners advisory clients who are con-
tributing Properties (or where such clients hold title through another entity,
such title holding entity), C-M Holdings, L.P. ("C-M Holdings") and certain
affiliated partnerships (collectively, with C-M Holdings, the "C-M Property
Partnerships") and certain other investors who are contributing Properties in
the Formation Transactions. All other capitalized terms used in this Prospectus
have the meanings set forth in the Glossary.
THE COMPANY
The Company is an internally managed, fully integrated real estate company
formed to continue and expand the national industrial real estate business of
Cabot Partners. The Company will have a portfolio of 144 Properties located in
21 states throughout the United States, containing approximately 22 million
rentable square feet. At September 30, 1997, the Properties were approximately
93% leased to 258 tenants. As of November 18, 1997, no single tenant accounted
for more than 5.2% of the Company's total Annualized Base Rent. Approximately
92% of the Company's Properties (measured by square footage) are located in the
top 15% of the nation's 273 industrial markets as rated by Cognetics Real
Estate, Inc. ("Cognetics"), a nationally recognized real estate research firm,
on the basis of a five-year projected demand for distribution property space
and flex/R&D property space.
The Company's goal is to be the preeminent national real estate company focused
on serving a variety of industrial space users in the country's principal com-
mercial markets. The Company owns and operates a diversified portfolio of bulk
distribution, multitenant distribution and "workspace" (light assembly and
flex/R&D) properties and has a significant market presence across the United
States, owning Properties in a total of 21 markets (17 of which the Company has
identified as principal target markets) and owning Properties with more than
one million rentable square feet in eight of such markets. Based on results of
a 1996 census, the Properties are within overnight trucking access (a 500-mile
radius) to 90% of the country's population. The Company believes that its geo-
graphic diversification and substantial presence in multiple markets is a stra-
tegic advantage that allows it to (i) serve industrial space users with mul-
tiple site and property type requirements, (ii) compete more effectively in its
chosen markets and (iii) respond quickly to acquisition opportunities across
the country. The Company, through its investment in the Management Company,
will also continue Cabot Partners' industrial real estate investment management
business.
The Company's principal growth strategy is to acquire modern, high-quality
industrial properties in attractive submarkets within the markets it currently
serves. Cabot Partners completed the acquisition of approximately $251 million
and $191 million of industrial properties on behalf of its clients in 1995 and
1996, respectively. Cabot Partners expects to acquire a total of $275 million
of industrial properties on behalf of its clients in 1997. As of December 19,
1997, $244 million of such acquisitions had been completed and approximately
$31 million were under contract. Also, during 1997, Cabot Partners negotiated
the contribution to the Company in the Formation Transactions of approximately
$270 million of industrial properties not previously managed by Cabot Partners.
The Company has contracts to purchase 21 additional Properties for an aggregate
purchase price of approximately $142 million (the "Company Acquisitions"). The
Company Acquisitions are expected to be completed concurrently with or shortly
following the completion of the Offering.
The senior management of the Company has an average of approximately 18 years
of experience in the real estate industry and will beneficially own 4.0% of the
Company's fully diluted common equity upon the closing of the Offering. Members
of the Company's senior management have worked together since 1987 as the exec-
utive officers of Cabot Partners and, previously, Cabot, Cabot & Forbes Realty
Advisors, Inc. ("Cabot Advisors"). Cabot Advisors was founded in 1986 as an
affiliate of Cabot, Cabot & Forbes Company ("CC&F"), a nationwide real estate
development, investment, construction and management firm that pioneered the
development of large-scale planned industrial parks. Cabot Partners, a regis-
tered investment advisor providing industrial real estate investment and man-
agement services to public and private pension funds and others, was formed as
a separate entity in 1990 to purchase the real estate advisory management busi-
ness of Cabot Advisors.
The Company is organized as a real estate investment trust under Maryland law
and expects to qualify as a REIT for federal income tax purposes.
1
<PAGE>
RISK FACTORS
An investment in the Common Shares involves various risks. Prospective
investors should carefully consider the matters discussed under "Risk Factors"
prior to making an investment in the Company. Such risks include, among others:
. The market value of the Common Shares may exceed the aggregate fair
market value of the proportionate interest in the Company's portfolio of
Properties and other assets they represent.
. The Company's expected initial level of distributions was determined on
the basis of a number of assumptions, any of which could prove incorrect
or become incorrect over time. No assurance can be given that the Company
will be able to sustain its expected initial level of distributions.
. The antitakeover effects of limiting actual or constructive ownership of
shares of the Company by a single person to 9.8% of the number of issued
and outstanding shares of beneficial interest of the Company or the total
equity value of such shares (subject to certain exceptions), staggered
elections of Trustees and certain other provisions contained in the orga-
nizational documents of the Company and the Operating Partnership, each
of which may have the effect of delaying, deferring or preventing a
change in control of the Company or other transaction that might involve
a price for the Common Shares that exceeds their then current market
price or that may otherwise be considered by the Company's shareholders
to be desirable.
. Tax risks, including taxation of the Company as a corporation if it fails
to qualify as a REIT for federal income tax purposes and the resulting
decrease in cash that would be available for distribution, and the fact
that the Company's management lacks experience in operating in accordance
with the requirements for maintaining qualification as a REIT.
. The Company's Board of Trustees (the "Board of Trustees") may change the
Company's investment, financing, distribution and other policies at any
time without shareholder approval.
. Investment in and operation of commercial real estate generally involves
certain risks, including the failure of tenants to make lease payments,
the inability to renew or re-lease space upon the expiration of leases
(leases accounting for 11.8% of the Company's Annualized Base Rents are
scheduled to expire in 1998), the effect of national and local economic
and other conditions on real estate values, including effects associated
with cyclical weaknesses or demographic changes in real estate markets,
competition from other REITs and real estate investors seeking properties
of the types which the Company intends to acquire, costs relating to ren-
ovation and re-leasing costs, the impact on the Company's properties of
competition from other existing properties and from newly constructed
properties in future periods, environmental issues and changes in the
ability of the Company's properties to generate sufficient cash flow to
meet operating expenses (including possible future debt service require-
ments).
. The Company may constitute a "pension-held REIT" immediately after the
closing of the Offering. If this were to occur, certain types of
borrowings or other activities, if engaged in by the Company, would
result in a portion of the dividends received by any qualified pension
plan owning more than 10.0% in value of the Company's shares being tax-
able to such plan as unrelated business taxable income.
. Conflicts of interest between the Company, the Cabot Group Participants
(most of whom will serve as executive officers and Trustees of the Com-
pany) and the other Contributing Investors with respect to the Formation
Transactions and the ongoing business decisions regarding the Company,
which could result in decisions that do not fully reflect the interests
of all of the Company's shareholders. Two Contributing Investors will own
24.2% and 14.1%, respectively, of the Company's fully diluted common
equity.
. The absence of a prior market for the Common Shares, the lack of assur-
ance that an active trading market will develop or that the Common Shares
will trade at or above the Offering Price, the potential negative effects
of rising interest rates on the market price of the Common Shares and the
effect of the availability of shares for future sale on the price of the
Common Shares.
. One Contributing Investor has relied upon an exemption from the prohib-
ited transaction rules of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and Section 4975 of the Internal Revenue Code
of 1986, as amended (the "Code"), in contributing Properties to the Com-
pany. The applicability of such exemption in certain circumstances
recently has been questioned by the Department of Labor. The Company has
received an opinion of counsel that such exemption applies to the Forma-
tion Transactions; however, such opinion is not binding on the Department
of Labor, the Internal Revenue Service (the "Service") or any court.
. The possibility that certain of the Properties, particularly newly
acquired Properties and properties acquired in the future, may fail to
perform as expected or may have characteristics or defects unknown to the
Company.
. As a result, among other things, of the annual income distribution
requirements applicable to REITs under the Code, the Company expects to
rely on borrowings and other external sources of financing to fund the
costs of new property acquisitions, capital expenditures and other items.
Accordingly, the Company will be subject to real estate
2
<PAGE>
financing risks, including changes from period to period in the avail-
ability of such financing, increased interest expense that may be incurred
on variable rate debt in rising interest rate markets and the risk that
the Company's cash flow may not be sufficient to cover both required debt
service payments and distributions to shareholders at desired levels.
. The Company is dependent on the efforts of its executive officers and the
loss of their services could have an adverse effect on the operations of
the Company.
. This Prospectus contains certain forward-looking statements which involve
risks and uncertainties. The Company's actual results may differ signifi-
cantly from the results discussed in such forward-looking statements.
Factors that could cause such differences include, but are not limited
to, the risks described under the "Risk Factors" section of this Prospec-
tus.
. The purchasers of Common Shares in the Offering will experience immediate
dilution of $1.26 per Common Share in net tangible book value in connec-
tion with their investment in the Common Shares offered hereby based on
the Offering Price.
INDUSTRIAL REAL ESTATE BUSINESS
Attractive Real Estate Sector
Industrial real estate has historically generated a high level of cash income
and attractive rates of return as compared with other types of real estate
investments. The Company believes that industrial properties tend to be less
costly to manage and require lower amounts of capital expenditures and tenant-
specific improvement costs. Such properties provide generic storage and work
space suitable for and adaptable to a broad range of tenants and uses. Indus-
trial properties also generally require relatively short development periods,
which enables better balancing of supply and demand for such properties and
reduces overbuilding risks.
Strong Demand
The Company believes that, at least for the near term, the demand for desir-
able, well-located industrial properties will continue and will support
increasing rents. Nationwide, the demand for distribution and flex/R&D proper-
ties during the period from 1997 to 2002 is projected by Cognetics to increase
over existing levels by approximately 791 million square feet, or 14.8%, con-
sisting of approximately 598 million square feet for distribution properties
and approximately 193 million square feet for flex/R&D properties. Continuing
demand for well-located, modern industrial properties is expected to increase
due to (i) increasing consumption on a per capita basis, coupled with popula-
tion growth, (ii) business' increasing need for efficient inventory management,
(iii) growing international trade, and (iv) the growing significance of smaller
companies seeking efficient and flexible work space in well-located, suburban
industrial parks. According to Cognetics, during the period from 1992 to 1996,
companies with fewer than 100 employees accounted for 47% of all existing jobs;
however, they accounted for 84% of all net job creation during the same period.
Cognetics anticipates that the majority of net job creation over the next five
years will continue to be due to small firms with less than 100 employees as
this has been a consistent pattern for the last decade.
Industry Consolidation
The historically fragmented industrial real estate business is being reshaped
by strong pressures toward consolidation resulting from the substantial advan-
tages enjoyed by large, integrated and well-capitalized firms over local owners
and developers. These advantages include professional management, greater
access to public and private capital, economies of scale and greater opportuni-
ties to increase revenue by serving the changing needs of industrial tenants.
In addition, there is an increasing trend toward securitization of real estate
holdings as institutional real estate investors shift from direct private own-
ership to indirect public ownership of real estate. The Company believes that
both of these trends provide substantial opportunities for publicly held real
estate companies that have the managerial and financial resources to maintain
an active acquisition and development program.
Diverse Tenant Needs
Different types of industrial space users have significantly different property
and space requirements. Large national and major regional distributors gener-
ally require efficient, well-located bulk distribution properties. Smaller com-
panies generally demand more flexible work space, including light assembly
facilities and flex/R&D space. While these properties are generally more costly
to manage, the Company believes that such properties offer the prospect of
higher current returns because the users of such space are location sensitive
and less inclined to move if the properties they occupy are well located and
managed. Moreover, the Company believes that the continued employment growth
resulting from smaller companies will result in strong demand for these
workspace properties.
3
<PAGE>
BUSINESS AND GROWTH STRATEGIES
The Company's fundamental business objective is to maximize the total return to
its shareholders through growth in its cash available for distribution per
Common Share and in the value of its portfolio of industrial properties and
operations.
BUSINESS STRATEGIES
Leveraging Substantial National Market Presence
The Company's substantial presence in markets throughout the country positions
it well to market its industrial space to national companies with space
requirements in multiple locations. The Company will pursue a national tenant
marketing program emphasizing the advantages of dealing with a single source
for industrial space needs, as well as the quality and central locations of the
Company's properties. These advantages include greater efficiency of lease
negotiations and day-to-day property management matters, as well as better
understanding of the tenant's current needs and prospective space requirements.
Within each local market, having a substantial inventory of properties and sig-
nificant leasing activity increases the Company's visibility to prospective
tenants and enables the Company to establish strong relationships with leasing
brokers and other local market participants who serve as sources of information
and referrals of potential tenants. In addition, the Company has increased
opportunities to relocate tenants to one or more of its other properties as
their needs change.
Serving a Variety of Tenants by Offering a Broad Spectrum of Industrial
Property Types
Offering a broad spectrum of industrial property types and the Company's size
enable it to provide better service, on a more cost-efficient basis, to
national customers who often need workspace properties, in addition to distri-
bution properties, for their local operations. At the same time, offering an
array of property types suitable for smaller companies enables the Company to
capture a larger share of the growth in its chosen industrial property markets.
The Company believes that smaller business establishments will form an impor-
tant segment of its tenant base. Business establishments with fewer than 100
employees are projected, based on data supplied by Cognetics, to generate
approximately 67% of the projected increased demand for distribution and
flex/R&D property space during the period from 1997 to 2002.
GROWTH STRATEGIES
Acquisitions
The Company will seek to capitalize on its competitive advantages primarily by
acquiring additional modern, high-quality properties in attractive submarkets
within major industrial markets.
The Company's acquisitions are based on extensive research in each targeted
market regarding (i) economic and demographic trends, (ii) supply of and demand
for industrial space in targeted submarkets, (iii) existing and potential
tenant space requirements, (iv) rent levels and trends and (v) the physical
characteristics of buildings within the market. The Company's research also
involves physical site inspections and continuing contacts with leasing brokers
and other market participants. The results of the Company's research are com-
piled into a proprietary database covering each market and submarket in which
it has invested or that it has targeted. This database is updated periodically
and contains computerized profiles, keyed to Company-prepared aerial maps, of
the Company's properties and each of the buildings deemed most competitive to
the Company's properties or attractive for acquisition. Each profile includes
information regarding the building's age, physical characteristics and current
tenant and lease information.
Upon the closing of the Offering and the Concurrent Placement, the Company
expects to have approximately $13.4 million of outstanding long-term debt,
approximately $6.2 million of available cash and a Debt-to-Total Market Capi-
talization Ratio of less than 2%. The Company expects to be able to obtain
borrowings on a timely basis that will enable it to move quickly in completing
proposed property acquisitions and believes that its ability to do so will
enhance its credibility with potential property sellers. In addition, the
Company's UPREIT structure, which will enable it to acquire industrial proper-
ties on a non-cash basis by exchanging Units in the Operating Partnership for
such properties in a tax-deferred manner, provides an attractive alternative to
taxable cash sales for tax-paying property owners.
4
<PAGE>
The Company's management has extensive knowledge of and, the Company believes,
a favorable reputation with public and private pension funds and other institu-
tional real estate investors as a result of Cabot Partners' focus on serving
such investors. The Company believes that it will benefit from its relation-
ships with these investors through further acquisitions as they increasingly
seek to securitize their direct real estate investments.
Internal Growth
The Company's primary internal growth strategy is to increase the cash flow
generated by the Properties, and from properties that it acquires in the
future, by renewing or replacing expiring leases with new leases at higher
rents and through rent increase provisions in its leases. In addition, the Com-
pany intends to work actively to (i) maintain its historically high occupancy
levels by retaining existing tenants, thereby minimizing "down time" and
releasing costs, (ii) improve the occupancy levels of any newly acquired prop-
erties that have low occupancy levels, (iii) realize economies of scale from
the size of its portfolio of properties and (iv) control costs. During the
period from January 1, 1995 to September 30, 1997, the lease renewal rates for
the Properties acquired prior to September 30, 1997 and for the Existing
Investors Property Group were 84.0% and 88.7%, respectively.
Development
The Company's senior management has extensive real estate development experi-
ence, including experience derived from the industrial park development activi-
ties of CC&F. The Company is engaging its existing tenants in discussions about
future space needs and, based on such discussions, believes that financially
attractive build-to-suit opportunities from its tenant base may be available
over time. The Company also believes that in select target markets there are
attractive opportunities for new development with potentially greater returns
than those available from the purchase of existing stabilized properties, and
it intends to pursue a development program where such opportunities exist. In
order to limit initial overhead expenses, the Company intends to begin its
development activities by engaging local or regional builders with whom it has
established strong relationships. Thereafter, the Company intends to expand its
in-house development staff as the Company's development activities increase.
FINANCIAL STRATEGIES
The Company's financial strategy is to minimize its cost of capital by main-
taining adequate working capital and conservative debt levels. The Company
estimates that approximately $6.2 million of the proceeds from the Offering and
the Concurrent Placement will be available for general corporate purposes,
including acquisitions and working capital, after payment of expenses of the
Offering, the Concurrent Placement and the Formation Transactions and the use
of approximately $133.7 million and $13.1 million of net proceeds to fund the
Company Acquisitions and to repay certain outstanding indebtedness, respec-
tively. The Company is currently negotiating with several financial institu-
tions the establishment of a $325 million revolving credit facility (the "Ac-
quisition Facility") to be used primarily for property acquisitions and expects
the facility to be in place upon the closing of the Offering. The Company
intends to operate with a Debt-to-Total Market Capitalization Ratio that gener-
ally will not exceed 40%, although the Company's Declaration of Trust and
Bylaws do not impose any limit on the incurrence of debt.
The Company believes that the size and diversity of its portfolio of Properties
will provide it access to the public debt and equity markets which are not gen-
erally available to smaller, less diversified property owners. The Company also
believes that its "UPREIT" structure (i.e., ownership of properties through the
Operating Partnership) will enable it to acquire industrial properties in
exchange for Units in the Operating Partnership, thereby reducing its need to
incur indebtedness to support future acquisitions.
5
<PAGE>
PROPERTIES
Upon the closing of the Offering, the Company will own a portfolio of 144 Prop-
erties having an aggregate of approximately 22 million rentable square feet,
approximately 93% of which space was leased to 258 tenants at September 30,
1997. The Company categorizes its properties into three types: bulk distribu-
tion properties, multitenant distribution properties and workspace properties.
See "Properties--General."
The following tables provide information regarding the Properties as of Sep-
tember 30, 1997.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
RENTABLE SQUARE FEET ANNUALIZED NET RENT(1) ANNUALIZED
------------------------ ---------------------------------- NET EFFECTIVE
PER LEASED RENT PER
NUMBER OF SQUARE LEASED PERCENT
PROPERTY TYPE BY REGION PROPERTIES NUMBER % OF TOTAL AMOUNT % OF TOTAL FOOT SQUARE FOOT(2) LEASED
- ----------------------- ---------- ---------- ---------- ----------- ---------- ---------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BULK DISTRIBUTION
PROPERTIES:
West 13 2,739,730 12.5% $ 7,790,735 10.4% $3.22 $3.22 88.4%
Southwest 4 1,326,200 6.0 2,709,712 3.6 3.07 3.06 66.6
Midwest 16 3,872,086 17.6 11,295,226 15.0 3.01 2.90 97.0
Southeast 5 1,355,266 6.2 3,690,304 4.9 3.16 3.14 86.1
Northeast 10 2,496,262 11.3 9,291,628 12.4 3.72 3.76 100.0
---------- ---------- ---------- ----------- ---------- ---------- -------------- -------
Subtotal/weighted
average 48 11,789,544 53.6% $34,777,605 46.3% $3.24 $3.21 91.0%
---------- ---------- ---------- ----------- ---------- ---------- -------------- -------
MULTITENANT DISTRIBUTION
PROPERTIES:
West 4 831,626 3.8% $ 3,002,560 4.0% $3.61 $3.49 100.0%
Southwest 3 385,135 1.8 1,163,982 1.5 3.02 2.75 100.0
Midwest 13 2,159,560 9.8 7,771,102 10.3 3.93 3.88 91.7
Southeast 7 1,274,745 5.8 4,070,073 5.5 3.39 2.85 94.2
Northeast 11 2,065,503 9.3 7,998,906 10.7 3.87 3.71 100.0
---------- ---------- ---------- ----------- ---------- ---------- -------------- -------
Subtotal/weighted
average 38 6,716,569 30.5% $24,006,623 32.0% $3.71 $3.52 96.2%
---------- ---------- ---------- ----------- ---------- ---------- -------------- -------
WORKSPACE PROPERTIES:
West 28 1,337,123 6.1% $ 6,566,829 8.7% $4.96 $5.03 99.0%
Southwest 2 255,736 1.2 914,640 1.2 5.74 6.27 62.3
Midwest 5 345,060 1.6 1,636,516 2.2 5.65 5.55 84.0
Southeast 12 889,523 4.0 3,420,659 4.6 4.27 4.23 90.1
Northeast 11 665,892 3.0 3,790,400 5.0 5.88 5.12 96.8
---------- ---------- ---------- ----------- ---------- ---------- -------------- -------
Subtotal/weighted
average 58 3,493,334 15.9% $16,329,044 21.7% $5.07 $4.96 92.2%
---------- ---------- ---------- ----------- ---------- ---------- -------------- -------
Total/weighted average 144 21,999,447 100.0% $75,113,272 100.0% $3.68 $3.58 92.8%
========== ========== ========== =========== ========== ========== ============== =======
<CAPTION>
----------------------------------------------------------------------------------------------
RENTABLE SQUARE FEET ANNUALIZED NET RENT(1) ANNUALIZED
------------------------ ---------------------------------- NET EFFECTIVE
PER LEASED RENT PER
NUMBER OF SQUARE LEASED PERCENT
PROPERTIES BY REGION PROPERTIES NUMBER % OF TOTAL AMOUNT % OF TOTAL FOOT SQUARE FOOT(2) LEASED
- -------------------- ---------- ---------- ---------- ----------- ---------- ---------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
West 45 4,908,479 22.3% $17,360,124 23.1% $3.79 $3.79 93.3%
Southwest 9 1,967,071 8.9 4,788,334 6.4 3.35 3.34 72.6
Midwest 34 6,376,706 29.0 20,702,844 27.6 3.44 3.35 94.5
Southeast 24 3,519,534 16.0 11,181,036 14.9 3.53 3.31 90.1
Northeast 32 5,227,657 23.8 21,080,934 28.0 4.05 3.91 99.6
---------- ---------- ---------- ----------- ---------- ---------- -------------- -------
Total/weighted average 144 21,999,447 100.0% $75,113,272 100.0% $3.68 $3.58 92.8%
========== ========== ========== =========== ========== ========== ============== =======
</TABLE>
- -------
(1) "Annualized Net Rent" means annualized monthly Net Rent from leases in
effect as of September 30, 1997. "Net Rent" means contractual rent, excluding
any reimbursements for real estate taxes or operating expenses.
(2) "Annualized Net Effective Rent" means Annualized Net Rent, less amortiza-
tion of the related leasing costs, as adjusted to reflect the effect of rent
concessions and straight-lining of rent steps.
6
<PAGE>
THE FORMATION AND OTHER TRANSACTIONS
Cabot Partners and the Contributing Investors are undertaking the Formation
Transactions for the purpose of organizing the Company and the Operating Part-
nership in preparation for the Offering and to transfer the Properties and
Cabot Partners' real estate advisory and management business to the Operating
Partnership in a tax-efficient manner. Upon completion of the Formation Trans-
actions (i) the Properties and Cabot Partners' operating assets, other than
certain assets relating to Cabot Partners' advisory and management business,
will be held by the Operating Partnership, of which the Company will be the
sole general partner, and (ii) the assets of Cabot Partners' advisory and man-
agement business relating to industrial properties that are not being contrib-
uted pursuant to the Formation Transactions will be held by, and such business
will be conducted through, the Management Company. See "Formation and Other
Transactions."
The Formation Transactions and the Company Acquisitions have been and will be
effected as follows:
. The Company has been organized by Cabot Partners as a real estate invest-
ment trust under Maryland law.
. The Operating Partnership has been formed as a limited partnership under
Delaware law, with the Company as its sole general partner.
. The Properties described in this Prospectus include both Properties that
are being contributed to the Operating Partnership (or to the Company for
transfer to the Operating Partnership) by the Contributing Investors and
Properties expected to be purchased by the Operating Partnership concur-
rently with or shortly after the closing of the Offering (referred to
herein as the "Company Acquisitions"). The Contributing Investors include
certain of the existing advisory clients of Cabot Partners or their holding
entities (collectively referred to herein as the "Existing Investors") and
certain other industrial real estate investors or their holding entities.
. The Properties that will be contributed to the Company in the Formation
Transactions include previously owned Properties of the Existing Investors
that have been managed by Cabot Partners and are referred to in the histor-
ical and pro forma financial statements included in this Prospectus as the
"Existing Investors Property Group," additional Properties recently
acquired or being acquired by Cabot Partners on behalf of Existing
Investors (the "Additional Acquisitions"), and Properties owned by the
other Contributing Investors (the "New Investors Property Group").
. The 21 Properties that are to be purchased in the Company Acquisitions are
currently under contract to be purchased by the Operating Partnership at an
aggregate purchase price of approximately $141.8 million. Approximately
$133.7 million of the net proceeds from the Offering and the Concurrent
Placement will be used to fund such purchases. The Company also will assume
approximately $8.2 million of existing mortgage indebtedness secured by
certain of the Properties to be acquired in the Company Acquisitions. See
"Use of Proceeds," "--Financial Strategies" and "The Company--Financial
Strategies."
. Cabot Partners will contribute its real estate advisory and management
business and related assets, including its investment advisory and manage-
ment contracts with certain of its advisory clients (the "Advisory Con-
tracts") relating to industrial properties that are not being contributed
in the Formation Transactions, to the Management Company or to the Oper-
ating Partnership for transfer to the Management Company concurrently with
the closing of the Offering. The Operating Partnership will own 100% of the
non-voting preferred stock of the Management Company, representing 95.0% of
the economic interest in the Management Company. Ferdinand Colloredo-
Mansfeld, the Company's Chief Executive Officer, will own 100% of the
voting common stock of the Management Company, representing 5.0% of the
economic interest in the Management Company.
. The contributions of Properties and other assets by the Contributing
Investors and Cabot Partners will be made in exchange for Units in the
Operating Partnership that may, subject to certain limitations and excep-
tions, be exchanged for Common Shares or, in certain cases, will be made in
exchange for Common Shares.
. Contemporaneously with the closing of the Offering, the Company will sell
$20.0 million of Common Shares at the Offering Price to the Concurrent
Investor in the Concurrent Placement.
. As a result of the Formation Transactions, the Contributing Investors and
Cabot Partners will become equity investors in the Company and the Oper-
ating Partnership. The Contributing Investors will hold an aggregate of
23,068,699 Units and 8,961,714 Common Shares having a value, based on the
Offering Price, of approximately $640.6 million and Cabot Partners will
hold an aggregate of 1,819,587 Units having a value, based on the Offering
Price, of approxi mately $36.4 million. See "Principal and Management
Shareholders." Such ownership by the Contributing Investors and Cabot Part-
ners will represent approximately 75.6% and 4.3%, respectively, of the
fully diluted common equity of the Company. Of the Units that will be
received by Cabot Partners (i) Ferdinand Colloredo-Mansfeld, the Chief
7
<PAGE>
Executive Officer of the Company, will receive 875,792 Units having a value,
based on the Offering Price, of approximately $17.5 million and (ii) Robert
E. Patterson, the President of the Company, will receive 128,590 Units
having a value, based on the Offering Price, of approximately $2.6 million.
. The Company will contribute the net proceeds of the Offering received by it
to the Operating Partnership in exchange for the number of general partner-
ship interests ("GP Units") in the Operating Partnership that equals the
number of Common Shares sold in the Offering. As a result of such contribu-
tion and its receipt of Units in connection with the Formation Transac-
tions, the Company will hold a 41.2% general partnership interest (before
exchange of Units) in the Operating Partnership and will be an indirect
owner of the contributed Properties and other assets through and to the
extent of such general partnership interest.
8
<PAGE>
STRUCTURE OF THE COMPANY
The following chart illustrates the structure of the Company and the beneficial
ownership of the Company, the Operating Partnership and the Management Company
after the consummation of the Formation Transactions and the closing of the
Offering and the Concurrent Placement. See "Formation and Other Transactions."
THE COMPANY
<TABLE>
<CAPTION>
---------------------
PERCENT PERCENT
OF COMMON OF COMMON
SHARES SHARES
BEFORE AFTER
EXCHANGE EXCHANGE
OWNER OF UNITS OF UNITS
----- --------- ---------
<S> <C> <C>
Public Investors................................ 43.0% 17.7%
Contributing Investors, Concurrent Investor and
Others(1)...................................... 57.0% 78.3%
Management(2)................................... -- 4.0%
</TABLE>
THE OPERATING PARTNERSHIP
<TABLE>
<CAPTION>
---------------------
OWNERSHIP OWNERSHIP
INTEREST INTEREST
BEFORE AFTER
EXCHANGE EXCHANGE
OWNER OF UNITS OF UNITS
----- --------- ---------
<S> <C> <C>
Company........................................... 41.2% 100.0%
Contributing Investors and Others(1).............. 54.8% --
Management(2)..................................... 4.0% --
</TABLE>
THE MANAGEMENT COMPANY
<TABLE>
<CAPTION>
--------------------------------
VOTING NON-VOTING TOTAL
COMMON PREFERRED ECONOMIC
OWNER STOCK STOCK INTEREST
----- --------- --------- ---------
<S> <C> <C> <C>
Operating Partnership(3)............... -- 100.0% 95.0%
Ferdinand Colloredo-Mansfeld........... 100.0% -- 5.0%
</TABLE>
- -------
(1) Includes each of the Contributing Investors other than the C-M Property
Partnerships and those holders of interests in Cabot Partners who are not offi-
cers or Trustees of the Company or the Management Company. The C-M Property
Partnerships are owned by Ferdinand Colloredo-Mansfeld, who is the Company's
Chief Executive Officer, and members of his immediate family. The ownership
interests in the Company attributable to the C-M Property Partnerships are
included under "Management." See Note (2) below. Each of the Contributing
Investors will receive Units or Common Shares in the Formation Transactions in
exchange for their interests in the Properties. See "Formation and Other Trans-
actions."
(2) Includes certain officers and Trustees and members of their immediate fami-
lies who will receive beneficial ownership of Units in exchange for their
interests in Cabot Partners and/or the C-M Property Partnerships which are
being contributed in the Formation Transactions. See "Formation and Other
Transactions."
(3) As a result of the Operating Partnership's ownership of non-voting pre-
ferred stock of the Management Company, the Company, through the Operating
Partnership, expects to receive 95% of the after-tax economic benefits of the
Management Company. See "The Company--Third-Party Investment Management."
9
<PAGE>
BENEFITS TO RELATED PARTIES
Certain of the officers and Trustees of the Company and members of their imme-
diate families, which persons are collectively referred to herein as the "Cabot
Group Participants," and the Contributing Investors will realize certain bene-
fits as a result of the Offering and the Formation Transactions. These benefits
are summarized below and are described in greater detail under the captions
"Formation and Other Transactions," "Certain Relationships and Related Transac-
tions" and "Principal and Management Shareholders."
RECEIPT OF UNITS AND COMMON SHARES IN THE FORMATION TRANSACTIONS
The Cabot Group Participants will receive a total of 1,705,506 Units in the
Formation Transactions in exchange for their interests in the C-M Property
Partnerships and/or Cabot Partners. These Units (representing approximately
4.0% of the common equity of the Company on a fully diluted basis) will have a
total value of approximately $34.1 million, based on the Offering Price. The
Cabot Group Participants' partnership interests for the C-M Property Partner-
ships and Cabot Partners had an aggregate net book value of $5.1 million as of
September 30, 1997. The aggregate cost to the Cabot Group Participants for
these partnership interests was $8.8 million, resulting in an unrealized gain
of approximately $25.3 million. The C-M Property Partnerships are owned by Fer-
dinand Colloredo-Mansfeld, the Company's Chief Executive Officer, and members
of his immediate family, including Franz Colloredo-Mansfeld, the Company's
Chief Financial Officer, with Ferdinand Colloredo-Mansfeld owning a 97% part-
nership interest therein and Franz Colloredo-Mansfeld and other family members
holding 1% and 2% partnership interests therein, respectively. Of the total
number of Units that will be received by the Cabot Group Participants in the
Formation Transactions, (i) Ferdinand Colloredo-Mansfeld will receive 1,331,657
Units having a value, based on the Offering Price, of approximately $26.6 mil-
lion in exchange for his partnership interests in the C-M Property Partnerships
and Cabot Partners, which had an aggregate cost of approximately $4.7 million
and $3.9 million, respectively, and (ii) Robert E. Patterson, President of the
Company, will receive 128,590 Units having a value, on such basis, of approxi-
mately $2.6 million in exchange for his partnership interests in Cabot Part-
ners, which had an aggregate cost of $59,000.
The Contributing Investors (excluding for this purpose the C-M Property Part-
nerships) will receive a total of 22,598,735 Units and 8,961,714 Common Shares
in exchange for their interests in the Properties in connection with the Forma-
tion Transactions. These Units and Common Shares (representing approximately
74.5% of the common equity of the Company on a fully diluted basis) will have a
total value of approximately $631.2 million, based on the Offering Price, com-
pared to the aggregate cost for the Properties to be contributed to the Company
by such Contributing Investors of approximately $655.9 million.
The Units received by the Cabot Group Participants and the Contributing
Investors in the Formation Transactions may, in accordance with the Operating
Partnership Agreement, be exchanged in whole or in part for Common Shares on a
one-for-one basis or, at the election of the Company, the cash equivalent
thereof, at any time commencing one year after the Closing Date in the case of
Contributing Investors or two years after the Closing Date in the case of Cabot
Group Participants. The Company currently expects that it will not elect to pay
cash for Units in connection with any such exchange request, but instead will
issue Common Shares in exchange for such Units. The receipt and retention of
the Units in exchange for contributed assets may provide the Cabot Group Par-
ticipants and certain of the Contributing Investors with continued deferral of
the taxable gain associated with dispositions of those assets.
Treasury regulations under Section 704(c) of the Code provide partnerships with
a choice of several methods of accounting for the difference between the fair
market value of the contributed property at the time of contribution and the
adjusted tax basis of such property at the time of the contribution ("Book-Tax
Differences"). The Operating Partnership and the Company have not yet deter-
mined which of the alternative methods of accounting for Book-Tax Differences
will be elected by the Partnership. Such determination could result in the
allocation of lower amounts of taxable income to the Cabot Group Participants
in certain circumstances than might otherwise occur if the Partnership elected
an alternative method. See "Federal Income Tax Consequences--Tax Aspects of the
Company's Investments in Partnerships--Tax Allocations with Respect to the
Properties."
REPAYMENT OF DEBT
Approximately $18.3 million of indebtedness secured by the Properties to be
contributed by the C-M Property Partnerships will be assumed by the Operating
Partnership and approximately $13.1 million of such indebtedness will be repaid
from the proceeds of the Offering.
10
<PAGE>
OPTIONS GRANTED
The Company will grant options to purchase at the Offering Price an aggregate
of 1,675,000 Units that will be convertible into an equal number of Common
Shares under the Company's Long Term Incentive Plan to senior executive offi-
cers of the Company, subject to certain vesting requirements. See "Management--
Long Term Incentive Plan."
THE OFFERING
<TABLE>
<S> <C>
COMMON SHARES OFFERED........................ 7,500,000 (1)
COMMON SHARES TO BE OUTSTANDING AFTER THE
OFFERING.................................... 42,350,000 (1)(2)
USE OF PROCEEDS.............................. The proceeds to the Company from the Offering
and the Concurrent Placement, after deducting
the underwriting discount of the Offering and
the estimated expenses of the Offering, the
Concurrent Placement and the Formation
Transactions, are estimated to be approximately
$153.0 million (approximately $173.9 million if
the Underwriters' over-allotment option is
exercised in full). Approximately $133.7 million
and $13.1 million of such net proceeds will be
used to fund the Company Acquisitions and to
repay indebtedness secured by certain of the
Properties, respectively, with the balance to be
used for general purposes, including
acquisitions of additional properties.
NYSE TRADING SYMBOL.......................... "CTR"
</TABLE>
- -------
(1) Excludes 1,125,000 Common Shares issuable upon exercise of the Underwrit-
ers' over-allotment option.
(2) Includes 24,888,286 Common Shares that may be issued upon exchange of Units
and 1,000,000 Common Shares (based on the Offering Price) to be sold in the
Concurrent Placement. See "Formation and Other Transactions." Excludes
2,188,500 Common Shares reserved for issuance upon exercise of options to be
granted to officers, employees and Trustees pursuant to the Company's Long Term
Incentive Plan effective upon the closing of the Offering.
DISTRIBUTIONS
The Company intends to make regular quarterly cash distributions to its share-
holders, commencing with a pro rata distribution for the period from the com-
pletion of the Offering through March 31, 1998, based upon a quarterly distri-
bution of $.325 per Common Share. On an annualized basis, this would be $1.30
per Common Share (or an annual distribution rate of 6.5% based on the Offering
Price). The Company does not expect to change its estimated initial distribu-
tion per Common Share if the Underwriters' over-allotment option is exercised.
The Company intends to maintain its initial distribution rate through at least
the remainder of 1998 unless actual results of operations, economic conditions
or other factors differ materially from the assumptions used in calculating the
estimate of its cash available for distribution. Based on the Company's esti-
mated results of operations for the 12 months ending December 31, 1998, the
Company estimates that less than 1% of the anticipated initial annual distribu-
tion to shareholders will represent a return of capital for federal income tax
purposes and that the Company will be required to distribute $21.4 million or
$1.22 per Common Share with respect to such 12-month period in order to main-
tain its status as a REIT. If future taxable income increases above or
decreases below the estimated taxable income for the 12 months following the
closing of the Offering, the percentage of the anticipated initial annual dis-
tribution representing a return of capital will decrease or increase, respec-
tively. See "Distribution Policy" for the calculation of estimated pro forma
cash available for distribution and related assumptions. Future distributions
by the Company will be at the discretion of the Board of Trustees and will
depend on the actual cash available for distribution, the Company's financial
condition and capital requirements, the annual distribution requirements under
the REIT provisions of the Code (see "Federal Income Tax Consequences--Taxation
of the Company--Annual Distribution Requirements") and such other factors as
the Board of Trustees deems relevant. See "Risk Factors--Possible Changes in
Policies Without Shareholder Approval; No Limitation on Debt."
11
<PAGE>
TAX STATUS OF THE COMPANY
The Company intends to qualify and will elect to be taxed as a REIT under
Sections 856 through 860 of the Code, commencing with its taxable year ending
December 31, 1998. If the Company qualifies for taxation as a REIT, the Company
generally will not be subject to federal income tax on its taxable income that
is distributed to its shareholders. A REIT is subject to a number of
organizational and operational requirements, including a requirement that it
currently distribute at least 95% of its annual taxable income (excluding net
capital gain). The Company does not intend to request a ruling from the Service
as to its REIT status. The Company has received an opinion of its legal counsel
that, based on certain assumptions and representations described in "Federal
Income Tax Consequences," the Company has been organized in conformity with the
requirements for qualification as a REIT beginning with its taxable year ending
December 31, 1998, and its proposed method of operation as represented by the
Company to its legal counsel and described in "Federal Income Tax Consequences"
will enable it to satisfy the requirements for such qualification. Investors
should be aware, however, that opinions of counsel are not binding on the
Service or any court. Even if the Company qualifies for taxation as a REIT, the
Company may be subject to certain federal, state and local taxes on its income
and property. Failure to qualify as a REIT would subject the Company to tax
(including any applicable minimum tax) on its taxable income at regular
corporate rates, and distributions to the Company's shareholders in any such
year would not be deductible by the Company. See "Risk Factors--Tax Risks" and
"--Antitakeover Effect of Ownership Limit, Staggered Board and Power to Issue
Additional Shares" and "Federal Income Tax Consequences--Taxation of the
Company."
12
<PAGE>
SUMMARY FINANCIAL AND OTHER DATA
Set forth below are (i) summary historical financial and other data for (A) the
Properties that were managed by Cabot Partners as of September 30, 1997 for the
Contributing Investors (such Contributing Investors are referred to herein as
the "Existing Investors" and such Properties (including the related assets and
liabilities) are referred to herein as the "Existing Investors Property Group")
and (B) the real estate advisory business of Cabot Partners, and (ii) summary
financial and other data for the Company on a pro forma basis.
The summary financial data presented below as of and for the nine months ended
September 30, 1997, in the case of the Existing Investors Property Group, and
as of and for the years ended December 31, 1996, 1995 and 1994, in the case of
both the Existing Investors Property Group and Cabot Partners, have been
derived from Existing Investors Property Group Combined financial statements
and Cabot Partners financial statements that have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports
included elsewhere in this Prospectus. This information should be read in conj-
unction with such financial statements and the notes thereto included elsewhere
in this Prospectus. The summary financial data presented below as of and for
the years ended December 31, 1993 and 1992 for Cabot Partners are derived from
Cabot Partners financial statements and the notes thereto not included in this
Prospectus which have been audited by Arthur Andersen LLP. The summary finan-
cial data presented below as of and for the years ended December 31, 1993 and
1992 and as of and for the nine months ended September 30, 1996 for the
Existing Investors Property Group and as of and for the nine months ended Sep-
tember 30, 1997 and 1996 for Cabot Partners have not been audited but, in the
opinion of management, include all adjustments (consisting only of normal
recurring accruals) necessary to present fairly such information in accordance
with generally accepted accounting principles ("GAAP") applied on a consistent
basis. The results of operations for the nine months ended September 30, 1997
are not necessarily indicative of results for the entire year. Other Data (in-
cluding Property data) for all periods and dates presented are unaudited.
The summary pro forma financial data presented below has been derived from the
pro forma combined consolidated balance sheet as of September 30, 1997 and has
been prepared to reflect (i) the contribution to the Company of (A) the
Existing Investors Property Group, (B) the Properties owned by those Contrib-
uting Investors that were not advisory clients of Cabot Partners at or prior to
September 30, 1997 (the "New Investors Property Group") and (C) the Properties
acquired after September 30, 1997 by Cabot Partners on behalf of the Existing
Investors (the "Additional Acquisitions"), (ii) the other Formation Transac-
tions, (iii) the Company Acquisitions, (iv) the Offering and the Concurrent
Placement and the use of a portion of the net proceeds thereof to repay indebt-
edness and (v) certain other adjustments, as if each of such contributions,
transactions and adjustments had occurred on September 30, 1997. The pro forma
condensed combined operating and other data for the nine months ended September
30, 1997 and the year ended December 31, 1996 have been prepared to reflect (i)
the contribution to the Company of (A) the Existing Investors Property Group,
(B) the Additional Acquisitions, (C) the New Investors Property Group and (D)
the Properties acquired during the year ended December 31, 1996 and during the
nine months ended September 30, 1997, (ii) the other Formation Transactions,
(iii) the Company Acquisitions, (iv) the use of a portion of the net proceeds
of the Offering and the Concurrent Placement to repay indebtedness and (v) cer-
tain other adjustments, as if each of such contributions, transactions and
adjustments had occurred on January 1, 1996.
In the opinion of management, the pro forma combined consolidated financial
statements include all adjustments necessary to reflect the effects of the
foregoing transactions and adjustments. The pro forma statements are unaudited
and are not necessarily indicative of what the financial position would have
been or the combined results that would have been obtained if the transactions
and adjustments reflected therein had been consummated on the dates indicated,
or on any particular date in the future, nor do they purport to represent the
financial position, results of operations or changes in cash flows as of any
future date or for any future period.
13
<PAGE>
CABOT INDUSTRIAL TRUST
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
--------------------------------- --------------------------------------------------------------
COMPANY EXISTING INVESTORS COMPANY
PRO FORMA PROPERTY GROUP (1) PRO FORMA EXISTING INVESTORS PROPERTY GROUP (1)
----------- -------------------- ------------ ------------------------------------------------
In thousands,
except per share 1997 1997 1996 1996 1996 1995 1994 1993 1992
data ----------- --------- --------- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Revenues $ 67,918 $ 28,736 $ 26,138 $ 88,691 $ 35,180 $ 28,794 $ 28,209 $ 25,252 $ 21,904
Real estate tax
expense 7,600 4,005 3,649 9,925 5,037 3,979 3,769 5,144 2,772
Property operating
expenses 5,279 3,284 3,003 7,095 4,323 3,357 3,063 3,227 2,940
General and adminis-
trative expenses 2,655 -- -- 3,404 -- -- -- -- --
Interest expense 872 1,399 1,430 1,177 1,931 2,097 2,082 2,013 2,292
Depreciation and
amortization
expense 16,022 6,473 5,864 21,850 7,966 7,118 6,606 6,111 5,441
----------- --------- --------- ------------ -------- -------- -------- -------- --------
Operating income 35,490 13,575 12,192 45,240 15,923 12,243 12,689 8,757 8,459
Gain on sale of
properties -- -- -- -- -- -- 186 -- --
----------- --------- --------- ------------ -------- -------- -------- -------- --------
Net income before
minority interest 35,490 13,575 12,192 45,240 15,923 12,243 12,875 8,757 8,459
Minority interest (20,858) -- -- (26,588) -- -- -- -- --
----------- --------- --------- ------------ -------- -------- -------- -------- --------
Net income $ 14,632 $ 13,575 $ 12,192 $ 18,652 $ 15,923 $ 12,243 $ 12,875 $ 8,757 $ 8,459
=========== ========= ========= ============ ======== ======== ======== ======== ========
Pro forma net income
per Common Share
(2) $0.84 $1.07
=========== ============
<CAPTION>
-------------------------------------------------------------------------------------------------
AS OF SEPTEMBER 30, AS OF DECEMBER 31,
--------------------------------- ------------------------------------------------
COMPANY EXISTING INVESTORS
PRO FORMA PROPERTY GROUP (1) EXISTING INVESTORS PROPERTY GROUP (1)
----------- -------------------- ------------------------------------------------
1997 1997 1996 1996 1995 1994 1993 1992
In thousands ----------- --------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Rental properties
(before accumulated
depreciation) $ 791,278 $ 358,498 $ 323,639 $336,836 $301,059 $250,387 $255,050 $240,358
Rental properties,
net 791,278 320,956 291,226 304,308 274,629 229,451 237,101 227,149
Total assets 807,389 334,569 308,237 318,732 289,337 241,026 247,615 236,457
Mortgage debt 13,694 18,655 19,496 19,292 20,083 20,608 20,550 20,550
Limited Partners
interest in Oper-
ating Partnership 466,449 -- -- -- -- -- -- --
Shareholders'/Owners'
equity 327,237 307,501 281,267 291,286 261,629 213,203 220,621 211,897
<CAPTION>
-------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
--------------------------------- --------------------------------------------------------------
COMPANY EXISTING INVESTORS COMPANY
In thousands, PRO FORMA PROPERTY GROUP (1) PRO FORMA EXISTING INVESTORS PROPERTY GROUP (1)
except number of ----------- -------------------- ------------ ------------------------------------------------
properties and 1997 1997 1996 1996 1996 1995 1994 1993 1992
percentages ----------- --------- --------- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA
EBITDA (3) $ 52,384 $ 21,447 $ 19,486 $ 68,267 $ 25,820 $ 21,458 $ 21,377 $ 16,881 $ 16,192
Funds From Opera-
tions (4) $ 51,512 $ 19,988 $ 18,012 $ 67,090 $ 23,809 $ 19,298 $ 19,193 $ 14,764 $ 13,855
Cash flows provided
by (used in):
Operating activi-
ties $ 49,983 $ 19,497 $ 16,525 $ 67,158 $ 25,695 $ 19,401 $ 17,552 $ 17,471 $ 14,123
Investing activi-
ties $ (24,792) $ (22,818) $ (24,825) $ (303,824) $(39,074) $(53,868) $ 2,037 $(17,393) $ (9,980)
Financing activi-
ties $ (31,488) $ 2,038 $ 7,068 $ 242,094 $ 13,204 $ 35,680 $(19,596) $ (278) $ (6,216)
Total rentable
square footage of
properties at end
of period 21,999 9,529 8,547 9,069 7,879 6,253 6,644 6,100
Number of properties
at end of period 144 72 64 67 61 53 57 53
Occupancy rate at
end of period 93% 93% 97% 92% 99% 90% 90% 86%
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
CABOT PARTNERS (5)
- ------------------
--------------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------ ------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
In thousands --------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Revenues $ 6,818 $ 5,743 $ 7,908 $ 6,516 $ 4,159 $ 4,088 $ 3,618
General and administra-
tive expenses 4,899 4,362 5,888 5,069 4,267 4,074 3,992
Depreciation and amorti-
zation expense 732 315 419 453 474 480 480
Net income (loss) 1,203 1,050 1,594 1,057 (536) (428) (806)
<CAPTION>
--------------------------------------------------------------------
AS OF SEPTEMBER
30, AS OF DECEMBER 31,
------------------ ------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
In thousands --------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets $ 5,608 $ 5,925 $ 6,075 $ 5,628 $ 4,300 $ 4,923 $ 5,412
Total liabilities 884 878 485 563 292 379 440
Total partners' capital 4,724 5,047 5,590 5,065 4,008 4,544 4,972
<CAPTION>
--------------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------ ------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
In thousands --------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA
Cash flows provided by
(used in):
Operating activities $ 1,908 $ 875 $ 1,283 $ 1,351 $ (12) $ (173) $ (269)
Investing activities 41 (37) 113 (6) 40 25 5
Financing activities (2,069) (1,069) (1,069) -- -- -- --
Assets under manage-
ment(6) 1,058,000 934,000 979,000 778,000 515,000 472,000 442,000
</TABLE>
- -------
(1) Represents historical combined financial and other data for the Existing
Investors Property Group for the periods indicated. See Note (1) to Combined
Financial Statements of the Existing Investors Property Group.
(2) Pro forma net income per Common Share equals the pro forma net income
divided by 42,350,000 issued and outstanding Common Shares (assuming the
exchange of all issued and outstanding Units into Common Shares).
(3) EBITDA is computed as operating income before gain on sale of properties
plus interest expense, income taxes, depreciation and amortization. Management
believes that in addition to cash flows and net income, EBITDA is a useful
financial performance measure of assessing the operating performance of an
equity REIT because, together with net income and cash flows, EBITDA provides
investors with an additional basis to evaluate the ability of a REIT to incur
and service debt and to fund acquisitions and other capital expenditures. To
evaluate EBITDA and the trends it depicts, the components of EBITDA, such as
revenues, property operating expenses, real estate taxes and general and admin-
istrative expenses should be considered. See "Management's Discussion and Anal-
ysis of Financial Condition and Results of Operations." Excluded from EBITDA
are financing costs such as interest, as well as depreciation and amortization,
each of which can significantly affect a REIT's results of operations and
liquidity and should be considered in evaluating a REIT's operating perfor-
mance. Further, EBITDA does not represent net income or cash flows from operat-
ing, financing and investing activities as defined by GAAP and does not neces-
sarily indicate that cash flows will be sufficient to fund cash needs. It
should not be considered as an alternative to net income as an indicator of a
REIT's operating performance or to cash flows as a measure of liquidity.
(4) Funds from Operations ("FFO") represents net income before minority inter-
ests and extraordinary items, adjusted for depreciation on real property and
amortization of tenant improvements costs and lease commissions, gains from the
sale of properties. In addition to cash flow and net income, management gener-
ally considers FFO to be one additional measure of the performance of an equity
REIT because, together with net income and cash flows, FFO provides investors
with an additional basis to evaluate the ability of a REIT to incur and service
debt and to fund acquisitions and other capital expenditures. However, FFO does
not measure whether cash flow is sufficient to fund all of an entity's cash
needs including principal amortization, capital improvements and distributions
to stockholders. FFO also does not represent cash generated from operating,
investing or financing activities as determined in accordance with GAAP. It
should not be considered as an alternative to net income as an indicator of a
REIT's operating performance or to cash flows as a measure of liquidity. Fur-
ther, FFO as disclosed by other REITs may not be comparable to the Company's
calculation of FFO. The Company calculates FFO in accordance with the White
Paper on Funds from Operations approved by the Board of Governors of NAREIT in
March 1995 (the "White Paper").
(5) Represents the historical financial and other data of Cabot Partners for
periods prior to the Formation Transactions.
(6) Based on the estimated fair market value of such assets as of the dates
indicated.
15
<PAGE>
RISK FACTORS
An investment in the Common Shares involves various risks. Prospective
investors should carefully consider the following information in conjunction
with the other information contained in this Prospectus before making a deci-
sion to purchase Common Shares in the Offering.
OFFERING PRICE OF COMMON SHARES DOES NOT REFLECT VALUES OF THE PROPERTIES
The value of the Company and the Offering Price have not been determined on the
basis of valuations of the fair market value of the Properties or other assets
being contributed to the Company, although third-party estimates of derived
contribution amounts (dollar amounts assigned to each Property pursuant to cer-
tain procedures agreed upon by the Contributing Investors and Cabot Partners)
were obtained in August and September 1997 solely to assist Cabot Partners and
the Contributing Investors in determining the relative ownership interests in
the Company to be received by such parties in the Formation Transactions.
Rather, the focus of the valuation of the Company in connection with the nego-
tiation of the Offering Price between the Company and the Representatives of
the Underwriters has been on pro forma adjusted FFO, estimated cash available
for distribution, the Company's potential for growth, multiples of publicly
traded REITs and the other factors set forth under "Underwriting." Management
believes it is appropriate to value the Company as an ongoing business, rather
than with a view to values that could be obtained from a liquidation of the
Company or of individual assets owned by the Company. Accordingly, the aggre-
gate market value of the Common Shares offered hereby may exceed the aggregate
fair market value of the proportionate interest in the Properties and other
assets they represent.
RISK OF INABILITY TO SUSTAIN DISTRIBUTION LEVEL
The Company's initial intended distribution level for 1998 is based on a number
of assumptions, including assumptions relating to future operations of the Com-
pany. These assumptions concern, among other matters, continued property occu-
pancy and profitability of tenants, the amount of future capital expenditures
and expenses relating to the Company's properties, the level of leasing
activity and future rental rates, the strength of the industrial real estate
market, competition, the costs of compliance with environmental and other laws,
the amount of uninsured losses and decisions by the Company to reinvest rather
than distribute cash available for distribution. The Company currently expects
to maintain its initial distribution level throughout 1998. A number of the
assumptions described above, however, relate to matters that are beyond the
control of the Company. Accordingly, no assurance can be given that the Company
will be able to maintain its initial distribution level.
ANTITAKEOVER EFFECTS OF OWNERSHIP LIMIT, STAGGERED BOARD AND POWER TO ISSUE
ADDITIONAL SHARES
Antitakeover Effects of Ownership Limitation. For the Company to maintain its
qualification as a REIT under the Code, not more than 50% in value of the out-
standing shares of beneficial interest of the Company may be owned, directly or
indirectly, by five or fewer persons (defined in the Code to include certain
entities) at any time during the last half of any taxable year other than the
first taxable year for which the election to be treated as a REIT has been
made. See "Federal Income Tax Considerations--Taxation of the Company." For
this purpose, among others, the Company's Declaration of Trust authorizes the
Trustees, subject to certain exceptions, to take such actions as may be neces-
sary or desirable to preserve its qualification as a REIT and to limit any
person to direct or indirect ownership of no more than (i) 9.8% of the
Company's number of issued and outstanding shares of beneficial interest, or
(ii) 9.8% of the total equity value of such shares of beneficial interest (the
"Ownership Limit"). The Company's Board of Trustees, upon receipt of a ruling
from the Service, an opinion of counsel or other evidence satisfactory to the
Board, and upon such other conditions as the Board may establish, may exempt a
proposed transferee from the Ownership Limit. However, the Board may not grant
an exemption from the Ownership Limit to any proposed transferee whose owner-
ship, direct or indirect, of shares of beneficial interest of the Company in
excess of the Ownership Limit would result in the termination of the Company's
status as a REIT. A transfer of shares in violation of the above limits may be
void under certain circumstances. See "Description of Shares of Beneficial
Interest--Restrictions on Transfer." The foregoing restrictions on transfera-
bility and ownership will continue to apply until the Board of Trustees deter-
mines that it is no longer in the best interests of the Company to attempt to
qualify, or to continue to qualify, as a REIT. The Ownership Limit may have the
effect of delaying, deferring or preventing a transaction or a change in con-
trol of the Company that might involve a premium over the then prevailing
market price for the Common Shares or otherwise be in the best interest of the
shareholders. See "Description of Shares of Beneficial Interest--Restrictions
on Transfer."
Antitakeover Effects of Staggered Elections of Trustees. The Company's Board of
Trustees is divided into three classes. The initial terms of the first, second
and third classes will expire in 1998, 1999 and 2000, respectively. Beginning
in 1998,
16
<PAGE>
Trustees of each class will be chosen for three-year terms upon the expiration
of their current terms and one class of Trustees will be elected by the share-
holders each year. The staggered terms of the Trustees may reduce the possi-
bility of a tender offer or an attempt to change control of the Company, even
though a tender offer or change in control might be considered by the share-
holders to be desirable. See "Certain Provisions of Maryland Law and of the
Company's Declaration of Trust and Bylaws--Classification of the Board of
Trustees."
Potential Antitakeover and Dilutive Effects of Issuance of Additional Shares,
Other Matters. The Company's Declaration of Trust authorizes the Board of
Trustees to (i) amend the Declaration of Trust in order to increase or decrease
the aggregate number of shares of beneficial interest of any class, including
Common Shares, that the Company has the authority to issue, without shareholder
approval, (ii) cause the Company to issue additional authorized but unissued
shares of beneficial interest, and (iii) classify or reclassify any unissued
Common Shares and Preferred Shares and to set the preferences, rights and other
terms of such shares. See "Description of Shares of Beneficial Interest."
Although the Board of Trustees has no intention to do so at the present time,
it will be authorized pursuant to these provisions to establish a class or
series of shares of beneficial interest that could, depending on the terms of
such series, delay, defer or prevent a transaction or a change in control of
the Company that might involve a price for the Common Shares or other attri-
butes that the shareholders may consider to be desirable. The Declaration of
Trust and Bylaws of the Company also contain other provisions that may have the
effect of delaying, deferring or preventing a transaction or a change in con-
trol of the Company that might involve a price for the Common Shares or other
attributes that the shareholders may consider to be desirable. See "Certain
Provisions of Maryland Law and of the Company's Declaration of Trust and
Bylaws--Removal of Trustees," "--Control Share Acquisitions" and "--Advance
Notice of Trustee Nominations and New Business." The Company also may cause the
Operating Partnership to offer additional Units in exchange for property or
otherwise. Under Maryland law, existing shareholders will have no preemptive
right to acquire any such equity securities, and any such issuance of equity
securities could result in dilution of an existing shareholder's investment in
the Company.
TAXATION AS A CORPORATION IF THE COMPANY FAILS TO QUALIFY AS A REIT; OTHER TAX
RISKS
Adverse Consequences of Failure to Qualify as a REIT; Lack of Management Expe-
rience in Maintaining Qualification as a REIT. The Company intends to operate
so as to qualify as a REIT for federal income tax purposes. The Company has not
requested, and does not expect to request, a ruling from the Service that it
qualifies as a REIT. The Company has received an opinion of its legal counsel
that, based on certain assumptions and representations described in "Federal
Income Tax Consequences," the Company has been organized in conformity with the
requirements for qualification as a REIT beginning with its taxable year ending
December 31, 1998, and its proposed method of operation as represented by the
Company to its legal counsel and described in "Federal Income Tax Consequences"
will enable it to satisfy the requirements for such qualification. Investors
should be aware, however, that opinions of counsel are not binding on the
Service or any court. The REIT qualification opinion only represents the view
of counsel to the Company based on such counsel's review and analysis of
existing law, which includes no controlling precedent. Furthermore, both the
validity of the opinion and the qualification of the Company as a REIT will
depend on the Company's continuing ability to meet various requirements con-
cerning, among other things, the ownership of its outstanding stock, the nature
of its assets, the sources of its income and the amount of its distributions to
its shareholders. Because management of the Company has no history of operating
so as to qualify as a REIT, there can be no assurance that the Company will do
so successfully. See "Federal Income Tax Consequences--Taxation of the Compa-
ny."
If the Company were to fail to qualify as a REIT for any taxable year, the Com-
pany would not be allowed a deduction for distributions to its shareholders in
computing its taxable income and would be subject to federal income tax (in-
cluding any applicable minimum tax) on its taxable income at regular corporate
rates. Unless entitled to relief under certain Code provisions, the Company
also would be disqualified from treatment as a REIT for the four taxable years
following the year during which qualification was lost. As a result, cash
available for distribution would be reduced for each of the years involved.
Although management intends to operate the Company in a manner designed to meet
the REIT qualification requirements, it is possible that future economic, mar-
ket, legal, tax or other considerations may cause the Board of Trustees to
revoke the REIT election. See "Federal Income Tax Consequences."
Other Tax Liabilities. Even if the Company qualifies as a REIT, it will be sub-
ject to certain state and local taxes on its income and property, and may be
subject to certain federal taxes. See "Federal Income Tax Consequences--Taxa-
tion of the Company." In addition, the net taxable income, if any, from activi-
ties conducted through the Management Company will be subject to federal and
state income tax.
Borrowings May Be Required to Meet REIT Minimum Distribution Requirements; Pos-
sible Incurrence of Additional Debt. In order to qualify as a REIT, the Company
generally will be required each year to distribute to its shareholders at least
95%
17
<PAGE>
of its net taxable income (excluding any net capital gain). In addition, the
Company will be subject to a 4% nondeductible excise tax on the amount, if any,
by which certain distributions paid by it with respect to any calendar year are
less than the sum of (i) 85% of its ordinary income for that year, (ii) 95% of
its capital gain net income for that year, and (iii) 100% of its undistributed
taxable income from prior years. The Company intends to make distributions to
its shareholders to comply with the 95% distribution requirement and to avoid
the nondeductible excise tax. The Company's income will consist primarily of
its share of the income of the Operating Partnership, and the cash available
for distribution by the Company to its shareholders will consist of its share
of cash distributions from the Operating Partnership. Differences in timing
between (i) the actual receipt of income and actual payment of deductible
expenses, and (ii) the inclusion of such income and deduction of such expenses
in arriving at taxable income of the Company could require the Company to
borrow funds on a short-term (or possible long-term) basis to meet the 95% dis-
tribution requirement and to avoid the nondeductible excise tax.
Possible Taxation of Dividends Received by Pension Plans. The Company may con-
stitute a "pension-held REIT" immediately after the closing of Offering or may
become one as a result of subsequent market purchases of Common Shares by pen-
sion funds after the closing of the Offering . If the Company becomes a pen-
sion-held REIT, certain types of borrowings or other activities, if engaged in
by the Company, would result in a portion of dividends received by any quali-
fied pension plan owning more than 10% in value of the Company's shares, being
taxable to such plan as unrelated business taxable income.
POSSIBLE CHANGES IN POLICIES WITHOUT SHAREHOLDER APPROVAL; NO LIMITATION ON
DEBT
The Company's investment, financing and distribution policies, and its policies
with respect to all other activities, including growth, capitalization and
operations, will be determined by the Board of Trustees. The Company's "Debt
Limitation" described elsewhere in this Prospectus is a policy limiting the
Company's Debt-to-Total Market Capitalization Ratio to 40%. The organizational
documents of the Company do not contain any limitation on the amount of indebt-
edness the Company may incur. Although the Company's Board of Trustees has no
present intention to do so, these policies may be amended or revised at any
time and from time to time at the discretion of the Board of Trustees without a
vote of the shareholders of the Company. A change in these policies could
adversely affect the Company's financial condition or results of operations or
the market price of the Common Shares. See "Policies with Respect to Certain
Activities."
REAL ESTATE INVESTMENT RISKS
General Risks. Real property investments are subject to varying degrees of
risk. The yields available from equity investments in real estate depend in
large part on the amount of rental income earned and capital appreciation gen-
erated, as well as property operating and other expenses incurred. If the
Company's properties do not generate revenues sufficient to meet operating
expenses, including debt service, tenant improvements, leasing commissions and
other capital expenditures, the Company may have to borrow additional amounts
to cover fixed costs, and the Company's cash flow and ability to make distribu-
tions to its shareholders may be adversely affected.
The Company's revenues and the value of its properties may be adversely
affected by a number of factors, including (i) the national, state and local
economic climate and real estate conditions (such as oversupply of or reduced
demand for space and changes in market rental rates), (ii) the perceptions of
prospective tenants of the attractiveness, convenience and safety of the
Company's properties, (iii) the ability of the Company to provide adequate man-
agement, maintenance and insurance, (iv) the Company's ability to collect all
rent from tenants on a timely basis, (v) the expense of periodically renovat-
ing, repairing and reletting spaces and (vi) increasing operating costs (in-
cluding real estate taxes and utilities) to the extent that such increased
costs cannot be passed through to tenants. Certain significant costs associated
with investments in real estate (such as mortgage payments, real estate taxes,
insurance and maintenance costs) generally are not reduced when circumstances
cause a reduction in rental revenues from the property and vacancies result in
loss of the ability to receive tenant reimbursements of operating costs custom-
arily borne by industrial real estate tenants. In addition, real estate values
and income from properties are also affected by such factors as compliance with
laws applicable to real property, including environmental and tax laws,
interest rate levels and the availability of financing. Furthermore, the amount
of available rentable square feet of commercial property is often affected by
market conditions and may therefore fluctuate over time.
Tenant Defaults and Bankruptcy. The majority of the Company's income will be
derived from rental income from its properties. The Company's distributable
cash flow and ability to make expected distributions to shareholders would be
adversely affected if a significant number of its tenants failed to meet their
lease obligations. Tenants may seek the protection of the bankruptcy laws,
which could result in delays in rental payments or in the rejection and termi-
nation of such tenant's lease and thereby cause a reduction in the Company's
cash flow and the amounts available for distribution to its shareholders. No
assurance can be given that tenants will not file for bankruptcy protection in
the future or, if any
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tenants file for such protection, that they will affirm their leases and con-
tinue to make rental payments in a timely manner. In addition, a tenant from
time to time may experience a downturn in its business which may weaken its
financial condition and result in the failure to make rental payments when due.
If tenant leases are not affirmed following bankruptcy or if a tenant's finan-
cial condition weakens, the Company's cash flow and the amounts available for
distribution to its shareholders may be adversely affected.
Operating Risks. The Company's properties will be subject to operating risks
common to commercial real estate in general, any and all of which may adversely
affect occupancy and rental rates. Such properties will be subject to increases
in operating expenses such as cleaning, electricity, heating, ventilation and
air conditioning and maintenance, insurance and administrative costs, and other
general costs associated with security, landscaping, repairs and maintenance.
While the Company's current tenants generally are obligated to pay a portion of
these escalating costs, there can be no assurance that tenants will agree to
pay all or a portion of such costs upon renewal or that new tenants will agree
to pay such costs. If operating expenses increase, the local rental market may
limit the extent to which rents may be increased to meet increased expenses
without decreasing occupancy rates. Although the Company intends to implement
cost-saving incentive measures at its properties, the Company's ability to make
distributions to shareholders could be adversely affected if operating expenses
increase without a corresponding increase in revenues, including tenant reim-
bursements of operating costs.
Risks of Non-Renewal of Leases and Vacancies. The Company will be subject to
the risk that upon expiration of leases for space located in its properties,
the leases may not be renewed, the space may not be relet or the terms of
renewal or reletting (including the cost of required renovations) may be less
favorable than expiring lease terms. Leases accounting for approximately 11.8%
of the Company's Annualized Base Rent will expire in 1998. The Company has
established annual reserves for renovation and reletting expenses, which take
into consideration its views of both the current and expected business condi-
tions in the appropriate markets, but no assurance can be given that these
reserves will be sufficient to cover such expenses. If the Company were unable
to promptly relet or renew the leases for all or a substantial portion of the
Company's space, if the rental rates upon such renewal or reletting were sig-
nificantly lower than expected rates or if its reserves for these purposes
proved inadequate, then the Company's cash flow and ability to make expected
distributions to shareholders may be adversely affected.
Competition; Risk of Not Meeting Targeted Level of Leasing Activity, Acquisi-
tions and Development. Numerous industrial properties compete with the Proper-
ties in attracting tenants to lease space and additional properties can be
expected to be built in the markets in which the Company's properties are
located. The number and quality of competitive industrial properties in a par-
ticular area will have a material effect on the Company's ability to lease
space at the Properties or at newly acquired properties and on the rents
charged. Some of these competing properties may be newer or better located than
the Company's properties. In addition, the industrial real estate market has
become highly competitive. There are a significant number of buyers of indus-
trial property, including other publicly traded industrial REITs, many of which
have significant financial resources. This has resulted in increased competi-
tion in acquiring attractive industrial properties. See "--Real Estate Invest-
ment Risks--Possible Adverse Effects of Acquisition, Development and Construc-
tion Activities." Accordingly, it is possible that the Company may not be able
to meet its targeted level of property acquisitions and developments due to
such competition or other factors which may have an adverse effect on the
Company's expected growth in FFO.
Possible Environmental Liabilities. Under various federal, state and local
environmental laws, ordinances and regulations, a current or previous owner or
operator of real property may be liable for the costs of removal or remediation
of hazardous or toxic substances on, under or in such property. Such laws often
impose liability whether or not the owner or operator knew of, or was respon-
sible for, the presence of such hazardous or toxic substances. In addition, the
presence of hazardous or toxic substances, or the failure to remediate such
property properly, may adversely affect the owner's ability to borrow using
such real property as collateral. Persons who arrange for the disposal or
treatment of hazardous or toxic substances may also be liable for the costs of
removal or remediation of hazardous substances at the disposal or treatment
facility, whether or not such facility is or ever was owned or operated by such
person. Certain environmental laws and common law principles could be used to
impose liability for release of and exposure to hazardous substances, including
asbestos-containing materials ("ACMs"), into the air, and third parties may
seek recovery from owners or operators of real properties for personal injury
or property damage associated with exposure to released hazardous substances,
including ACMs. As the owner of real properties, the Company may be potentially
liable for any such costs. Phase I environmental site assessment reports
("Phase I ESAs") were obtained in connection with the initial acquisition of
the Properties by the Contributing Investors, for those Properties managed by
Cabot Partners as of September 30, 1997, and, for all other Properties, in con-
nection with their contribution to the Company in the Formation Transactions.
The purpose of Phase I ESAs is to identify potential sources of contamination
for which the Company may be responsible and to assess the status of environ-
mental regulatory compliance. The earliest of such Phase I ESAs were obtained
in 1988 and Phase I ESAs on approximately 40% of the Properties were obtained
prior to 1995. Commonly accepted standards and procedures for such Phase I
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ESAs have evolved to encompass higher standards and more extensive procedures
over the period from 1988 to the present. Where recommended in the Phase I ESA,
invasive procedures, such as soil sampling and testing or the installation and
monitoring of groundwater wells, were subsequently performed.
The Phase I ESAs, including subsequent procedures where applicable, have not
revealed any environmental liability that the Company believes would have a
material adverse affect on the Company's business, assets or results of opera-
tions, nor is the Company aware of any such material environmental liability.
Nevertheless, it is possible that the Phase I ESAs relating to the Properties
do not reveal all environmental liabilities or that there are material environ-
mental liabilities of which the Company is unaware. Moreover, there can be no
assurance that (i) future laws, ordinances or regulations will not impose any
material environmental liability or (ii) the current environmental condition of
the Properties will not be affected by tenants, by the condition of land or
operations in the vicinity of the Properties (such as the presence of under-
ground storage tanks) or by third parties unrelated to the Company.
Adverse Effect of Possible Additional Costs of Compliance with Americans with
Disabilities Act on Cash Flow and Distributions. Under the Americans with Disa-
bilities Act of 1990 (the "ADA"), all public accommodations and commercial
facilities are required to meet certain federal requirements related to access
and use by disabled persons. Existing industrial properties generally are
exempt from the provisions of the ADA but may be subject to provisions
requiring that buildings be made accessible to people with disabilities. Com-
pliance with the ADA requirements could require removal of access barriers, and
non-compliance could result in imposition of fines by the U.S. government or an
award of damages to private litigants. While the amounts of such compliance
costs, if any, are not currently ascertainable, they are not expected to have a
material effect on the Company.
Changes in Laws. Because increases in income or service taxes generally are not
passed through to tenants under leases, such increases may adversely affect the
Company's cash flow and its ability to make distributions to shareholders. The
Company's properties also are subject to various federal, state and local regu-
latory requirements and to state and local fire and life-safety requirements.
Failure to comply with these requirements could result in the imposition of
fines by governmental authorities or awards of damages to private litigants.
The Company believes that the Properties currently are in material compliance
with all such regulatory requirements. However, there can be no assurance that
these requirements will not be changed or that new requirements will not be
imposed which would require significant unanticipated expenditures by the Com-
pany and could have an adverse effect on the Company's cash flow and ability to
make expected distributions to shareholders.
Uninsured Losses. The Company will generally carry commercial general liability
insurance, standard "all-risk" property insurance, and flood and earthquake
(where appropriate) and rental loss insurance with respect to its properties
with policy terms and conditions customarily carried for similar properties. No
assurance can be given, however, that material losses in excess of insurance
proceeds will not occur in the future which would adversely affect the business
of the Company and its financial condition and results of operations. In addi-
tion, certain types of losses (such as from wars or from earthquakes for prop-
erties located in California) may be either uninsurable or not economically
insurable. Should an uninsured loss or a loss in excess of insured limits
occur, the Company could lose its capital invested in a property, as well as
the anticipated future revenue from such property, and would continue to be
obligated on any mortgage indebtedness or other obligations related to the
property. With certain exceptions, the Company does not carry earthquake insur-
ance on the Properties located in California. In light of the California earth-
quake risk, California building codes have since the early 1970's established
construction standards for all new buildings and also contain guidelines for
seismic upgrading of buildings intended to reduce the possibility and severity
of loss from earthquakes. It is the Company's policy to obtain assessments from
qualified third-party professionals of the seismic standards of its properties
located in California and to conduct such seismic upgrading thereof as it
determines, on the basis of such third-party assessments, to be appropriate.
Such upgrading, however, does not eliminate the possibility of earthquake loss.
In addition, such upgrading with respect to a number of such Properties is at
various stages of completion as of the date hereof, ranging from initial plan
review to partial completion of construction. Of the Company's 34 Properties
located in California, 15 are covered by earthquake insurance. Seismic
upgrading has been completed on four of the Properties located in California
and is expected to be completed with respect to its remaining Properties
located in California within 12 months from date hereof. The Company currently
maintains blanket earthquake insurance coverage for all Properties located out-
side California in amounts it deems reasonable.
Possible Adverse Effects of Illiquidity of Real Estate Investments. Equity real
estate investments are relatively illiquid. Such illiquidity will tend to limit
the ability of the Company to vary its portfolio promptly in response to
changes in economic or other conditions. In addition, the Code limits the
ability of a REIT to sell properties held for fewer than four years, which may
affect the Company's ability to sell properties without adversely affecting
returns to holders of Common Shares.
Possible Adverse Effects of Acquisition, Development and Construction
Activities. The Company intends to acquire existing industrial properties to
the extent that they can be acquired on advantageous terms and meet the
Company's investment
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criteria. See "The Company--Growth Strategies--Acquisitions." Acquisitions of
such properties entail general investment risks associated with any real estate
investment, including the risk that investments will fail to perform in accor-
dance with expectations or that estimates of the costs of improvements to bring
an acquired property up to the Company's standards may prove inaccurate.
The Company also intends to grow through the selective development and con-
struction of industrial properties, including build-to-suit properties and
speculative development, as suitable opportunities arise. See "The Company--
Business Strategies." Additional risks associated with such real estate devel-
opment and construction activities include the risk that the Company may
abandon development activities after expending significant resources to deter-
mine their feasibility; the construction cost of a project may exceed original
estimates; occupancy rates and rents at a newly completed property may not be
sufficient to make the property profitable; financing may not be available on
favorable terms for development of a property; and the construction and lease
up of a property may not be completed on schedule (resulting in increased debt
service and construction costs). Development activities are also subject to
risks relating to inability to obtain, or delays in obtaining, necessary zon-
ing, land-use, building occupancy and other required governmental permits and
authorizations. If any of the above occur, the Company's cash flow and ability
to make expected distributions to shareholders could be adversely affected. In
addition, new development activities, regardless of whether they are ultimately
successful, may require a substantial portion of management's time and atten-
tion.
Possible Additional Cost Resulting From Reassessment of Properties. Certain
local real property tax assessors may seek to reassess certain of the Proper-
ties as a result of the Formation Transactions and the transfer of interests to
occur in connection therewith. In jurisdictions such as California, where Prop-
osition 13 limits the assessor's ability to reassess real property so long as
there is no change in ownership, the assessed value could increase by as much
as the full value of any appreciation that has occurred during the Contributing
Investors' period of ownership. Where appropriate, the Company would contest
vigorously any such reassessment. Certain of the current leases may permit the
Company to pass through to tenants a portion of the effect of any increases in
real estate taxes resulting from any such reassessment.
CONFLICTS OF INTEREST IN THE FORMATION TRANSACTIONS AND THE BUSINESS OF THE
COMPANY
Benefits to the Cabot Group Participants and the Contributing Investors. The
Cabot Group Participants and the Contributing Investors will receive certain
benefits from the Formation Transactions. As such, these persons may have
interests that differ from, and may in certain cases conflict with, the inter-
ests of persons acquiring Common Shares in the Offering. The benefits the Cabot
Group Participants and the Contributing Investors will receive might have been
different if they had not participated in structuring the Formation Transac-
tions. These benefits include the following: (i) receipt by senior executive
officers of the Company of options to purchase an aggregate of 1,675,000 Common
Shares under the Company's Long Term Incentive Plan at the Offering Price, sub-
ject to certain vesting requirements, which will have an aggregate purchase
price of approximately $33.5 million based on the Offering Price, (ii) deferral
of certain tax consequences to the Cabot Group Participants from the contribu-
tion of their interests in Cabot Partners and the C-M Property Partnerships to
the Operating Partnership, and (iii) the Operating Partnership's assumption and
repayment from the proceeds of the Offering of approximately $18.3 million and
$13.1 million, respectively, in debt relating to the Properties beneficially
owned by certain of the Cabot Group Participants. In addition, certain methods
of accounting that may be selected by the Partnership for Book-Tax Differences
could result in the allocation of lower amounts of taxable income to the Cabot
Group Participants, and correspondingly higher amounts of taxable income to the
Company (with a resulting lower return of capital dividend component to share-
holders). See "Certain Relationships and Related Transactions--Benefits to
Related Parties," "Use of Proceeds" and "Management--Long Term Incentive Plan."
Immediate Dilution. The Properties and other assets to be contributed by the
Cabot Group Participants and the other Contributing Investors in exchange for
Units and Common Shares had a pro forma net tangible book value of $18.93 per
Common Share as of September 30, 1997. The pro forma net tangible book value
per Common Share of the assets of the Company after the Offering will be less
than the Offering Price per share. Accordingly, purchasers of the Common Shares
offered hereby will experience an immediate dilution of $1.26 per Common Share
in net tangible book value in connection with their investment in the Common
Shares based on the Offering Price. See "Dilution."
Limitations on Representations and Warranties Could Limit the Company's
Remedies. The Contributing Investors and Cabot Partners have each made certain
representations and warranties to the Company in the Contribution Agreement
entered into among the parties in connection with the Formation Transactions.
Such representations and warranties, which in the case of environmental matters
and certain other matters are limited to the knowledge of specified entities
and persons, relate to, among other things, their authority to enter into the
Formation Transactions, their ownership of the Properties or other assets to be
contributed by them, the absence of certain liabilities and other matters
relating to the Properties and such assets. The respective obligations of each
Contributing Investor and of Cabot Partners to indemnify the
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Company in the event of breach of any of such representations and warranties,
or breach of certain other provisions of the Contribution Agreement or under
certain other circumstances, is subject to an overall limitation under the Con-
tribution Agreement equal to the value (based on the Offering Price) of the
Units or Common Shares received in the Formation Transactions (or in lieu
thereof, the return to the Company of all such Units or Common Shares
received), and is subject to the further limitation that any such indemnifica-
tion obligation relating to a specific Property is limited to the contribution
amount assigned to such Property by the parties in connection with the Forma-
tion Transactions. The obligation to make any such indemnification payments may
be satisfied by making cash payments or by delivering Common Shares or Units,
valued at the then market price for Common Shares, to the Company. In addition,
such indemnification obligations are, with certain limited exceptions, limited
to claims for indemnification made within one year after the consummation of
the Formation Transactions. Any losses to the Company resulting from breaches
of such representations and warranties or other provisions of the Contribution
Agreement in excess of the foregoing indemnification limitations would have to
be satisfied out of the Company's assets, with the potential consequences of
adversely affecting the Company's financial condition and of decreasing cash
available for distribution to the shareholders.
Possible Failure to Enforce Terms of Contribution and Other Agreements. The
Cabot Group Participants, some of whom are Trustees and executive officers of
the Company, and the other Contributing Investors each, directly or indirectly,
have ownership interests in certain of the Properties and in the other assets
to be acquired by the Company. Following the closing of the Offering and con-
summation of the Formation Transactions, the Company, under the agreements
relating to the contribution of the Properties and such other assets, will be
entitled to indemnification and damages in the event of breaches of certain of
the terms thereof. Due to conflicts of interest or in order to maintain an
ongoing business relationship with the entity or individual involved, such
officers and Trustees may cause the Company to choose to enforce its rights
under any of these contribution agreements and to pursue available remedies,
such as actions for damages or injunctive relief, less vigorously than it oth-
erwise might.
Differing Objectives Between the Cabot Group Participants and the Company
Relating to the Sale of the Properties. As holders of Units, the Cabot Group
Participants will have unrealized taxable gain associated with their interests
in certain Properties contributed to the Operating Partnership. Because the
Cabot Group Participants may incur different and more adverse tax consequences
than the Company upon the sale of those Properties, the Cabot Group Partici-
pants and the Company may have different views regarding the appropriate
pricing and timing of any sale of such Properties. While the Company has the
exclusive authority to determine whether and on what terms to sell an indi-
vidual Property, the Cabot Group Participants, through their status as holders
of Units and senior executives and Trustees of the Company, may influence the
Company not to sell certain Properties even though such sales might otherwise
be financially advantageous to the Company. See "Policies With Respect to Cer-
tain Activities--Conflict of Interest Policies."
Influence of Significant Shareholders, Trustees and Executive Officers. Upon
the closing of the Offering, the IBM Retirement Plan Trust and the New York
State Teachers' Retirement System will be deemed beneficially to own approxi-
mately 24.2% and 14.1%, respectively, of the outstanding Common Shares (as-
suming the exchange of all Units for Common Shares). In addition, the senior
management of the Company will beneficially own approximately 4.0% of the out-
standing Common Shares (assuming the exchange of all Units for Common Shares).
The foregoing Contributing Investors and senior management, both as share-
holders and management, will have influence on the management and operations of
the Company and the outcome of matters submitted to a vote of the Company's
shareholders. Such influence might be exercised in a manner that is inconsis-
tent with the interests of other shareholders.
Risks Relating to the Operating Partnership. Persons holding Units in the Oper-
ating Partnership (including the Cabot Group Participants) will have the right
to vote, as limited partners of the Operating Partnership ("Limited Partners"),
on certain amendments to the Operating Partnership Agreement (most of which
require approval by a majority in interest of the Limited Partners), and on
certain other matters during the first year following the closing of the
Offering involving the Company (such as a merger of the Company or an amendment
to the Declaration of Trust that requires the approval of the Company's share-
holders), see "Partnership Agreement of Operating Partnership--Management," and
individually to approve certain amendments that would adversely affect their
rights. Such voting rights may be exercised in a manner that conflicts with the
interests of the Company's shareholders. After the Offering, the Company, as
the general partner of the Operating Partnership, will have fiduciary duties to
the Limited Partners, the discharge of which may conflict with interests of the
Company's shareholders. Pursuant to the Operating Partnership Agreement, how-
ever, the Limited Partners have acknowledged that the Company is acting both on
behalf of the Company's shareholders and, in its capacity as general partner of
the Operating Partnership, on behalf of the Limited Partners. The Limited Part-
ners have agreed that the Company is under no obligation to consider the sepa-
rate interests of the Limited Partners in deciding whether to cause the Oper-
ating Partnership to take (or decline to take) any actions which the General
Partner has taken in good faith on behalf of the Operating Partnership.
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ABSENCE OF PRIOR PUBLIC MARKET FOR COMMON SHARES COULD AFFECT MARKET PRICE OF
COMMON SHARES
Prior to the Offering, there has been no public market for the Common Shares
and there can be no assurance that an active trading market will develop or be
sustained or that Common Shares will be resold at or above the Offering Price.
The Common Shares have been approved for listing on the NYSE, subject to offi-
cial notice of issuance. The Offering Price has been determined by agreement
between the Company and the Representatives of the Underwriters and may not be
indicative of the market price for the Common Shares after the Offering. See
"Formation and Other Transactions--Contribution Amounts of the Properties and
Cabot Partners" and "Underwriting." The market value of the Common Shares
could be substantially affected by general market conditions, including
changes in interest rates. Moreover, numerous other factors, such as regula-
tory action and changes in tax laws, could have a significant impact on the
future market price of the Common Shares. There also can be no assurances
that, following listing, the Company will continue to meet the criteria for
continued listing of the Common Shares on the NYSE.
POSSIBLE ADVERSE EFFECT OF MARKET INTEREST RATES ON PRICE OF COMMON SHARES
One of the factors that is expected to influence the market price of the
Common Shares is the annual distribution rate on the Common Shares. An
increase in market interest rates may lead prospective purchasers of the
Common Shares to demand a higher annual distribution rate for future distribu-
tions. Such an increase in the required distribution rate may adversely affect
the market price of the Common Shares.
POSSIBLE ADVERSE EFFECT ON PRICE OF COMMON SHARES OF SHARES AVAILABLE FOR
FUTURE SALE
Sales of a substantial number of Common Shares, or the perception that such
sales could occur, could adversely affect prevailing market prices of the
Common Shares. In addition to the Common Shares offered by the Company in the
Offering, the Company will issue an aggregate of 22,598,735 Units and
8,961,714 Common Shares to the Contributing Investors (excluding for this pur-
pose the C-M Property Partnerships), and 1,819,587 Units to Cabot Partners in
the Formation Transactions and 1,000,000 Common Shares to the Concurrent
Investor in the Concurrent Placement. See "Formation and Other Transactions."
The Contributing Investors, the Cabot Group Participants and the Concurrent
Investor will not be permitted to offer, sell, contract to sell or otherwise
dispose of the Units or Common Shares, except in certain limited circum-
stances, for six months after the closing of the Offering in the case of the
Concurrent Investor, one year thereafter in the case of the Contributing
Investors or two years thereafter in the case of the partners of Cabot Part-
ners and of the partners of the C-M Property Partnerships. See "Shares Avail-
able for Future Sale." At the conclusion of such periods, and, in the case of
Units, upon the subsequent exchange of Units for Common Shares, such Common
Shares may be sold in the public market pursuant to registration statements
which the Company is obligated to file on behalf of the Contributing Invest-
ors, the Cabot Group Participants and the Concurrent Investor or pursuant to
any available exemptions from applicable registration requirements. In addi-
tion, options to purchase a total of 2,188,500 Common Shares will be granted
to certain executive officers, employees and Trustees upon the closing of the
Offering. See "Management--Compensation of Trustees" and "--Long Term Incen-
tive Plan." No prediction can be made concerning the effect that future sales
of any of such Common Shares will have on the market price of Common Shares.
ERISA RISKS
ERISA and section 4975 of the Code prohibit certain transactions that involve
an ERISA plan and a "party in interest" or "disqualified person" (collectively
referred to herein as a "party in interest") with respect to the plan. Cabot
Partners is a party in interest with respect to one ERISA plan that is a Con-
tributing Investor. It is not clear that the Formation Transactions would con-
stitute a prohibited transaction with respect to such plan. Nevertheless, such
plan has informed the Company that it is relying on Prohibited Transaction
Exemption 84-14 ("PTE 84-14") and has retained a Qualified Professional Asset
Manager ("QPAM") to decide whether or not to enter into the Formation Transac-
tions. The applicability of such exemption in certain circumstances recently
has been questioned by the Department of Labor. If it were ultimately deter-
mined that the Formation Transactions constitute a prohibited transaction, and
also that PTE 84-14 does not apply to such plan's participation in the Forma-
tion Transactions, then sanctions could be imposed on Cabot Partners and the
fiduciaries of such plan that could include reallocation of Units between
Cabot Partners and such plan or other remedies, possibly including rescission
of the Property transfers from such plan, intended to put such plan in a
financial position not worse than that in which it would have been if the par-
ties had acted in accordance with the requirements of ERISA. Cabot Partners
and the Company have received an opinion from Mayer, Brown & Platt that PTE
84-14 applies to the Formation Transactions with respect to such plan; how-
ever, such opinion is not binding on the Department of Labor, the Service or
any court. See "ERISA Considerations."
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POSSIBLE UNKNOWN ADVERSE CHARACTERISTICS OF RECENTLY ACQUIRED NEW PROPERTIES;
LACK OF OPERATING HISTORY
Certain of the Properties to be acquired by the Company in the Formation Trans-
actions have not previously been, or only recently have been, under the manage-
ment of Cabot Partners. Such Properties, in addition to properties acquired in
the future, may have characteristics or deficiencies unknown to the Company
affecting their valuation or revenue potential, and the operating performance
of such Properties may therefore be less than anticipated or may decline. As
the Company acquires additional properties, the Company will be subject to
risks associated with managing new properties, including lease-up and tenant
retention. In addition, the Company's ability to manage its growth effectively
will require it to successfully integrate its new acquisitions into its
existing management structure.
REAL ESTATE FINANCING RISKS
Debt Financing and Potential Adverse Effects on Cash Flows and
Distributions. Upon the consummation of the Formation Transactions and the
closing of the Offering and the Concurrent Placement, the Company expects to
have no material outstanding debt. As a result, among other things, of the
annual income distribution requirements applicable to REITs under the Code,
however, the Company will be required to rely on borrowings and other external
sources of financing to fund the costs of new property acquisitions, capital
expenditures and other items. Accordingly, the Company will be subject to real
estate financing risks, including changes from period to period in the
availability of such financing, the risk that the Company's cash flow may not
be sufficient to cover both required debt service payments and distributions to
shareholders, and the risk that indebtedness secured by properties will not be
able to be refinanced or that the terms of such refinancing will not be as
favorable as the terms of existing indebtedness. If the Company becomes unable
to meet its required mortgage payment obligations, the property or properties
subject to such mortgage indebtedness could be foreclosed upon by or otherwise
transferred to the mortgagee, with a consequent loss of income and asset value
to the Company.
Rising Interest Rates. The Acquisition Facility that the Company is currently
negotiating will bear interest at variable rates, and the Company may incur
additional variable rate indebtedness in the future. Variable-rate debt creates
higher debt service requirements if market interest rates increase, which would
adversely affect the Company's cash flow and the amounts available for distri-
bution to its shareholders. In such event, the Company may in the future engage
in transactions to limit its exposure to rising interest rates as appropriate
and cost effective.
MANAGEMENT COMPANY RISKS
Possible Adverse Consequences of Lack of Control over the Management
Company. In order to permit the Company to share in the income of the Manage-
ment Company while maintaining its status as a REIT, the Operating Partnership
will own all of the Management Company's non-voting preferred stock (repre-
senting approximately 95% of its economic interest) and Ferdinand Colleredo-
Mansfeld, the Company's Chief Executive Officer, will own all of the Management
Company's voting common stock (representing approximately 5% of its economic
interest). Although the Company will receive substantially all of the economic
benefit of the Management Company's business through dividends from the Oper-
ating Partnership, the Company will not be able to vote on the election of the
Management Company's directors or officers and, as a result, will not have the
ability to control the Management Company's operations or require its board of
directors to declare and pay cash dividends. See "Formation and Other Transac-
tions. "
Uncertainty as to Management Company Fees. Fees earned by the Management Com-
pany will be dependent upon various factors outside the control of the Company
and the Operating Partnership, including the ability of a contracting party
generally to terminate any of the Advisory Contracts upon 30 days notice or to
refuse to consent to the assignment of such a contract to the Management Com-
pany as contemplated in the Formation Transactions.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the efforts of its executive officers, including,
Ferdinand Colloredo-Mansfeld and Robert E. Patterson, the Company's Chief Exec-
utive Officer and President, respectively. The loss of either of their services
could have an adverse effect on the operations of the Company.
RISKS ASSOCIATED WITH RELIANCE ON FORWARD-LOOKING STATEMENTS
This Prospectus contains "forward-looking statements" relating to, without lim-
itation, future economic performance, plans and objectives of management for
future operations and projections of revenue and other financial items, which
can be identified by the use of forward-looking terminology such as "may,"
"will," "should," "expect," "anticipate," "estimate," "believe" or "continue"
or the negative thereof or other variations thereon or comparable terminology.
The Company's actual results may differ significantly from the results dis-
cussed in such "forward-looking statements." Factors that could cause such dif-
ferences include, but are not limited to, the risks described in this Risk Fac-
tors section of this Prospectus.
24
<PAGE>
THE COMPANY
GENERAL
The Company is an internally managed, fully integrated real estate company that
was formed to continue and expand the national industrial real estate business
of Cabot Partners. Upon the closing of the Offering, the Company will have a
portfolio of 144 Properties containing approximately 22 million rentable square
feet located in 21 states throughout the country. At September 30, 1997, the
Properties were approximately 93% leased to 258 tenants. As of November 18,
1997, no single tenant accounted for more than 5.2% of the Company's total
Annualized Base Rent. Approximately 92% of the Company's Properties are located
in the top 15% of the nation's 273 industrial markets as rated by Cognetics on
the basis of projected demand for distribution property space and flex/R&D
property space.
The Company's goal is to be the preeminent national real estate company focused
on serving a variety of industrial space users. The Company currently owns and
operates a diversified portfolio of properties and has a significant market
presence across the United States, owning properties in a total of 21 markets
(17 of which the Company has identified as principal targeted markets) and
owning Properties with more than one million rentable square feet in eight of
such markets. Its tenant base ranges from large national distributors using
bulk warehouse and other types of industrial space in multiple locations to
small companies located in single flexible workspace properties. The Properties
are within overnight trucking access (a 500-mile radius) to 90% of the
country's population. The Company believes that its geographic diversification
and substantial presence in multiple markets is a strategic advantage that
allows it (i) to serve industrial space users with multiple site and industrial
property type requirements, (ii) compete more effectively in its individual
markets and (iii) respond quickly to acquisition opportunities in markets
across the country.
The Company's 17 principal targeted markets, together with information summa-
rizing its property holdings in each such market and in its other markets, are
presented in the following table as of September 30, 1997.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
ANNUALIZED NET
NUMBER RENTABLE SQUARE FEET ANNUALIZED NET RENT EFFECTIVE RENT
OF --------------------- ----------------------- PER LEASED
BY REGION(1) PROPERTIES NUMBER % OF TOTAL AMOUNT % OF TOTAL SQUARE FOOT(2)
- ------------ ---------- ---------- ---------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
WESTERN REGION
San Francisco area
market 18 819,869 3.7% $ 3,773,553 5.0% $4.57
Los Angeles area market 13 2,231,522 10.1 6,927,705 9.2 3.27
Phoenix area market 6 1,028,320 4.7 2,539,697 3.4 2.92
San Diego area market 3 426,008 2.0 2,253,613 3.0 6.10
Seattle area market 5 402,760 1.8 1,865,556 2.5 4.31
--------- ---------- --------- ----------- --------- ---------
Subtotal Western Region 45 4,908,479 22.3% $17,360,124 23.1% $3.79
--------- ---------- --------- ----------- --------- ---------
SOUTHWEST REGION
Dallas area market 9 1,967,071 8.9% $ 4,788,334 6.4% $3.34
--------- ---------- --------- ----------- --------- ---------
MIDWEST REGION
Chicago area market 12 2,582,328 11.7% $ 9,208,467 12.3% $3.56
Cincinnati/Northern
Kentucky area market 10 1,586,547 7.2 5,045,767 6.7 3.25
Columbus area market 9 1,609,599 7.3 4,669,456 6.2 3.33
Other area markets 3 598,232 2.8 1,779,154 2.4 2.79
--------- ---------- --------- ----------- --------- ---------
Subtotal Midwest Region 34 6,376,706 29.0% $20,702,844 27.6% $3.35
--------- ---------- --------- ----------- --------- ---------
SOUTHEAST REGION
Orlando area market 12 1,843,907 8.4% $ 5,970,453 7.9% $3.46
Memphis area market 1 336,080 1.5 778,522 1.0 2.21
Atlanta area market 7 820,017 3.7 2,456,448 3.3 3.26
Charlotte area market 3 359,530 1.6 1,304,227 1.7 3.39
Other area markets 1 160,000 0.8 671,386 1.0 4.20
--------- ---------- --------- ----------- --------- ---------
Subtotal Southeast
Region 24 3,519,534 16.0% $11,181,036 14.9% $3.31
--------- ---------- --------- ----------- --------- ---------
NORTHEAST REGION
Boston area market 3 208,197 0.9% $ 1,059,407 1.4% $3.98
New York/New Jersey area
market 15 3,265,090 14.8 12,877,226 17.1 3.89
Baltimore/Washington,
D.C. area market 10 882,170 4.0 4,156,642 5.5 4.41
Harrisburg area market 4 872,200 4.1 2,987,659 4.0 3.46
--------- ---------- --------- ----------- --------- ---------
Subtotal Northeast
Region 32 5,227,657 23.8% $21,080,934 28.0% $3.91
--------- ---------- --------- ----------- --------- ---------
Total/weighted average 144 21,999,447 100.0% $75,113,272 100.0% $3.58
========== ========== ========== =========== ========== ==============
</TABLE>
- -------
(1) References to specific cities include suburban portions of the relevant
metropolitan areas.
(2) "Annualized Net Effective Rent" means Annualized Net Rent, less amortiza-
tion of the related leasing costs, as adjusted to reflect the effect of rent
concessions and straight-lining of rent steps.
25
<PAGE>
The Company offers a broad spectrum of industrial property types to meet the
diverse needs of its tenants. The Company classifies its properties into three
general categories: bulk distribution properties, multitenant distribution
properties and workspace properties (light assembly and flex/R&D). The fol-
lowing table provides information concerning the general characteristics and
the Company's holdings of each of these property types as of September 30,
1997.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
RENTABLE SQUARE FEET ANNUALIZED NET RENT ANNUALIZED NET
--------------------- ----------------------------------- EFFECTIVE RENT
PER LEASED PER LEASED
PROPERTY TYPE PROPERTY CHARACTERISTICS NUMBER % OF TOTAL AMOUNT % OF TOTAL SQUARE FOOT SQUARE FOOT
- ------------- ------------------------ ---------- ---------- ----------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bulk Distribution Buildings
configured for
large tenants
(generally at least
100,000 square
feet; building
depths of 240 feet
or more) 11,789,544 54% $34,777,605 46% $3.24 $3.21
Multitenant Distribution Buildings
configured for
multitenant use
(generally tenant
sizes of 10,000-
100,000 square
feet; building
depths of less than
240 feet) 6,716,569 30 24,006,623 32 3.71 3.52
Workspace Light assembly and
flex/R&D (generally
tenant sizes of
3,000-70,000 square
feet) 3,493,334 16 16,329,044 22 5.07 4.96
---------- --------- ----------- --------- --------- ---------
Total/weighted average 21,999,447 100% $75,113,272 100% $3.68 $3.58
========== ========= =========== ========= ========= =========
</TABLE>
The Company's principal growth strategy is to acquire modern, high-quality
industrial properties in attractive submarkets within the markets it currently
serves. Cabot Partners completed the acquisition of approximately $251 million
and $191 million of industrial properties on behalf of its clients in 1995 and
1996, respectively. Cabot Partners expects to acquire $275 million of indus-
trial properties on behalf of its clients in 1997, $244 million of which acqui-
sitions had been completed and approximately $31 million of which acquisitions
were under contract, as of December 19, 1997. Also during 1997, Cabot Partners
had negotiated the contribution to the Company in the Formation Transactions of
approximately $270 million of industrial properties not previously owned by its
advisory clients. The Company has contracts to purchase 21 additional proper-
ties for an aggregate purchase price of approximately $142 million in the Com-
pany Acquisitions that are expected to be completed concurrently with or
shortly following the completion of the Offering.
The senior management of the Company has an average of approximately 18 years
of experience in the real estate industry and will beneficially own 4.0% of the
Company's fully diluted common equity upon the closing of the Offering. Members
of the Company's senior management have worked together since 1987 as the exec-
utive officers of Cabot Partners and, previously, Cabot Advisors. Cabot Advi-
sors was founded as an affiliate of CC&F, a nationwide real estate development,
investment, construction and management firm established in 1904. CC&F pio-
neered the development of large-scale planned industrial parks. In 1990, Ferdi-
nand Colloredo-Mansfeld, the Chief Executive Officer of Cabot Partners, who was
also the Chief Executive Officer of CC&F from 1976 to 1989, and other senior
managers of CC&F formed Cabot Partners as a separate entity to purchase the
real estate advisory and management business of Cabot Advisors. Cabot Partners
was established as a registered investment advisor to provide real estate
investment services primarily to public and private pension funds and others.
The Company is organized as a REIT under the laws of Maryland and expects to
qualify as a REIT for federal income tax purposes. See "Federal Income Tax Con-
siderations." The Company's principal executive offices are located at Two
Center Plaza, Suite 200, Boston, Massachusetts 02108, and its telephone number
is (617) 723-0900.
26
<PAGE>
INDUSTRIAL REAL ESTATE BUSINESS
Attractive Real Estate Sector
The industrial sector of the real estate market has historically generated a
high level of cash income and attractive annual rates of return as compared
with other types of real estate investments. Industrial properties tend to be
less costly to manage and require lower amounts of capital expenditures and
tenant-specific improvement costs. Such properties provide generic storage and
work space suitable for and adaptable to a broad range of tenants and uses.
Industrial properties also generally require shorter development periods as
compared with other commercial property types, such as office buildings, which
enables better balancing of supply and demand for such properties and reduces
risk of overbuilding.
[BAR GRAPH APPEARS HERE]
- -------
* Annual Returns are from first quarter 1978 through third quarter 1997,
except for the R&D/Office Sector which is from second quarter 1978 and the
Apartment Sector which is from fourth quarter 1984.
Source: NCREIF Classic Property Index.
Strong Demand
The Company believes that, at least for the near term, the demand for desir-
able, well-located industrial properties will continue and will support
increasing rents due to the following factors: (i) increasing consumption on a
per capita basis, coupled with population growth, (ii) business' increasing
need for efficient inventory management, (iii) growing international trade, and
(iv) the growing significance of smaller business establishments which are
increasingly looking for efficient and flexible work space in well located,
suburban industrial parks. According to Cognetics, companies with fewer than
100 employees now account for 47% of all existing jobs; however, they accounted
for 84% of all net job creation during 1992 through 1996. Cognetics anticipates
that the majority of net job creation over the next five years will continue to
be due to small firms with less than 100 employees as this has been a consis-
tent pattern for the last decade. Nationwide, the demand for distribution and
flex/R&D properties during the period from 1997 to 2002 is projected by
Cognetics to increase over existing levels by approximately 791 million square
feet, or 14.8%, consisting of approximately 598 million square feet for distri-
bution properties and approximately 193 million square feet for flex/R&D prop-
erties. The Company believes that much of the available supply of industrial
property is functionally obsolete and is at a significant competitive disadvan-
tage to modern, well-designed types of facilities. Older facilities often do
not have the modern design configurations required to satisfy current truck
handling and efficiency standards of major distributors and third-party logis-
tics companies. Approximately 40% of existing warehouse facilities in the
Company's 17 principal targeted markets were built prior to 1970 (excluding
Memphis and Harrisburg, for which no information was provided) and approxi-
mately 65% were built before 1980 according to CB Commercial Real Estate Group,
Inc./Torto Wheaton Research ("CB Commercial/Torto Wheaton Research") (data
through year end 1996).
Industry Consolidation
The historically fragmented industrial real estate business is being reshaped
by strong pressures toward consolidation resulting from the substantial advan-
tages enjoyed by large, integrated and well capitalized firms over local owners
and developers. These advantages include professional management, greater
access to public and private capital, economies of scale and greater opportuni-
ties to increase revenue by serving the changing needs of industrial space
users. In addition, there is an increasing trend toward securitization of real
estate holdings as institutional real estate investors shift from
27
<PAGE>
direct private ownership to indirect public ownership of real estate. The Com-
pany believes that both of these trends provide substantial opportunities for
publicly held real estate companies that have the managerial and financial
resources to maintain an active acquisition and development program.
Diverse Tenant Needs
Different types of industrial space users have significantly different property
and space requirements. Large national and major regional distributors gener-
ally require efficient, well-located bulk distribution properties. These prop-
erties offer the advantages of predictable incomes, less costly management
operations and additional growth opportunities through targeted marketing of
additional sites to large national companies having space requirements in mul-
tiple locations, as well as rental growth resulting from favorable supply and
demand factors. Smaller companies generally demand more flexible work space,
including light assembly facilities and flex/R&D space. While these properties
are generally more costly to manage, the Company believes that such properties
offer the prospect of higher current returns because the users of such space
are location sensitive and less inclined to move if the properties they occupy
are well located and managed. Moreover, the Company believes that the continued
employment growth resulting from smaller companies will result in strong demand
in the near future for these workspace properties.
BUSINESS STRATEGIES
The Company's fundamental business objective is to maximize the total return to
its shareholders through growth in its cash available for distribution per
Common Share and in the value of its portfolio of industrial properties and
operations. The Company believes that it is well positioned to take advantage
of the opportunities presented by today's changing industrial real estate mar-
kets through the business strategies and operations described below.
Leveraging Substantial National Market Presence
The Company believes that maintaining and expanding its market presence in its
17 principal targeted markets across the country will be an important factor in
achieving future growth and its targeted returns on investment. These 17 mar-
kets are projected by Cognetics to capture approximately 41% of the growth in
distribution and flex/R&D property space demand projected to occur over the
period from 1997 to 2002 in the 273 markets that are tracked by Cognetics. See
"Properties--Industrial Property Market Information."
The Company's substantial market presence in its principal markets provides
significant strategic advantages. Foremost among these advantages is that the
Company is well positioned to market its industrial space to national companies
and third-party logistics companies who have space requirements in multiple
markets. Approximately 36% of the Company's rentable space is leased by Fortune
1,000 companies, subsidiaries thereof, and major third-party logistics compa-
nies serving such companies. The Company will pursue a national tenant mar-
keting program that, in addition to the quality and attractive locations of the
Properties, will emphasize the advantages of dealing with a single source for a
company's industrial space needs. These advantages include greater efficiency
of lease negotiations and day-to-day property management, as well as better
understanding of the tenants' current needs and prospective space requirements.
The Company serves 13 tenants in multiple Properties (four of which tenants use
Properties in multiple markets) accounting for approximately 18% of the
Company's Annualized Net Rents as of September 30, 1997.
Within each local market, having a substantial inventory of properties and sig-
nificant leasing activities increases the Company's visibility to prospective
tenants and enables the Company to establish strong relationships with leasing
brokers and other local market participants. Such persons serve as sources of
information and potential tenant referrals. In addition, larger inventories
increase the Company's opportunities to relocate tenants to one or more of its
other properties as their needs change. Critical mass also permits the Company
to achieve the economies of scale necessary to support the management personnel
and infrastructure needed to build long-term tenant relationships.
Serving a Variety of Tenants By Offering a Broad Spectrum of Industrial
Property Types
The Company believes that its broad offering strategy provides complementary
benefits in meeting the Company's growth objectives. Offering a broad spectrum
of industrial property types and the Company's size enable it to provide better
service, on a more cost-efficient basis, to national customers who often need
various types of workspace properties, in addition to distribution space, for
their local operations. At the same time, offering a variety of property types
to smaller companies enables the Company to capture a larger share of the
growth in its chosen industrial property markets. Smaller business establish-
ments are projected, based on data supplied by Cognetics, to generate approxi-
mately 67% of the projected increased demand for distribution and flex/R&D
property space during the period from 1997 to 2002. The Company's strategy of
offering diverse property types also enables the Company to pursue opportuni-
ties as they arise across industry segments by responding to shifts in demand
at different stages of the economic cycle.
28
<PAGE>
GROWTH STRATEGIES
The Company intends to achieve its growth objectives through a combination of
property acquisitions, development and internal growth.
Acquisitions
The Company will seek to capitalize on its competitive advantages primarily by
acquiring additional modern, high-quality properties in attractive submarkets
within the industrial markets that it currently serves.
Investment Criteria. The Company follows a disciplined, value-oriented strategy
in its property acquisitions. The Company seeks to acquire modern, cost-effi-
cient buildings located in key national and regional distribution centers. The
Company's investment considerations include (i) capitalization rates, (ii) eco-
nomic fundamentals in the market, (iii) replacement costs, (iv) rent levels and
trends, (v) construction quality and property condition, (vi) historical occu-
pancy rates, (vii) access to transportation, (viii) proximity to housing, (ix)
operating costs, (x) location in modern industrial parks and (xi) local crime
rates.
Emphasis on Market Research. The Company's property acquisitions are based on
extensive research in each targeted market regarding (i) economic and demo-
graphic trends; (ii) the supply of and demand for industrial space in targeted
sub-markets; (iii) existing and potential tenant space requirements; (iv) rent
levels and trends; and (v) the physical characteristics of buildings within the
market. The Company's research includes extensive in-market activity by Company
employees, including physical site inspections and continuing contacts with
leasing brokers and other active participants in the local markets. The Company
has compiled the results of its extensive research over the years into a pro-
prietary database, which is updated periodically, covering each market and
submarket in which it has invested or that it has targeted. The database con-
tains computerized profiles, keyed to Company-prepared aerial maps, of the
Company's properties and each of the buildings deemed most competitive to the
Company's properties or attractive for acquisition. Such profiles include
information regarding the building's age, physical characteristics (including
overall dimensions, clear heights and truck court dimensions) and current
tenant and lease information.
Diversification of Industrial Property Types. To date, the majority of the
Company's properties (78.3% of the Properties based on Annualized Net Rents at
September 30, 1997) have been bulk distribution and multitenant distribution
facilities because of the opportunities for superior returns such properties
have provided. While the Company expects that both types of properties will
continue to be an important focus of its future acquisition program, the Com-
pany believes that workspace properties (light assembly and flex/R&D facili-
ties) are also attractive in selected markets where they are in limited supply
and strong demand exists. The Company has begun to increase its acquisitions of
workspace properties, which represented approximately 21.7% of its Properties
at September 30, 1997 (based on Annualized Net Rents).
Relationships with Institutional Real Estate Investors. Over the past ten
years, Cabot Partners' operations have been focused on serving public and pri-
vate pension funds and other institutional real estate investors in connection
with investments in and management of industrial real estate. This has provided
the Company's management with an extensive knowledge of and, the Company
believes, a favorable reputation with such investors. The Company believes that
it will benefit from its relationships with these investors through further
acquisitions as they increasingly seek to securitize their direct real estate
investments.
Capital and UPREIT Structure. The Company intends to exploit its relatively
unleveraged capital structure and substantial equity base in its acquisition
and future development activities. Upon the closing of the Offering, the Com-
pany expects to have approximately $13.4 million of outstanding long term debt,
approximately $6.2 million of available cash and a Debt-to-Total Market Capi-
talization Ratio of less than 2%. The Company expects to be able to obtain
borrowings on a timely basis that will enable it to move quickly in completing
proposed property acquisitions. The Company believes that its ability to do so
will enhance its credibility with potential property sellers. The Company is
currently in discussions regarding the establishment of the Acquisition
Facility to be used for the purpose of property acquisitions and expects that
this facility will be available to it upon the closing of the Offering. The
Company's UPREIT structure, which will enable it to acquire industrial proper-
ties on a non-cash basis by exchanging Units in the Operating Partnership for
properties in a tax-deferred manner, provides an attractive alternative to a
taxable cash sale for tax paying property owners. See "--Financial Strategies"
below.
Internal Growth
The Company's primary internal growth strategy is to increase the cash flow
generated by the Properties, and from properties that it acquires in the
future, by renewing or replacing expiring leases with new leases at higher
rental rates and
29
<PAGE>
through rent increase provisions in its leases. Based on available industry
research and its own market knowledge, the Company believes that market rents
exceed the Company's current rental rates in a number of its markets. The Com-
pany expects to increase its rental income with respect to such properties over
time if market rental rates remain stable or increase. The Company believes
that it will have an opportunity to increase the average rental rate on its
leases expiring during 1998. In addition, the Company intends to work actively
to (i) maintain its historically high occupancy levels by retaining existing
tenants, thereby minimizing "down time" and re-leasing costs, (ii) improve the
occupancy levels of any newly acquired properties that have lower occupancy
levels than the Company typically expects from its existing properties, (iii)
capitalize on economies of scale arising from the size of its portfolio of
properties, and (iv) control costs. During the period from January 1, 1995 to
September 30, 1997, the lease renewal rates for the Properties acquired prior
to September 30, 1997 and for the Existing Investors Property Group were 84.0%
and 88.7%, respectively. The Company also will seek internal growth through
converting its properties to more intensive, higher margin uses if and to the
extent that suitable opportunities to do so arise.
Development
The Company's senior management has extensive real estate development experi-
ence, including experience derived from the industrial park development activi-
ties of CC&F. The Company is engaging its existing tenants in discussions about
future space needs and believes that financially attractive build-to-suit
opportunities from its tenant base may be available over time. The Company also
believes that in select target markets there are attractive opportunities for
new development with potentially greater returns than those available from the
purchase of existing stabilized properties, and it intends to pursue a develop-
ment program where such opportunities exist. In order to limit initial overhead
expenses, the Company intends to begin its development activities by engaging
local or regional builders with whom it has established strong relationships.
Thereafter, the Company intends to expand its in-house development staff as the
Company's development activities increase.
OPERATIONS
Real Estate Operations. The Company's property management functions with
respect to its own properties include strategic planning and decision making,
centralized leasing activities and other property management activities. The
Director of Real Estate Operations and the Company's four regional managers,
all of whom are located in the Company's Boston headquarters, oversee the prop-
erty management activities relating to the Company's properties, which include
controlling capital expenditures and expenses that are not reimbursable by ten-
ants, making regular property inspections, overseeing rent collections and cost
control and planning and budgeting activities. Tenant relations functions,
including monitoring of tenant compliance with their property maintenance obli-
gations and other lease provisions, have been handled by in-house personnel for
most of the properties under Cabot Partners' management located in its North-
east Region and by third-party building managers for most other properties
under its management. Shortly after the closing of the Offering, the Company
expects to further internalize such tenant relations functions by opening local
offices in Chicago, Columbus, Dallas, Los Angeles and Orlando.
Leasing. The Company's leasing activities are the primary responsibility of the
Company's Director of Leasing, who reports to the Director of Real Estate Oper-
ations. The Director of Leasing leads the negotiation of most leases with major
tenants and oversees all other leasing negotiations. Smaller tenant leasing and
marketing efforts are typically handled by the Company's regional managers,
working with local leasing brokers and under the overall direction of the
Director of Leasing. The Company believes that centralizing its leasing activi-
ties provides greater coordination and control of its leasing strategy. The
Company seeks to maximize rental income by working actively to retain existing
tenants and by aggressively marketing space for which tenant renewals are not
obtained. The Company takes an active approach to managing its lease portfolio,
typically preparing its renewal or releasing strategy 24 months prior to sched-
uled lease expiration dates and entering into discussions with tenants well in
advance of such dates. The Company also seeks to stagger lease termination
dates so as to minimize the possibility of large blocks of space becoming
vacant at the same time.
National Marketing. The Company will pursue a national tenant marketing program
emphasizing the advantages of dealing with a single source supplier of indus-
trial space for industrial space needs across the country and the flexibility
in structuring lease maturities and other terms that the Company is able to
offer.
Service Orientation. The Company intends to continue Cabot Partners' emphasis
on providing high-quality service to its tenants. Examples of such service
include promptly addressing tenant concerns, determining and regularly reas-
sessing tenant space requirements and engaging in cooperative cost reduction
efforts with or for the benefit of tenants. As part of its ongoing program of
building mutually beneficial long-term tenant relationships, the Company's
regional managers meet
30
<PAGE>
with tenants frequently to supplement the day-to-day activities of the
Company's internal and third-party building managers. The Company believes that
the quality of its tenant services is evidenced by its high tenant retention
rates.
Financial and Cost Controls. The Company maintains strict financial and cost
controls in administering its asset/property management operations. These
include (i) close monitoring and active collection of rents and tenant expense
reimbursements, (ii) use of competitive bidding procedures for all maintenance
and other material expenses and for capital expenditures, (iii) regular real
estate tax assessment appeals where warranted, (iv) approval of all
nonreimbursable expenses and capital expenditures by the Company's regional
managers and (v) active lease administration, including close monitoring of
tenants' compliance with their lease responsibilities. The Company also
requires extensive planning and budgeting activities for each of its properties
using a standardized, zero-basis budgeting format in an annual process that is
updated quarterly and is coordinated by the Director of Real Estate Operations.
The results of this budgeting process are then incorporated into the Company's
overall budgeting and planning process.
THIRD-PARTY INVESTMENT MANAGEMENT
The Management Company will provide investment advisory and management services
to the clients of Cabot Partners which elected not to contribute some or all of
their industrial properties to the Company. On a pro forma basis for the nine
months ended September 30, 1997, the Management Company would have generated
pro forma net income of less than 2.0% of the Company's pro forma net income.
The Management Company will not provide services relating to any industrial
real estate acquisition or development activities that would conflict with the
Company's own acquisition and development activities. The Company believes that
its investment in the Management Company will help it achieve economies of
scale with its property management systems, increase market penetration and
provide access to further acquisition opportunities.
FINANCIAL STRATEGIES
The Company's financial strategy is to minimize its cost of capital by main-
taining adequate working capital and conservative debt levels. The Company
estimates that approximately $6.2 million of net proceeds from the Offering and
the Concurrent Placement will be available to allocate to operating capital
after payment of offering expenses and the use of approximately $133.7 million
and $13.1 million of such proceeds to fund the Company Acquisitions and to
repay certain outstanding indebtedness secured by the Properties, respectively.
See "Use of Proceeds." The Company intends to operate with a Debt-to-Total
Market Capitalization Ratio that generally will not exceed 40%, although the
Company's Declaration of Trust and By-laws do not impose any limit on the
incurrence of debt.
The Company is currently negotiating with several financial institutions the
establishment of the Acquisition Facility under which the Company would be per-
mitted to borrow up to $325 million. The Acquisition Facility is expected to be
used primarily in connection with the acquisition of additional properties and
is anticipated to be available for such use upon the closing of the Offering.
The Company believes that the size and diversity of its portfolio of properties
will provide it with access to the public debt and equity markets which are not
generally available to smaller, less diversified property owners. The Company
also believes that its UPREIT structure will enable it to acquire industrial
properties in exchange for Units in the Operating Partnership, thereby reducing
its need to incur indebtedness to support future acquisitions. Contributions of
properties to the Operating Partnership by the owners thereof in exchange for
such Units, if properly structured, permit the transferring property owner to
defer recognition, for federal income tax purposes, of gains realized on such
transactions and thereby provide attractive alternatives to a cash sale for
property owners.
31
<PAGE>
USE OF PROCEEDS
The proceeds to the Company from the Offering and the Concurrent Placement,
after deducting the underwriting discount and the estimated expenses of the
Offering, the Concurrent Placement and the Formation Transactions, are esti-
mated to be approximately $153.0 million (approximately $173.9 million if the
Underwriters' over-allotment option is exercised in full). The Company will
contribute such net proceeds to the Operating Partnership in exchange for the
Company's general partner interest therein. The Operating Partnership will use
net proceeds of approximately $133.7 million to fund the Company Acquisitions
and approximately $13.1 million to repay outstanding mortgage indebtedness
having an interest rate of 8.375% per annum. The Operating Partnership intends
to use the remaining $6.2 million of net proceeds for general purposes,
including acquisitions of additional properties. The net proceeds not immedi-
ately used for the foregoing purposes will be invested in short-term, income
producing investments such as depository accounts, investment grade commercial
paper, government securities or money market funds that invest in government
securities. None of the net cash proceeds from the Offering are being paid to
any partner of Cabot Partners, any Cabot Group Participant or any other offi-
cer, Trustee or affiliate of the Company.
32
<PAGE>
DISTRIBUTION POLICY
The Company intends to make regular quarterly cash distributions to its share-
holders, commencing with a pro rata distribution for the period from comple-
tion of the Offering through March 31, 1998, based upon a quarterly distribu-
tion of $.325 per Common Share. On an annualized basis, this would be $1.30
per Common Share (or an annual distribution rate of 6.5% based on the Offering
Price). The Company does not expect to change its estimated initial distribu-
tion per Common Share if the Underwriters' over-allotment option is exercised.
The following discussion and the information set forth in the tables and
related notes below should be read in conjunction with the historical and pro
forma financial statements and respective notes thereto and "Management's Dis-
cussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.
The Company's intended initial annual distribution rate is based on an esti-
mate of the cash that will be available for distribution for the 12 months
ending December 31, 1998. The Company's estimate of cash available for distri-
bution is based on pro forma FFO for the 12 months ended September 30, 1997,
as adjusted for the impact of the Offering, the Concurrent Placement and the
Formation Transactions as well as adjustments (a) for certain known events and
contractual commitments that either occurred subsequent to September 30, 1997
or during the 12 months ended September 30, 1997 but which were not effective
for the full 12 months, (b) which revise historical rental revenues from a
GAAP basis to amounts currently being paid or due from tenants and (c) for the
amount of cash estimated to be used for (i) investing activities consisting of
recurring tenant improvements, leasing commissions and building improvements
and (ii) for financing activities consisting of debt principal amortization.
Except as reflected in the table below and the notes thereto, investing and
financing activities are not expected to have a material adverse effect on the
estimated cash that will be available for distribution. The estimate of FFO is
being made solely for the purpose of setting the initial distribution rate and
is not intended to be a prediction or forecast of the Company's results of
operations or of its liquidity.
The Company believes that its estimated cash available for distribution con-
stitutes a reasonable basis for setting the initial distribution rate on the
Common Shares and intends to maintain its initial distribution rate at least
throughout 1998 unless actual results of operations, economic conditions or
other factors differ from the assumptions used in calculating its estimate.
The actual return that the Company will realize and the amount available for
distributions to shareholders will be affected by a number of factors,
including the revenues received from the Properties, the distributions
received from the Operating Partnership, the operating expenses of the Com-
pany, the interest expense incurred on its borrowings and unanticipated cap-
ital expenditures. No assurance can be given that the Company's estimate will
prove accurate. In addition, pro forma results of operations do not purport to
present the actual results that can be expected for future periods. See "Man-
agement's Discussion and Analysis of Financial Condition and Results of Opera-
tions--Funds from Operations."
The Company anticipates that FFO will exceed earnings and profits due to non-
cash expenses, primarily depreciation and amortization, expected to be
incurred by the Company. Distributions by the Company to the extent of its
current or accumulated earnings and profits for federal income tax purposes,
other than capital gain dividends, will be taxable to shareholders as ordinary
dividend income. Capital gain dividends generally will be treated as long-term
capital gain. Distributions in excess of earnings and profits generally will
be treated as a non-taxable reduction of the shareholder's basis in the Common
Shares to the extent thereof, and thereafter as capital gain. Distributions
treated as a non-taxable reduction in basis will have the effect of deferring
taxation until the sale of a shareholder's Common Shares. Based on the
Company's estimated results of operations for the 12 months ending December
31, 1998, the Company estimates that less than 1% of the anticipated initial
annual distribution to shareholders will represent a return of capital for
federal income tax purposes and that the Company will be required to dis-
tribute $21.4 million, or $1.22 per Common Share, with respect to such 12-
month period in order to maintain its status as a REIT. If actual FFO or tax-
able income vary from the Company's estimates, the percentage of distributions
which represents a return of capital may be materially different. In addition,
such capital gain percentage of distributions may vary substantially in future
years, particularly since REITs are no longer required to distribute net cap-
ital gains to shareholders. For a further discussion of the tax treatment of
distributions to holders of Common Shares, see "Federal Income Tax Conse-
quences--Taxation of Taxable U.S. Shareholders" and "--Taxation of Non-U.S.
Shareholders." In order to qualify to be taxed as a REIT, the Company must
make annual distributions to shareholders of at least 95% of its REIT taxable
income (determined by excluding any net capital gain), which the Company
anticipates will be less than its share of adjusted FFO. Under certain circum-
stances, the Company may be required to make distributions in excess of its
cash available for distribution in order to meet such distribution require-
ments. In such a case, the Company may find it necessary to arrange for short-
term (or possibly long-term) borrowings or to raise funds through the issuance
of Preferred Shares or additional Common Shares.
33
<PAGE>
Future distributions by the Company will be at the discretion of the Board of
Trustees and will depend on the actual FFO of the Company, its financial condi-
tion, capital requirements, the annual distribution requirements under the REIT
provisions of the Code (see "Federal Income Tax Consequences--Taxation of the
Company--Annual Distribution Requirements") and such other factors as the Board
of Trustees deems relevant. See "Risk Factors--Possible Changes in Policies
Without Shareholder Approval; No Limitation on Debt."
The following table illustrates the adjustments made by the Company to its pro
forma FFO for the 12 months ended September 30, 1997 in order to determine its
initial estimated distributions.
<TABLE>
<CAPTION>
---------
Dollars in thousands except per share data
<S> <C>
Pro forma net income for the 12 months ended September 30, 1997(1) $ 46,644
Adjustment:
Depreciation and amortization 21,277
---------
Pro forma funds from operations for the 12 months ended September
30, 1997 67,921
ADJUSTMENTS TO DERIVE ESTIMATED FFO FOR THE 12 MONTHS ENDING
DECEMBER 31, 1998:
Contractual increase in rental revenues(2) 5,135
Contractual increase in rental revenues from recently signed
leases(3) 1,744
Provision for leases expiring in 1998(4) (1,154)
Incremental effect of straight-line rents(5) (86)
---------
Estimated adjusted FFO for the 12 months ending December 31, 1998 73,560
ADJUSTMENTS TO DERIVE ESTIMATED CASH FLOWS FOR THE 12 MONTHS ENDING
DECEMBER 31, 1998:
Straight-line rent accrual adjustment(6) (2,103)
---------
Estimated cash flows from operating activities 71,457
---------
ESTIMATED CASH FLOWS USED IN INVESTING ACTIVITIES:
Estimated annual tenant improvements and leasing commissions to
retain revenues attributable to existing leased space(7) (2,670)
Estimated recurring non-incremental revenue-generating capital
expenditures(8) (4,400)
---------
Estimated cash used in investing activities (7,070)
---------
ESTIMATED CASH FLOWS USED IN FINANCING ACTIVITIES:
Estimated annual reserve for debt principal amortization (810)
---------
ESTIMATED CASH AVAILABLE FOR DISTRIBUTION FOR THE 12 MONTHS ENDING
DECEMBER 31, 1998 $ 63,577
=========
ESTIMATED INITIAL ANNUAL CASH DISTRIBUTIONS:
Shareholders of the Company $ 22,700
Limited partners in the Operating Partnership 32,355
---------
Total estimated initial annual cash distributions $ 55,055
=========
Expected initial annual distributions per Common Share and Unit $1.30
=========
Expected cash available for distribution payout ratio(9) 86.6%
=========
</TABLE>
- -------
(1) Computed as pro forma income from operations before minority interests for
the nine months ended September 30, 1997 of approximately $35,490 plus pro
forma income from operations before minority interests for the three months
ended December 31, 1996 of approximately $11,154. See "Pro Forma Condensed Com-
bined Financial Statements."
(2) Represents (i) the estimated annual incremental effect on rental revenues
from leases executed prior to September 30, 1997, including contractual
increases in base rents for existing leases and contractual base rents from
leases which commenced paying from October 1, 1996 to September 30, 1997 and
(ii) the estimated annual incremental effect of rental increases for the 12
months ending December 31, 1998 compared to the 12 months ended September 30,
1997 which increases are included only for the period that the leases are in
effect and the tenants will be making payments and are not annualized for the
12 months ending December 31, 1998.
(3) Contractual increases in rental revenues from executed leases that com-
menced paying base rents between October 1, 1997 and November 18, 1997.
34
<PAGE>
(4) Management has assumed that 80% of the existing leases which expire during
the 12 months ending December 31, 1998 will be renewed at existing rental
rates. Given that the Company's rate of renewals over the past two years has
exceeded 80%, management believes that its assumption regarding the renewal
rate and rents at which leases renew (i.e., the current base rent) is reason-
able. These adjustments do not represent forecasts or projections of expected
future rental revenue from space not currently under lease.
(5) Represents an adjustment to reflect estimated additional straight-line
rents for the 12 months ending December 31, 1998 which has been computed as the
estimated straight-line rent adjustment for 1998 of approximately $2,103 less
the pro forma straight-line rent adjustment of $2,189 which is included in FFO
for the 12 months ended September 30, 1997.
(6) Represents the conversion of estimated rental revenues for the 12 months
ending December 31, 1998 from a straight-line accrual basis to a cash basis of
revenue recognition.
(7) Represents recurring non-revenue enhancing tenant improvements ("TI") and
leasing commissions ("LC") anticipated for the 12 months ending December 31,
1998 based on the weighted average tenant improvements and leasing commissions
for renewed and re-tenanted space at the Properties for the years ended
December 31, 1996, 1995, 1994 multiplied by the average annual square feet of
space for which leases expire during the period from November 18, 1997 to
December 31, 2000. The weighted average annual per square foot costs of tenant
improvements and leasing commissions and the calculation of the estimated pro-
vision for non-revenue enhancing tenant improvements and leasing commissions on
an annual basis based on lease expirations for the period November 18, 1997 to
December 31, 2000 are presented below:
<TABLE>
<CAPTION>
-------------------------------------------
TOTAL/
WEIGHTED
1996 1995 1994 AVERAGE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Total TIs and LCs $3,875,246 $2,490,707 $2,416,987 $8,782,940
Renewed or released space in
square feet 4,880,988 2,578,374 2,347,899 9,807,261
Cost per square foot $0.79 $0.97 $1.03 $0.90
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------
AVERAGE
NOVEMBER 18, -- ANNUAL
DECEMBER 31, FOOTAGE
2000 1999 1998 1997 EXPIRING
--------- --------- --------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Annual Square Footage
Expiring 2,426,043 3,862,277 2,724,775 258,425 2,966,886
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL SQUARE
TI & LC PER SQUARE FOOT FOOTAGE EXPIRING IN THE TOTAL
RENEWED OR RELEASED NEXT 3 YEARS (INCLUDING 1997) COSTS
----------------------- ----------------------------- ----------
<S> <C> <C> <C> <C>
$0.90 X 2,966,886 = $2,670,197
</TABLE>
(8) Represents estimated annual provision for recurring capital expenditures
for the 12 months ending December 31, 1998 based upon an annual cost of $.20
per square foot. The Company has calculated this reserve based on the weighted
average historical recurring capital expenditures for the years ended December
31, 1996, 1995 and 1994. The following table summarizes the recurring capital
expenditures for the Properties for the last three years.
<TABLE>
<CAPTION>
-----------------------------------------------
TOTAL/
WEIGHTED
1996 1995 1994 AVERAGE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total recurring capital
expenditures $ 2,830,780 $ 2,133,118 $ 2,076,193 $ 7,040,091
Weighted average square feet 14,449,744 11,588,260 8,959,973 34,997,977
Cost per square foot $0.20 $0.18 $0.23 $0.20
Pro forma total square feet 21,999,447
Cost per square foot $0.20
-----------
Estimated recurring capital expenditures $ 4,399,889
===========
</TABLE>
(9) Calculated by dividing the estimated initial annual cash distributions by
the estimated cash available for distribution. The Company's estimated pro
forma adjusted FFO payout ratio, which is calculated by dividing the estimated
initial annual cash dividends by the estimated pro forma adjusted FFO, is
74.8%.
The Company believes that the amount not distributed will be sufficient to
cover (i) tenant allowances and other costs associated with renewal or replace-
ment of current tenants as their leases expire, (ii) recurring capital expendi-
tures that will not be reimbursed by tenants and (iii) other unforeseen cash
needs. The Company also will have available to it for such purposes a portion
of the net proceeds from the Offering and the Concurrent Placement and avail-
able borrowing capacity under the Acquisition Facility. See "Use of Proceeds"
and "The Company--Financial Strategies."
35
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of Sep-
tember 30, 1997 on a pro forma basis to reflect the consummation of the Forma-
tion Transactions and on a pro forma basis, as adjusted to reflect the closing
of the Offering and the Concurrent Placement, the application of a portion of
the net proceeds therefrom to repay certain indebtedness and the assumption of
indebtedness in connection with the Company Acquisitions, as if each of such
transactions had occurred on September 30, 1997. See "Use of Proceeds." The
information set forth in the table should be read in conjunction with the com-
bined historical and pro forma financial statements of the Company and notes
thereto included elsewhere in this Prospectus and the discussion under "Manage-
ment's Discussion and Analysis of Financial Condition and Results of Opera-
tions."
<TABLE>
<CAPTION>
--------------------------
AS OF SEPTEMBER 30, 1997
--------------------------
PRO FORMA,
PRO FORMA AS ADJUSTED
Dollars in thousands ----------- -------------
<S> <C> <C>
Mortgage debt $ 18,655 $ 13,694
Limited Partners' interest in Operating Partnership 471,095 466,449
Shareholders' equity:
Common shares, $.01 par value; 150,000,000 shares
authorized; 8,961,714 issued and outstanding on a
pro forma basis and 17,461,714 issued and out-
standing on a pro forma, as adjusted basis(1) 90 175
Additional paid-in capital 169,501 327,062
----------- -------------
Total shareholders' equity 169,591 327,237
----------- -------------
Total capitalization $ 659,341 $ 807,380
=========== =============
</TABLE>
- -------
(1) Does not include Common Shares reserved for issuance upon (i) possible
exchange of 24,888,286 Units issued and outstanding after the Offering (the
issuance of which would reduce Limited Partners' interest in the Operating
Partnership), (ii) 2,188,500 Common Shares subject to options to be granted
pursuant to the Company's Long Term Incentive Plan effective upon the closing
of the Offering (see "Management--Long Term Incentive Plan") or (iii) 1,125,000
Common Shares subject to the Underwriters' over-allotment option.
36
<PAGE>
DILUTION
The initial price per share to the public of the Common Shares offered hereby
exceeds the Company's expected net tangible book value per Common Share immedi-
ately following the closing of the Offering and the Concurrent Placement.
Holders of Units and Common Shares issued in connection with the Formation
Transactions will realize an immediate increase in the net tangible book value
of their Units and Common Shares, while purchasers of the Common Shares in the
Offering and the Concurrent Placement will realize immediate dilution in the
net tangible book value of their shares. Pro forma net tangible book value per
share has been determined as of September 30, 1997 by subtracting the Company's
total liabilities from its total tangible assets and dividing the remainder by
the number of Units and Common Shares that will be outstanding after the
Offering and the Concurrent Placement. The following table illustrates the
dilution to purchasers of Common Shares sold in the Offering and the Concurrent
Placement.
<TABLE>
<CAPTION>
----------------------
<S> <C> <C>
Initial public offering price per share (1) $20.00
Pro forma net tangible book value per Common
Share/Unit as of September 30, 1997 prior to the
Offering $18.93
Decrease in net tangible book value per share
attributable to purchasers of Common Shares in the
Offering and the Concurrent Placement (.19)
----------------------
Pro forma net tangible book value per share after the Offering 18.74
---------
Dilution per share sold in the Offering and the Concurrent Place-
ment $1.26
=========
</TABLE>
- -------
(1) Before deducting the underwriting discount of the Offering and estimated
expenses of the Offering, the Concurrent Placement and the Formation Transac-
tions.
The following table summarizes, on a pro forma basis giving effect to the
Offering, the Concurrent Placement and the number of Common Shares and Units to
be issued to the Contributing Investors (excluding for this purpose the C-M
Property Partnerships) and to Cabot Partners and the C-M Property Partnerships
in connection with the Formation Transactions, the net tangible book value as
of September 30, 1997 of the net assets contributed by the Contributing
Investors (excluding for this purpose the C-M Property Partnerships) and to
Cabot Partners and the C-M Property Partnerships in the Formation Transactions
and the net tangible book value of the average contribution per share based on
total contributions.
<TABLE>
<CAPTION>
--------------------------------------------------------------
PURCHASE
PRICE/BOOK
CASH/BOOK VALUE OF
COMMON VALUE OF AVERAGE
SHARES/UNITS ISSUED TOTAL CONTRIBUTIONS CONTRIBUTIONS
Dollars in thousands, -------------------- -------------------------- PER COMMON
except per Share/Unit SHARES/UNITS PERCENT AMOUNT PERCENT SHARE/UNIT
amounts ------------ ------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Common Shares sold in
the Offering 7,500 17.7% $ 150,000 18.5% $20.00(1)
Common Shares sold in
the Concurrent
Placement 1,000 2.4 20,000 2.5 20.00(1)
Common Shares/Units
issued to Contributing
Investors (2) 31,560 74.5 631,209(3) 77.8 20.00
Units issued to Cabot
Partners and the C-M
Property Partnerships 2,290 5.4 9,476(3) 1.2 4.14
------------ ------- ------------ ----------
Total 42,350 100.0% $ 810,685 100.0%
============ ======= ============ ==========
</TABLE>
- -------
(1) Before deducting underwriting discount of the Offering and estimated
expenses of the Offering, the Concurrent Placement and the Formation Transac-
tions.
(2) Excludes Units issued in respect of the C-M Property Partnerships.
(3) Based on the September 30, 1997 pro forma net book value of the assets to
be contributed in connection with the Formation Transactions, net of liabili-
ties to be assumed.
37
<PAGE>
CABOT INDUSTRIAL TRUST
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
The pro forma condensed combined balance sheet as of September 30, 1997 has
been prepared to reflect (i) the contribution to the Company of (A) the
Existing Investors Property Group, (B) the New Investors Property Group and (C)
the Additional Acquisitions, (ii) the other Formation Transactions, (iii) the
Company Acquisitions, (iv) the Offering and the Concurrent Placement and the
use of a portion of the net proceeds therefrom to repay indebtedness and (v)
certain other adjustments, as if each of such contributions, transactions and
adjustments had occurred on September 30, 1997. The pro forma condensed com-
bined statements of operations for the nine months ended September 30, 1997 and
the year ended December 31, 1996 have been prepared to reflect (i) the contri-
bution to the Company of (A) the Existing Investors Property Group, (B) the New
Investors Property Group, (C) the Additional Acquisitions and (D) the Proper-
ties acquired during the year ended December 31, 1996 and during the nine
months ended September 30, 1997, (ii) the other Formation Transactions, (iii)
the Company Acquisitions, (iv) the use of a portion of the net proceeds of the
Offering and the Concurrent Placement to repay indebtedness and (v) certain
other adjustments, as if each of such contributions, transactions and adjust-
ments had occurred on January 1, 1996.
In the opinion of management, the pro forma condensed combined financial state-
ments include all adjustments necessary to reflect the effects of the foregoing
transactions and adjustments. The pro forma statements are unaudited and are
not necessarily indicative of what the Company's financial position would have
been or the combined results of the Company's operations that would have been
obtained if the transactions and adjustments reflected therein had been consum-
mated on the dates indicated, or on any particular date in the future, nor do
they purport to represent the financial position, results of operations or
changes in cash flows as of any future date or for any future period.
38
<PAGE>
CABOT INDUSTRIAL TRUST
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
---------------------------------------------------------------------
EXISTING NEW
CABOT INVESTORS INVESTORS OTHER
INDUSTRIAL CABOT PROPERTY PROPERTY ADDITIONAL FORMATION
TRUST PARTNERS GROUP GROUP(A) ACQUISITIONS (B) TRANSACTIONS
---------- -------- --------- --------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Properties, net $ -- $ -- $320,956 $243,152 $58,131 $ 27,190 (C)
Cash and cash
equivalents 1 1,589 1,140 806 -- (3,535)(F)
Rents and other
receivables -- 1,593 1,101 344 -- (3,038)(F)
Advisory fees
receivables -- 502 -- -- -- (502)(G)
Restricted cash -- -- 9 -- -- --
Deferred rent
receivable -- -- 4,414 3,907 -- (8,321)(D)
Lease
acquisition
costs, net -- -- 6,564 3,270 -- --
Other assets -- 1,924 385 586 -- (2,818)(E)(F)
----- ------ -------- -------- ------- ---------
Total Assets $ 1 $5,608 $334,569 $252,065 $58,131 $ 8,976
===== ====== ======== ======== ======= =========
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Mortgage debt $ -- $ -- $ 18,655 $ -- $ -- $ --
Due to related
parties -- -- 3,703 -- -- (3,703)(H)
Accounts payable
and accrued
liabilities -- 884 3,231 1,301 -- (5,416)(F)
Advisory fees
payable -- -- 502 1,717 -- (2,219)(F)(G)
Other
liabilities -- -- 977 1,173 -- (2,141)(F)
----- ------ -------- -------- ------- ---------
Total
Liabilities -- 884 27,068 4,191 -- (13,479)
----- ------ -------- -------- ------- ---------
Limited Partners
interest in
Operating
Partnership -- -- -- -- -- 471,095 (C)
Owners' equity -- 4,724 307,501 247,874 58,131 (618,230)
Common stock -- -- -- -- -- 90 (C)
Paid in capital 1 -- -- -- -- 169,500 (C)
----- ------ -------- -------- ------- ---------
Total
Shareholders'
Equity 1 4,724 307,501 247,874 58,131 (448,640)
----- ------ -------- -------- ------- ---------
Total
Liabilities
and
Shareholders'
Equity $ 1 $5,608 $334,569 $252,065 $58,131 $ 8,976
===== ====== ======== ======== ======= =========
<CAPTION>
--------------------------------------------------------------
PRE-OFFERING OFFERING CABOT
CABOT INDUSTRIAL AND INDUSTRIAL
TRUST COMPANY CONCURRENT TRUST
PRO-FORMA ACQUISITIONS(I) PLACEMENT(J)(K) PRO FORMA
---------------- --------------- -------------- ----------
<S> <C> <C> <C> <C>
ASSETS
Properties, net $ 649,429 $ 141,849 $ -- $791,278
Cash and cash
equivalents 1 (133,457) 139,647 6,191
Rents and other
receivables -- -- -- --
Advisory fees
receivables -- -- -- --
Restricted cash 9 -- -- 9
Deferred rent
receivable -- -- -- --
Lease
acquisition
costs, net 9,834 -- -- 9,834
Other assets 77 -- -- 77
--------- ---------- ---------- --------
Total Assets $ 659,350 $ 8,392 $ 139,647 $807,389
========= ========== ========== ========
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Mortgage debt $ 18,655 $ 8,392 $ (13,353) $ 13,694
Due to related
parties -- -- -- --
Accounts payable
and accrued
liabilities -- -- -- --
Advisory fees
payable -- -- -- --
Other
liabilities 9 -- -- 9
--------- ---------- ---------- --------
Total
Liabilities 18,664 8,392 (13,353) 13,703
--------- ---------- ---------- --------
Limited Partners
interest in
Operating
Partnership 471,095 -- (4,646) 466,449
Owners' equity -- -- -- --
Common stock 90 -- 85 175
Paid in capital 169,501 -- 157,561 327,062
--------- ---------- ---------- --------
Total
Shareholders'
Equity 169,591 -- 157,646 327,237
--------- ---------- ---------- --------
Total
Liabilities
and
Shareholders'
Equity $ 659,350 $ 8,392 $ 139,647 $807,389
========= ========== ========== ========
</TABLE>
39
<PAGE>
CABOT INDUSTRIAL TRUST
NOTES TO PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
New Investors Property Group
(A)The New Investors Property Group is the combination of the financial infor-
mation for the following Contributing Investors whose financial statements are
included elsewhere in this Prospectus:
Orlando Central Park and 500 Memorial Drive
Knickerbocker Properties, Inc. II
Pennsylvania Public School Employes' Retirement System Industrial Prop-
erties Portfolio
Prudential Properties Group
West Coast Industrial, LLC
In addition, the New Investors Property Group includes a Contributing Investor
with a single property which commenced operations on September 1, 1997. Accord-
ingly, no financial statements for the property are included in this Prospec-
tus.
Additional Acquisitions
(B) To reflect the acquisition of the following properties after September 30,
1997 and their contribution to the Company in the Formation Transactions:
<TABLE>
<CAPTION>
----------------------
LEASABLE EXPECTED
NUMBER OF SQUARE ACQUISITION
PROPERTY LOCATION BUILDINGS BUILDING TYPE FEET COST
----------------- --------- ------------------------- --------- -----------
<S> <C> <C> <C> <C>
Herrod Boulevard, South
Brunswick, NJ 1 Bulk Distribution 418,000 $ 18,321
Blue Ash, OH 2/1 Multitenant Distribution/
Workspace 482,942 15,565
Remington Street,
Bolingbrook, IL 1 Bulk Distribution 212,333 8,625
Ambassador Road,
Naperville, IL 1 Bulk Distribution 203,500 8,106
Luna Road, Carrollton,
TX 1 Bulk Distribution 205,400 7,514
--------- --------- -----------
7 1,522,175 $ 58,131
========= ========= ===========
</TABLE>
Other Formation Transactions
(C) To record the allocation of cost of real estate properties acquired in
excess of the Properties' historical net book value based on the Common Shares
and Units issued in connection with the Formation Transactions (excludes Units
issued to the sponsor, Cabot Partners, which are recorded at Cabot Partners'
carryover basis), as follows:
<TABLE>
<CAPTION>
---------
<S> <C>
Issuance of 32,030,413 Common Shares and Units at $20.00 per
Common Share/Unit to the Contributing Investors for equity
interests in real estate assets $ 640,608
Plus: Liabilities assumed 18,655
Less: Historical net book value of Properties and other acquired
assets (632,073)
---------
Cost of assets acquired in excess of historical book value $ 27,190
=========
</TABLE>
(D) To eliminate $8,321 deferred rent receivable which arose from the histor-
ical straight-lining of rents.
(E) To write off $1,017 of intangible assets of Cabot Partners related to Advi-
sory Contracts terminated at the time of the Formation Transactions and to
eliminate $133 of unamortized deferred loan costs related to mortgage debt to
be repaid with net proceeds of the Offering.
40
<PAGE>
CABOT INDUSTRIAL TRUST
NOTES TO PRO FORMA CONDENSED COMBINED BALANCE SHEET--(CONTINUED)
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(F) To reflect the distribution of substantially all of the net non-real estate
assets to the Contributing Investors as a result of the Formation Transactions.
(G) To eliminate fees receivable (payable) between Cabot Partners and the
Existing Investors Property Group arising from Advisory Contracts which will be
terminated as a part of the Formation Transactions.
(H) To reflect the conversion to equity of $3,703 due by certain of the C-M
Property Partnerships to certain affiliated entities.
The Company Acquisitions
(I) To reflect the probable acquisition of the following properties with pro-
ceeds from the Offering:
<TABLE>
<CAPTION>
--------------------------------------------------------------------
EXPECTED
NUMBER OF SQUARE ACQUISITION
PROPERTY LOCATION BUILDINGS BUILDING TYPE FEET COST
----------------- --------- ------------------------------------ --------- -----------
<S> <C> <C> <C> <C>
Grapevine, TX 2/1 Bulk Distribution/Workspace 1,182,361 $ 52,279
Mira Loma, CA, Dacula,
GA,
Mechanicsburg, PA 3 Bulk Distribution 916,603 34,452
Mechanicsburg, PA 2 Bulk Distribution 494,400 16,730
San Diego, CA 1 Bulk Distribution 220,000 10,885
Orlando, FL 4 Workspace Properties 213,430 9,210
Tucker, GA 3 Workspace Properties 134,163 5,615
Atlanta, GA 2 Workspace Properties 128,000 5,350
Florence, KY 2 Workspace Properties 61,555 4,030
Tempe, AZ 1 Workspace Properties 81,817 3,298
--------- ---------
21 Total Acquisition Cost 141,849
Less: Debt assumed 8,392
---------
Proceeds needed to fund acquisitions $133,457
=========
</TABLE>
The Offering and Concurrent Placement
(J) To reflect the net proceeds derived from (i) the Offering of 7.5 million
Common Shares at a price of $20.00 per share ($150,000), (ii) the Concurrent
Placement of 1.0 million Common Shares at a price of $20.00 per share
($20,000), reduced by (iii) $17,000 of estimated fees and expenses associated
with the Formation Transactions, the Offering and the Concurrent Placement.
The following table sets forth the calculation of the minority interest (Lim-
ited Partners Interest in Operating Partnership) in the Company:
<TABLE>
<S> <C>
Total equity in the Operating Partnership $793,686
Minority interest ownership percentage 58.77%
Limited Partners interest in the Operating Partnership $466,449
</TABLE>
(K) To reflect the repayment of three mortgage loans totalling $13,353, each
with a fixed interest rate of 8.375%, due February 1, 1998 with a portion of
the net proceeds of the Offering. The total debt to be repaid with the proceeds
of the Offering is based on the principal outstanding at September 30, 1997.
The actual amounts repaid will differ to the extent of any amortization of the
principal occurring prior to the actual date of repayment.
41
<PAGE>
CABOT INDUSTRIAL TRUST
NOTES TO PRO FORMA CONDENSED COMBINED BALANCE SHEET--(CONTINUED)
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Pro Forma Condensed Combined Balance Sheet Adjustment Summary:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
NOTE C NOTE D NOTE E NOTE E NOTE F NOTE G NOTE H
---------- ----------- ---------- ----------- ------------ ----------- ----------
CONVERSION
ALLOCATION DISTRIBUTION ELIMINATE OF
OF COST ELIMINATION OF ADVISOR RELATED TOTAL
IN EXCESS ELIMINATION WRITE OFF OF NON-REAL FEES PARTY OTHER
OF OF DEFERRED INTANGIBLE UNAMORTIZED ESTATE RECEIVABLE/ LOAN TO FORMATION
BOOK VALUE RENT ASSETS LOAN COSTS ASSETS PAYABLE EQUITY TRANSACTIONS
---------- ----------- ---------- ----------- ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Properties, net $ 27,190 $ $ $ $ $ $ $ 27,190
Cash and cash equiv-
alents (3,535) (3,535)
Rents and other
receivables (3,038) (3,038)
Advisory fees
receivables (502) (502)
Deferred rent
receivable (8,321) (8,321)
Other assets (1,017) (133) (1,668) (2,818)
Due to related par-
ties 3,703 3,703
Accounts payable and
accrued liabilities 5,416 5,416
Advisory fees pay-
able 1,717 502 2,219
Other liabilities 2,141 2,141
Limited Partners
Interest in Oper-
ating Company (471,095) (471,095)
Common Stock (90) (90)
Paid in capital (169,500) (169,500)
Owners' equity $ 613,495 $ 8,321 $ 1,017 $ 133 $(1,033) $ -- $(3,703) $ 618,230
</TABLE>
42
<PAGE>
CABOT INDUSTRIAL TRUST
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRE-
OFFERING
EXISTING NEW CABOT
CABOT INVESTORS INVESTORS OTHER INDUSTRIAL
INDUSTRIAL CABOT PROPERTY PROPERTY 1997 FORMATION TRUST COMPANY
TRUST PARTNERS GROUP GROUP(A) ACQUISITIONS(L) TRANSACTIONS PRO FORMA ACQUISITIONS(O)
---------- -------- --------- --------- --------------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Rental $ -- $ -- $23,968 $22,725 $ 5,174 $ 376 (U) $52,243 $ 7,416
Tenant reim-
bursements -- -- 4,343 1,138 797 -- 6,278 705
Other -- -- 331 53 39 -- 423 39
Advisory fee
income -- 5,095 -- -- -- (4,446)(N) 649 --
Advisory fee
income
associated with
the
Existing
Investors
Property Group -- 1,739 -- -- -- (1,739)(M) -- --
Interest -- -- 94 71 -- -- 165 --
----- ------ ------- ------- ------- -------- ------- -------
-- 6,834 28,736 23,987 6,010 (5,809) 59,758 8,160
----- ------ ------- ------- ------- -------- ------- -------
EXPENSES
Real estate
taxes -- -- 4,005 2,076 818 -- 6,899 701
Property
operating -- -- 1,602 1,827 558 -- 3,987 412
Management fees -- -- 609 125 102 (85)(M) 751 129
Advisory fees -- -- 1,073 2,345 -- (3,418)(M) --
General and
administrative -- 4,899 -- -- -- (2,994)(M)(N) 1,905
Interest -- -- 1,399 -- -- (218)(Q) 1,181 546
Depreciation and
amortization -- 732 6,473 5,562 1,195 (333)(R)(S)(T) 13,629 2,393
----- ------ ------- ------- ------- -------- ------- -------
-- 5,631 15,161 11,935 2,673 (7,048) 28,352 4,181
----- ------ ------- ------- ------- -------- ------- -------
Net income
before Minority
Interest -- 1,203 13,575 12,052 3,337 1,239 31,406 3,979
Minority
Interest -- -- -- -- -- (23,093) (23,093) (2,338)
----- ------ ------- ------- ------- -------- ------- -------
Net income $ -- $1,203 $13,575 $12,052 $ 3,337 $(21,854) $ 8,313 $ 1,641
===== ====== ======= ======= ======= ======== ======= =======
Net income per
common share
Weighted average
common shares
outstanding
<CAPTION>
OFFERING CABOT
AND INDUSTRIAL
CONCURRENT TRUST
PLACEMENT PRO FORMA
------------ ----------
<S> <C> <C>
REVENUES
Rental $ -- $ 59,659
Tenant reim-
bursements -- 6,983
Other -- 462
Advisory fee
income -- 649
Advisory fee
income
associated with
the
Existing
Investors
Property Group -- --
Interest -- 165
------------ ----------
-- 67,918
------------ ----------
EXPENSES
Real estate
taxes -- 7,600
Property
operating -- 4,399
Management fees -- 880
Advisory fees -- --
General and
administrative 750 (P) 2,655
Interest (855)(Q) 872
Depreciation and
amortization -- 16,022
------------ ----------
(105) 32,428
------------ ----------
Net income
before Minority
Interest 105 35,490
Minority
Interest 4,573 (20,858)
------------ ----------
Net income $4,678 $ 14,632
============ ==========
Net income per
common share $0.84 (V)
==========
Weighted average
common shares
outstanding 17,461,714
<CAPTION>
==============
</TABLE>
43
<PAGE>
CABOT INDUSTRIAL TRUST
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
PRE-
OFFERING
EXISTING NEW CABOT
CABOT INVESTORS INVESTORS OTHER INDUSTRIAL
INDUSTRIAL CABOT PROPERTY PROPERTY 1996 1997 FORMATION TRUST
TRUST PARTNERS GROUP GROUP(A) ACQUISITIONS(L) ACQUISITIONS(L) TRANSACTIONS PRO-FORMA
---------- -------- --------- --------- --------------- --------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Rental $ -- $ -- $29,736 $29,335 $1,995 $7,777 $ 870 (U) $69,713
Tenant reim-
bursements -- -- 4,917 2,068 172 1,195 -- 8,352
Other -- -- 334 735 -- 33 -- 1,102
Advisory fee
income -- 5,822 -- -- -- -- (4,980)(N) 842
Advisory fee
income
associated with
the
Existing
Investors
Property Group -- 2,086 -- -- -- -- (2,086)(M) --
Interest -- -- 193 139 -- -- -- 332
----- ------ ------- ------- ------ ------ -------- -------
Total Revenues -- 7,908 35,180 32,277 2,167 9,005 (6,196) 80,341
----- ------ ------- ------- ------ ------ -------- -------
EXPENSES
Real estate
taxes -- -- 5,037 3,030 183 1,195 -- 9,445
Property
operating -- -- 2,434 2,639 97 660 -- 5,830
Management fees -- -- 645 175 58 161 (119)(M) 920
Advisory fees -- -- 1,244 1,358 77 -- (2,679)(M) --
General and
administrative -- 5,895 -- -- -- -- (3,491)(M)(N) 2,404
Interest -- -- 1,931 -- -- -- (299)(Q) 1,632
Depreciation and
amortization -- 419 7,966 7,020 400 1,725 1,130 (R)(S)(T) 18,660
----- ------ ------- ------- ------ ------ -------- -------
Total Expenses -- 6,314 19,257 14,222 815 3,741 (5,458) 38,891
----- ------ ------- ------- ------ ------ -------- -------
Net income
before minority
interest -- 1,594 15,923 18,055 1,352 5,264 (738) 41,450
Minority
interest -- -- -- -- -- -- (30,478) (30,478)
----- ------ ------- ------- ------ ------ -------- -------
Net income $ -- $1,594 $15,923 $18,055 $1,352 $5,264 $(31,216) $10,972
===== ====== ======= ======= ====== ====== ======== =======
Net income per
common share
Weighted average
common shares
outstanding
------------------------------------------------------------------------------------------------------------------
<CAPTION>
CABOT
OFFERING AND INDUSTRIAL
COMPANY CONCURRENT TRUST
ACQUISITIONS(O) PLACEMENT PRO FORMA
---------------- ---------------- --------------
<S> <C> <C> <C>
REVENUES
Rental $7,885 $ -- $ 77,598
Tenant reim-
bursements 458 -- 8,810
Other 7 -- 1,109
Advisory fee
income -- -- 842
Advisory fee
income
associated with
the
Existing
Investors
Property Group -- -- --
Interest -- -- 332
---------------- ---------------- --------------
Total Revenues 8,350 -- 88,691
---------------- ---------------- --------------
EXPENSES
Real estate
taxes 480 -- 9,925
Property
operating 277 -- 6,107
Management fees 68 -- 988
Advisory fees -- -- --
General and
administrative -- 1,000 (P) 3,404
Interest 728 (1,183)(Q) 1,177
Depreciation and
amortization 3,190 -- 21,850
---------------- ---------------- --------------
Total Expenses 4,743 (183) 43,451
---------------- ---------------- --------------
Net income
before minority
interest 3,607 183 45,240
Minority
interest (2,120) 6,010 (26,588)
---------------- ---------------- --------------
Net income $1,487 $ 6,193 $ 18,652
================ ================ ==============
Net income per
common share $1.07 (V)
==============
Weighted average
common shares
outstanding 17,461,714
<CAPTION>
==============
</TABLE>
44
<PAGE>
CABOT INDUSTRIAL TRUST
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Acquisitions
(L) To reflect the operations and the depreciation expense for the pro forma
condensed combined statement of operations for (a) the nine months ended Sep-
tember 30, 1997: for the period from January 1, 1997 through the earlier of the
date of acquisition or September 30, 1997, as applicable, for properties
acquired or anticipated to be acquired in 1997 and (b) the year ended December
31, 1996: for the period from January 1, 1996 through the date of acquisition
for properties acquired in 1996 or December 31, 1996 for the properties
acquired or anticipated to be acquired in 1997, for the following properties:
<TABLE>
<CAPTION>
-----------------------------
PERIOD
ACQUIRED PROPERTY DATE ACQUIRED REFERENCE
----------------- ------------------ ----------
<S> <C> <C>
Reames Road, Charlotte, NC February 22, 1996 *
Santa Anita Avenue, Rancho Cucamonga, CA June 27, 1996 *
Holton Drive, Independence, KY July 6, 1996 *
East Jurupa Street, Ontario, CA November 11, 1996 *
North 104th Avenue, Tolleson, AZ November 26, 1996 *
Kingspointe Parkway, Orlando, FL December 30, 1996 *
South 55th Avenue, Phoenix, AZ March 27, 1997 **
North 47th Avenue, Phoenix, AZ March 27, 1997 **
South Rockefeller Avenue, Ontario, CA July 17, 1997 **
Huntwood Avenue, Hayward, CA September 12, 1997 **
Diplomat Drive, Carrollton, TX September 19, 1997 **
Remington Street, Bolingbrook, IL October 7, 1997 **
Ambassador Road, Naperville, IL October 9, 1997 **
Luna Road, Carrollton, TX October 17, 1997 **
Herrod Boulevard, South Brunswick, NJ October 22, 1997 **
Blue Ash, OH December 18, 1997 **
</TABLE>
* Included in the pro forma condensed combined statement of operations for
the year ended December 31, 1996 (through the date of acquisition) in the
column entitled "1996 Acquisitions".
** Included in the pro forma condensed combined statement of operations for
the year ended December 31, 1996 and for the nine months ended September
30, 1997 through the date of acquisition or September 30, 1997, whichever
is earlier in the column entitled "1997 Acquisitions".
Other Formation Transactions
(M) To eliminate advisory fee revenues of Cabot Partners and the related advi-
sory fee expense of the Existing Investors Property Group arising from Advisory
Contracts which will be terminated as a part of the Formation Transactions and
to restate advisory fees paid by the New Investors Property Group to third par-
ties as general and administrative expenses of the Company using an estimate of
the cost to manage the real estate assets (see Note E).
45
<PAGE>
CABOT INDUSTRIAL TRUST
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS--(CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(N) To reflect the effects of establishing the Company's investment in the Man-
agement Company by reclassifying the associated revenues, operating expenses
and amortization expense to an unconsolidated subsidiary, which management will
account for using the equity method, for the nine months ended September 30,
1997 and the year ended December 31, 1996. The pro forma operations of the Man-
agement Company and the Company's share of the Management Company's net income,
based upon its 95% economic interest, are as follows:
<TABLE>
<CAPTION>
---------------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Advisory fee revenues $ 5,095 $ 5,822
General and administrative expenses (3,310) (4,039)
Amortization expense (647) (306)
------------- ------------
Income before income taxes 1,138 1,477
Income tax (assumed effective tax rate of
40%) (455) (591)
------------- ------------
Net income 683 886
------------- ------------
Company's share of net income $ 649 $ 842
============= ============
</TABLE>
Advisory fee revenues consist of actual fees earned by Cabot Partners during
the nine months ended September 30, 1997 and the year ended December 31, 1996
from the assets not owned by the Existing Investors.
General and administrative expenses consist of direct and indirect costs allo-
cated by the Company to the Management Company. Such indirect costs have been
allocated based upon the percentage of total assets expected to be managed by
the Management Company after the Offering.
The Company Acquisitions
(O) To reflect the operations and the depreciation expense for the nine months
ended September 30, 1997 and the year ended December 31, 1996 for the proper-
ties to be acquired with proceeds from the Offering and the Concurrent Place-
ment (see Note I).
The Offering
(P) To reflect additional general and administrative expenses expected to be
incurred on an annual basis, as a result of reporting as a public company, as
follows:
<TABLE>
<CAPTION>
----------
<S> <C>
Legal, audit and tax services $ 350
Printing and mailing 350
Directors and officers insurance 100
Investor relations 50
Other 150
----------
Totals $ 1,000
==========
</TABLE>
(Q) To reflect the reduction of interest expense associated with the repayment
of mortgage debt with a portion of the net proceeds of the Offering and the
Concurrent Placement and the conversion to equity of related party indebtedness
(see Note H).
(R) To eliminate deferred loan cost amortization of $60 for the nine months
ended September 30, 1997 and $80 for the year ended December 31, 1996 histori-
cally recognized by Existing Investors Property Group (see Note E).
(S) To fully amortize the unamortized intangible assets of Cabot Partners
($1,017 in the year ended December 31, 1996); to eliminate the related histor-
ical amortization for the Advisory Contracts which have been terminated as a
result of a sale of the underlying properties or will be terminated as part of
the Formation Transactions of $85 and $113 for the nine
46
<PAGE>
CABOT INDUSTRIAL TRUST
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS--(CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
months ended September 30, 1997 and the year ended December 31, 1996, respec-
tively; and to reclass to the Management Company $647 and $306 for the nine
months ended September 30, 1997 and the year ended December 31, 1996, respec-
tively.
(T) The depreciation adjustment for the nine months ended September 30, 1997
and the year ended December 31, 1996, respectively, includes the following:
<TABLE>
<CAPTION>
----------
<S> <C>
Adjustment to the basis of the Properties (see Note C) $ 27,190
Less: Portion allocated to land estimated at 10% 2,719
----------
$ 24,471
==========
Depreciation expense based on a weighted average estimated
useful life of 40 years--
For the nine months ended September 30, 1997 $ 459
==========
For the year ended December 31, 1996 $ 612
==========
</TABLE>
(U) To reflect the adjustment for the straight-line effect of scheduled rent
increases, assuming the transaction closed on January 1, 1996.
(V) Represents both primary and fully diluted earnings per Common Share. The
impact of options to purchase Common Shares and the conversion of Units in the
Operating Partnership into Common Shares are not dilutive and as such are
excluded from the calculation of primary and fully diluted earnings per Common
Share. The impact on pro forma per Common Share amounts resulting from the
adoption of Statement of Financial Accounting Standards No. 128--"Earnings Per
Share" is not expected to be material.
47
<PAGE>
CABOT INDUSTRIAL TRUST
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS--(CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Pro Forma Condensed Combined Statement of Operations Adjustment Summary:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
----------------------------------------------------------------------------------------
NOTE M NOTE M NOTE N NOTE R NOTE S
-------------------- ---------------- ------------- ----------------- ---------------
ESTABLISH ELIMINATE
RESTATE COMPANY'S HISTORICAL
ELIMINATE RELATED ADVISORY INVESTMENT IN ELIMINATE AMORTIZATION
ADVISORY FEE REVENUE FEES PAID BY THE MANAGEMENT DEFERRED LOAN OF ADVISORY
AND EXPENSES NEW INVESTORS COMPANY COST AMORTIZATION CONTRACTS
-------------------- ---------------- ------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Advisory fee income $ $ $ (4,446) $ $
Advisory fee income associated
with the Existing Investors
Property Group (1,739)
Management fees 85
Advisory fees 1,073 2,345
General and Administrative 367 (683) 3,310
Depreciation and amortization 647 60 85
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
--------------------------------------------
NOTE T
---------
DEPRECIATION
ADJUSTMENT TOTAL
------------ ------------
<S> <C> <C>
Advisory fee income $ $ (4,446)
Advisory fee income associated
with the Existing Investors
Property Group (1,739)
Management fees 85
Advisory fees 3,418
General and Administrative 2,994
Depreciation and amortization (459) 333
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------------------------
NOTE M NOTE M NOTE N NOTE R
-------------------- ---------------- ------------- -----------------
ELIMINATE RESTATE ESTABLISH
RELATED ADVISORY COMPANY'S
ADVISORY FEE FEES PAID INVESTMENT IN ELIMINATE
REVENUE BY THE MANAGEMENT DEFERRED LOAN
AND EXPENSES NEW INVESTORS COMPANY COST AMORTIZATION
-------------------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C>
Advisory fee income $ $ $ (4,980) $
Advisory fee income associated
with the Existing Investors
Property Group (2,086)
Management fees 119
Advisory fees 1,244 1,435
General and Administrative 363 (911) 4,039
Depreciation and amortization 306 80
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
---------------------------------------------
NOTE S NOTE S NOTE T
--------------- -------------- ------------
ELIMINATE
HISTORICAL FULLY AMORTIZE
AMORTIZATION OF INTANGIBLE
ADVISORY ASSETS OF DEPRECIATION
CONTRACTS CABOT PARTNERS ADJUSTMENT TOTAL
--------------- -------------- ------------ -------
<S> <C> <C> <C> <C>
Advisory fee income $ $ $ $(4,980)
Advisory fee income associated
with the Existing Investors
Property Group (2,086)
Management fees 119
Advisory fees 2,679
General and Administrative 3,491
Depreciation and amortization 113 (1,017) (612) (1,130)
</TABLE>
48
<PAGE>
SELECTED FINANCIAL AND OTHER DATA
Set forth below are selected historical financial and other data for (i) the
Existing Investors Property Group and (ii) the real estate advisory business of
Cabot Partners. The selected financial data presented below as of and for the
nine months ended September 30, 1997, in the case of the Existing Investors
Property Group, and as of and for the years ended December 31, 1996, 1995 and
1994, in the case of both the Existing Investors Property Group and Cabot Part-
ners, have been derived from Existing Investors Property Group Combined finan-
cial statements and the Cabot Partners financial statements that have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports included elsewhere in this Prospectus. This information should be
read in conjunction with such financial statements and the notes thereto
included elsewhere in this Prospectus. The selected financial data presented
below as of and for the years ended December 31, 1993 and 1992 for Cabot Part-
ners are derived from the Cabot Partners Financial Statements and the notes
thereto not included in this Prospectus which have been audited by Arthur
Andersen LLP. The selected financial data presented below as of and for the
years ended December 31, 1993 and 1992 and as of and for the nine months ended
September 30, 1996 for the Existing Investors Property Group and as of and for
the nine months ended September 30, 1997 and 1996 for Cabot Partners have not
been audited but, in the opinion of management, include all adjustments (con-
sisting only of normal recurring accruals) necessary to present fairly such
information in accordance with GAAP applied on a consistent basis. The results
of operations for the nine months ended September 30, 1997 are not necessarily
indicative of results for the entire year. Other Data (including Property data)
for all periods and dates presented are unaudited and are derived from the
unaudited financial and other records of Cabot Partners and the Existing
Investors Property Group.
49
<PAGE>
CABOT INDUSTRIAL TRUST
SELECTED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
----------------------------------------------------------------------
EXISTING INVESTORS NINE MONTHS ENDED
PROPERTY GROUP(1) SEPTEMBER 30, YEARS ENDED DECEMBER 31,
- ------------------ -------------------- ------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
In thousands --------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Revenues $ 28,736 $ 26,138 $ 35,180 $ 28,794 $ 28,209 $ 25,252 $ 21,904
Real estate tax expense 4,005 3,649 5,037 3,979 3,769 5,144 2,772
Property operating
expenses 3,284 3,003 4,323 3,357 3,063 3,227 2,940
General and administra-
tive expenses -- -- -- -- -- -- --
Interest expense 1,399 1,430 1,931 2,097 2,082 2,013 2,292
Depreciation and amorti-
zation expense 6,473 5,864 7,966 7,118 6,606 6,111 5,441
--------- --------- -------- -------- -------- -------- --------
Operating income 13,575 12,192 15,923 12,243 12,689 8,757 8,459
Gain on sale of proper-
ties -- -- -- -- 186 -- --
--------- --------- -------- -------- -------- -------- --------
Net income $ 13,575 $ 12,192 $ 15,923 $ 12,243 $ 12,875 $ 8,757 $ 8,459
========= ========= ======== ======== ======== ======== ========
<CAPTION>
----------------------------------------------------------------------
AS OF SEPTEMBER 30, AS OF DECEMBER 31,
-------------------- ------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
In thousands --------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Rental Properties
(before accumulated
depreciation) $ 358,498 $ 323,639 $336,836 $301,059 $250,387 $255,050 $240,358
Rental Properties, net 320,956 291,226 304,308 274,629 229,451 237,101 227,149
Total assets 334,569 308,237 318,732 289,337 241,026 247,615 236,457
Mortgage debt 18,655 19,496 19,292 20,083 20,608 20,550 20,550
Owners' equity 307,501 281,267 291,286 261,629 213,203 220,621 211,897
<CAPTION>
----------------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
-------------------- ------------------------------------------------
In thousands
except number of
properties and 1997 1996 1996 1995 1994 1993 1992
percentages --------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA
EBITDA (2) $ 21,447 $ 19,486 $ 25,820 $ 21,458 $ 21,377 $ 16,881 $ 16,192
Funds From Operations
(3) $ 19,988 $ 18,012 $ 23,809 $ 19,298 $ 19,193 $ 14,764 $ 13,855
Cash flows provided by
(used in):
Operating activities $ 19,497 $ 16,525 $ 25,695 $ 19,401 $ 17,552 $ 17,471 $ 14,123
Investing activities $ (22,818) $ (24,825) $(39,074) $(53,868) $ 2,037 $(17,393) $ (9,980)
Financing activities $ 2,038 $ 7,068 $ 13,204 $ 35,680 $(19,596) $ (278) $ (6,216)
Total rentable square
footage of properties
at end of period 9,529 8,547 9,069 7,879 6,253 6,644 6,100
Number of properties at
end of period 72 64 67 61 53 57 53
Occupancy rate at end of
period 93% 97% 92% 99% 90% 90% 86%
</TABLE>
- -------
(1) Represents historical combined financial and other data for the Existing
Investors Property Group for the periods indicated. See Note (1) to Combined
Financial Statements of the Existing Investors Property Group.
(2) EBITDA is computed as operating income before gain on sale of properties
plus interest expense, income taxes, depreciation and amortization. Management
believes that in addition to cash flows and net income, EBITDA is a useful
financial performance measure of assessing the operating performance of an
equity REIT because, together with net income and cash flows, EBITDA provides
investors with an additional basis to evaluate the ability of a REIT to incur
and service debt and to fund acquisitions and other capital expenditures. To
evaluate EBITDA and the trends it depicts, the components of EBITDA, such as
revenues, property operating expenses, real estate taxes and general and admin-
istrative expenses should be considered. See "Management's Discussion and Anal-
ysis of Financial Condition and Results of Operations." Excluded from EBITDA
are financing costs such as interest, as well as depreciation and amortization,
each of which can significantly affect a REIT's results of operations and
liquidity and should be considered in evaluating a REIT's operating perfor-
mance. Further, EBITDA does not represent net income or cash flows from operat-
ing, financing and investing activities as defined by GAAP and does not neces-
sarily indicate that cash flows will be sufficient to fund cash needs. It
should not be considered as an alternative to net income as an indicator of a
REIT's operating performance or to cash flows as a measure of liquidity.
(notes continued on next page)
50
<PAGE>
<TABLE>
<CAPTION>
CABOT PARTNERS (4) --------------------------------------------------------------------------
- ------------------ NINE MONTHS
ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
---------------------- ------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
In thousands ------------ ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Revenues $ 6,818 $ 5,743 $ 7,908 $ 6,516 $ 4,159 $ 4,088 $ 3,618
General and
administrative expenses 4,899 4,362 5,888 5,069 4,267 4,074 3,992
Depreciation and
amortization expense 732 315 419 453 474 480 480
Net income (loss) 1,203 1,050 1,594 1,057 (536) (428) (806)
<CAPTION>
--------------------------------------------------------------------------
AS OF SEPTEMBER 30, AS OF DECEMBER 31,
---------------------- ------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
In thousands ------------ ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets $ 5,608 $ 5,925 $ 6,075 $ 5,628 $ 4,300 $ 4,923 $ 5,412
Total liabilities 884 878 485 563 292 379 440
Total partners' capital 4,724 5,047 5,590 5,065 4,008 4,544 4,972
<CAPTION>
-------------------------------------------------------------------------
NINE MONTHS
ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
--------------------- ------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
In thousands ------------ ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA
Cash flows provided by
(used in):
Operating activities $ 1,908 $ 875 $ 1,283 $ 1,351 $ (12) $ (173) $ (269)
Investing activities 41 (37) 113 (6) 40 25 5
Financing activities (2,069) (1,069) (1,069) -- -- -- --
Assets under
management (5) 1,058,000 934,000 979,000 778,000 515,000 472,000 442,000
</TABLE>
- -------
(notes continued from preceding page)
(3) FFO represents net income before minority interests and extraordinary
items, adjusted for depreciation on real property and amortization of tenant
improvements costs and lease commissions and gains from the sale of properties
and FFO. In addition to cash flow and net income, management and industry ana-
lysts generally consider FFO to be one additional measure of the performance of
an equity REIT because, together with net income and cash flows, FFO provides
investors with an additional basis to evaluate the ability of a REIT to incur
and service debt and to fund acquisitions and other capital expenditures. How-
ever, FFO does not measure whether cash flow is sufficient to fund all of an
entity's cash needs including principal amortization, capital improvements and
distributions to stockholders. FFO also does not represent cash generated from
operating, investing or financing activities as determined in accordance with
GAAP. It should not be considered as an alternative to net income as an indi-
cator of a REIT's operating performance or to cash flows as a measure of
liquidity. Further, FFO as disclosed by other REITs may not be comparable to
the Company's calculation of FFO. The Company calculates FFO in accordance with
the White Paper.
(4) Represents the historical financial and other data of Cabot Partners for
periods prior to the Formation Transactions.
(5) Based on the estimated fair market value of such assets as of the dates
indicated.
51
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Statements contained in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" which are not historical facts may be for-
ward-looking statements. Such statements are subject to certain risks and
uncertainties which could cause actual results to differ materially from those
projected. Readers are cautioned not to place undue reliance on these forward-
looking statements which speak only as of the date hereof. See "Risk Factors--
Risks Associated with Reliance on Forward-Looking Statements."
GENERAL
Existing Investors Property Group
The Existing Investors Property Group referred to herein is not a separate
legal entity and has not conducted operations as such for any period. Refer-
ences to the Existing Investors Property Group, and the combined financial
statements and related notes thereto contained in this Prospectus, are intended
to reflect, in accordance with the accounting requirements of the Commission
and GAAP, the Properties contributed by the Contributing Investors that were
actually managed by Cabot Partners as of the dates indicated on a combined his-
torical basis. The New Investors Property Group operations, as well as the
operations of the Properties to be acquired in the Company Acquisitions, are
presented separately in the other financial statements included in this Pro-
spectus.
The timing and amount of funds used for property acquisitions by the Existing
Investors was primarily the result of individual decisions of the Existing
Investors to commit additional capital to industrial real estate investments.
The Existing Investors Property Group financial statements and related notes
contained elsewhere in this Prospectus should be read in conjunction with the
other historical financial statements relating to Cabot Partners and the other
Properties that are to be contributed to the Company in the Formation Transac-
tions and purchased in the Company Acquisitions, as well as the pro forma
financial statements and related notes, for more complete information con-
cerning the intended combined operations, assets and liabilities of the
Company.
Cabot Partners
Cabot Partners is the real estate advisory and management entity that is the
predecessor to the Company. Its revenues have primarily consisted of asset man-
agement and acquisition fees earned under Advisory Contracts with large insti-
tutional investors. Cabot Partners' property acquisitions on the behalf of its
clients for the first nine months of 1997 and for the years ended 1995 and 1996
were approximately $168 million, $191 million and $251 million, respectively.
The Company
The Company will be the result of combining the properties of the Contributing
Investors and the advisory business of Cabot Partners contributed in the Forma-
tion Transactions described in this Prospectus, the Offering and the Concurrent
Placement and the use of the net proceeds therefrom to fund the Company Acqui-
sitions and to repay indebtedness as described herein under "Use of Proceeds."
The Company's growth will be dependent upon its ability to acquire and develop
additional properties, attract low cost debt and equity capital and to increase
occupancy rates and increase rental rates of its properties.
RESULTS OF OPERATIONS
Existing Investors Property Group
The historical financial data presented herein show increases in revenues and
expenses attributable to property acquisitions and increases in occupancy and
rental rates. Therefore, the analysis below describes (i) changes resulting
from properties that were held during the entire period for both periods being
compared (the "Base Line Properties") and (ii) changes attributable to acquisi-
tion activity. Base Line Properties consisted of 61 properties for the compar-
ison between the nine months ended September 30, 1997 and 1996, 53 properties
for the comparison between the years ended December 31, 1996 and 1995 and 51
properties for the comparison between the years ended December 31, 1995 and
1994.
Nine Months Ended September 30, 1997 and 1996
Revenues. Revenues include rental revenues, tenant reimbursements, interest and
other rental revenues. Revenues increased by $2.6 million for the nine months
ended September 30, 1997, or 9.9%, to $28.7 million as compared to $26.1
52
<PAGE>
million for the nine months ended September 30, 1996. Approximately $1.2 mil-
lion, or 45.4%, of the increase was attributable to eight properties acquired
during the 12 months ended September 30, 1997 which had partial operations
during the nine months ended September 30, 1997. Approximately $1.1 million, or
41.1%, of the increase was attributable to three properties acquired during the
nine months ended September 30, 1996 which had a full nine months of operations
ending September 30, 1997. The remaining $351,000 was attributable to growth in
rental revenue in the Base Line Properties primarily from leasing vacant space
and tenant expansions.
Real estate tax expense. Real estate tax expense increased by $356,000 for the
nine months ended September 30, 1997, or 9.8%, to $4.0 million as compared to
$3.6 million for the nine months ended September 30, 1996. Substantially all of
this increase was attributable to eight properties acquired during the 12
months ended September 30, 1997 and three properties acquired during the nine
months ended September 30, 1996.
Property operating expenses. Property operating expenses (excluding real estate
tax expense) increased by $281,000 for the nine months ended September 30,
1997, or 9.4%, to $3.3 million as compared to $3.0 million for the nine months
ended September 30, 1996. Substantially all of this increase was attributable
to eight properties acquired during the 12 months ended September 30, 1997 and
three properties acquired during the nine months ended September 30, 1996.
Depreciation and amortization expense. Depreciation and amortization expense
increased by $609,000 for the nine months ended September 30, 1997, or 10.4%,
to $6.5 million as compared to $5.9 million for the nine months ended September
30, 1996. Approximately $439,000, or 72.1%, of this increase was attributable
to eight properties acquired during the 12 months ended September 30, 1997 and
three properties acquired during the nine months ended September 30, 1996. The
remaining $170,000 of this increase was attributable to depreciation and amor-
tization of capital and tenant improvements and leasing commissions made at the
Base Line Properties in 1997 and 1996.
Years Ended December 31, 1996 and 1995
Revenues. Revenues increased by $6.4 million for the year ended December 31,
1996, or 22.2%, to $35.2 million as compared to $28.8 million for the year
ended 1995. Approximately $2.7 million, or 42.1%, of the increase was attribut-
able to eight properties acquired in 1995 which had a full year of operations
in 1996 and approximately $1.4 million, or 21.7%, of the increase was attribut-
able to a partial year of ownership of six properties acquired in 1996. The
remaining $2.3 million was attributable to growth in rental revenue in the Base
Line Properties primarily from leasing vacant space.
Real estate tax expense. Real estate tax expense increased by $1.1 million for
the year ended December 31, 1996, or 26.6%, to $5.0 million as compared to $4.0
million for the year ended December 31, 1995. Approximately $530,000, or 50.1%,
of the increase was attributable to eight properties acquired in 1995 which had
a full year of operations in 1996 and approximately $84,000, or 8.0%, of the
increase was attributable to six properties acquired in 1996 which had partial
operations during the year. The Base Line Properties increase of approximately
$443,000 was primarily attributable to lower real estate tax expense due to tax
abatements received in 1995 that related to 1995 and prior years.
Property operating expenses. Property operating expenses (excluding real estate
tax expense) increased by $966,000 for the year ended December 31, 1996, or
28.8%, to $4.3 million as compared to $3.4 million for the year ended December
31, 1995. Approximately $512,000, or 53.0%, of this increase was attributable
to Base Line Properties. The increase in property operating expenses for Base
Line Properties was due primarily to additional provisions for doubtful tenant
accounts receivable associated with two tenants totalling approximately
$226,000 and unusually high snow removal costs. The remainder of the increase
was attributable to eight properties acquired in 1995, and six properties
acquired in 1996.
Depreciation and amortization expense. Depreciation and amortization expense
increased by $848,000 for the year ended December 31, 1996, or 11.9%, to $8.0
million as compared to $7.1 million for the year ended December 31, 1995.
Approximately $444,000, or 52.4%, of the increase was attributable to eight
properties acquired in 1995 which had a full year of operations in 1996 and
approximately $236,000, or 27.8%, of the increase was attributable to six prop-
erties acquired in 1996 which had partial operations during the year. The
increase in the Base Line Properties was related to depreciation and amortiza-
tion of capital and tenant improvements and leasing commissions incurred at the
Base Line Properties in 1996 and 1995.
Years Ended December 31, 1995 and 1994
Revenues. Revenues increased by $585,000 for the year ended December 31, 1995,
or 2.1%, to $28.8 million as compared to $28.2 million for the year ended 1994.
Approximately $3.5 million of the revenue increase was attributable to eight
properties acquired in 1995 and approximately $944,000 of the revenue increase
was attributable to two properties
53
<PAGE>
acquired in 1994 which had a full year of operations in 1995. These increases
were offset by lower revenue from Base Line Properties of approximately $2.2
million due primarily to $1.6 million of termination payments received in 1994
and the resulting vacancy in 1995 of the properties previously leased to the
terminating tenants. Rental revenue also decreased by $1.7 million in 1995 as
compared to 1994 due to six properties sold during 1994.
Real estate tax expense. Real estate tax expense increased by $210,000 for the
year ended December 31, 1995, or 5.6%, to $4.0 million as compared to $3.8 mil-
lion for the year ended December 31, 1994. Approximately $448,000 of this
increase was attributable to eight properties acquired in 1995 and approxi-
mately $227,000 of this increase was attributable to two properties acquired in
1994 which had a full year of operations in 1995. These increases were offset
by a decrease in Base Line Properties of approximately $148,000 due to real
estate tax abatements. Properties sold in 1994 resulted in a $317,000 decrease
in real estate tax expense for 1995 as compared to 1994.
Property operating expenses. Property operating expenses (excluding real estate
tax expense) increased by $294,000 for the year ended December 31, 1995, or
9.6%, to $3.4 million as compared to $3.1 million for the year ended December
31, 1994. Approximately $439,000 of this increase was a result of eight proper-
ties acquired in 1995 and approximately $132,000 of this increase was a result
of two properties acquired in 1994 which had a full year of operations in 1995.
These increases were partially offset by six properties sold in 1994 resulting
in a $233,000 decrease in property operating expenses.
Depreciation and amortization expense. Depreciation and amortization expense
increased by $512,000 for the year ended December 31, 1995, or 7.8%, to $7.1
million as compared to $6.6 million for the year ended December 31, 1994.
Approximately $732,000 of this increase was attributable to eight properties
acquired in 1995 and approximately $125,000 of this increase was attributable
to two properties acquired in 1994 which had a full year of operations in 1995.
Properties sold in 1994 resulted in a $419,000 decrease in depreciation and
amortization expense for 1995 as compared to 1994.
Cabot Partners
Nine Months Ended September 30, 1997 and 1996
Revenues. Revenues, primarily consisting of asset management fees and acquisi-
tion fees, increased by $1.1 million for the nine months ended September 30,
1997, or 18.7%, to $6.8 million as compared to $5.7 million for the nine months
ended September 30, 1996. The increase was due to a $216 million increase in
the average assets under management for the nine months ended September 30,
1997 as compared to the nine months ended September 30, 1996 which resulted in
a $755,000 increase in asset management fees.
General and administrative expenses. General and administrative expenses
increased by $537,000 for the nine months ended September 30, 1997, or 12.3%,
to $4.9 million as compared to $4.4 million for the nine months ended September
30, 1996. Compensation expense increases resulted in $291,000, or 54.2%, of the
increase. The remainder of the increase was primarily due to higher profes-
sional services fees. General and administrative expenses as a percent of reve-
nues declined from 76.0% to 71.9% for the comparative periods.
Depreciation and amortization expense. Depreciation and amortization expense
increased by $417,000 for the nine months ended September 30, 1997, or 132%, to
$732,000 due to increased amortization of two Advisory Contracts that will ter-
minate before the end of 1997.
Years Ended December 31, 1996, 1995 and 1994
Revenues. Revenues, primarily consisting of asset management fees and acquisi-
tion fees, increased by $1.4 million for the year ended December 31, 1996, or
21.4%, to $7.9 million as compared to $6.5 million for the year ended December
31, 1995 due to a $201 million, or 25.8%, increase in assets under management.
Advisory fee revenues increased $2.4 million for the year ended December 31,
1995, or 56.7%, to $6.5 million as compared to $4.1 million for the year ended
December 31, 1994 because of a $188 million increase in acquisitions in 1995 as
compared to 1994.
General and administrative expense. General and administrative expenses for the
years ended December 31, 1996 and 1995 increased by approximately 16.2% and
18.8% over the prior year due primarily to compensation expense increases. Gen-
eral and administrative expense as a percent of revenues for 1996, 1995 and
1994 was 74.5%, 77.8% and 102.6%, respectively.
54
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
The principal sources of funding for acquisitions, expansions and renovation of
the Existing Investors Property Group historically have been capital contribu-
tions from its investors and cash flow provided by operations. In the future,
the Company intends to rely on cash provided by operations, bank borrowings,
and public debt and equity financings as its primary sources of funding for
acquisition, development, expansion or renovation of properties. The Company is
currently negotiating with several financial institutions concerning the estab-
lishment of a $325 million Acquisition Facility. It is anticipated the Acquisi-
tion Facility will be available at the closing of the Offering and it will be
used to fund property acquisitions, development activities, building expan-
sions, tenant leasing costs and other general corporate purposes. The Acquisi-
tion Facility is expected to contain certain customary restrictions and
requirements such as total debt-to-assets, debt service coverage, minimum unen-
cumbered assets to unsecured debt ratios, and other limitations. Although the
Company is currently negotiating the terms of the Acquisition Facility and
believes commercially acceptable terms will be realized, a currently binding
commitment does not exist. The Company believes cash flow from operations not
distributed will be sufficient to cover tenant allowances and costs associated
with renewal or replacement of current tenants as their leases expire and
recurring non-incremental revenue generating capital expenditures. See "Proper-
ties--Tenant Improvements and Leasing Commissions" and "Capital Expenditures"
for a discussion of historical leasing costs and capital expenditures.
CAPITAL RESOURCES
The Company's low Debt-to-Total Market Capitalization Ratio reduces exposure to
fixed charges and increases its ability to access large amounts of debt capi-
tal. On a pro forma basis at September 30, 1997, after giving effect to the
Formation Transactions, the Offering, the Concurrent Placement and the Company
Acquisitions, the Operating Partnership expects to have fixed rate debt secured
by properties with an outstanding principal amount of approximately $13.7 mil-
lion and a Debt-to-Total Market Capitalization Ratio of less than 2%. See
"Cabot Industrial Trust Pro Forma Combined Condensed Financial Statements."
LIQUIDITY
Existing Investors Property Group
Nine Months Ended September 30, 1997 and 1996
Cash and cash equivalents decreased by approximately $1.3 million, to approxi-
mately $1.1 million, at September 30, 1997 compared to $2.4 million at December
31, 1996. This was the result of $19.5 million of cash generated from opera-
tions, reduced by $22.8 million of cash used for investing activities and
increased by $2.0 million provided by financing activities. Cash flow generated
by operations increased by $3.0 million, from $16.5 million to $19.5 million,
primarily due to additional cash flow generated by an increase in the number of
properties owned. Net cash used for investing activities decreased by $2.0 mil-
lion, from $24.8 million to $22.8 million, due to a $2.4 million decrease in
property acquisitions partially offset by increased capital expenditures and
lease acquisition cost. Net cash provided by financing activities decreased by
$5.1 million, from $7.1 million to $2.0 million, primarily due to a $4.8 mil-
lion decrease in capital contributions, net of distributions.
Years ended December 31, 1996 and 1995
Cash and cash equivalents decreased by $175,000, to $2.4 million at December
31, 1996 compared to $2.6 million at December 31, 1995. This was the result of
$25.7 million generated from operations and $13.2 million provided by financing
activities, reduced by $39.1 million of net cash used for investing activities.
Cash generated by operations increased by $6.3 million, from $19.4 million to
$25.7 million, primarily due to additional cash flow generated by an increase
in the number of properties owned. Net cash used for investing activities
decreased by $14.8 million, from $53.9 million to $39.1 million, primarily due
to a decrease in the number of properties purchased during 1996 as compared to
1995. Net cash provided by financing activities decreased by $22.5 million,
from $35.7 million to $13.2 million due to a $15.1 million decrease in capital
contributions and a $7.4 million increase in distributions.
Cabot Partners
Cabot Partners relies primarily on cash payments of asset management fees and
acquisition fees from its advisory clients to fund its operating expenses and
distributions to its partners. The receivables related to these fees have
increased significantly over the last three years due to the increase in acqui-
sition activity and assets under management discussed above. In addition, sev-
eral Advisory Contracts provide for quarterly, rather than monthly, fee pay-
ments in arrears, further increasing amounts receivable. The increase in
accounts receivable is not an indication of a collectibility problem.
55
<PAGE>
INFLATION
Substantially all of the leases of the Properties require the tenant to pay, as
additional rent, either all real estate taxes and operating expenses or all
increases in real estate taxes and operating expenses over a base amount. In
addition, many of such leases provide for fixed increases in base rent or
indexed escalations (based on the consumer price index or other measures). Man-
agement believes that inflationary increases in operating expenses will be off-
set, in part, by the expense reimbursements and contractual rent increases
described above.
FUNDS FROM OPERATIONS
Management believes that Funds from Operations ("FFO"), as defined by the
National Association of Real Estate Investment Trusts ("NAREIT") is an appro-
priate measure of performance for an equity REIT. The following table reflects
the calculation of the Existing Investors Property Group's FFO on a historical
combined basis for the years ended December 31, 1994, 1995 and 1996 and the
nine months ended September 30, 1996 and 1997.
<TABLE>
<CAPTION>
-----------------------------------------
NINE MONTHS ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
----------------- -----------------------
1997 1996 1996 1995 1994
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Income before gain on sale of prop-
erties $ 13,575 $ 12,192 $15,923 $12,243 $12,689
Real estate depreciation and amorti-
zation 6,413 5,820 7,886 7,055 6,504
-------- -------- ------- ------- -------
FFO(1) $ 19,988 $ 18,012 $23,809 $19,298 $19,193
======== ======== ======= ======= =======
</TABLE>
- -------
(1) The White Paper defines FFO as net income (loss) (computed in accordance
with GAAP), excluding gains (or losses) from debt restructuring and sales of
properties, plus real estate related depreciation and amortization. Management
considers FFO to be an appropriate measure of performance of an equity REIT
because it is predicated on cash flow analyses. The Company computes FFO in
accordance with standards established by the White Paper which may differ from
the methodology for calculating FFO utilized by other REITs and, accordingly,
may not be comparable to such other REITs. FFO should not be considered as an
alternative to net income (determined in accordance with GAAP) as an indicator
of the Company's financial performance or to cash flow from operating activi-
ties (determined in accordance with GAAP) as a measure of the Company's liquid-
ity, nor is it indicative of funds available to fund the Company's cash needs,
including its ability to make distributions.
56
<PAGE>
PROPERTIES
GENERAL
Upon the closing of the Offering, the Company will own a geographically diver-
sified portfolio of 144 Properties having an aggregate of approximately 22 mil-
lion rentable square feet, approximately 93% of which space was leased to 258
tenants at September 30, 1997. The Properties are located in 21 states and in
each of the five principal regions of the United States and are within over-
night trucking access (a 500-mile radius) to 90% of the population of the
United States.
The Company categorizes its properties into three types: bulk distribution
properties, multitenant distribution properties, and workspace properties. Bulk
distribution properties are oriented primarily to large national and regional
distribution tenants. These properties generally have at least 100,000 square
feet of rentable space, building depths of at least 240 feet, clear heights of
24 feet or more, truck courts in excess of 100 feet in depth to accommodate
larger modern trucks, a ratio of loading docks to rentable space of one or more
per 10,000 square feet, and a location with good access to interstate highways.
Multitenant distribution properties are oriented primarily to smaller regional
and local distribution tenants, and are generally designed to be subdivided to
suit tenants whose space requirements generally range from 10,000 square feet
to 100,000 square feet. These properties generally have clear heights of 20
feet or more, building depths of less than 240 feet (unless configured with
loading docks on two sides), and a location with good access to regional and
interstate highways. Both types of distribution property are used predominately
for the storage and distribution of goods. Workspace properties are designed to
serve a variety of industrial tenants with workspace related requirements,
including light manufacturing and assembly, research, testing, re-packaging and
sorting, back office and sales office functions. Workspace tenants include
smaller companies whose space requirements generally range from 3,000 square
feet to 70,000 square feet. Workspace properties generally have clear heights
of 14 to 24 feet, attractive building exteriors, office finish of up to 30% or
more, parking ratios of one to four spaces per 1,000 rentable square feet, and
locations with good access to executive residential areas and local highways,
labor supply, and dining and shopping amenities.
The Properties typically are leased on a triple net basis, with tenants paying
their proportionate share of real estate taxes, operating costs and utilities
costs. However, some of the Properties are leased at higher gross rents with
the Company being responsible for paying a stated amount of real estate taxes,
operating costs and utilities costs and tenants being responsible for any and
all increases in such taxes and costs above that stated amount. Excluding lease
renewal options, lease terms typically range from three to five years or, for
leases that are renewed, a shorter period of generally two to three years.
Approximately 49% (based on leased square footage) of the leases contain a pro-
vision providing for an automatic "stepped rent" increase of a specified amount
or percentage at a certain point or points during the term of the lease.
Leases with respect to two of the Properties having a total of approximately
393,386 leasable square feet contain provisions granting the related tenants
(or in one case a third party) an option to purchase the related Property at a
fixed or formula based price for a specified period. Leases with respect to
seven of the Properties having a total of approximately 877,484 leasable square
feet (including approximately 204,369 leasable square feet relating to one of
the two Properties described above that has both associated option and right of
first refusal rights) contain provisions granting to the related tenant (or in
one case a third party) a right of first refusal to purchase the related Prop-
erty at the price offered by a prospective purchaser if such right is exercised
within a limited period after notice of the offer. The Company has not to date
received any indication from the holders of such rights of the intended exer-
cise of any of such rights. The Company believes the exercise of all or part of
such rights would not have a material adverse effect on its operations.
57
<PAGE>
PROPERTY OVERVIEW
The Properties are located in 21 major industrial real estate markets (17 of
which the Company has identified as principal targeted markets) and in each of
the five principal regions of the United States. Information regarding the
Properties by region as of September 30, 1997 is set forth below.
PROPERTIES BY REGION
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
ANNUALIZED
RENTABLE SQUARE FEET ANNUALIZED NET RENT(1) NET EFFECTIVE
------------------------ ------------------------------------- RENT PER
PER LEASED LEASED
PROPERTY TYPE BY NUMBER OF SQUARE SQUARE PERCENT
REGION PROPERTIES NUMBER % OF TOTAL AMOUNT % OF TOTAL FOOT FOOT(2) LEASED
- ---------------- ---------- ---------- ---------- ----------- ---------- ---------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BULK DISTRIBUTION PROPERTIES:
West 13 2,739,730 12.5% $ 7,790,735 10.4% $ 3.22 $ 3.22 88.4%
Southwest 4 1,326,200 6.0 2,709,712 3.6 3.07 3.06 66.6
Midwest 16 3,872,086 17.6 11,295,226 15.0 3.01 2.89 97.0
Southeast 5 1,355,266 6.2 3,690,304 4.9 3.16 3.14 86.1
Northeast 10 2,496,262 11.3 9,291,628 12.4 3.72 3.76 100.0
------- ---------- ------- ----------- ------- ------- ------- -------
Subtotal/weighted
average 48 11,789,544 53.6% $34,777,605 46.3% $ 3.24 $ 3.21 91.0%
------- ---------- ------- ----------- ------- ------- ------- -------
MULTITENANT DISTRIBUTION
PROPERTIES:
West 4 831,626 3.8% $ 3,002,560 4.0% $ 3.61 $ 3.49 100.0%
Southwest 3 385,135 1.8 1,163,982 1.5 3.02 2.75 100.0
Midwest 13 2,159,560 9.8 7,771,102 10.3 3.93 3.91 91.7
Southeast 7 1,274,745 5.8 4,070,073 5.5 3.39 2.85 94.2
Northeast 11 2,065,503 9.3 7,998,906 10.7 3.87 3.71 100.0
------- ---------- ------- ----------- ------- ------- ------- -------
Subtotal/weighted
average 38 6,716,569 30.5% $24,006,623 32.0% $ 3.71 $ 3.53 96.2%
------- ---------- ------- ----------- ------- ------- ------- -------
WORKSPACE PROPERTIES:
West 28 1,337,123 6.1% $ 6,566,829 8.7% $ 4.96 $ 5.03 99.0%
Southwest 2 255,736 1.2 914,640 1.2 5.74 6.27 62.3
Midwest 5 345,060 1.6 1,636,516 2.2 5.65 5.37 84.0
Southeast 12 889,523 4.0 3,420,659 4.6 4.27 4.23 90.1
Northeast 11 665,892 3.0 3,790,400 5.0 5.88 5.12 96.8
------- ---------- ------- ----------- ------- ------- ------- -------
Subtotal/weighted
average 58 3,493,334 15.9% $16,329,044 21.7% $ 5.07 $ 4.94 92.2%
------- ---------- ------- ----------- ------- ------- ------- -------
Total/weighted average 144 21,999,447 100.0% $75,113,272 100.0% $ 3.68 $3.58 92.8%
======= ========== ======= =========== ======= ======= ======= =======
</TABLE>
- -------
(1) "Annualized Net Rent" means annualized monthly Net Rent from leases in
effect as of September 30, 1997. "Net Rent" means contractual rent, excluding
any reimbursements for real estate taxes or operating expenses.
(2) "Annualized Net Effective Rent" means Annualized Net Rent, less amortiza-
tion of the related leasing costs, as adjusted to reflect the effect of rent
concessions and straight-lining of rent steps.
58
<PAGE>
PROPERTIES BY REGION AND MARKET
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
RENTABLE SQUARE FEET ANNUALIZED NET RENT(1)
----------------------- ----------------------------------
ANNUALIZED NET
EFFECTIVE
RENT
YEAR BUILT/ NUMBER OF PER LEASED PER LEASED
PROPERTY TYPE AND LOCATION RENOVATED PROPERTIES NUMBER % LEASED AMOUNT % OF TOTAL SQUARE FOOT SQUARE FOOT(2)
- -------------------------- ----------- ---------- ----------- ----------- ---------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BULK DISTRIBUTION
PROPERTIES:
WEST REGION
Los Angeles Market
South Vintage Avenue,
Ontario, CA............ 1986 2 520,512 100% $1,512,233 2.0% $2.91 $2.83
South Rockefeller
Avenue, Ontario, CA.... 1986 1 164,140 100 551,510 0.7 3.36 3.36
East Jurupa Street,
Ontario, CA............ 1986 1 141,132 0 0 0.0 0.00 0.00
DeForest Circle, Mira
Loma, CA(4)............ 1992 1 250,584 100 857,943 1.1 3.42 3.42
Vintage Avenue, Ontario,
CA..................... 1988 1 284,559 100 914,000 1.2 3.21 3.11
Santa Anita Avenue,
Rancho Cucamonga, CA... 1988 1 212,300 100 764,280 1.1 3.60 3.73
------ ----------- -------- ---------- ------ ------- ---------
Market Subtotal........ 7 1,573,227 91% $4,599,966 6.1% $3.21 $3.19
San Diego Market
Dornoch Court, San
Diego, CA(4)........... 1988 1 220,000 100% $ 957,709 1.3% $4.35 $4.75
------ ----------- -------- ---------- ------ ------- ---------
Phoenix Market
North 47th Avenue,
Phoenix, AZ............ 1986 1 163,200 100% $ 434,283 0.6% $2.66 $2.57
South 63rd Avenue,
Phoenix, AZ............ 1990 1 168,165 100 450,494 0.6 2.68 2.73
South 55th Avenue,
Phoenix, AZ............ 1986 1 100,000 100 288,000 0.4 2.88 2.88
North 104th Avenue,
Tolleson, AZ........... 1995 1 279,131 37 297,815 0.4 2.88 2.62
South 84th Avenue,
Tolleson, AZ........... 1989 1 236,007 100 762,468 1.0 3.23 3.16
------ ----------- -------- ---------- ------ ------- ---------
Market Subtotal........ 5 946,503 81% $2,233,060 3.0% $2.90 $2.83
------ ----------- -------- ---------- ------ ------- ---------
WEST REGION SUBTOTAL... 13 2,739,730 88% $7,790,735 10.4% $3.22 $3.22
SOUTHWEST REGION
Dallas Market
Luna Road, Carrollton,
TX(3).................. 1997 1 205,400 50% $ 346,908 0.5% $3.37 $3.56
DFW Trade Center,
Building 1, Grapevine,
TX(4). 1996 1 540,000 70 1,129,000 1.5 2.97 2.97
DFW Trade Center,
Building 2, Grapevine,
TX(4). 1997 1 440,000 59 741,000 1.0 2.85 2.85
Airline Drive, Building
2, Coppell, TX......... 1990 1 140,800 100 492,804 0.6 3.50 3.34
------ ----------- -------- ---------- ------ ------- ---------
SOUTHWEST REGION/MARKET
SUBTOTAL.............. 4 1,326,200 67% $2,709,712 3.6% $3.07 $3.06
MIDWEST REGION
Chicago Market
West 73rd Street,
Building 1, Bedford
Park, IL............... 1982 1 233,282 100% $ 671,482 0.9% $2.88 $2.67
West 73rd Street,
Building 2, Bedford
Park, IL............... 1986 1 380,269 100 1,034,331 1.4 2.72 2.52
West 73rd Street,
Building 3, Bedford
Park, IL............... 1979 1 232,000 100 720,953 1.0 3.11 2.80
Remington Street,
Bolingbrook, IL(3)..... 1996 1 212,333 100 796,925 1.1 3.75 3.75
Harvester Drive,
Chicago, IL............ 1974 1 212,922 100 798,458 1.1 3.75 3.57
Arthur Avenue, Elk
Grove, IL.............. 1978 1 230,768 100 653,076 0.9 2.83 3.04
Ambassador Road,
Naperville, IL(3)...... 1997 1 203,500 44 328,967 0.3 3.70 3.96
Mark Street, Wood Dale,
IL..................... 1985 1 234,000 100 809,992 1.0 3.46 2.91
------ ----------- -------- ---------- ------ ------- ---------
Market Subtotal........ 8 1,939,074 94% $5,814,184 7.7% $3.19 $3.03
Cincinnati/Northern Ken-
tucky Market
Holton Drive,
Independence, KY....... 1996 1 352,000 100% $ 991,952 1.3% $2.82 $3.04
International Way,
Hebron, KY............. 1990 1 192,000 100 556,800 0.7 2.90 2.81
International Road,
Building 1,
Cincinnatti, OH........ 1990 1 192,000 100 528,000 0.7 2.75 2.41
International Road,
Building 2,
Cincinnatti, OH........ 1990 1 204,800 100 720,896 1.0 3.52 3.53
------ ----------- -------- ---------- ------ ------- ---------
Market Subtotal........ 4 940,800 100% $2,797,648 3.7% $2.97 $2.97
Columbus Market
Westbelt Drive, Building
2, Columbus, OH........ 1980 1 229,200 100% $ 616,343 0.8% $2.69 $2.48
Equity Drive, Building
1, Columbus, OH........ 1980 1 227,480 100 648,318 0.9 2.85 2.85
------ ----------- -------- ---------- ------ ------- ---------
Market Subtotal........ 2 456,680 100% $1,264,661 1.7% $2.77 $2.67
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
RENTABLE SQUARE FEET ANNUALIZED NET RENT(1)
------------------------- -----------------------------------
ANNUALIZED NET
EFFECTIVE
RENT
PER LEASED
YEAR BUILT/ NUMBER OF PER LEASED SQUARE
PROPERTY TYPE AND LOCATION RENOVATED PROPERTIES NUMBER % LEASED AMOUNT % OF TOTAL SQUARE FOOT FOOT(2)
- -------------------------- ----------- ---------- ------------ ----------- ----------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other Market
North State Rd. #9,
Howe, IN............... 1988 1 346,515 100% $ 762,333 1.0% $ 2.20 $ 1.83
Lakefront Drive, Earth
City, MO............... 1995 1 189,017 100 656,400 0.9 3.47 3.78
------ ------------ -------- ----------- ------ ------- ---------
Market Subtotal........ 2 535,532 100% $ 1,418,733 1.9% $ 2.65 $ 2.51
------ ------------ -------- ----------- ------ ------- ---------
MIDWEST REGION
SUBTOTAL.............. 16 3,872,086 97% $11,295,226 15.0% $ 3.01 $ 2.90
SOUTHEAST REGION
Memphis Market
Pilot Drive, Memphis,
TN..................... 1987 1 336,080 100% $ 778,522 1.0% $ 2.32 $ 2.21
Orlando Market
Landstreet Road,
Building 1, Orlando,
FL..................... 1997 1 355,732 47% $ 995,742 1.3% $ 5.95 $ 5.95
Charlotte Market
Reames Road, Charlotte,
NC..................... 1994 1 105,600 100% $ 318,227 0.5% $ 3.01 $ 3.01
Atlanta Market
Highway 316, Dacula, GA
(4).................... 1989 1 326,019 100% $ 1,041,889 1.4% $ 3.20 $ 3.20
Westgate Parkway,
Atlanta, GA............ 1988 1 231,835 100 555,924 0.7 2.40 2.45
------ ------------ -------- ----------- ------ ------- ---------
Market Subtotal........ 2 557,854 100% $ 1,597,813 2.1% $ 2.86 $ 2.89
------ ------------ -------- ----------- ------ ------- ---------
SOUTHEAST REGION
SUBTOTAL.............. 5 1,355,266 86% $ 3,690,304 4.9% $ 3.16 $ 3.14
NORTHEAST REGION
Baltimore/Washington
Market
Tar Bay Drive, Jessup,
MD..................... 1990 1 210,000 100% $ 800,527 1.1% $3.81 $3.81
Oceano Avenue, Jessup,
MD..................... 1987 1 243,500 100 998,350 1.3 4.10 4.04
------ ------------ -------- ----------- ------ ------- ---------
Market Subtotal........ 2 453,500 100% $ 1,798,877 2.4% $3.97 $3.94
New York/New Jersey
Market
Pepes Farm Road,
Milford, CT............ 1980 1 200,000 100% $ 829,998 1.1% $ 4.15 $ 4.07
South Middlesex Avenue,
Building 1,
Cranbury, NJ........... 1989 1 204,369 100 735,728 1.0 3.60 3.60
Birch Creek Road,
Bridgeport, NJ......... 1991/1997 1 203,229 100 713,204 0.9 3.51 3.76
Pierce Street, Franklin
Township, NJ........... 1984 1 182,764 100 776,748 1.0 4.25 4.25
Herrod Boulevard, South
Brunswick, NJ(3)....... 1989 1 418,000 100 1,698,384 2.4 4.06 4.06
------ ------------ -------- ----------- ------ ------- ---------
Market Subtotal........ 5 1,208,362 100% $ 4,754,062 6.4% $ 3.93 $ 3.96
------ ------------ -------- ----------- ------ ------- ---------
Harrisburg Market
Brackbill Boulevard,
Building 1, Mechanics-
burg, PA (4)........... 1984 1 259,200 100% $ 835,588 1.1% $ 3.22 $ 3.36
Brackbill Boulevard,
Building 2,
Mechanicsburg, PA
(4).................... 1985 1 235,200 100 $ 758,133 1.0 3.22 3.36
Cumberland Parkway,
Mechanicsburg, PA(4)... 1992 1 340,000 100 1,144,968 1.5 3.37 3.37
------ ------------ -------- ----------- ------ ------- ---------
Market Subtotal........ 3 834,400 100% $ 2,738,689 3.6% $ 3.28 $ 3.37
------ ------------ -------- ----------- ------ ------- ---------
NORTHEAST REGION
SUBTOTAL.............. 10 2,496,262 100% $ 9,291,628 12.4% $ 3.72 $ 3.76
------ ------------ -------- ----------- ------ ------- ---------
BULK DISTRIBUTION
PROPERTIES TOTAL..... 48 11,789,544 91% $34,777,605 46.3% $ 3.24 $ 3.21
MULTITENANT DISTRIBUTION
PROPERTIES:
WEST REGION
Los Angeles Market
East Dyer Road, Santa
Ana, CA................ 1954/1965 1 372,096 100% $ 1,301,983 1.7% $ 3.50 $ 3.29
------ ------------ -------- ----------- ------ ------- ---------
San Francisco Market
Reed Avenue, Building
1, West
Sacramento, CA......... 1988 1 103,110 100% $ 378,141 0.5% $ 3.67 $ 4.06
Reed Avenue, Building
2, West
Sacramento, CA......... 1988 1 105,600 100 423,336 0.6 4.01 4.24
------ ------------ -------- ----------- ------ ------- ---------
Market Subtotal........ 2 208,710 100% $ 801,477 1.1% $ 3.84 $ 4.15
Seattle Market
Kent West Corporate
Park, II, Kent, WA..... 1989 1 250,820 100% $ 899,100 1.2% $ 3.58 $ 3.24
------ ------------ -------- ----------- ------ ------- ---------
WEST REGION SUBTOTAL... 4 831,626 100% $ 3,002,560 4.0% $ 3.61 $ 3.49
SOUTHWEST REGION
Dallas Market
113th Street, Arling-
ton, TX................ 1979 1 79,735 100% $ 291,032 0.4% $ 3.65 $ 3.49
Airline Drive, Building
1, Coppell, TX......... 1991 1 75,000 100 262,500 0.3 3.50 3.38
North Lake Drive,
Coppell, TX............ 1982 1 230,400 100 610,450 0.8 2.65 2.30
------ ------------ -------- ----------- ------ ------- ---------
SOUTHWEST
REGION/MARKET
SUBTOTAL.............. 3 385,135 100% $ 1,163,982 1.5% $ 3.02 $ 2.75
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
RENTABLE SQUARE FEET ANNUALIZED NET RENT(1)
------------------------ -----------------------------------
ANNUALIZED NET
EFFECTIVE
RENT
PER LEASED
YEAR BUILT/ NUMBER OF PER LEASED SQUARE
PROPERTY TYPE AND LOCATION RENOVATED PROPERTIES NUMBER % LEASED AMOUNT % OF TOTAL SQUARE FOOT FOOT(2)
- -------------------------- ----------- ---------- ----------- ----------- ----------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MIDWEST REGION
Chicago Market
Medinah Road, Roselle,
IL...................... 1986 2 480,258 100% $ 2,618,591 3.5% $5.45 $ 5.34
High Grove Lane, Naper-
ville, IL............... 1994 1 95,000 100 392,549 0.5 4.13 4.13
Western Avenue, Lisle,
IL...................... 1970/1985 1 67,996 100 383,143 0.5 5.63 4.50
------ ----------- -------- ----------- ------ ------- ---------
Market Subtotal.......... 4 643,254 100% $ 3,394,283 4.5% $5.28 $ 5.07
Cincinnati/Northern Ken-
tucky Market
Lake Forest Drive,
Building 1, Blue Ash,
OH(3)................... 1978 1 239,891 98% $ 628,303 0.8% $2.67 $ 2.70
Lake Forest Drive,
Building 2, Blue Ash,
OH(3)................... 1979 1 176,956 100 398,671 0.6 2.25 2.30
------ ----------- -------- ----------- ------ ------- ---------
Market Subtotal.......... 2 416,847 99% $ 1,026,974 1.4% $2.49 $ 2.53
Columbus Market
International Street,
Columbus, OH............ 1988 1 152,800 100% $ 450,760 0.6% $2.95 $ 2.73
Port Road, Building 1,
Columbus, OH............ 1995 1 205,109 100 672,903 0.9 3.28 3.27
Port Road, Building 2,
Columbus, OH............ 1995 1 156,000 100 425,880 0.6 2.73 2.82
Westbelt Drive, Building
1, Columbus, OH......... 1979 1 202,000 100 1,010,000 1.3 5.00 5.36
Dividend Drive, Columbus,
OH...................... 1980 1 144,850 100 429,881 0.6 2.97 3.09
Twin Creek Drive, Colum-
bus, OH................. 1989 1 176,000 0 0 0.0 0.00 0.00
------ ----------- -------- ----------- ------ ------- ---------
Market Subtotal.......... 6 1,036,759 83% $ 2,989,424 4.0% $3.47 $ 3.55
Other Market
Sysco Court, Grand Rap-
ids, MI................. 1985 1 62,700 100% $ 360,421 0.4% $5.75 $ 5.17
------ ----------- -------- ----------- ------ ------- ---------
MIDWEST REGION
SUBTOTAL............... 13 2,159,560 92% $ 7,771,102 10.3% $3.93 $ 3.88
SOUTHEAST REGION
Orlando Market
Orlando Central Park,
Orlando, FL............. 1983 6 1,172,875 94% $ 3,729,932 5.0% $3.39 $ 2.81
Kingspointe Parkway,
Orlando, FL............. 1991 1 101,870 100 340,141 0.5 3.34 3.34
------ ----------- -------- ----------- ------ ------- ---------
SOUTHEAST REGION/MARKET
SUBTOTAL............... 7 1,274,745 94% $ 4,070,073 5.5% $3.39 $2.85
NORTHEAST REGION
Boston Market
First Avenue, Needham,
MA...................... 1961/1992 1 119,573 100% $ 662,892 0.9% $5.54 $ 4.19
------ ----------- -------- ----------- ------ ------- ---------
New York/ New Jersey
Market
South Middlesex Avenue,
Building 2, Cranbury,
NJ...................... 1982 1 203,404 100% $ 661,062 0.9% $3.25 $ 3.25
Colony Road, Building 1,
Jersey City, NJ......... 1976 1 262,453 100 918,438 1.2 3.50 3.46
Colony Road, Building 2,
Jersey City, NJ......... 1974 1 124,933 100 499,732 0.7 4.00 3.79
Pulaski Boulevard,
Bayonne, NJ............. 1974/1982 1 224,664 100 703,139 0.9 3.13 3.13
Port Jersey Boulevard,
Building 1, Jersey City,
NJ...................... 1974 1 425,121 100 1,802,297 2.4 4.24 4.03
Port Jersey Boulevard,
Building 2, Jersey City,
NJ...................... 1974 1 204,564 100 754,841 1.0 3.69 3.65
Industrial Drive,
Building 1,
Jersey City, NJ......... 1976 1 263,717 100 988,939 1.3 3.75 3.80
Industrial Drive,
Building 2,
Jersey City, NJ......... 1976 1 154,000 100 577,500 0.8 3.75 3.75
Industrial Drive,
Building 3,
Jersey City, NJ......... 1972 1 45,274 100 181,096 0.2 4.00 3.96
------ ----------- -------- ----------- ------ ------- ---------
Market Subtotal.......... 9 1,908,130 100% $ 7,087,044 9.4% $3.71 $ 3.65
Harrisburg Market
Ritter Road, Mechanics-
burg, PA................ 1986 1 37,800 100% $ 248,970 0.4% $6.59 $ 5.44
------ ----------- -------- ----------- ------ ------- ---------
NORTHEAST REGION
SUBTOTAL............... 11 2,065,503 100% $ 7,998,906 10.7% $3.87 $ 3.71
------ ----------- -------- ----------- ------ ------- ---------
MULTITENANT DISTRIBUTION
PROPERTIES TOTAL....... 38 6,716,569 96% $24,006,623 32.0% $3.71 $ 3.52
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
RENTABLE SQUARE FEET ANNUALIZED NET RENT(1)
------------------------- ----------------------------------
ANNUALIZED NET
EFFECTIVE
RENT
PER LEASED
YEAR BUILT/ NUMBER OF PER LEASED SQUARE
PROPERTY TYPE AND LOCATION RENOVATED PROPERTIES NUMBER % LEASED AMOUNT % OF TOTAL SQUARE FOOT FOOT(2)
- -------------------------- ----------- ---------- ------------- ----------- ---------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WORKSPACE PROPERTIES:
WEST REGION
Los Angeles Market
East Howell Avenue,
Building 1,
Anaheim, CA............ 1968 1 81,475 100% $ 322,641 0.4% $ 3.96 $ 4.08
East Howell Avenue,
Building 2,
Anaheim, CA............ 1991 1 25,962 100 109,040 0.1 4.20 4.20
Artesia Avenue, Building
1, Fullerton, CA....... 1991 1 55,498 100 211,749 0.3 3.82 3.82
Artesia Avenue, Building
2, Fullerton, CA....... 1991 1 60,502 100 224,944 0.3 3.72 3.81
Commonwealth Avenue,
Fullerton, CA.......... 1965 1 62,762 95 157,382 0.3 2.63 2.63
---------- ------------- ----------- ---------- ---------- ----------- --------------
Market Subtotal........ 5 286,199 99% $1,025,756 1.4% $ 3.62 $ 3.68
San Diego Market
Avenida Encinas,
Building 1, Carlsbad,
CA..................... 1972 1 80,000 100% $ 613,193 0.8% $ 7.66 $ 9.30
Avenida Encinas,
Building 2, Carlsbad,
CA..................... 1993 1 126,008 100 682,711 0.9 5.42 6.44
---------- ------------- ----------- ---------- ---------- ----------- --------------
Market Subtotal........ 2 206,008 100% $1,295,904 1.7% $ 6.29 $ 7.55
San Francisco Market
Brisbane Industrial
Park, Brisbane, CA..... 1965 15 549,128 98% $2,525,448 3.4% $ 4.68 $ 4.43
Huntwood Avenue, Hay-
ward, CA............... 1982 1 62,031 100 446,628 0.6 7.20 7.20
---------- ------------- ----------- ---------- ---------- ----------- --------------
Market Subtotal........ 16 611,159 98% $2,972,076 4.0% $ 4.94 $ 4.72
Phoenix Market
East Encanto Drive,
Tempe, AZ(4)........... 1990 1 81,817 100% $ 306,637 0.4% $ 3.75 $ 3.75
---------- ------------- ----------- ---------- ---------- ----------- --------------
Seattle Market
Kent West Corporate Park
I, Kent, WA............ 1989 4 151,940 100% $ 966,456 1.2% $ 6.36 $ 6.08
---------- ------------- ----------- ---------- ---------- ----------- --------------
WEST REGION SUBTOTAL... 28 1,337,123 99% $6,566,829 8.7% $4.96 $5.03
SOUTHWEST REGION
Dallas Market
DFW Trade Center,
Building 3,
Grapevine, TX(4)....... 1997 1 202,361 52% $ 589,596 0.8% $ 5.57 $ 6.36
Diplomat Drive, Carroll-
ton, TX................ 1997 1 53,375 100% $ 325,044 0.4% $ 6.09 $ 6.09
---------- ------------- ----------- ---------- ---------- ----------- --------------
SOUTHWEST REGION/MARKET
SUBTOTAL.............. 2 255,736 62% $ 914,640 1.2% $5.74 $6.27
MIDWEST REGION
Cincinnati/Northern Ken-
tucky Market
Empire Drive, Florence,
KY..................... 1991 1 101,250 100% $ 318,999 0.4% $ 3.15 $ 3.15
Spiral Drive, Building
1, Florence, KY(4)..... 1988 1 26,556 100 245,846 0.3 9.26 8.89
Spiral Drive, Building
2, Florence, KY(4)..... 1989 1 34,999 93 257,442 0.3 7.93 8.02
Creek Road, Blue Ash, OH
(3).................... 1983 1 66,095 88 398,858 0.6 6.84 7.70
---------- ------------- ----------- ---------- ---------- ----------- --------------
Market Subtotal........ 4 228,900 95% $1,221,145 1.6% $ 5.59 $ 5.79
Columbus Market
Equity Drive, Building
2, Columbus, OH........ 1980 1 116,160 61% $ 415,371 0.6% $ 5.83 $ 4.83
---------- ------------- ----------- ---------- ---------- ----------- --------------
MIDWEST REGION
SUBTOTAL.............. 5 345,060 84% $1,636,516 2.2% $ 5.65 $ 5.55
SOUTHEAST REGION
Charlotte Market
Old Charlotte Highway,
Monroe, NC............. 1957/1972 2 253,930 100% $ 986,000 1.3% $ 3.88 $ 3.55
---------- ------------- ----------- ---------- ---------- ----------- --------------
Atlanta Market
Cobb International
Place, Building 1,
Atlanta, GA(4)......... 1996 1 60,000 60% $ 156,420 0.2% $ 4.35 $ 4.47
Cobb International
Place, Building 2,
Atlanta, GA(4)......... 1996 1 68,000 80 207,659 0.2 3.82 3.98
South Royal Drive,
Building 1, Tucker,
GA(4).................. 1987 1 53,402 81 199,566 0.3 4.61 4.81
South Royal Drive,
Building 2, Tucker,
GA(4).................. 1987 1 43,720 86 146,402 0.2 3.88 4.01
South Royal Drive,
Building 3, Tucker,
GA(4).................. 1989 1 37,041 100 148,588 0.2 4.01 4.11
---------- ------------- ----------- ---------- ---------- ----------- --------------
Market Subtotal........ 5 262,163 80% $ 858,635 1.1% $ 4.12 $ 4.27
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
RENTABLE SQUARE FEET ANNUALIZED NET RENT(1)
------------------------- -----------------------------------
ANNUALIZED NET
EFFECTIVE
RENT
PER LEASED
YEAR BUILT/ NUMBER OF PER LEASED SQUARE
PROPERTY TYPE AND LOCATION RENOVATED PROPERTIES NUMBER % LEASED AMOUNT % OF TOTAL SQUARE FOOT FOOT(2)
- -------------------------- ----------- ---------- ------------- ----------- ----------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Orlando Market
Boggy Creek Road,
Building 1, Orlando,
FL (4)................. 1992 1 52,500 99% $ 242,874 0.3% $4.66 $4.74
Boggy Creek Road,
Building 2, Orlando,
FL (4)................. 1996 1 55,456 100 297,949 0.4 5.37 5.54
Landstreet Road,
Building 2, Orlando,
FL (4)................. 1997 1 55,456 40 116,228 0.2 5.29 5.65
Landstreet Road,
Building 3, Orlando,
FL (4)................. 1996 1 50,018 100 247,587 0.3 4.95 5.10
---------- ------------- ----------- ----------- ---------- ----------- --------------
Market Subtotal........ 4 213,430 84% $ 904,638 1.2% $5.04 $5.20
Other Market
Industrial Drive South,
Gluckstadt, MS......... 1988 1 160,000 100% $ 671,386 1.0% $4.20 $4.20
---------- ------------- ----------- ----------- ---------- ----------- --------------
SOUTHEAST REGION
SUBTOTAL.............. 12 889,523 90% $ 3,420,659 4.6% $4.27 $4.23
NORTHEAST REGION
Baltimore/Washington
Market
The Crysen Center,
Jessup, MD............. 1985 2 151,863 100% $ 697,087 0.9% $4.59 $4.14
Oakville Industrial
Park, Alexandria, VA... 1948 6 276,807 92 1,660,678 2.2 6.50 5.42
---------- ------------- ----------- ----------- ---------- ----------- --------------
Market Subtotal........ 8 428,670 95% $ 2,357,765 3.1% $5.79 $4.94
Boston Market
Technology Drive,
Auburn, MA............. 1973 1 54,400 100% $ 190,368 0.3% $3.50 $2.75
John Hancock Road,
Taunton, MA............ 1986 1 34,224 100 206,147 0.3 6.02 5.24
---------- ------------- ----------- ----------- ---------- ----------- --------------
Market Subtotal........ 2 88,624 100% $ 396,515 0.6% $4.47 $3.71
New York/ New Jersey
Market
Memorial Drive,
Franklin Township, NJ.. 1988 1 148,598 100% $ 1,036,120 1.3% $6.97 $6.43
---------- ------------- ----------- ----------- ---------- ----------- --------------
NORTHEAST REGION
SUBTOTAL.............. 11 665,892 97% $ 3,790,400 5.0% $5.88 $5.12
---------- ------------- ----------- ----------- ---------- ----------- --------------
WORKSPACE PROPERTIES
TOTAL................ 58 3,493,334 92% $16,329,044 21.7% $5.07 $4.96
---------- ------------- ----------- ----------- ---------- ----------- --------------
GRAND TOTAL.............. 144 21,999,447 93% $75,113,272 100.0% $3.68 $3.58
========== ============= =========== =========== ========== =========== ==============
</TABLE>
- -------
(1) "Annualized Net Rent" means annualized monthly Net Rent from leases in
effect as of September 30, 1997. "Net Rent" means contractual rent, excluding
any reimbursements for real estate taxes or operating expenses.
(2) "Annualized Net Effective Rent" means Annualized Net Rent, less amortiza-
tion of the related leasing costs, as adjusted to reflect the effect of rent
concessions and straight-lining of rent steps.
(3) Property was acquired subsequent to September 30, 1997. The Property's
Annualized Net Rent is as of September 30, 1997 and Annualized Net Effective
Rent is as of the estimated acquisition date.
(4) Property to be acquired in the Company Acquisitions.
63
<PAGE>
INDUSTRIAL PROPERTY MARKET INFORMATION
Cognetics and CB Commercial/Torto Wheaton Research have each ranked the fastest
growing industrial property markets in the United States. Of the top 10 markets
ranked by each as listed below, the Company owns properties in those markets
highlighted in bold face text.
<TABLE>
<CAPTION>
TOP 10 TOP 10
LEADING MARKETS FOR DISTRIBUTION SPACE MARKETS FLEX/R&D MARKETS
FORECASTED NET ABSORPTION OF FORECASTED SPACE FORECASTED SPACE
INDUSTRIAL SPACE 1997-2002 DEMAND 1997-2002 DEMAND 1997-2002
---------------------------- -------------------------- ----------------
<S> <C> <C>
1. ATLANTA 1. NEW YORK/NEW JERSEY 1. SAN FRANCISCO*
2. CHICAGO 2. LOS ANGELES 2. LOS ANGELES
3. RIVERSIDE, CA** 3. CHICAGO 3. NEW YORK/NEW JERSEY
4. Houston 4. SAN FRANCISCO* 4. DALLAS/FORTH WORTH
5. PHOENIX 5. ATLANTA 5. CHICAGO
6. WASHINGTON, D.C. 6. DALLAS/FORT WORTH 6. BOSTON
7. Oakland 7. Miami/Ft. Lauderdale 7. ATLANTA
8. Portland 8. Houston/Galveston 8. SEATTLE
9. SEATTLE 9. PHOENIX 9. Minneapolis/St. Paul
10. DALLAS 10. Detroit 10. PHOENIX
Source: CB Source: Cognetics Source: Cognetics
Commercial/Torto
Wheaton Research
</TABLE>
- -------
* San Francisco market includes Oakland, San Jose and San Francisco.
** Riverside is adjacent to Los Angeles.
Information regarding the Company's 21 markets, including its 17 principal
targeted markets, as of September 30, 1997, is set forth below.
<TABLE>
<CAPTION>
-----------------------------
PERCENT OF PERCENT OF
MARKET ANNUALIZED RENT RENTABLE AREA
------ --------------- -------------
<S> <C> <C>
New York/New Jersey 17.1% 14.8%
Chicago 12.3 11.7
Los Angeles, including Riverside 9.2 10.1
Orlando 7.9 8.4
Cincinnati/Northern Kentucky 6.7 7.2
Dallas 6.4 8.9
Columbus 6.2 7.3
Baltimore/Washington, D.C. 5.5 4.0
San Francisco, including San Jose 5.0 3.7
Harrisburg 4.0 4.1
Phoenix 3.4 4.7
Atlanta 3.3 3.7
San Diego 3.0 2.0
Seattle 2.5 1.8
Charlotte 1.7 1.6
Boston 1.4 0.9
Memphis 1.0 1.5
Other Markets (four markets) 3.4 3.6
------ ------
Total 100.0% 100.0%
====== ======
</TABLE>
64
<PAGE>
VACANCY RATE AND TW RENT INDEX FOR PRINCIPAL MARKETS(1)
[GRAPH APPEARS HERE]
- -------
Source: CB Commercial/Torto Wheaton Research
(1) CB Commercial/Torto Wheaton Research defines the "TW Rent Index" as a "sta-
tistically computed dollar value for a three-year, 15,000 square foot lease for
an existing warehouse space in the statistical average of the metro or
submarket area." The TW Rent Index and vacancy rate in the chart above repre-
sent the weighted average of the TW Rent Index and vacancy rate for 15 of the
Company's 17 principal targeted markets, as identified in the Company's prin-
cipal targeted markets table on the preceding page. The Memphis and Harrisburg
markets are not covered by CB Commercial/Torto Wheaton Research. The 1997 fig-
ures are forecasts but are based upon actual information through mid-year 1997.
NET ABSORPTION, COMPLETIONS AND VACANCY RATES FOR PRINCIPAL MARKETS(1)
[GRAPH APPEARS HERE]
- -------
Source: CB Commercial/Torto Wheaton Research
(1) CB Commercial/Torto Wheaton Research defines "net absorption" as the change
in occupied stock (completions less change in availability) of industrial
space, in square feet, during that period. The net absorption and completions
in the chart above represent the aggregate of such parameters, and the vacancy
rate in the chart above represents the weighted average vacancy rate, for 15 of
the Company's 17 principal targeted markets, as identified in the Company's
principal targeted markets table on the preceding page. The Memphis and
Harrisburg markets are not covered by CB Commercial/Torto Wheaton Research. The
1997 figures are forecasts but are based upon actual information through mid-
year 1997.
65
<PAGE>
TENANT INFORMATION
The following table sets forth the Company's 20 largest tenants based on
Annualized Base Rent as of November 18, 1997.
<TABLE>
<CAPTION>
---------------------------------------------------
WEIGHTED
AVERAGE
MONTHS
TOTAL PERCENT REMAINING
LEASED ANNUALIZED OF ANNUALIZED AFTER
SQUARE BASE BASE NOVEMBER 18,
TENANTS(1) FEET(1) RENT(1)(2) RENT(1) 1997
- ---------- --------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
GATX Logistics, Inc. 1,296,872 $ 4,079,130 5.11% 46
Exel Logistics, Inc.
(Merchants Home Delivery) 861,848 2,836,307 3.55 78
Forrestville Industries
(guaranteed by North
American Philips
Corporation) 480,258 2,618,591 3.28 44
Goodtimes Home Video Corp. 358,564 1,332,341 1.67 27
GTE Communications Corp 96,517 1,278,850 1.60 119
National Distribution
Centers 299,567 1,168,053 1.46 87
B. Dalton Bookseller
(guaranteed by Barnes &
Noble, Inc.) 306,901 1,161,699 1.46 33
Enesco Corporation 234,000 1,064,700 1.33 18
CGM, Inc. (Tri-State Gift) 202,000 1,010,000 1.27 138
Giant of Maryland, Inc. 243,500 998,350 1.25 19
Hitachi Home Electronics 220,000 996,018 1.25 59
Menlo Logistics, Inc.
(guaranteed by Emery Air
Freight Corporation) 167,264 995,742 1.25 52
Appleton Papers, Inc. 352,000 991,952 1.24 103
CPC International, Inc. 263,717 988,939 1.24 53
Yale Security, Inc. 253,930 986,000 1.24 46
Food Warehousing Corp. 223,412 949,502 1.19 32
Port Jersey Distribution
Serivces, Inc. 262,453 918,438 1.15 53
LA Gear, Inc. 284,559 914,000 1.15 19
Reebok International Ltd. 336,080 907,416 1.14 16
Locust Industries Ltd.
Partnership 210,000 871,500 1.09 3
--------- ----------- ------------- ------------
Total 6,953,442 $27,067,528 33.92% 52
========= =========== ============= ============
</TABLE>
- -------
(1) Aggregate of all affiliated entities based on information known.
(2) Annualized Base Rent means annual contractual rent.
The following table sets forth information relating to the distribution of the
Company's leases at the Properties based upon rentable square feet under lease
as of November 18, 1997.
<TABLE>
<CAPTION>
-------------------------------------------------------------------
PERCENT OF ANNUALIZED PERCENT
PERCENT TOTAL AGGREGATE BASE OF PORTFOLIO
SQUARE FOOTAGE NUMBER OF OF ALL LEASED LEASED RENT (IN ANNUALIZED
UNDER LEASE LEASES LEASES SQUARE FEET SQUARE FEET THOUSANDS) BASE RENT
- -------------- --------- ------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Less than 10,001 71 24.5% 384,757 1.8% $ 2,422 3.0%
10,001-20,000 35 12.1 490,879 2.4 2,631 3.3
20,001-50,000 61 21.0 1,926,813 9.2 8,555 10.7
50,001-100,000 46 15.9 3,381,478 16.2 14,671 18.4
100,001 and over 77 26.5 14,737,929 70.4 51,543 64.6
--------- ------- ----------- ----------- ---------- ------------
Total 290 100.0% 20,921,856 100.0% $ 79,822 100.0%
========= ======= =========== =========== ========== ============
</TABLE>
66
<PAGE>
LEASE EXPIRATIONS--PORTFOLIO TOTAL
The following table sets forth a summary schedule of lease expirations for the
Properties for leases in place as of November 18, 1997, assuming that none of
the tenants exercise renewal options or termination rights, if any, at or prior
to the scheduled expirations.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
ANNUALIZED PERCENT
ANNUALIZED BASE RENT OF ANNUALIZED
NUMBER OF EXPIRING LEASES BASE RENT OF OF EXPIRING BASE RENT OF
YEAR OF LEASES ---------------------- EXPIRING LEASES PER EXPIRING
LEASE EXPIRATION EXPIRING SQUARE FEET % OF TOTAL LEASES(1) SQUARE FOOT(1) LEASES(1)
- ---------------- --------- ----------- ---------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1997(2) 12 258,425 1.2% $ 1,166,516 $4.51 1.4%
1998 45 2,724,775 13.0 9,455,991 3.47 11.8
1999 57 3,862,277 18.5 14,458,398 3.74 18.1
2000 53 2,426,043 11.6 10,025,766 4.13 12.6
2001 48 3,102,192 14.8 12,255,790 3.95 15.4
2002 32 3,314,577 15.8 11,975,652 3.61 15.0
2003 10 868,749 4.2 3,506,302 4.04 4.4
2004 6 671,265 3.2 2,213,896 3.30 2.8
2005 6 749,765 3.6 3,043,670 4.06 3.8
2006 5 764,416 3.7 2,862,928 3.75 3.6
2007 10 1,299,907 6.2 5,486,260 4.22 6.9
2008 and beyond 6 879,465 4.2 3,370,684 3.83 4.2
--------- ----------- ---------- ------------ -------------- -------------
290 20,921,856 100.0% $79,821,853 $3.82 100.0%
========= =========== ========== ============ ============== =============
</TABLE>
- -------
(1) Based on currently payable rent.
(2) Represents lease expirations from November 18 to December 31, 1997 and
month-to-month leases.
The following reconciles the square footage of expiring leases set forth above
to the Company's total rentable square footage as of November 18, 1997.
<TABLE>
<CAPTION>
---------------------
SQUARE PERCENTAGE
FOOTAGE TOTAL
---------- ----------
<S> <C> <C>
Square footage occupied by tenants 20,921,856 95.1%
Square footage vacant 1,077,591 4.9
---------- ----------
Total net rentable square footage 21,999,447 100.0%
========== ==========
</TABLE>
TENANT IMPROVEMENTS AND LEASING COMMISSIONS
The following table summarizes by year the Company's capitalized tenant
improvement and leasing commission expenditures incurred in the renewal or
releasing of previously occupied space for the past three years.
<TABLE>
<CAPTION>
--------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Cost per square foot $0.79 $0.97 $1.03
Renewed or released space in square feet 4,880,988 2,578,374 2,347,899
Total expenditures $3,875,246 $2,490,707 $2,416,987
</TABLE>
RECURRING CAPITAL EXPENDITURES
The following table summarizes the recurring capital expenditures for the Prop-
erties for the last three years.
<TABLE>
<CAPTION>
--------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Cost per square foot $0.20 $0.18 $0.23
Total weighted/average square feet 14,449,744 11,588,260 8,959,973
Total recurring capital expenditures $2,830,780 $2,133,118 $2,076,193
</TABLE>
67
<PAGE>
INSURANCE
The Company maintains comprehensive insurance, including liability, fire, work-
ers' compensation, extended coverage, rental loss and, when available on rea-
sonable commercial terms, flood and earthquake insurance, with policy specifi-
cations, limits and deductibles customarily carried for other properties sim-
ilar to the Properties. The Company currently maintains blanket earthquake
insurance on all Properties located outside of California in amounts it deems
reasonable. With certain exceptions, the Company does not carry earthquake
insurance on its Properties located in California. In light of the California
earthquake risk, California building codes have since the early 1970's estab-
lished construction standards for all new buildings and also contain standards
for seismic upgrading of buildings intended to reduce the possibility and
severity of loss from earthquakes. It is the Company's policy to obtain assess-
ments from qualified third-party professionals of the seismic guidelines of its
Properties located in California and to conduct such seismic upgrading thereof
as it determines, on the basis of such third-party assessments, to be appropri-
ate. Such upgrading, however, does not eliminate the possibility of earthquake
loss. In addition, such upgrading with respect to a number of such Properties
is at various stages of completion as of the date hereof, ranging from initial
plan review to partial completion of construction. Of the Company's 34 Proper-
ties located in California, 15 were covered by earthquake insurance. Seismic
upgrading has been completed on four of the Properties located in California
and is expected to be completed with respect to all remaining Properties
located in California within 12 months from the date hereof. Certain types of
losses, such as those arising from subsidence activity, are insurable only to
the extent that certain standard policy exceptions to insurability are waived
by agreement with the insurer. The Company believes, however, that the Proper-
ties are insured in accordance with industry standards.
ENVIRONMENTAL MATTERS
In connection with the ownership and operation of the Properties, the Company
may be potentially liable for costs associated with the removal or remediation
of certain hazardous or toxic substances or the release into the air of or
exposure to hazardous substances, including ACMs. See "Risk Factors--Real
Estate Investment Risks--Possible Environmental Liabilities."
Phase I ESAs were obtained in connection with the initial acquisition of the
Properties by the Contributing Investors, for those Properties managed by Cabot
Partners as of September 30, 1997, and for all other Properties in connection
with their contribution to the Company in the Formation Transactions. The pur-
pose of Phase I ESAs is to identify potential sources of contamination for
which the Company may be responsible and to assess the status of environmental
regulatory compliance. The earliest of such Phase I ESAs were obtained in 1988
and Phase I ESAs on approximately 40% of the Properties were obtained prior to
1995. Commonly accepted standards and procedures for such Phase I ESAs have
evolved to encompass higher standards and more extensive procedures over the
period from 1988 to the present. Where recommended in the Phase I ESA, invasive
procedures, such as soil sampling and testing or the installation and moni-
toring of groundwater wells, were subsequently performed.
The Phase I ESAs, including subsequent procedures where applicable, have not
revealed any environmental liability that the Company believes would have a
material adverse affect on the Company's business, assets or results of opera-
tions, nor is the Company aware of any such material environmental liability.
Nevertheless, it is possible that the Phase I ESAs relating to any one of the
Properties do not reveal all environmental liabilities or that there are mate-
rial environmental liabilities of which the Company is unaware. Neither the
Company nor, to the knowledge of the Company, any of the current owners of the
Properties has been notified by any governmental authority of any material non-
compliance, liability or claim relating to hazardous or toxic substances or
other environmental substances in connection with any of its present or former
properties.
COMPETITION
The Company operates nationally and has no markets with a concentration of
leasable square feet in excess of 15% of its total leasable square feet.
Although the industrial real estate business is highly fragmented, with no dom-
inant competitors, the Company faces substantial competition in both its
leasing and property acquisition activities. There are numerous other indus-
trial properties located in close proximity to each of the Properties. The
amount of leasable space available in any market could have a material adverse
effect on the Company's ability to rent space and on the rents charged. Compe-
tition for acquisition of existing industrial properties from institutional
investors and other publicly traded REITs has increased substantially in the
past several years. In many of the Company's markets, institutional investors
and owners and developers of industrial facilities compete vigorously for the
acquisition, development and lease of industrial space. Many of these competi-
tors have substantial resources and experience.
68
<PAGE>
LEGAL PROCEEDINGS
Neither the Company nor any of the Properties is presently subject to any mate-
rial litigation nor, to the Company's knowledge, is any litigation threatened
against the Company or any of the Properties, other than routine actions
arising in the ordinary course of business, substantially all of which are
expected to be covered by liability insurance and which in the aggregate are
not expected to have a material adverse effect on the business, results of
operations or financial condition of the Company.
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
The following is a description of certain investment, financing and other poli-
cies of the Company. These policies have been adopted by the Company's Board of
Trustees and may be amended or revised from time to time without the approval
of the Company's shareholders, except that (i) the Company may not change its
policy of holding its assets and conducting its businesses only through the
Operating Partnership and its subsidiaries and other affiliates, including the
Management Company and joint ventures in which the Operating Partnership or a
subsidiary may be a partner, without the consent of the Limited Partners as
provided in the Operating Partnership Agreement and (ii) changes in certain
policies with respect to conflicts of interest must be consistent with legal
requirements.
INVESTMENT POLICIES
The Company will conduct all of its investment activities through the Operating
Partnership and its subsidiaries and other affiliates, including the Management
Company and joint ventures in which the Operating Partnership or a subsidiary
may be a partner. The Company's investment objectives are to provide quarterly
cash distributions and achieve long-term capital appreciation through increases
in the value of the Company's portfolio of properties and its operations. For a
discussion of the Company's Properties and its property acquisition and other
strategic objectives, see "Properties" and "The Company--Business Strategies"
and "--Operations." The Company's policies are to (i) purchase income-producing
industrial properties primarily for long-term capital appreciation and rental
growth, and (ii) expand and improve the Properties or other properties pur-
chased or sell such properties, in whole or in part, when circumstances war-
rant.
Equity investments may be subject to existing mortgage financing and other
indebtedness or to such financing or indebtedness as may be incurred in connec-
tion with acquiring or refinancing such equity investments. Debt service with
respect to such financing or indebtedness will have a priority over any distri-
butions with respect to the Common Shares. Investments are also subject to the
Company's policy not to be treated as an investment company under the Invest-
ment Company Act of 1940.
The Company expects to pursue its investment objectives primarily through the
direct ownership by the Operating Partnership of the Properties and other
acquired properties. The Company currently intends to invest primarily in
existing improved properties but may, if market conditions warrant, invest in
development projects as well. Future investment or development activities will
not be limited to any geographic area or product type or to a specified per-
centage of the Company's assets. While the Company intends to maintain diver-
sity in its investments in terms of property locations, size and market, the
Company does not have any limit on the amount or percentage of its assets that
may be invested in any one property or any one geographic area. The Company
intends to engage in such future investment and development activities in a
manner which is consistent with the maintenance of its status as a REIT for
federal income tax purposes.
While the Company's current portfolio consists of, and the Company's business
objectives emphasize, equity investments in industrial real estate, the Company
may, in the discretion of the Board of Trustees, invest in mortgages and deeds
of trust, consistent with the Company's continued qualification as a REIT for
federal income tax purposes, including participating or convertible mortgages
if the Company concludes that it may benefit from the cash flow or any appreci-
ation in value of the property secured by such mortgages. Investments in real
estate mortgages run the risk that one or more borrowers may default under such
mortgages and that the collateral securing such mortgages may not be sufficient
to enable the Company to recoup its full investment.
Subject to the limitations on ownership of certain types of assets and the
gross income tests imposed by the Code, the Company also may invest in the
securities of other REITs, other entities engaged in real estate activities or
other issuers, including for the purpose of exercising control over such enti-
ties. See "Federal Income Tax Consequences--Taxation of the Company--Gross
Income Tests" and "--Taxation of the Company--Asset Tests." The Company may
enter into joint ventures or partnerships for the purpose of obtaining an
equity interest in a particular property in accordance with the Company's
investment policies. Such investments may permit the Company to own interests
in larger assets without unduly
69
<PAGE>
restricting diversification and, therefore, add flexibility in structuring its
portfolio. The Company will not enter into a joint venture or partnership to
make an investment that would not meet its investment policies.
FINANCING POLICIES
As a general policy, the Company intends to limit its total consolidated
indebtedness incurred so that at the time any debt is incurred, the Company's
Debt-to-Total Market Capitalization Ratio does not exceed 40%. The Company's
Declaration of Trust and Bylaws do not, however, limit the amount or percentage
of indebtedness that the Company may incur. In addition, the Company may from
time to time modify its debt policy in light of current economic conditions,
relative costs of debt and equity capital, the market values of its properties,
general conditions in the market for debt and equity securities, fluctuations
in the market price of its Common Shares, growth and acquisition opportunities
and other factors. Accordingly, the Company may increase its Debt-to-Total
Market Capitalization Ratio beyond the limit described above. If its debt
policy were changed, the Company could become more highly leveraged, resulting
in an increased risk of default on its obligations and a related increase in
debt service requirements that could adversely affect the financial condition
and results of operations of the Company and the Company's ability to make dis-
tributions to shareholders.
The Company has established its debt policy on the basis of its Debt-to-Total
Market Capitalization Ratio, rather than on the basis of a ratio of debt to the
book value of its assets, a ratio that is frequently employed, because it
believes that the book value of its assets (which to a large extent is the
depreciated value of real property, the Company's primary tangible asset) does
not accurately reflect its ability to borrow and to meet debt service require-
ments. The Debt-to-Total Market Capitalization Ratio, however, is subject to
greater fluctuation than book value ratios, and does not necessarily reflect
the fair market value of the underlying assets of the Company. Moreover, due to
fluctuations in the value of the Company's portfolio of properties over time,
and since any determination of the Company's Debt-to-Total Market Capitaliza-
tion Ratio is made only at the time debt is incurred, the Debt-to-Total Market
Capitalization Ratio could exceed the 40% level.
The Company has not established any limit on the number or amount of mortgages
that may be placed on any single property or on its portfolio as a whole.
Although the Company will consider factors other than its Debt-to-Total Market
Capitalization Ratio in making decisions regarding the incurrence of debt (such
as the purchase price of properties to be acquired with debt financing, the
estimated market value of properties upon refinancing and the ability of par-
ticular properties and the Company as a whole to generate sufficient cash flow
to cover expected debt service), there can be no assurance that the Debt-to-
Total Market Capitalization Ratio, or any other financial measure, at the time
the debt is incurred or at any other time will be consistent with any partic-
ular level of distributions to shareholders. See "Risk Factors--Possible
Changes in Policies Without Shareholder Approval; No Limitation on Debt."
To the extent that the Board of Trustees decides to obtain additional capital,
the Company may raise such capital through additional equity offerings (in-
cluding offerings of senior securities), debt financings or retention of cash
available for distribution (subject to provisions in the Code concerning tax-
ability of undistributed REIT income), or a combination of these methods. As
long as the Operating Partnership is in existence, the net proceeds of the sale
of Common Shares by the Company will be transferred to the Operating Partner-
ship in exchange for that number of Units in the Operating Partnership equal to
the number of Common Shares sold by the Company. The Company presently antici-
pates that any additional borrowings would be made through the Operating Part-
nership, although the Company may incur indebtedness directly and loan the pro-
ceeds to the Operating Partnership. Borrowings may be unsecured or may be
secured by any or all of the assets of the Company, the Operating Partnership
or any existing or new property owning partnership and may have full or limited
recourse to all or any portion of the assets of the Company, the Operating
Partnership or any existing or new property owning partnership. Indebtedness
incurred by the Company may be in the form of bank borrowings, purchase money
obligations to sellers of properties, publicly or privately placed debt instru-
ments or financing from institutional investors or other lenders. The proceeds
from borrowings by the Company may be used for working capital, to refinance
existing indebtedness or to finance acquisitions, expansions or the development
of new properties, and for the payment of distributions. See "Federal Income
Tax Consequences."
CONFLICT OF INTEREST POLICIES
The Company has adopted certain policies that are intended to minimize poten-
tial conflicts of interest. However, there can be no assurance that these poli-
cies will be successful in eliminating the influence of such conflicts, and if
they are not successful, decisions could be made that might fail to reflect
fully the interests of all shareholders.
70
<PAGE>
Declaration of Trust and Bylaw Provisions
The Company's Declaration of Trust, with limited exceptions, requires that a
majority of the Company's Board of Trustees be comprised of individuals who are
not officers or employees of the Company ("Independent Trustees"). The fore-
going requirement may not be amended, altered, changed or repealed without the
affirmative vote of majority of all of the outstanding shares of the Company
entitled to vote on the matter. The Declaration of Trust also includes a provi-
sion generally permitting the Company to enter into any agreement or transac-
tion with any person, including any Trustee, officer, employee or agent of the
Company. The Company's Bylaws provide that Section 2-419 of the MGCL, relating
to transactions by interested directors, shall be available for and apply to
contracts and other transactions between the Company and any of its Trustees or
between the Company and any other trust, corporation, firm or other entity in
which any of the Company's Trustees is a trustee or director or has a material
financial interest. Under Section 2-419 of the MGCL, a contract or other trans-
action between a corporation and any of its directors and any other corpora-
tion, firm or other entity in which any of its directors is a director or has a
material financial interest is not void or voidable solely because of (a) the
common directorship or interest, (b) the presence of the director at the
meeting of the board or a committee of the board that authorizes, approves or
ratifies the contract or transaction or (c) the counting of the vote of the
director for the authorization, approval or ratification of the contract or
transaction if (i) after disclosure of the interest, the transaction is autho-
rized, approved or ratified by the affirmative vote of a majority of the disin-
terested directors, or by the affirmative vote of a majority of the votes cast
by stockholders entitled to vote other than the votes of shares owned of record
or beneficially by the interested director or such corporation, firm or other
entity, or (ii) the transaction is fair and reasonable to the corporation.
The Operating Partnership
The Operating Partnership Agreement gives the Company, in its capacity as gen-
eral partner, full, complete and exclusive discretion in managing and control-
ling the business of the Operating Partnership and in making all decisions
affecting the business and assets of the Operating Partnership, subject to cer-
tain limited exceptions as described under "Partnership Agreement of the Oper-
ating Partnership-Management." Pursuant to the Operating Partnership Agreement,
the Limited Partners have agreed that the Company is acting on behalf of the
Operating Partnership and the Company's shareholders generally and, in its
capacity as general partner of the Operating Partnership, the Company is under
no obligation to consider the separate interests of the Limited Partners in
deciding whether to cause the Operating Partnership to take (or decline to
take) any actions which the Company, in its capacity as general partner, has
undertaken in good faith on behalf of the Operating Partnership. In addition,
the Company in its capacity as general partner is not responsible for any mis-
conduct or negligence on the part of its agents, provided that such agents were
appointed in good faith. The Operating Partnership Agreement also provides that
neither the Company nor any of its affiliates (including its officers and
Trustees) may sell, transfer or convey any property to, or purchase any prop-
erty from, the Operating Partnership except on terms that are fair and reason-
able and no less favorable than would be obtained from an unaffiliated party.
Policies with Respect to Other Activities
The Company may, but does not presently intend, to make investments other than
as previously described. The Company has authority to offer its Common Shares,
other shares of beneficial interest or other securities for cash or in exchange
for property and to repurchase or otherwise reacquire its shares or any other
securities and may engage in such activities in the future. As described under
"Shares Available for Future Sale," the Company expects to issue Common Shares
to holders of Units upon exercise of their Exchange Rights. The Company has not
issued Common Shares, interests or any other securities to date, except in con-
nection with the formation of the Company. The Company has no outstanding loans
to other entities or persons, including its officers and Trustees. The Company
has not engaged in trading, underwriting or agency distribution or sale of
securities of other issuers, nor has the Company invested in the securities of
other issuers other than the Operating Partnership for the purpose of exer-
cising control and currently does not intend to do so. The Company makes and
intends to continue to make investments in such a way that it will not be
treated as an investment company under the Investment Company Act of 1940. The
Company's policies with respect to such activities may be reviewed and modified
or amended from time to time by the Company's Board of Trustees without
approval of the Company's shareholders.
At all times, the Company intends to make investments in a manner consistent
with the requirements of the Code for the Company to qualify as a REIT unless,
because of changing circumstances or changes in the Code (or in Treasury Regu-
lations), the Company's Board of Trustees determines that it is no longer in
the best interests of the Company to qualify as a REIT.
WORKING CAPITAL RESERVES
The Company intends to maintain working capital reserves in amounts that the
Board of Trustees determines to be adequate to meet normal contingencies in
connection with the operation of the Company's business and investments.
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<PAGE>
MANAGEMENT
TRUSTEES AND EXECUTIVE OFFICERS
The following table sets forth information with respect to the Company's offi-
cers and Trustees (including those persons who have agreed to become Trustees
upon the closing of the Offering).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TERM AS
TRUSTEE
NAME AGE POSITION EXPIRES
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Ferdinand Colloredo- 58 Chairman of the Board and Chief
Mansfeld(1) Executive Officer, Trustee 2000
Robert E. Patterson 52 President, Trustee 2000
Noah T. Herndon (2) 64 Trustee
Christopher C. Milliken (2) 52 Trustee
Maurice Segall (2) 68 Trustee
W. Nicholas Thorndike (2) 64 Trustee
Ronald L. Skates (2) 56 Trustee
Franz Colloredo-Mansfeld(1) 34 Chief Financial Officer
Andrew D. Ebbott 41 Senior Vice President--Director
of Acquisitions
Howard B. Hodgson, Jr. 41 Senior Vice President--Director
of Real Estate Operations
Neil E. Waisnor 42 Senior Vice President--Finance,
Treasurer and Secretary
Eugene F. Reilly 36 Senior Vice President--Director of
Leasing, Marketing and Development
Gerald F. Ianetta 36 Vice President, Asset Management
Jean M. Murphy 34 Vice President, Asset Management
Brian R. Barringer 31 Vice President, Acquisitions
Mark A. Bechard 31 Vice President, Financial Planning
Andrew J. Klouse 32 Vice President, Financial Reporting
Andrew G. LeStage 27 Asset Manager
Jeffrey G. Swanson 26 Asset Manager
Janine Cobb 42 General Manager, Management Company
John F. Malloy 52 Senior Vice President, Management
Company
Peter F. Tague 58 Senior Vice President, Management
Company
</TABLE>
- -------
(1) Messrs. Ferdinand and Franz Colloredo-Mansfeld are father and son.
(2) Has agreed to become a Trustee upon the closing of the Offering.
The following paragraphs summarize the business experience of the Trustees and
officers of the Company:
FERDINAND COLLOREDO-MANSFELD has been Chairman, Chief Executive Officer and
Chief Investment Officer of Cabot Partners since he founded it in 1990, having
previously served in the same positions with Cabot Advisors since its formation
in 1986. Mr. Colloredo-Mansfeld began his real estate career in 1970 when he
joined Cabot, Cabot & Forbes, a national real estate development, management
and construction firm, becoming its Chief Financial Officer in 1973, Chief
Operating Officer in 1974 and Chief Executive Officer in 1976, a position he
held until his retirement from Cabot, Cabot & Forbes in 1989. As Chief Execu-
tive Officer, Mr. Colloredo-Mansfeld oversaw the development and management of
approximately $4 billion of commercial properties in twenty states including 35
master planned suburban business and industrial parks. Mr. Colloredo-Mansfeld
is a graduate of Harvard College and Harvard Business School. He is a limited
partner in Brown Brothers, Harriman and Company and is a Director of Data Gen-
eral Corporation and Raytheon Company. He is Chairman of the Board of Trustees
of Massachusetts General Hospital and a Trustee of Partners HealthCare System,
Inc.
ROBERT E. PATTERSON has been Executive Vice President, Director of Acquisitions
and a member of the Investment Committee of Cabot Advisors and Cabot Partners
since 1987. Mr. Patterson began his real estate career in 1972 as a lawyer with
the firm of Gaston Snow & Ely Bartlett. In 1978, he became the first Executive
Director of the Massachusetts Industrial Finance Agency and remained in that
position until 1983 when he joined the Beal Companies, a Boston-based
72
<PAGE>
real estate development, management and investment firm as Senior Vice Presi-
dent. He joined Cabot Advisors in 1987 to head its acquisitions group and was a
founding partner of Cabot Partners upon its formation as an independent entity
in 1990. Mr. Patterson is a graduate of Harvard College and Harvard Law School.
He is a Trustee of the Putnam Group of Mutual Funds and is Chairman of the
Board of Trustees of the Joslin Diabetes Center. He is a member of numerous
industry associations including the National Association of Real Estate Invest-
ment Trusts, the Society of Industrial and Office Realtors, the Urban Land
Institute and the National Association of Real Estate Investment Managers.
NOAH T. HERNDON is a Partner of Brown Brothers Harriman & Co., where he has
worked since 1958. Mr. Herndon is a Director of Fieldcrest Cannon, Inc.,
National Auto Credit, Inc., Scully Signal Company, Standard Mutual Insurance
Company, Watts Industries, Inc., Wonalancet Company and Zoll Medical Company.
He is an Overseer of the Museum of Science, Boston, and the Tufts University
School of Veterinary Medicine. He is Trustee and Treasurer of Dumaines Trust,
and Trustee of the American Textile History Museum, The Carroll School and
Thompson Island Outward Bound Education Center. Mr. Herndon is a graduate of
Princeton University and Harvard Business School.
CHRISTOPHER C. MILLIKEN has been the Senior Vice President, Operations of the
Boise Cascade Office Products Corporation since 1995, previously having served
as Eastern Region Manager from 1990. Prior to beginning his career at Boise
Cascade Office Products Corporation in 1977, Mr. Milliken served in various
merchandise management positions at Marshall Field & Company from 1970 to 1977.
Mr. Milliken is a graduate of Clemson University.
MAURICE SEGALL has been a senior lecturer at the MIT-Sloan School of Management
and a senior advisor to the Boston Consulting Group since 1989. Until 1989, he
was Chairman, President and Chief Executive Corporate Officer of Zayre Corpora-
tion which he joined as President and Chief Executive Officer in 1978. Mr.
Segall is a Director of AMR Corporation and Harcourt General, Inc. He is a
Trustee of Massachusetts General Hospital, Beth Israel Hospital and the Boston
Museum of Fine Arts. Mr. Segall is a graduate of McGill University, Columbia
University and the London School of Economics.
RONALD L. SKATES has been President, Chief Executive Officer and a Director of
Data General Corporation since 1989. Prior to joining Data General Corporation
in 1986, Mr. Skates was a Partner of Price Waterhouse LLP, certified public
accountants. He is a member of the American Institute of Certified Public
Accountants and the Massachusetts Society of Certified Public Accountants. He
is also a Trustee of Massachusetts General Hospital, an Overseer of the Boston
Museum of Fine Arts, and Vice Chairman and a Director of the Massachusetts High
Technology Council. Mr. Skates is a graduate of Harvard College and Harvard
Business School.
W. NICHOLAS THORNDIKE retired in 1988 from Wellington Management
Company/Thorndike, Doran, Paine and Lewis where he was Chairman of the Board
and Managing Partner. Mr. Thorndike serves as a Director of Courier Corpora-
tion, Data General Corporation, The Providence Journal (where he is Chairman of
the Executive Committee), and Bradley Real Estate Inc. He also serves as a
Trustee of Massachusetts General Hospital, having served as Chairman of the
Board from 1987 to 1992 and President from 1992 to 1994, and serves as Trustee
of Eastern Utilities Associates, Northeastern University and The Putnam Funds.
Mr. Thorndike is a graduate of Harvard College.
FRANZ COLLOREDO-MANSFELD has been a Senior Vice President of Cabot Partners
since 1996. He was a Senior Engagement Manager of McKinsey & Company, Inc. from
1992 through 1996. He previously worked for the Deutsche Bank real estate
investment group in 1992 and was a Robert Bosch Fellow at the German Central
Bank (Bundesbank) in Frankfurt, Germany in 1991. He was also an investment
banker with Merrill Lynch & Co. from 1986 through 1989 where he worked in
Mergers and Acquisitions. Mr. Colloredo-Mansfeld is a graduate of Harvard Col-
lege and Harvard Business School. He is a director or trustee of numerous char-
itable organizations.
ANDREW D. EBBOTT joined Cabot Advisors in 1988 as Director of Research and a
member of its acquisition department, becoming a Vice President in 1991 and a
Senior Vice President in 1995 of Cabot Partners. Mr. Ebbott is a graduate of
Dartmouth College and the University of Chicago Business School. He has over 11
years experience in real estate finance, investments and research and is a
member of the American Institute of Certified Public Accountants, the National
Association of Real Estate Investment Managers and the National Council of Real
Estate Investment Fiduciaries.
HOWARD B. HODGSON, JR. has been a Senior Vice President--Director of Asset Man-
agement and Member of the Investment Committee of Cabot Partners since 1992.
Mr. Hodgson began his real estate career in 1979 with the Boston-based real
estate firm R.M. Bradley & Co., Inc., becoming the head of its institutional
property management group prior to joining CC&F Asset Management Company, an
affiliate of Cabot, Cabot & Forbes, in 1991 as a Senior Vice President and head
73
<PAGE>
of its property management group. Mr. Hodgson is a graduate of Northeastern
University. He is a Trustee and a member of the Board of Investment of the Cam-
bridge Savings Bank. He is a member of the Building Owners and Managers Associ-
ation, the National Association of Industrial and Office Parks and the National
Council of Real Estate Investment Fiduciaries.
NEIL E. WAISNOR was a founding partner of Cabot Partners, joining as a Vice
President and Treasurer in 1990 and becoming a Senior Vice President and Chief
Financial Officer in 1995. Prior to joining Cabot Partners, he was Vice Presi-
dent and Controller of Cabot, Cabot & Forbes, where he served in a variety of
financial capacities since 1985. He worked for Arthur Andersen & Co. from 1977
until 1985 where he was a senior audit manager serving real estate and high
technology companies. Mr. Waisnor is a graduate of the University of Massachu-
setts at Amherst and is a member of the American Institute of Certified Public
Accountants, the Massachusetts Society of Certified Public Accountants, the
National Association of Real Estate Investment Managers and has served on the
Accounting Committee of the National Council of Real Estate Investment
Fiduciaries.
EUGENE F. REILLY has been Director of Leasing and Marketing of Cabot Partners
since 1992, becoming Senior Vice President in 1996. Mr. Reilly began his real
estate career with the Boston commercial real estate brokerage firm of Leggat
McCall and Werner in 1983 and subsequently became a leasing broker with Julien
J. Studley, Inc. In 1985, he joined National Development Corporation where he
became a Senior Vice President prior to joining Cabot Partners as a Vice Presi-
dent in 1992. Mr. Reilly is a graduate of Harvard College. He is a member of
the National Association of Industrial and Office Parks, the Industrial Devel-
opment Research Council and The Council of Logistics Managers.
GERALD F. IANETTA has been a Vice President, Asset Management of Cabot Partners
since 1993. He is also the Senior Regional Asset Manager and oversees the man-
agement of assets located in the Northeast and South regions. Prior thereto, he
was an asset manager at The Boston Company Real Estate Counsel, Inc. which he
joined in 1989. Mr. Ianetta began his career in real estate asset management in
1982 upon joining CC&F Asset Management Company, an affiliate of Cabot Part-
ners. Mr. Ianetta is a graduate of Bentley College.
JEAN M. MURPHY has been an Asset Manager of Cabot Partners since 1989. Ms.
Murphy is a graduate of Shiller International University in Paris, France. She
is an Insurance Institute of America Associate in Risk Management.
BRIAN R. BARRINGER has been a Regional Manager of Acquisitions at Cabot Part-
ners since 1994. Prior to joining Cabot Partners, Mr. Barringer was a leasing
agent covering retail, office, and industrial properties with Combined Proper-
ties (Washington, D.C.) between 1991 and 1992, and with the Trammell Crow Com-
pany (Washington D.C. and Cleveland, Ohio) from 1989 to 1991. Mr. Barringer is
a graduate of Harvard College and Harvard Business School.
MARK A. BECHARD served as a Senior Portfolio Accountant of Cabot Partners from
1993. Mr. Bechard served as a real estate analyst at the Codman Company between
1993 and 1990. Mr. Bechard is a graduate of Salem State College.
ANDREW J. KLOUSE served as a Manager of Portfolio Accounting at Cabot Partners
from 1994. He was an Assistance Vice President at The Boston Company Real
Estate Counsel, Inc. from 1990 to 1993 and an accountant at Liberty Real Estate
between 1988 and 1990. Mr. Klouse is a graduate of the University of Bridge-
port.
ANDREW G. LESTAGE has been an Asset Manager for Cabot Partners since 1996. He
is responsible for the Midwest and Southwest regions. From 1993 to 1996, he was
a Property Manager with John Burnham & Company in San Diego. He is a graduate
of Bucknell University.
JEFFREY G. SWANSON joined Cabot Partners as an Asset Manager in 1997. He will
manage properties for the Management Company. From 1993 to 1997, he was an
Assistant Vice President with AEW Capital Management and its predecessor compa-
nies. He is a graduate of Colgate University.
JANINE COBB joined Cabot Partners as a General Manager in 1997, having previ-
ously served as a mortgage broker for First Colony Trust Mortgage Co. beginning
in 1996 and as a real estate consultant for various real estate companies since
1995. From 1986 to 1995, Ms. Cobb worked with MacFarlane Partners (formerly
known as The Boston Company Real Estate Council Inc.) serving as Director of
Debt Restructuring and Refinance beginning in 1993 and as a Regional Asset Man-
ager prior thereto. Ms. Cobb began her real estate career with Cabot Advisors
in 1978. She is a graduate of North Adams State College.
JOHN F. MALLOY has been a Senior Vice President of Cabot Partners since 1990,
having previously served in a similar position with Cabot Advisors since 1986.
He has been an institutional investment counselor for over twenty years and
began his institutional real estate experience upon joining the Equitable Life
Assurance Society in 1980. He subsequently worked with Lehndorff & Babson Real
Estate Counsel, Inc., before joining Cabot Advisors. Mr. Malloy is a graduate
of Fitchburg State College and Northeastern University. He is a Director of the
Boston Adult Literacy Fund and a member of the Association of Investment Man-
agement Sales Executives.
PETER F. TAGUE has been a Senior Vice President of Cabot Partners since 1990,
having previously served in a similar position with Cabot Advisors since 1987.
He worked with Boston Financial Real Estate Advisors from 1984 until joining
Cabot Advisors in 1987. He has been an institutional investment counselor for
over twenty-five years, beginning his
74
<PAGE>
investment career as a fixed income analyst and portfolio manager with the Bank
of Boston in 1964. Mr. Tague is a graduate of Harvard College. He is a member
of the National Association of Real Estate Investment Trusts, and the Pension
Real Estate Association.
BOARD OF TRUSTEES
The business and affairs of the Company will be managed under the direction of
the Board of Trustees. Pursuant to the terms of the Company's Declaration of
Trust, the Trustees are divided into three classes. One class will hold office
initially for a term expiring at the annual meeting of shareholders to be held
in 1998, a second class will hold office initially for a term expiring at the
annual meeting of shareholders to be held in 1999, and a third class will hold
office initially for a term expiring at the annual meeting of shareholders to
be held in 2000. At each annual meeting of the shareholders of the Company, the
successors to the class of Trustees whose terms expire at that meeting will be
elected to hold office for a term continuing until the annual meeting of share-
holders held in the third year following the year of their election and the
election and qualification of their successors. See "Certain Provisions of
Maryland Law and of the Company's Declaration of Trust and Bylaws."
COMMITTEES OF THE BOARD OF TRUSTEES
Audit Committee. Within 30 days following the closing of the Offering, the
Board of Trustees of the Company will establish an Audit Committee that will
consist of not less than three Independent Trustees. The Audit Committee will
make recommendations concerning the engagement of independent public accoun-
tants, review with the independent public accountants the plans and results of
the audit engagement, approve professional services provided by the independent
public accountants, review the independence of the independent public accoun-
tants, consider the range of audit and non-audit fees and review the adequacy
of the Company's internal accounting controls.
Executive Compensation Committee. The Board of Trustees will also establish an
Executive Compensation Committee (the "Compensation Committee") comprised of
two or more Independent Trustees to determine the compensation levels and poli-
cies for the Company's executive officers and to implement the Company's Long
Term Incentive Plan.
The Board of Trustees will not have a standing nominating committee.
COMPENSATION OF TRUSTEES
The Independent Trustees will receive annual retainer fees of $18,000 and per
meeting compensation of $1,000. The chairmen of the Audit Committee and the
Compensation Committee will each receive an additional $1,000 annually for
their services in such capacities. In addition, each Independent Trustee will
receive an initial grant of options to purchase 10,000 Common Shares at the
Offering Price and will receive additional annual grants of options to purchase
4,000 Common Shares at the market price for Common Shares at the date of grant.
Officers of the Company who are Trustees will not receive any separate compen-
sation for their service as Trustees.
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<PAGE>
EXECUTIVE COMPENSATION
The Company was organized as a Maryland real estate investment trust on October
10, 1997, and has not to date paid any cash compensation to its executive offi-
cers. The following tables set forth information concerning the base compensa-
tion proposed to be paid and the initial amounts of stock options proposed to
be granted to the Company's Chief Executive Officer and each of the other exec-
utive officers indicated (collectively, the "Named Executive Officers") during
the fiscal year ending December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
----------------------
SECURITIES
UNDERLYING
BASE STOCK
NAME AND PRINCIPAL POSITION SALARY RATE OPTIONS(#)
--------------------------- ----------- ----------
<S> <C> <C>
Ferdinand Colloredo-Mansfeld $265,000 350,000
Chairman of the Board and Chief Executive Officer
Robert E. Patterson 245,000 275,000
President
Franz Colloredo-Mansfeld 175,000 250,000
Chief Financial Officer
Andrew D. Ebbott 175,000 200,000
Senior Vice President
Howard B. Hodgson, Jr. 175,000 200,000
Senior Vice President
Eugene F. Reilly 175,000 200,000
Senior Vice President
Neil E. Waisnor 175,000 200,000
Senior Vice President, Treasurer and Secretary
</TABLE>
OPTION GRANTS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE OF ASSUMED
ANNUAL RATE OF
NUMBER OF COMMON SHARE
SECURITIES PRICE APPRECIATION
UNDERLYING PERCENT OF TOTAL EXERCISE PRICE FOR OPTION TERM(3)
OPTIONS TO BE OPTIONS TO BE PER COMMON EXPIRATION ----------------------
NAME GRANTED(1) GRANTED SHARE(2) DATE 5% 10%
- ---- ------------- ---------------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ferdinand Colloredo-
Mansfeld 350,000 16.0% $20.00 1/ /2008 $4,402,262 $11,156,197
Robert E. Patterson 275,000 12.6 20.00 1/ /2008 3,458,920 8,765,584
Franz Colloredo-Mansfeld 250,000 11.4 20.00 1/ /2008 3,144,473 7,968,712
Andrew D. Ebbott 200,000 9.1 20.00 1/ /2008 2,515,579 6,374,971
Howard B. Hodgson, Jr. 200,000 9.1 20.00 1/ /2008 2,515,579 6,374,971
Eugene F. Reilly 200,000 9.1 20.00 1/ /2008 2,515,579 6,374,971
Neil E. Waisnor 200,000 9.1 20.00 1/ /2008 2,515,579 6,374,971
</TABLE>
- -------
(1)All options are granted at the fair market value of the Common Shares at the
date of grant. Options granted are for a term of not more than 10 years from
the date of grant and vest in four equal installments (rounded to the nearest
whole share of Common Stock) over four years.
(2)Based on the assumed initial public offering price. The exercise price per
share will be the actual initial public offering price.
(3)In accordance with the rules of the Commission, these amounts are the hypo-
thetical gains or "option spreads" that would exist for the respective options
based on assumed rates of annual compound share price appreciation of 5% and
10% from the date the options are granted over the full option term. No gain to
the optionee is possible without an increase in the market price of the Common
Shares, which would benefit all shareholders.
In addition to cash compensation in the form of annual base salary, the Company
will have a cash bonus incentive plan pursuant to which cash bonuses may be
awarded to executive officers and other key employees based on attainment of
specified personal and corporate objectives. The amounts of such bonuses may,
depending on the level of an individual's corporate responsibility and attain-
ment of specified objectives, range up to 100% of the individual's annual base
salary.
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<PAGE>
EMPLOYMENT AGREEMENTS
Messrs. Ferdinand Colloredo-Mansfeld, Robert E. Patterson and Franz Colloredo-
Mansfeld and each of the other Named Executive Officers will enter into
employment agreements with the Operating Partnership. Each of the agreements
with Messrs. Colloredo-Mansfeld and Patterson will be for an initial term of
three years, which will be automatically extended for successive one-year
periods unless otherwise terminated. The agreements with each of the other
Named Executive Officers will be for initial terms of two years, which will be
automatically extended for successive one-year periods unless otherwise termi-
nated. The agreements will each provide for base annual compensation in the
amounts set forth in "--Executive Compensation" above and incentive compensa-
tion to be determined by the Board of Trustees or the Compensation Committee
thereof. The base annual compensation may be increased in subsequent years by
action of the Board of Trustees or the Compensation Committee. Each of the
employment agreements will provide for certain severance payments, including
certain tax reimbursements, in the event of termination by the Company without
cause or by the employee after a change in control of the Company. Each execu-
tive will be required under the terms of his employment agreement to devote
substantially all of his business time to the affairs of the Company. The
agreements will also prohibit each executive from engaging, directly or indi-
rectly, during the term of his employment in activities that compete with
those of the Company.
LONG TERM INCENTIVE PLAN
Prior to the Offering, the Board of Trustees will adopt, and the sole share-
holder of the Company will approve, the Cabot Industrial Trust Long Term
Incentive Plan (the "Long Term Incentive Plan") for the purpose of attracting
and retaining highly qualified executive officers, Trustees and employees. The
Long Term Incentive Plan will be administered by the Compensation Committee of
the Board of Trustees, except that the Board of Directors of the Management
Company or a committee thereof will select those employees of the Management
Company who are eligible for awards under the Long Term Incentive Plan. As
used in this summary, the term "Administrator" means the applicable Board or
committee or its delegate, as appropriate. Officers and other employees of the
Company, the Operating Partnership and designated subsidiaries, including the
Management Company, and members of the Board of Trustees who are not employees
of the Company ("Non-employee Trustees") will be eligible to participate in
the Long Term Incentive Plan. Certain awards will be made to the Non-employee
Trustees automatically and the applicable Administrator will select the other
individuals who will participate in the Plan ("Participants"). No option or
other incentive award may be granted under the Long Term Incentive Plan after
the tenth anniversary of the date of its adoption.
Options awarded to Participants in the Long Term Incentive Plan who are Non-
employee Trustees or employees of the Company relate to Common Shares. Options
awarded to Participants in the Plan who are employees of the Operating Part-
nership or the Management Company relate to Units. The Long Term Incentive
Plan authorizes the issuance of up to 4,235,000 Common Shares and Units. The
number of Common Shares and Units available may increase on each January 1 to
an amount equal to 10% of the aggregate number of outstanding Common Shares
and Units on such date. The number of Common Shares or Units underlying awards
made to any one individual in any one-year period may not exceed 500,000
Common Shares or 500,000 Units or any combination thereof. The Long Term
Incentive Plan provides for the grant of (i) Common Share options intended to
qualify as incentive options under Section 422 of the Code, (ii) Common Share
options and Unit options not intended to qualify as incentive options under
Section 422 of the Code and (iii) dividend equivalent rights and distribution
equivalent rights which entitle a Participant to be credited with additional
Common Share or Unit Rights.
In connection with the grant of options under the Long Term Incentive Plan
other than options to Non-employee Trustees, the Administrator will determine
the terms of the option, including the option exercise price and any vesting
requirements and whether a dividend equivalent right or a distribution equiva-
lent right shall be awarded in conjunction, respectively, with a Common Share
option or a Unit option. The Administrator has authority to award options at
less than fair market value (as defined in the Long Term Incentive Plan) but
at this time has no intention of doing so. At the time of a Non-employee
Trustee's initial election or appointment as a Trustee, such Trustee shall
automatically receive an option to purchase 10,000 Common Shares. Thereafter,
at the closing of the annual meeting of the Trust's shareholders, each contin-
uing Non-employee Trustee shall receive an option to purchase an additional
4,000 Common Shares. Effective as of the closing of the Offering, options for
a total of 2,188,500 Common Shares and Units will be granted to employees,
officers and Non-employee Trustees, including the officers named in "--Execu-
tive Compensation" above, with an exercise price equal to the Offering Price.
The initial options granted under the Long Term Incentive Plan will have ten-
year terms and will become exercisable in four equal annual installments com-
mencing on the first anniversary of the date of grant, subject to acceleration
of vesting upon a change in control of the Company (as defined in the Long
Term Incentive Plan).
A Common Share option granted under the Long Term Incentive Plan may be exer-
cised for any number of whole Common Shares up to the full number of Common
Shares for which the option could be exercised. A Unit option may be exercised
77
<PAGE>
for any number of whole units up to the full number of Units for which the
option could be exercised. A holder of an option will have no rights as an
owner with respect to the Common Shares or Units, as applicable, subject to his
or her option until the option is exercised. To the extent an option has not
become exercisable at the time of the holder's termination of employment, it
will be forfeited unless the Administrator has previously exercised its reason-
able discretion to make such option exercisable, and all vested options which
are not exercised by the expiration date described in the Long Term Incentive
Plan will be forfeited. Any Common Shares or Units subject to an option which
is forfeited (or which expires without exercise) will again be available for
grant under the Long Term Incentive Plan. Payment of the exercise price of an
option granted under the Long Term Incentive Plan may be made in cash or by
exchanging Common Shares, in the case of Common Share options, or Units, in the
case of Unit options, that have, in either case, been held by the Participant
for at least six months, or in any combination thereof, as determined by the
Administrator.
SAVINGS PLAN
The Company intends to assume and continue, and the Operating Partnership and
designated subsidiaries, including the Management Company (each, a "Partici-
pating Employer"), intend to adopt, the Cabot Partners Employee Savings Plan
(the "401(k) Plan"). Prior service with Cabot Partners will be credited in full
as service with the Company or a Participating Employer for all purposes under
the 401(k) Plan, including eligibility and vesting.
The 401(k) Plan permits each participating employee to elect to defer up to 15%
of compensation, subject to the annual statutory limitation prescribed by Sec-
tion 402(g) of the Code, on a pre-tax basis. The Company and the Participating
Employers will make matching contributions equal to 100% of the amount
deferred, up to the lesser of 6% of compensation or $1,800. The Company and the
Participating Employers may also make annual contributions if the Company
achieves certain performance objectives to be determined on an annual basis by
the Compensation Committee. Matching and discretionary contributions will be
made in cash or Common Shares.
INDEMNIFICATION
The Company will enter into indemnification agreements with each of its execu-
tive officers and Trustees that will require that the Company indemnify such
persons to the fullest extent permitted by Maryland law and reimburse them for
legal and related expenses as incurred in connection with litigation to which
they may become subject as a result of their positions with the Company, sub-
ject to an obligation to reimburse the Company if it is ultimately determined
that indemnification is not permitted in the circumstances. Although the indem-
nification agreements will provide substantially the same scope of indemnifica-
tion as that to which the Company's officers and Trustees will be entitled
under the Company's Bylaws and applicable Maryland law, such agreements may
provide greater assurance to Trustees and executive officers that indemnifica-
tion will be available, because, as contracts, they cannot be modified unilat-
erally in the future by the Board of Trustees or the shareholders to eliminate
the rights they provide. For a description of the limitation of liability and
indemnification rights of the Company's officers and Trustees, see "Certain
Provisions of Maryland Law and of the Company's Declaration of Trust and
Bylaws--Limitation of Liability and Indemnification."
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<PAGE>
FORMATION AND OTHER TRANSACTIONS
The Company was formed to continue and to expand Cabot Partners' national
industrial real estate business and to acquire the Properties. Prior to or
simultaneously with the closing of the Offering, the Company will complete the
Formation Transactions and the other transactions described below, which are
designed to consolidate the ownership of the Properties and Cabot Partners'
industrial real estate business (and certain of its related assets) in the
Company, to facilitate the Offering and to enable the Company to qualify as a
REIT commencing with its taxable year ending December 31, 1998.
FORMATION TRANSACTIONS
The principal focus of Cabot Partners' real estate advisory services for third
parties has been on assisting pension funds and other institutional investors
in developing industrial real estate investment strategies that are appro-
priate to their needs, implementing such strategies through identifying suit-
able properties for acquisition, acquiring and managing such properties for
the advisory clients and, ultimately, deciding when to sell such investments
and conducting the sale process. Such services are provided pursuant to
written contracts (the "Advisory Contracts") entered into between Cabot Part-
ners and the advisory client. The advisory clients hold such real estate
investments in a variety of forms, predominantly including single asset corpo-
rations of which a single pension fund or other advisory client is the sole
direct or indirect stockholder, but also including direct ownership of the
properties in certain cases and ownership through a corporation established
and managed by Cabot Partners for the purpose of providing a vehicle for
pooled investment by institutional clients.
In preparation for the Offering and in connection with the closing thereof,
Cabot Partners and the Contributing Investors are undertaking the transactions
summarized below (the "Formation Transactions") for the purpose of organizing
the Company and the Operating Partnership, and transferring the Properties and
Cabot Partners' real estate advisory and management business and certain
related assets to the Company and the Operating Partnership in a tax efficient
manner. As a result of the Formation Transactions, the Contributing Investors,
including the C-M Property Partnerships (all of the partnership interests in
which are owned by Ferdinand Colloredo-Mansfeld and Franz Colloredo-Mansfeld,
respectively, and members of their immediate families), will become equity
investors in the Company through, in certain cases, direct ownership of Common
Shares or, in most cases, ownership of Units in the Operating Partnership that
may, subject to the limitations described below, be exchanged for Common
Shares, to be received by them in exchange for their contributions of Proper-
ties to the Company or the Operating Partnership. Cabot Partners will con-
tribute to the Operating Partnership its real estate advisory and management
business and other assets that relate to the Properties contributed to the
Operating Partnership pursuant to the Formation Transactions. Cabot Partners'
Advisory Contracts and assets relating to industrial properties that are not
being contributed pursuant to the Formation Transactions will be held by the
Management Company. As a result of such contributions, the Company will become
the indirect owner of the contributed Properties, through and to the extent of
its interest in the Operating Partnership, and will not receive advisory or
management fees with respect to such Properties. The Properties to be contrib-
uted by the Contributing Investors, including those of the C-M Property Part-
nerships, do not, however, comprise all of the industrial properties for which
Cabot Partners is currently providing advisory or management services, nor do
the Contributing Investors comprise all of the advisory clients of Cabot Part-
ners. Each of the advisory clients of Cabot Partners was offered the opportu-
nity to participate in the Formation Transactions. Approximately 48.4% of the
Properties, based on Annualized Net Rent, were properties that were managed by
Cabot Partners.
The Formation Transactions include the following:
(i) The Company was formed as a real estate investment trust under Maryland
law through the filing of the Company's Declaration of Trust with the Mary-
land Secretary of State on October 10, 1997.
(ii) The Operating Partnership was formed as a limited partnership under
Delaware law on October 10, 1997.
(iii) The Operating Partnership incorporated the Management Company as its
wholly-owned subsidiary through the filing of a certificate of incorpora-
tion for the Management Company with the Delaware Secretary of State on
December 22, 1997 and the contemporaneous initial purchase by the Operating
Partnership of 100 shares of the non-voting preferred stock of the Manage-
ment Company.
(iv) Prior to or simultaneously with the closing of the Offering, the Con-
tributing Investors, including the partners of the C-M Property Partner-
ships, will contribute certain of their industrial real estate investment
properties (comprising the Properties described herein), directly or indi-
rectly, to the Operating Partnership. Such contributions will be effected
pursuant to the Contribution Agreement, dated as of October 10, 1997,
entered into among the Company, the Operating Partnership, Cabot Partners
and each of the Contributing Investors. The Contribution Agreement pro-
vides, among other things, that the Contributing Investors will convey to
the Operating Partnership, or in certain cases
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<PAGE>
directly to the Company, all of their interests in the Properties, in
exchange for a number of Units, or Common Shares, determined on the basis
of the relative derived contribution amounts of the Properties contributed
as compared to the aggregate derived contribution amounts of all of the
Properties and assets to be contributed by the Contributing Investors and
Cabot Partners in the Formation Transactions. See "--Contribution Amounts
of Properties and Cabot Partners." In the case of contributions of Proper-
ties that the Contribution Agreement provides are to be made directly to
the Company in exchange for Common Shares, the Company will direct that
such Properties be conveyed by the Contributing Investor to the Operating
Partnership, in exchange for which the Operating Partnership will issue to
the Company a number of GP Units in the Operating Partnership equal to the
number of Common Shares issued by the Company to the Contributing Investor.
The determination of the specific forms of such contribution transactions
and whether Units or Common Shares are to be issued in connection therewith
was made in order to maximize the tax efficiency of such contributions
taking into account the specific facts relating to and the organizational
structure of the respective contributing entities. As a result of such con-
tributions, and after giving effect to the proposed issuance and sale of
Common Shares in the Offering and the Concurrent Placement, the Contrib-
uting Investors (excluding for this purpose the C-M Property Partnerships)
will receive a total of 22,598,735 Units and 8,961,714 Common Shares having
a value, based on the Offering Price, of approximately $631.2 million,
which will in the aggregate represent approximately 74.5% of the common
equity of the Company on a fully diluted basis. See "Principal and Manage-
ment Shareholders" for a listing of Units and Common Shares to be received
by principal Contributing Investors in the Formation Transactions.
(v) The Contribution Agreement also provides, among other things, that
prior to or simultaneously with the closing of the Offering, Cabot Part-
ners, most of whose partners are Cabot Group Participants, will contribute
to the Operating Partnership (or to a subsidiary thereof) the Advisory Con-
tracts and other assets relating to Cabot Partner's advisory and management
business, including furniture, fixtures and equipment, general intangibles,
intellectual property, books and records. As a result of such contribution
and the contribution of the C-M Property Partnerships, and giving effect to
the proposed issuance and sale of Common Shares in the Offering and the
Concurrent Placement, Cabot Partners and the partners of the C-M Property
Partnerships will receive a total of 2,289,551 Units which will represent
approximately 5.4% of the common equity of the Company on a fully diluted
basis. Of the Units that will be received by Cabot Partners and the part-
ners of the C-M Property Partnerships, (i) Ferdinand Colloredo-Mansfeld,
Chief Executive Officer of the Company, will receive 1,331,657 Units having
a value, based on the Offering Price, of approximately $26.6 million, (ii)
Robert E. Patterson, President of the Company, will receive 128,590 Units
having a value, on the same basis, of approximately $2.6 million and (iii)
no other individual partner of Cabot Partners will receive more than
135,515 Units having a value, on the same basis, of approximately $2.7 mil-
lion. See "Principal and Management Shareholders." Cabot Partners' Advisory
Contracts and assets relating to industrial properties that are not being
contributed pursuant to the Formation Transactions will be held by the Man-
agement Company. The Operating Partnership will own 100% of the non-voting
preferred stock of the Management Company. The Operating Partnership, as
the holder of the non-voting preferred stock of the Management Company, is
entitled to receive quarterly cash dividends equal to 95% of the Management
Company's net operating cash flow and will be senior to the extent of the
liquidation preference thereof in a liquidation or dissolution to any class
of the Management Company's common equity. The non-voting preferred stock
is not redeemable by the Management Company or the holder thereof. Ferdi-
nand Colloredo-Mansfield will own 100% of the voting common stock of the
Management Company and will be entitled to receive quarterly cash dividends
equal to 5% of the Management Company's net operating cash flow.
(vi) The Units and Common Shares received by the Contributing Investors
(excluding the C-M Property Partnerships) in connection with the Formation
Transactions will be exchangeable for Common Shares on a one-for-one basis
or the cash equivalent thereof (as determined by the Company) beginning one
year after the Closing Date, or such earlier date as the Company may autho-
rize.
(vii) The Units received by Cabot Partners and the partners of the C-M
Property Partnerships, including Messrs. Colloredo-Mansfeld and members of
their immediate families, in connection with their contributions pursuant
to the Formation Transactions will be exchangeable into Common Shares on a
one-for-one basis or the cash equivalent thereof (as determined by the Com-
pany), beginning one year after the Closing Date (or such earlier date as
the Company may authorize); however, such Units or Common Shares may not,
subject to certain exceptions, be disposed of until two years after the
Closing Date (or such earlier date as the Company and J.P. Morgan Securi-
ties Inc. may authorize).
(viii) The Operating Partnership will use approximately $13.1 million of
the net proceeds of the Offering to repay mortgage indebtedness secured by
certain of the Properties. See "Use of Proceeds" and "Certain Relationships
and Transactions."
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CONCURRENT PLACEMENT
Concurrently with the sale of the Common Shares offered hereby, the Company
will sell $20 million of Common Shares to the Concurrent Investor at the ini-
tial public offering price in the Concurrent Placement. Under the agreements
relating to the sale of such shares to the Concurrent Investor, the Company
has agreed to file a registration statement with the Commission 180 days after
the Closing Date for the purpose of registering the sale, subject to certain
exceptions, of the Common Shares issued to the Concurrent Investor in the Con-
current Placement and to reimburse the Concurrent Investor for up to $25,000
in related legal expenses. In the event the gross proceeds of the Offering are
less than $125 million, the Concurrent Investor may in its discretion elect to
reduce the amount of Common Shares it will purchase to an amount which is not
less than 15% of the gross proceeds of the Offering. In the event the regis-
tration statement for the Offering is not declared effective by the Commission
and the initial public offering price is not determined on or prior to Feb-
ruary 15, 1998, the Concurrent Investor may elect not to purchase any Common
Shares.
COMPANY ACQUISITIONS
In addition to the Properties that are being contributed by the Contributing
Investors in the Formation Transactions, the Company has agreed to purchase 21
Properties from unaffiliated third parties for an aggregate purchase price of
approximately $142 million. The purchase of such Properties is expected to be
completed concurrently with or shortly after the closing of the Offering. See
"Properties" and Note (I) to the Pro Forma Condensed Balance Sheet for a
description of the Company Acquisitions.
LIMITATIONS ON REPRESENTATIONS AND WARRANTIES
The Contributing Investors and Cabot Partners have each made certain represen-
tations and warranties to the Company in the Contribution Agreement entered
into among the parties in connection with the Formation Transactions. Such
representations and warranties, which in the case of environmental matters and
certain other matters are limited to the knowledge of specified entities and
persons, relate to, among other things, their authority to enter into the For-
mation Transactions, their ownership of the Properties or other assets to be
contributed by them, and the absence of certain liabilities, and other matters
relating primarily to the condition and operation of the Properties and such
assets. The respective obligations of each Contributing Investor and of Cabot
Partners to indemnify the Company in the event of breach of any of such
representations and warranties, or breach of certain other provisions of the
Contribution Agreement or under certain other circumstances is subject to an
overall limitation under the Contribution Agreement equal to the value (based
on the Offering Price) of the Units or Common Shares received by the Contrib-
uting Investor in the Formation Transactions (or in lieu thereof, the return
to the Company of all such Units or Common Shares received), and is subject to
the further limitation that any such indemnification obligation relating to a
specific Property is limited to the contribution amount assigned to such Prop-
erty by the parties in connection with the Formation Transactions. In addi-
tion, such indemnification obligations are generally limited to claims for
indemnification made within one year after the completion of the Formation
Transactions.
EFFECTS OF THE FORMATION TRANSACTIONS AND THE OFFERING
As a result of the transactions involved in the formation of the Company,
together with the Offering and the Concurrent Placement, the Company initially
will hold an approximate 41.2% interest in the Operating Partnership. The
remaining 58.8% interest in the Operating Partnership will be held by certain
Contributing Investors and management. Immediately following the closing of
the Offering, on a fully diluted basis, purchasers of Common Shares in the
Offering will hold approximately 17.7% of the common equity of the Company,
the Cabot Group Participants will directly or indirectly hold approximately
4.0% of the common equity of the Company, the Concurrent Investor will hold
2.4% of the common equity of the Company and the Contributing Investors (ex-
cluding for this purpose the C-M Property Partnerships) will hold approxi-
mately 74.5% of the common equity of the Company. The remaining 1.4% of the
fully diluted common equity of the Company will be owned by unaffiliated
investors in Cabot Partners who will not be involved in the Company's opera-
tions, including one retired officer of Cabot Partners. The retired officer
will have the right to transfer the 135,515 Units to be received by him in
private transactions commencing six months after the Closing Date of the
Offering and the right to sell 67,758 of such Units to the Operating Partner-
ship at the Offering Price during the first 90 days after the Closing Date.
The Operating Partnership will own 100% of the fee interest in the Properties
and 100% of the non-voting preferred stock of the Management Company, repre-
senting 95% of the economic interests therein, with Ferdinand Colloredo-
Mansfeld, the Company's Chief Executive Officer, owning 100% of its voting
stock, representing 5% of the economic interests therein.
CONTRIBUTION AMOUNTS OF THE PROPERTIES AND CABOT PARTNERS
Neither Cabot Partners, the Contributing Investors nor the Company obtained
any third-party determination of the fair market value of the Properties or
other assets contributed to the Company or the Operating Partnership in con-
nection with
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<PAGE>
the Formation Transactions. Third-party estimates of the "derived contribution
amounts" of such assets, however, were obtained in August and September 1997 in
accordance with procedures agreed upon by the Contributing Investors and Cabot
Partners solely to assist Cabot Partners and the Contributing Investors in
determining the allocation of the equity interests in the Company and the Oper-
ating Partnership among Cabot Partners and the Contributing Investors (in-
cluding the C-M Property Partnerships) prior to the Offering.
The market capitalization of the Company at the Offering Price may not be
indicative of, and may exceed: (i) the aggregate of the derived contribution
values of the Properties and other assets to be acquired by the Company in the
Formation Transactions and the purchase prices to be paid for Properties in the
Company Acquisitions and (ii) the fair market value of the Properties and such
other assets. The Offering Price has been negotiated between the Company and
the Representatives of the Underwriters named herein based on their considera-
tion of the factors referred to in "Underwriting." This methodology has been
used because the Company believes it is appropriate to value the Company as an
ongoing business, rather than on the basis of values that might be obtained
from a liquidation of the Company or of its individual assets. No assurance can
be given that the Offering Price will be an indication of the actual value of
the Common Shares, which will be determined by market conditions and other fac-
tors over time. The Company's percentage interest in the Operating Partnership
was determined based upon the percentage of estimated cash available for dis-
tribution required to pay estimated distributions at an annual rate equal to
6.5% of the Offering Price on the Common Shares to be outstanding upon the
closing of the Offering. The distribution rate was derived by comparison to
distribution rates of other REITs that the Company believes may be comparable
and in light of current market conditions.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Formation and Other Transactions" for a summary of certain related party
transactions that will be consummated prior to or simultaneously with the
closing of the Offering.
The Cabot Group Participants will receive a total of 1,705,506 Units in the
Formation Transactions in exchange for their interests in the C-M Property
Partnerships and/or Cabot Partners, respectively. These Units (representing
approximately 4.0% of the common equity of the Company on a fully diluted
basis) will have a total value of approximately $34.1 million, based on the
Offering Price. The Cabot Group Participants' partnership interests for the C-M
Property Partnerships and Cabot Partners had an aggregate net book value of
$5.1 million as of September 30, 1997. The aggregate cost to the Cabot Group
Participants for these partnership interests was $8.8 million, resulting in an
unrealized gain of approximately $25.3 million. The C-M Property Partnerships
are owned by Ferdinand Colloredo-Mansfeld, the Company's Chief Executive Offi-
cer, and members of his immediate family, including Franz Colloredo-Mansfeld,
the Company's Chief Financial Officer, with Ferdinand Colloredo-Mansfeld owning
a 97% partnership interest therein and Franz Colloredo-Mansfeld and other
family members holding 1% and 2% partnership interests therein, respectively.
Of the total number of Units that will be received by the Cabot Group Partici-
pants in the Formation Transactions, (i) Ferdinand Colloredo-Mansfeld will
receive 1,331,657 Units having a value, based on the Offering Price, of approx-
imately $26.6 million in exchange for his partnership interests in the C-M
Property Partnerships and Cabot Partners, which had an aggregate cost of
approximately $4.7 million and $3.9 million, respectively, and (ii) Robert E.
Patterson, President of the Company, will receive 128,590 Units having a value,
on such basis, of approximately $2.6 million in exchange for his partnership
interests in Cabot Partners, which had an aggregate cost of $59,000.
The Contributing Investors (excluding for this purpose the C-M Property Part-
nerships) will receive a total of 22,598,735 Units and 8,961,714 Common Shares
in exchange for their interests in the Properties in connection with the Forma-
tion Transactions. These Units and Common Shares (representing approximately
74.5% of the common equity of the Company on a fully diluted basis) will have a
total value of approximately $631.2 million based on the Offering Price, com-
pared to the aggregate cost of the Properties to be contributed to the Company
by such Contributing Investors of approximately $655.9 million.
The Units received by the Cabot Group Participants and the Contributing
Investors in the Formation Transactions may, in accordance with the Operating
Partnership Agreement, be exchanged in whole or in part for Common Shares on a
one-for-one basis or, at the election of the Company, the cash equivalent
thereof, at any time commencing one year after the Closing Date in the case of
Contributing Investors or two years after the Closing Date in the case of the
Cabot Group Participants. The Company currently expects that it will not elect
to pay cash for Units in connection with any such exchange request, but instead
will issue Common Shares in exchange for such Units. The receipt and retention
of the Units in exchange for contributed assets may provide the Cabot Group
Participants and certain of the Contributing Investors with continued deferral
of the taxable gain associated with dispositions of those assets.
Treasury regulations under Section 704(c) of the Code provide partnerships with
a choice of several methods of accounting for the difference between the fair
market value of the contributed property at the time of contribution and the
adjusted tax basis of such property at the time of contribution (the "Book-Tax
Differences"). The Operating Partnership and the Company have not yet deter-
mined which of the alternative methods of accounting for Book-Tax Differences
will be elected by the Partnership. Such determination could result in the
allocation of lower amounts of taxable income to the Cabot Group Participants
in certain circumstances than might otherwise occur if the Partnership elected
an alternative method. See "Federal Income Tax Consequences--Tax Aspects of the
Company's Investments in Partnerships--Tax Allocations with Respect to the
Properties."
REPAYMENT OF DEBT
Approximately $18.3 million of indebtedness secured by the Properties to be
contributed by the C-M Property Partnerships will be assumed by the Operating
Partnership and approximately $13.1 million of such indebtedness will be repaid
from the proceeds of the Offering.
OPTIONS GRANTED
The Company will grant options to purchase an aggregate of 1,675,000 Units that
will be convertible into an equal number of Common Shares under the Company's
Long Term Incentive Plan at the Offering Price to senior executive officers of
the Company, subject to certain vesting requirements. See "Management--Long
Term Incentive Plan."
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<PAGE>
PRINCIPAL AND MANAGEMENT SHAREHOLDERS
The following table sets forth the beneficial ownership of Common Shares (in-
cluding Common Shares for which Units are exchangeable) of (i) each person who
is a shareholder of the Company owning more than 5% of the beneficial interest
in the Company, (ii) each person who is a Trustee or Trustee nominee, (iii)
each Named Executive Officer and (iv) all Trustees, Trustee nominees and execu-
tive officers of the Company as a group, in each case after the closing of the
Offering and the Concurrent Placement and consummation of the Formation Trans-
actions. Unless otherwise indicated, all of such interests are to be owned
directly, and the indicated person or entity will have sole voting and invest-
ment power. The extent to which a person will hold Common Shares as opposed to
Units is set forth in the notes to the table below.
<TABLE>
<CAPTION>
--------------------------------------------------
NUMBER OF
COMMON
SHARES
BENEFICIALLY NUMBER OF PERCENT OF
OWNED UNITS ALL COMMON PERCENT OF
AFTER THE BENEFICIALLY SHARES ALL COMMON
NAMES AND ADDRESS OF BENEFICIAL OWNERS(1) OFFERING OWNED AND UNITS(2) SHARES(3)
- ----------------------------------------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
Ferdinand Colloredo-
Mansfeld -- 1,331,657 3.1% 7.1%
Robert E. Patterson -- 128,590 * 0.7
Franz Colloredo-Mansfeld -- 25,991 * *
Andrew D. Ebbott -- 36,499 * *
Howard B. Hodgson, Jr. -- 36,499 * *
Eugene F. Reilly -- 30,416 * *
Neil E. Waisnor -- 36,499 * *
Noah T. Herndon -- -- -- --
Christopher C. Milliken -- -- -- --
Maurice Segall -- -- -- --
W. Nicholas Thorndike -- -- -- --
Ronald L. Skates -- -- -- --
IBM Retirement Plan
Trust(4) -- 10,246,244 24.2 37.0
Pennsylvania Public School
Employes' Retirement
System(5) -- 5,502,973 13.0 24.0
New York State Teachers'
Retirement System(6) 2,186,947 3,764,579 14.1 28.0
State of Wisconsin
Investment Board(7) 2,959,534 -- 7.0 16.9
Leland Stanford Jr.
Endowment Fund(8) -- 2,367,923 5.6 11.9
The Prudential Insurance
Company of America(9) 2,228,749 -- 5.3 12.8
Argo Partnership II,
L.P.(10) 1,586,484 -- 3.7 9.1
Morgan Stanley Asset
Management Inc.(11) 1,000,000 -- 2.4 5.7
All Trustees, Trustee
nominees and executive
officers as a group (15
persons) -- 1,696,107 4.0% 8.9%
</TABLE>
- -----------
* Less than 1%.
(1)Unless otherwise indicated, the address of each named person or title
holding entity is c/o Cabot Industrial Trust, Two Center Plaza, Suite 200, Bos-
ton, Massachusetts 02108.
(2)Assumes a total of 42,350,000 Common Shares and Units outstanding immedi-
ately following completion of the Offering. Assumes that all Units are
exchanged for Common Shares (without regard to the prohibition on exchange of
Units until one year or two years after the closing of the Offering and assumes
the Company elects to issue Common Shares rather than pay cash upon such
exchange).
(3)Assumes 17,461,714 Common Shares outstanding immediately following comple-
tion of the Offering (before giving effect to any exchange of Units benefi-
cially held by the identified person). Assumes that all Units beneficially held
by the identified person (and no other person) are exchanged for Common Shares
(without regard to the prohibition on exchange of Units until one year or two
years after the closing of the Offering and assumes the Company elects to issue
Common Shares rather than pay cash upon such exchange).
(4) Includes 10,246,244 Units held of record by CP Investment Properties, Inc.
which are beneficially owned by IBM Retirement Plan Trust.
(5) Includes 5,502,973 Units owned of record by Keystone-Illinois Property
Holding Corp., Keystone-New Jersey Property Holding Corp. and Keystone-Ohio
Property Holding Corp. which are each wholly owned by Pennsylvania Public
School Employes' Retirement System. The business address of these unitholders
is 875 North Michigan Avenue, Suite 4114, Chicago, Illinois 60611.
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<PAGE>
(6) Includes 2,186,947 Common Shares and 3,764,579 Units held of record by
three title holding entities and six title holding entities, respectively,
which are each wholly owned by New York State Teachers' Retirement Systems.
(7) The business address of this shareholder is 121 East Wilson Street, 2nd
Floor, Madison, Wisconsin 53702.
(8) Includes 2,367,923 Units held of record by CP REPROP Corp. which is wholly
owned by Leland Stanford Jr. Endowment Fund.
(9) The business address of this shareholder is Eight Campus Drive, Parsippany,
New Jersey 07054.
(10) Includes 1,586,484 Common Shares held of record by West Coast Industrial,
L.L.C. which are beneficially owned by its managing member, Argo Partnership
II, L.P. ("Argo Fund"). The business address of this unitholder is c/o The
O'Conner Group, 399 Park Avenue, New York, New York 10022. J.P. Morgan Securi-
ties, Inc. owns a partnership interest in the Argo Fund. See "Underwriting."
(11) Shares to be purchased in the Concurrent Placement. Morgan Stanley Asset
Management Inc. ("MSAM"), as the advisor to the Concurrent Investor, and Morgan
Stanley, Dean Witter, Discover & Co., as the owner of all of the common stock
of MSAM, are deemed beneficially to own the Common Shares beneficially owned by
the Concurrent Investor. MSAM maintains its principal office at 1221 Avenue of
the Americas, New York, New York 10020 and Morgan Stanley, Dean Witter, Dis-
cover & Co. maintains its principal office at 1585 Broadway, New York, New York
10036. MSAM disclaims beneficial ownership of such Common Shares.
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<PAGE>
DESCRIPTION OF SHARES OF BENEFICIAL INTEREST
The following summary of the terms of the shares of beneficial interest of the
Company does not purport to be complete and is subject to and qualified in its
entirety by reference to Maryland law and to the Declaration of Trust and
Bylaws of the Company, copies of which are exhibits to the Registration State-
ment of which this Prospectus is a part. See "Additional Information."
GENERAL
The Declaration of Trust of the Company provides that the Company may issue up
to 150,000,000 shares of beneficial interest (the "Shares"), which may consist
of Common Shares and preferred shares of beneficial interest, $0.01 par value
per share ("Preferred Shares"), in such combination as the Trustees may deter-
mine. Upon the closing of the Offering and the consummation of the Formation
Transactions, 17,461,714 Common Shares will be issued and outstanding
(18,586,714 shares if the Underwriters' overallotment option is exercised in
full) and no Preferred Shares will be issued and outstanding. As permitted by
Title 8 of the Corporations and Associations Article of the Annotated Code of
Maryland, as amended (the "Maryland REIT Law"), the Declaration of Trust con-
tains a provision permitting the Board of Trustees, without any action by the
shareholders of the Company, to amend the Declaration of Trust to increase or
decrease the aggregate number of shares of beneficial interest or the number
of shares of any class of shares of beneficial interest that the Trust has
authority to issue. The Company believes that the power of the Board of
Trustees to issue additional shares of beneficial interest will provide the
Company with increased flexibility in structuring possible future financings
and acquisitions and in meeting other needs that might arise. The additional
shares of beneficial interest, including possibly Common Shares, will be
available for issuance without further action by the Company's shareholders,
unless action by the shareholders is required by applicable law or the rules
of any stock exchange or automated quotation system on which the Company's
securities may be listed or traded. Although the Board of Trustees currently
has no intention of doing so, it could authorize the Company to issue a class
or series that could, depending on the terms of such class or series, delay,
defer or prevent a transaction or a change in control of the Company that
might involve a premium price for the Common Shares and might otherwise be in
the best interests of the shareholders.
Both the Maryland REIT Law and the Company's Declaration of Trust provide that
no shareholder of the Company will be personally liable for any obligation of
the Company solely as a result of such shareholder's status as a shareholder
of the Company. The Company's Declaration of Trust further provides that the
Company will indemnify and hold each shareholder harmless against any claim or
liability to which the shareholder may become subject by reason of such share-
holder's being or having been a shareholder or former shareholder, subject to
such shareholder providing prompt notice to the Company. The Company must also
pay or reimburse each shareholder or former shareholder for all legal and
other expenses reasonably incurred by such shareholder in connection with any
claim or liability unless it is established by a court that such claim or lia-
bility arose out of such shareholder's bad faith, willful misconduct or gross
negligence. In addition, the Company, as a matter of general practice, does
insert a clause in its contracts providing that its shareholders assume no
personal liability for obligations entered into on behalf of the Company. Nev-
ertheless, with respect to tort claims, contractual claims where shareholder
liability is not so negated, claims for taxes and certain statutory liabili-
ties, judicial decisions relating to business trusts organized under the laws
of certain jurisdictions other than Maryland might be asserted in such juris-
dictions as a basis for personal liability of shareholders of the Company to
the extent that any such claims are not satisfied by the Company. Inasmuch as
the Company carries public liability insurance which it considers adequate,
any risk of personal liability to shareholders is limited to situations in
which the Company's assets plus its insurance coverage would be insufficient
to satisfy the claims against the Company and its shareholders.
COMMON SHARES
All Common Shares offered pursuant to this Registration Statement will be duly
authorized, fully paid and nonassessable. Subject to the preferential rights
of any other shares or series of beneficial interest and to the provisions of
the Company's Declaration of Trust regarding the restriction on transfer of
Common Shares, holders of Common Shares are entitled to receive dividends on
such shares if, as and when authorized and declared by the Board of Trustees
of the Company out of assets legally available therefor and to share ratably
in the assets of the Company legally available for distribution to its share-
holders in the event of its liquidation, dissolution or winding-up after pay-
ment of, or adequate provision for, all known debts and liabilities of the
Company.
Each outstanding Common Share entitles the holder of such Common Share to one
vote on all matters submitted to a vote of shareholders, including the elec-
tion of Trustees, and, except as provided with respect to any other class or
series of shares of beneficial interest, the holders of such Common Shares
possess the exclusive voting power. There is no cumulative voting in the elec-
tion of Trustees, which means that the holders of a majority of the out-
standing Common Shares can elect all of the Trustees then standing for elec-
tion and the holders of the remaining shares will not be able to elect any
Trustees.
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holders of Common Shares have no preference, conversion, sinking fund, redemp-
tion or appraisal rights and have no preemptive rights to subscribe for any
securities of the Company. Subject to the provisions of the Declaration of
Trust regarding the restriction on transfer of Common Shares, Common Shares
have equal dividend, distribution, liquidation and other rights.
Under the Maryland REIT Law, a Maryland real estate investment trust generally
cannot amend its declaration of trust or merge unless approved by the affirma-
tive vote of shareholders holding at least two-thirds of the shares entitled
to vote on the matter unless a lesser percentage (but not less than a majority
of all the votes entitled to be cast on the matter) is set forth in the real
estate investment trust's declaration of trust. The Company's Declaration of
Trust provides for approval by a majority of the votes cast by holders of
Common Shares entitled to vote on the matter in all situations permitting or
requiring action by the shareholders, except with respect to: (i) the election
of Trustees (which requires a plurality of all the votes cast at a meeting of
shareholders of the Company at which a quorum is present), (ii) the removal of
Trustees (which requires the affirmative vote of the holders of two-thirds of
the outstanding shares of beneficial interest of the Company entitled to vote
generally in the election of Trustees, which action can only be taken by vote
at a shareholder meeting), (iii) the merger of the Company into a new entity,
consolidation or sale (or other disposition) of all or substantially all of
the assets of the Company (which requires the affirmative vote of the holders
of two-thirds of the outstanding shares entitled to vote on the matter, which
action can only be taken by vote at a shareholder meeting), (iv) the amendment
of the Declaration of Trust by shareholders, including the amendment or repeal
of the Independent Trustee provision (which requires the affirmative vote of a
majority of votes entitled to be cast on the matter, except under certain cir-
cumstances specified in the Declaration of Trust which require the affirmative
vote of two-thirds of all the votes entitled to be cast on the matter), and
(v) the dissolution of the Company (which requires the affirmative vote of
two-thirds of the outstanding shares entitled to vote on the matter). The Com-
pany has agreed pursuant to the Operating Partnership Agreement that Limited
Partners also have voting rights with respect to certain of the foregoing
actions for a limited period. See "Partnership Agreement of Operating Partner-
ship--Management." As allowed under the Maryland REIT Law, the Company's Dec-
laration of Trust permits the Trustees by a two-thirds vote to amend the Dec-
laration of Trust from time to time to qualify as a real estate investment
trust under the Code or the Maryland REIT Law without the approval of the
shareholders. As permitted by the Maryland REIT Law, the Declaration of Trust
contains a provision permitting the Board of Trustees, without any action by
the shareholders of the Company, to amend the Declaration of Trust to increase
or decrease the aggregate number of shares of beneficial interest or the
number of shares of any class of shares of beneficial interest that the Com-
pany has authority to issue.
CLASSIFICATION OR RECLASSIFICATION OF COMMON SHARES OR PREFERRED SHARES
The Declaration of Trust authorizes the Board of Trustees to classify any
unissued Preferred Shares and to reclassify any previously classified but
unissued Preferred Shares of any series from time to time in one or more
series, as authorized by the Board of Trustees. Prior to issuance of shares of
each series, the Board of Trustees is required by the Maryland REIT Law and
the Company's Declaration of Trust to set for each such series, subject to the
provisions of the Company's Declaration of Trust regarding the restriction on
transfer of shares of beneficial interest, the terms, the preferences, conver-
sion or other rights, voting powers, restrictions, limitations as to dividends
or other distributions, qualifications and terms or conditions of redemption
for each such series. Thus, the Board of Trustees could authorize the issuance
of Preferred Shares with terms and conditions which could have the effect of
delaying, deferring or preventing a transaction or a change in control of the
Company that might involve a premium price for holders of Common Shares or
otherwise might be in their best interest. As of the date hereof, no Preferred
Shares are outstanding and the Company has no present plans to issue any Pre-
ferred Shares.
RESTRICTIONS ON TRANSFER
For the Company to qualify as a REIT under the Code, it must meet certain
requirements concerning the ownership of its outstanding shares of beneficial
interest. Specifically, not more than 50% in value of the Company's out-
standing shares of beneficial interest may be owned, directly or indirectly,
by five or fewer individuals (as defined in the Code to include certain enti-
ties) at any time during the last half of a taxable year (other than the first
year the election to be a REIT has been made), and the Company must be benefi-
cially owned by 100 or more persons during at least 335 days of a taxable year
of twelve months or during a proportionate part of a shorter taxable year. See
"Federal Income Tax Consequences--Taxation of the Company."
For this reason, among others, the Declaration of Trust, subject to certain
exceptions described below and to possible limited exceptions regarding cer-
tain Contributing Investors, provides that no person may own, or be deemed to
own by
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virtue of the attribution provisions of the Code, more than (i) 9.8% of the
Company's issued and outstanding Shares, or (ii) 9.8% of the total value of
such Shares (the "Ownership Limit"). Any transfer of Common or Preferred Shares
that would (i) result in any person owning, directly or indirectly, Common or
Preferred Shares in excess of the Ownership Limit, (ii) result in the Common
and Preferred Shares being owned by fewer than 100 persons (determined without
reference to any rules of attribution), or (iii) result in the Company being
"closely held" within the meaning of Section 856(h) of the Code, shall be null
and void, and the intended transferee will acquire no rights in such Common or
Preferred Shares.
Subject to certain exceptions described below, if any purported transfer of
Common or Preferred Shares would (i) result in any person owning, directly or
indirectly, Common or Preferred Shares in excess of the Ownership Limit, or
(ii) result in the Company being "closely held" within the meaning of Section
856(h) of the Code, the Common or Preferred Shares will be designated as excess
shares (the "Excess Shares") and transferred automatically to a trust (the
"Share Trust") effective as of the close of business on the business day before
the purported transfer of such Common or Preferred Shares. The record holder of
the Common or Preferred Shares that are designated as Excess Shares (the "Pur-
ported Transferee") will have no rights in such shares except as described
below. The trustee of the Share Trust (the "Share Trustee") will be designated
by the Company, but will not be affiliated with the Company. The beneficiary of
the Share Trust (the "Beneficiary") will be one or more charitable organiza-
tions that are named by the Company.
Excess Shares will remain issued and outstanding Common or Preferred Shares and
will be entitled to the same rights and privileges as all other shares of the
same class or series. The Share Trust will receive all dividends and distribu-
tions on the Excess Shares and will hold such dividends and distributions in
trust for the benefit of the Beneficiary. The Share Trustee will vote all
Excess Shares. At the direction of the Company, the Share Trustee must transfer
the Shares held in the Excess Share Trust to a person whose ownership of the
Shares will not violate the Ownership Limit. Such transfer must be made within
60 days after the latest of (i) the date of the transfer that resulted in such
Excess Shares and (ii) the date that the Board of Trustees determines in good
faith that a transfer resulting in Excess Shares has occurred, if the Company
does not receive notice of such transfer (as described below). Upon such a
transfer, which is subject to the Company waiving its purchase right described
below, the Purported Transferee generally will receive from the Share Trustee
the lesser of (i) the price per share such Purported Transferee paid for the
Common or Preferred Shares that were designated as Excess Shares (or, in the
case of a gift or devise, the Market Price (as defined below) per share on the
date of such transfer) and (ii) the price per share received by the Share
Trustee from the sale of such Excess Shares. Any amounts received by the Share
Trustee in excess of the amounts to be paid to the Purported Transferee will be
distributed to the Beneficiary.
The Excess Shares will be deemed to have been offered for sale to the Company,
or its designee, at a price per share equal to the lesser of (i) the price per
share in the transaction that created such Excess Shares (or, in the case of a
gift or devise, the Market Price per share on the date of such transfer) or
(ii) the Market Price per share on the date that the Company, or its designee,
accepts such offer. The Company will have the right to accept such offer for a
period of ninety days after the later of (i) the date of the purported transfer
which resulted in such Excess Shares and (ii) the date the Company determines
in good faith that a transfer resulting in such Excess Shares occurred.
"Market Price" means the last reported sales price reported on the NYSE for a
particular class of Shares on the trading day immediately preceding the rele-
vant date, or if not then traded on the NYSE, the last reported sales price for
such class of Shares on the trading day immediately preceding the relevant date
as reported on any exchange or quotation system over or through which such
class of Shares may be traded, or if not then traded over or through any
exchange or quotation system, then the market price of such class of Shares on
the relevant date as determined in good faith by the Board of Trustees.
Any person who acquires or attempts to acquire Common or Preferred Shares in
violation of the foregoing restrictions, or any person who owned Common or Pre-
ferred Shares that were transferred to a Share Trust, will be required (i) to
give immediately written notice to the Company of such event or, in the event
of a proposed or attempted transfer, must give at least 15 days prior written
notice to the Company of such event, and (ii) to provide to the Company such
other information as the Company may request in order to determine the effect,
if any, of such transfer on the Company's status as a REIT.
The Declaration of Trust requires all persons who own, directly or indirectly,
more than 5% (or such lower percentages as required pursuant to regulations
under the Code) of the number or value of the outstanding Common and Preferred
Shares, within 30 days after January 1 of each year, to provide to the Company
a written statement stating the name and address of such direct or indirect
owner, the number of Common and Preferred Shares owned directly or indirectly,
and a description of how such shares are held. In addition, each direct or
indirect shareholder shall provide to the Company such additional information
as the Company may request in order to determine the effect, if any, of such
ownership on the Company's status as a REIT and to ensure compliance with the
Ownership Limit.
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The Ownership Limit generally will not apply to the acquisition of Common or
Preferred Shares by an underwriter that participates in a public offering of
such shares. In addition, the Board of Trustees, upon receipt of a ruling from
the Service or an opinion of counsel and upon such other conditions as the
Board of Trustees may direct, may exempt a person from the Ownership Limit
under certain circumstances. However, the Board may not grant an exemption from
the Ownership Limit to any proposed transferee whose ownership, direct or indi-
rect, of shares of beneficial interest of the Company in excess of the Owner-
ship Limit would result in the termination of the Company's status as a REIT.
The foregoing restrictions will continue to apply until the Board of Trustees
determines that it is no longer in the best interests of the Company to attempt
to qualify, or to continue to qualify, as a REIT.
The Ownership Limit could have the effect of delaying, deferring or preventing
a transaction or a change in control of the Company that might involve a pre-
mium price for the Common Shares or otherwise be in the best interest of the
shareholders of the Company.
All certificates representing Common or Preferred Shares will bear a legend
referring to the restrictions described above.
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CERTAIN PROVISIONS OF MARYLAND LAW AND OF
THE COMPANY'S DECLARATION OF TRUST AND BYLAWS
The following summary of certain provisions of Maryland law and of the Declara-
tion of Trust and Bylaws of the Company does not purport to be complete,
although the Company believes all material provisions thereof are described,
and is qualified in its entirety by reference to Maryland law and to the Decla-
ration of Trust and Bylaws of the Company, copies of which are exhibits to the
Registration Statement of which this Prospectus is a part. See "Additional
Information."
CLASSIFICATION OF THE BOARD OF TRUSTEES
The Company's Declaration of Trust provides that the number of Trustees of the
Company cannot be less than three nor more than 15. At the closing of the
Offering, there will be seven Trustees. The Trustees are divided into three
classes, with terms of three years each and with one class to be elected at
each annual meeting of shareholders. The classified Board of Trustees could
have the effect of making the removal of incumbent Trustees time-consuming and
difficult, which could discourage a third party from making a tender offer or
otherwise attempting to effect a change in control of the Company that a
majority of shareholders may believe to be beneficial to the Company and its
shareholders.
VACANCIES
Any vacancy on the Board of Trustees arising for any cause other than an
increase in the number of Trustees may be filled by a majority of the remaining
Trustees, even if less than a quorum, or by a sole remaining Trustee. Any
vacancy created by an increase in the number of Trustees may be filled by a
majority of the entire Board of Trustees. Only the Independent Trustees may
nominate a replacement for a vacancy in an Independent Trustee position. Any
Trustee elected to fill a vacancy will hold office until the next annual
meeting of shareholders. A Trustee elected at an annual meeting of shareholders
to fill a vacancy will have the same remaining term as that of his or her pred-
ecessor.
REMOVAL OF TRUSTEES
The Declaration of Trust provides that a Trustee may be removed with or without
cause upon the affirmative vote of at least two-thirds of the votes entitled to
be cast in the election of Trustees, but only by a vote taken at a shareholder
meeting. This provision has the effect of limiting shareholders' power to
remove incumbent Trustees to cases in which a substantial majority of share-
holders approve such removal.
BUSINESS COMBINATIONS
Under the MGCL, as applicable to Maryland real estate investment trusts, cer-
tain "business combinations" (including mergers, consolidations, share
exchanges and asset transfers and certain issuances or reclassifications of
equity securities) between a Maryland real estate investment trust and any
person who beneficially owns ten percent or more of the voting power of the
trust's shares or an affiliate of the trust who, at any time within the two-
year period prior to the date in question, was the beneficial owner of ten per-
cent or more of the voting power of the then outstanding voting stock of the
trust (an "Interested Shareholder"), or an affiliate of such an Interested
Shareholder, are prohibited for five years after the most recent date on which
the Interested Shareholder becomes an Interested Shareholder. Thereafter, any
such business combination must be recommended by the board of trustees of such
trust and approved by the affirmative vote of at least (i) 80% of the votes
entitled to be cast by holders of outstanding voting shares of beneficial
interest of the trust and (ii) two-thirds of the votes entitled to be cast by
holders of voting shares of the trust other than shares held by the Interested
Shareholder with whom (or with whose affiliate) the business combination is to
be effected, unless, among other conditions, the trust's common shareholders
receive a minimum price (as defined in the MGCL) for their shares and the con-
sideration is received in cash or in the same form as previously paid by the
Interested Shareholder for its shares. These provisions of Maryland law do not
apply, however, to business combinations that are approved or exempted by the
board of trustees of the trust prior to the time that the Interested Share-
holder becomes an Interested Shareholder.
CONTROL SHARE ACQUISITIONS
The MGCL, as applicable to Maryland real estate investment trusts, provides
that "control shares" (as defined below) of a Maryland real estate investment
trust acquired in a "control share acquisition" (as defined below) have no
voting rights except to the extent approved by a vote of two-thirds of the
votes entitled to be cast on the matter, excluding shares of beneficial
interest owned by the acquiror, by officers or by trustees who are employees of
the trust. "Control Shares" are voting shares of beneficial interest which, if
aggregated with all other such shares of beneficial interest previously
acquired
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by the acquiror or in respect of which the acquiror is able to exercise or
direct the exercise of voting power (except solely by virtue of a revocable
proxy), would entitle the acquiror to exercise voting power in electing
trustees within one of the following ranges of voting power: (i) one-fifth or
more but less than one-third, (ii) one-third or more but less than a majority,
or (iii) a majority or more of all voting power. Control Shares do not include
shares the acquiring person is then entitled to vote as a result of having pre-
viously obtained shareholder approval. A "control share acquisition" means the
acquisition of Control Shares, subject to certain exceptions.
A person who has made or proposes to make a Control Share Acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of trustees of the trust to call a special meeting of
shareholders to be held within 50 days of demand to consider the voting rights
of the shares. If no request for a meeting is made, the trust may itself
present the question at any shareholders meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute,
then, subject to certain conditions and limitations, the trust may redeem any
or all of the Control Shares (except those for which voting rights have previ-
ously been approved) at their fair value, determined without regard to the
absence of voting rights for the Control Shares, as of the date of the last
Control Share Acquisition by the acquiror or of any meeting of shareholders at
which the voting rights of such shares are considered and not approved. If
voting rights for Control Shares are approved at a shareholders meeting and the
acquiror becomes entitled to vote a majority of the shares entitled to vote,
all other shareholders may exercise appraisal rights. The fair value of the
shares as determined for purposes of such appraisal rights may not be less than
the highest price per share paid by the acquiror in the control share acquisi-
tion.
The Control Share Acquisition statute does not apply (a) to shares acquired in
a merger, consolidation or share exchange if the trust is a party to the trans-
action or (b) to acquisitions approved or exempted by the declaration of trust
or bylaws of the trust.
SHAREHOLDERS' MEETINGS
The Declaration of Trust and Bylaws provide for an annual meeting of Share-
holders to be held upon proper notice and within a reasonable period, but not
less than 30 days, following delivery of the Company's annual report. Special
meetings of Shareholders may be called by a majority of the Trustees, a
majority of the Independent Trustees or by an executive officer of the Company
and must be called upon the written request of Shareholders holding in the
aggregate not less than 25% of the outstanding shares of the Company entitled
to vote. Written notice stating the place, date and hour of the Shareholders'
meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, but is required to be delivered not less than 10
nor more than 60 days before the day of the meeting to each holder of record.
Unless requested by shareholders entitled to cast a majority of all the votes
entitled to be cast at such meeting, a special meeting need not be called to
consider any matter which is substantially the same as the matter voted on at
any meeting of the shareholders held during the preceding twelve months.
ANNUAL REPORT
Under the Maryland REIT Law, the Company is required to deliver to shareholders
an annual report concerning its operations for the preceding fiscal year con-
taining financial statements prepared in accordance with GAAP which are audited
and reported on by independent certified public accountants. The report must
include a balance sheet, an income statement and a surplus statement. Annual
reports must be mailed or delivered to each shareholder and must be placed on
file at the principal office of the Company within the time prescribed by the
Maryland REIT Law.
AMENDMENT
The Trustees, by a two-thirds vote, may amend the provisions of the Company's
Declaration of Trust, without shareholder approval, to qualify the Company as a
REIT under the Code or under the Maryland REIT Law. The Board of Trustees may
also amend the Declaration of Trust, without shareholder approval, to increase
or decrease the aggregate number of Shares that the Company has the authority
to issue. Otherwise, the Company's Declaration of Trust may be amended only by
the affirmative vote or written consent of the holders of not less than a
majority of the Shares then outstanding and entitled to vote thereon, except
with respect to provisions therein relating to (i) removal of Trustees and (ii)
certain reorganization transactions of the Company. The provisions described in
clauses (i)-(ii) in the preceding sentence may be amended only by the affirma-
tive vote or, in certain instances, written consent of the holders of not less
than two-thirds of the Shares then outstanding. The Company's Bylaws may only
be amended by the Board of Trustees.
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LIMITATION OF LIABILITY AND INDEMNIFICATION
The Maryland REIT Law permits a Maryland real estate investment trust to
include in its declaration of trust a provision limiting the liability of its
trustees and officers to the trust and its shareholders for money damages
except for liability resulting from (i) actual receipt of an improper benefit
or profit in money, property or services or (ii) active and deliberate dishon-
esty established by a final judgment as being material to the cause of action.
The Company's Declaration of Trust contains such a provision limiting such lia-
bility to the maximum extent permitted by the Maryland REIT Law.
The Declaration of Trust provides that the Company, to the fullest extent per-
mitted by Maryland law, must indemnify each Trustee and officer in connection
with any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such person was a Trustee or officer of the Company or is or was serving at the
request of the Company as a director, officer, partner, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
other enterprise or employee benefit plan, from all claims and liabilities to
which such person may become subject by reason of service in that capacity and
to pay or reimburse reasonable expenses, as such expenses are incurred, of each
Trustee or officer in connection with any such action, suit or proceeding. The
Bylaws of the Company obligate it, to the fullest extent permitted by Maryland
law, to indemnify and to pay or reimburse reasonable expenses in advance of
final disposition of a proceeding to (i) each Trustee and officer from and
against all claims and liabilities, whether they proceed to judgment or are
settled, in connection with any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative to
which such Trustee or officer may become subject by reason or such person being
or having been a Trustee or officer, or by reason of any action alleged to have
been taken or omitted by such person as a Trustee or officer, and will reim-
burse such person for all reasonable legal and other expenses incurred by such
person in connection with such claim or liability, including any claim or lia-
bility arising under the provisions of federal or state securities laws, or
(ii) any such Trustee or officer who at the request of the Company serves or
has served another foreign or domestic corporation, partnership, joint venture,
trust, employee benefit plan or any other enterprise as a director, trustee,
officer or partner, employee or agent of such foreign or domestic entity and
who is made a party to the proceeding by reason of such person's service in
that capacity against any claim or liability to which such person may become
subject by reason of such status.
The Maryland REIT Law permits a Maryland real estate investment trust to indem-
nify, and to advance expenses to, its trustees, officers, employees and agents
to the same extent as permitted by the MGCL for directors and officers of Mary-
land corporations. The MGCL permits a corporation to indemnify its present and
former directors and officers, among others, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in connec-
tion with any proceeding to which they may be made a party by reason of their
service in those or other capacities unless it is established that (i) the act
or omission of the director or officer was material to the matter giving rise
to the proceeding and (a) was committed in bad faith or (b) was the result of
active and deliberate dishonesty, (ii) the director or officer actually
received an improper personal benefit in money, property or services or (iii)
in the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. However, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation or for a judgement of liability on the basis that per-
sonal benefit was improperly received, unless in either case a court orders
indemnification and then only for expenses. In addition, the MGCL permits a
corporation to advance reasonable expenses to a director or officer upon the
corporation's receipt of (a) a written affirmation by the director or officer
of such person's good faith belief that he or she has met the standard of con-
duct necessary for indemnification by the corporation and (b) a written under-
taking by or on behalf of such person to repay the amount paid or reimbursed by
the corporation if it shall ultimately be determined that the standard of con-
duct was not met. Insofar as indemnification for liability arising under the
Securities Act may be permitted to Trustees, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the SEC, such indemnification is against public policy
as expressed in the Securities Act and is therefore unenforceable.
OPERATIONS
The Company is generally prohibited from acquiring or holding property or
engaging in any activity that would cause the Company to fail to qualify as a
real estate investment trust. To maintain its qualification as a Maryland real
estate investment trust, the Maryland REIT Law requires that the Company hold,
either directly or indirectly, at least 75% of the value of its assets in real
estate assets, mortgages or mortgage related securities, government securities,
cash and cash equivalent items, including high-grade short-term securities and
receivables. The Maryland REIT Law also prohibits using or applying land for
farming, agriculture, horticulture or similar purposes.
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TERMINATION OF THE TRUST AND REIT STATUS
The Company's Declaration of Trust permits (i) the termination of the Company
and the discontinuation of the operations of the Company by the affirmative
vote or written consent of the holders of not less than two-thirds of the
Company's outstanding Shares of all classes and (ii) the termination of the
Company's qualification as a REIT if such qualification, in the opinion of the
Board of Trustees, is no longer advantageous to the shareholders.
ADVANCE NOTICE OF TRUSTEE NOMINATIONS AND NEW BUSINESS
The Bylaws of the Company provide that (i) with respect to an annual meeting of
shareholders, nominations of persons for election to the Board of Trustees and
the proposal of business to be considered by shareholders may be made only (a)
pursuant to the Company's notice of the meeting, (b) by or at the direction of
the Board of Trustees or (c) by a shareholder who is entitled to vote at the
meeting and has complied with the advance notice procedures set forth in the
Bylaws and (ii) with respect to special meetings of shareholders, only the
business specified in the Company's notice of meeting may be brought before the
meeting of shareholders and nominations of persons for election to the Board of
Trustees may be made only (a) pursuant to the Company's notice of the meeting,
(b) by the Board of Trustees, or (c) provided that the Board of Trustees has
determined that Trustees shall be elected at such meeting, by a shareholder who
is entitled to vote at the meeting and has complied with the advance notice
provisions set forth in the Bylaws.
POSSIBLE ANTITAKEOVER EFFECT OF CERTAIN PROVISIONS OF MARYLAND LAW
AND OF THE DECLARATION OF TRUST AND BYLAWS
The provisions of the Declaration of Trust on classification of the Board of
Trustees, the removal of Trustees and the restrictions on the transfer of
shares of beneficial interest and the advance notice provisions of the Bylaws
could have the affect of delaying, deferring or preventing a transaction or a
change in control of the Company that might involve a premium price for holders
of Common Shares or otherwise be considered by shareholders to be in their best
interest.
MARYLAND ASSET REQUIREMENTS
To maintain its qualification as a Maryland real estate investment trust, the
Maryland REIT Law requires at least 75% of the value of the Company's assets to
be held, directly or indirectly, in real estate assets, mortgages or mortgage
related securities, government securities, cash and cash equivalent items,
including high-grade short term securities and receivables. The Maryland REIT
Law also prohibits the Company from using or applying land for farming, agri-
cultural, horticultural or similar purposes.
SHARES AVAILABLE FOR FUTURE SALE
Upon the closing of the Offering and the Concurrent Placement and consummation
of the Formation Transactions, the Company will have 17,461,714 Common Shares
issued and outstanding (18,586,714 Common Shares if the Underwriter's
overallotment option is exercised in full). In addition, 24,888,286 Common
Shares will be reserved for issuance upon conversion of Units and 2,188,500
Common Shares will be reserved for issuance under the Company's Long Term
Incentive Plan. The Common Shares issued in the Offering will be freely trade-
able by persons other than "Affiliates" (as that term is defined for purposes
of compliance with the Securities Act of 1933, as amended (the "Securities
Act")) of the Company without restriction under the Securities Act, subject to
certain limitations on ownership set forth in the Declaration of Trust. See
"Description of Shares of Beneficial Interest--Restrictions on Transfer."
Pursuant to the Operating Partnership Agreement, the Limited Partners have
Exchange Rights which, beginning one year (or earlier upon the consent of the
Company) from the Closing Date, enable them to cause the Operating Partnership
to exchange their Units for Common Shares on a one-for-one basis. Each of the
Limited Partners has agreed under the Operating Partnership Agreement (and each
of the other Contributing Investors has agreed separately) that until one year
from the Closing Date (or two years in the case of any Limited Partner that is
a partner of Cabot Partners or C-M Holdings), such Limited Partner (or Contrib-
uting Investor) will not dispose of any Common Shares or Units without the
prior consent of the Company, provided that any Limited Partner or Contributing
Investor (other than a partner of Cabot Partners or C-M Holdings) may make a
private resale to a Qualified Institutional Buyer (as defined in Commission
Rule 144A) beginning nine months after the closing of the Offering. In addi-
tion, the Company has agreed not to waive or amend the foregoing restrictions
on resale without the prior written consent of J.P. Morgan Securities Inc. In
addition, the Concurrent Investor agrees that it will not dispose of any Common
Shares acquired in the Concurrent Placement until 180 days after the Closing
Date, without the consent of the Company, provided that sales may be made prior
to that date to a Qualified
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Institutional Buyer. Pursuant to the Underwriting Agreement, the Company has
also agreed not to offer for sale or sell any Common Shares (except in certain
circumstances) for a period of 12 months after the closing of the offering
without the prior written consent of J.P. Morgan Securities Inc. See
"Underwriting."
The Common Shares issued to the Contributing Investors and the Concurrent
Investor and the Common Shares that will be issuable to holders of Units upon
exercise of the Exchange Rights will be "restricted" securities under the
meaning of Rule 144 promulgated under the Securities Act ("Rule 144") and may
not be sold in the absence of registration under the Securities Act unless an
exemption from the registration requirements of the Securities Act is avail-
able, including exemptions pursuant to Rule 144. As described below, the Com-
pany has granted registration rights with respect to such Common Shares to the
holders thereof.
In general, under Rule 144 as currently in effect, if one year has elapsed
since the later of the date of acquisition of restricted shares from the Com-
pany or any Affiliate of the Company, the acquiror or subsequent holder
thereof will be entitled to sell within any three-month period a number of
shares that does not exceed the greater of 1% of the then outstanding Common
Shares or the average weekly trading volume of the Common Shares during the
four calendar weeks preceding the date on which an appropriate notice of the
sale is filed with the Securities and Exchange Commission (the "Commission").
Sales under Rule 144 also are subject to certain manner of sale provisions,
notice requirements and the availability of current public information about
the Company. If two years have elapsed since the date of acquisition of
restricted shares from the Company or from any Affiliate, and the acquiror or
subsequent holder thereof is deemed not to have been an Affiliate at any time
during the three months preceding a sale, such person would be entitled to
sell such shares in the public market under Rule 144(k) without regard to the
volume limitations, manner of sale provisions, public information requirements
or notice requirements.
On the first business day after the first anniversary of the Closing Date, the
Company has agreed to file a registration statement with the Commission for
the purpose of registering the sale, subject to certain exceptions, of all,
but not less than all, of the Common Shares (including Common Shares issued on
conversion of Units) issued to the Contributing Investors or, commencing on
the second anniversary of the Closing Date, Cabot Partners (or issued upon
conversion of Units issued to such persons). The Company has also agreed to
file a registration statement with the Commission 180 days after the Closing
Date for the purpose of registering the sale, subject to certain exceptions,
of the Common Shares issued to the Concurrent Investor in the Concurrent
Placement. The Company will use its best efforts to have such registration
statements declared effective as soon as practical after filing and to keep it
effective for a period expiring on the earlier of (i) the date on which all
such securities have been sold and (ii) the date on which all such securities
are in the opinion of legal counsel for the Company eligible for sale (A)
under Rule 144(k) or, (B) in the case of any Affiliate of the Company, under
Rule 144 and could be sold in one transaction in accordance with the volume
limitations contained therein. Upon effectiveness of such registration state-
ment, those persons holding Common Shares upon redemption of the applicable
Units who are not Affiliates of the Company may sell such shares in the sec-
ondary market without being subject to the volume limitations or other
requirements of Rule 144. The Operating Partnership will bear expenses inci-
dent to these registration requirements, except that such expenses shall not
include any underwriting discounts or commissions, the fees and disbursements
of any counsel to a selling shareholder, transfer taxes or certain other fees
or taxes relating to such shares. Registration rights may be granted to future
sellers of properties to the Operating Partnership who agree to receive Common
Shares, Units, or other securities convertible into Common Shares, in lieu of
cash.
No prediction can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price of the Common Shares prevailing from time to time. Sales of substantial
amounts of Common Shares, or the perception that such sales could occur, may
affect adversely prevailing market prices of the Common Shares. See "Risk Fac-
tors--Possible Adverse Effect on Price of Common Shares of Shares Available
for Future Sale."
PARTNERSHIP AGREEMENT OF OPERATING PARTNERSHIP
GENERAL
The Properties will be owned by the Operating Partnership. By contributing
their interests in the CM Property Partnerships and Cabot Partners to the
Operating Partnership, the Cabot Group Participants will, among other things,
be permitted to defer until a later date a portion of the tax liabilities that
they otherwise would incur if they received Common Shares. In addition,
through the Operating Partnership the Company may acquire interests in addi-
tional industrial properties in transactions that may defer such tax conse-
quences for the contributors.
Following the closing of the Offering, substantially all of the Company's
assets (including the Company's interest in the Properties) will be held by,
and its operations will be conducted through, the Operating Partnership. The
Company will
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initially hold Units equal to 41.2% of the economic interest in the Operating
Partnership and will control the Operating Partnership in its capacity as the
sole general partner. The Company's interest in the Operating Partnership will
entitle it to share in cash distributions from, and in the profits and losses
of, the Operating Partnership in proportion to the Company's percentage owner-
ship of the Operating Partnership (apart from tax allocations of profits and
losses to take into account pre-contribution property appreciation). The Lim-
ited Partners will own the remaining 58.8% economic interest in the Operating
Partnership. For a period of one year (or two years for any partner of Cabot
Partners or C-M Holdings) following the Closing Date, the holders of Units or
Common Shares will not be permitted to offer, pledge, sell, contract to sell,
grant any options for the sale of or otherwise dispose of any such Units or
Common Shares without the permission of the Company (except (i) in the case of
a holder that is a natural person, to certain family members of such holder or
upon death of such holder, to such holder's estate, personal representative or
beneficiaries, (ii) in the case of a business entity, to another entity wholly
owned thereby or as a distribution to the equity owners thereof, (iii) in the
case of a master pension or profit sharing trust or group trust, to one or more
of its participating trusts or to a successor trust, (iv) as a bona fide gift,
or (v) pursuant to a pledge, grant of a security interest or other encumbrance
effected in a bona fide transaction with an unrelated and unaffiliated pledg-
ee). After the first anniversary after the closing of the Offering (or second
anniversary for any partner of Cabot Partners or C-M Holdings) Units or Common
Shares may be transferred by a Limited Partner without restriction (except if
such transfer would (i) violate any securities laws, (ii) result in the Oper-
ating Partnership being treated as an association taxable as a corporation,
(iii) be effectuated through an "established securities market" or a "secondary
market (or the substantial equivalent thereof)" within the meaning of Section
7709 of the Code, or (iv) be to a lender to the Operating Partnership or
related person holding nonrecourse liability), although the transferee will
only be admitted as a Limited Partner subject to furnishing certain specified
or requested instruments or documents to the Company in its capacity as general
partner. Also, after the first anniversary after the closing of the Offering
(or earlier with the consent of the Company in its capacity as general part-
ner), any holder of Units may exchange one Unit for one Common Share subject to
the Company's right to pay cash in lieu of issuing Common Shares. With each
exchange of Units, the Company's interest in the Operating Partnership will
increase.
The Company will hold one Unit in the Operating Partnership for each Common
Share that it has issued. The net proceeds of any issuance of Common Shares of
the Company will be contributed to the Operating Partnership in exchange for an
equivalent number of Units.
As the general partner of the Operating Partnership, the Company will have the
exclusive power under the Operating Partnership Agreement to manage and conduct
the business of the Operating Partnership. The Board of Trustees of the Company
will manage the affairs of the Company by directing the affairs of the Oper-
ating Partnership. The Operating Partnership will be responsible for, and pay
when due, its share of all administrative and operating expenses of the Proper-
ties.
The following summary of the Operating Partnership Agreement, including the
descriptions of certain provisions set forth elsewhere in this Prospectus, is
qualified in its entirety by reference to the Operating Partnership Agreement,
which is filed as an exhibit to the Registration Statement of which the Pro-
spectus is a part.
MANAGEMENT
The Operating Partnership has been organized as a Delaware limited partnership
pursuant to the terms of the Operating Partnership Agreement. The Company, as
the sole general partner of the Operating Partnership and the holder of the
majority of the Units, will generally have full, exclusive and complete discre-
tion in managing and controlling the Operating Partnership. The Contributing
Investors receiving Units, as the Limited Partners of the Operating Partner-
ship, will have no authority to transact business for, or to participate in the
management activities or decisions of, the Operating Partnership, except as
provided in the Operating Partnership Agreement and as provided by applicable
law. However, the consent of all the Limited Partners will be required to (i)
take any action that would make it impossible to carry on the ordinary business
of the Operating Partnership, except as otherwise provided in the Operating
Partnership Agreement; (ii) possess Operating Partnership property, or assign
any rights to specific Operating Partnership property for other than an Oper-
ating Partnership purpose, except as otherwise provided in the Operating Part-
nership Agreement; (iii) admit a person as a partner, except as otherwise pro-
vided in the Operating Partnership Agreement; or (iv) perform any act that
would subject a Limited Partner to liability as a general partner in any juris-
diction or any other liability except as provided in the Operating Partnership
Agreement or under the laws of the State of Delaware. In addition, the Company
has agreed pursuant to the Operating Partnership Agreement that it will not
take any of the following actions prior to the first anniversary of the Closing
Date without the consent of Limited Partners holding a majority of the out-
standing Units: (i) a merger, consolidation or share exchange of the Company
requiring the approval of the Company's shareholders or any merger, consolida-
tion or partnership interest exchange of the Operating Partnership, (ii) a
sale, lease, transfer or other disposition of all or
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substantially all of the Company's assets requiring the approval of the
Company's shareholders, a sale, lease, transfer or other disposition of all or
substantially all of the operating assets, or any election to dissolve the
Company requiring the approval of the Company's shareholders, or (iii) an
amendment to the Declaration of Trust requiring the approval of the Company's
shareholders.
INDEMNIFICATION
The Operating Partnership Agreement provides that each individual made a party
to a proceeding by reason of his status as a general partner or an officer of
the Operating Partnership or a trustee or officer of the Company or any other
person as the Company may designate from time to time in its sole and absolute
discretion (each, an "Indemnitee") will be indemnified and held harmless by
the Operating Partnership for any act relating to the operation of Operating
Partnership 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 dishon-
esty; (ii) the Indemnitee actually received an improper personal benefit of
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. The Operating Partnership Agreement further provides that the termi-
nation of any proceeding by judgment, order or settlement does not create a
presumption that the Indemnitee did not meet the requisite standard of conduct
set forth above. The termination of any proceeding by conviction or upon a
plea of nolo contendere or its equivalent, or an entry of an order of proba-
tion prior to judgment, would, under the Operating Partnership Agreement,
create a rebuttable presumption that the individual acted in a manner contrary
to that specified above. Any indemnification so made shall be made only out of
the assets of the Operating Partnership.
CAPITAL CONTRIBUTIONS
When the Company contributes additional capital to the Operating Partnership
from the proceeds of Common Shares (or preferred shares of beneficial inter-
est) issued by the Company, the Company's interest in the Operating Partner-
ship will be increased on a proportionate basis based upon the number of
Common Shares (or preferred shares of beneficial interest) issued to the
extent the net proceeds from, or the property received in consideration for,
the issuance thereof are used to fund the contribution.
TAX MATTERS
Pursuant to the Operating Partnership Agreement, the Company will be the tax
matters partner of the Operating Partnership and, as such, will have authority
to make certain tax related decisions and tax elections under the Code on
behalf of the Operating Partnership.
OPERATIONS
The Operating Partnership Agreement allows the Company to operate the Oper-
ating Partnership in a manner that will enable the Company to satisfy the
requirements for being classified as a REIT. The Operating Partnership Agree-
ment also requires the distribution of the cash available for distribution of
the Operating Partnership quarterly on a basis in accordance with the Oper-
ating Partnership Agreement.
DUTIES AND CONFLICTS
The Operating Partnership Agreement provides that the Company shall not enter
into or conduct any business other than in connection with its ownership,
acquisition and disposition of partnership interests in the Operating Partner-
ship and the management of the business and incidental activities of the Oper-
ating Partnership. Thereof, all activities pertaining to the acquisition,
development, management and operation of any properties, must be conducted
through the Operating Partnership.
TERM
The Operating Partnership will continue in full force and effect until
December 31, 2097 or until sooner dissolved upon (i) the withdrawal of the
Company as a general partner (unless all of the Limited Partners elect to con-
tinue the Operating Partnership), or (ii) by the election of the Company, with
the consent of a majority in interest of Limited Partners, or (iii) in connec-
tion with a merger or other combination of the Operating Partnership, or (iv)
by the sale or other disposition of all or substantially all of the assets of
the Operating Partnership, or (v) entry of a decree of judicial dissolution of
the Operating Partnership, or (vi) bankruptcy or insolvency of the Company.
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FEDERAL INCOME TAX CONSEQUENCES
The Company intends to operate in a manner that permits it to satisfy the
requirements for taxation as a REIT under the applicable provisions of the
Code. No assurance can be given, however, that such requirements will be met.
The following is a summary of the federal income tax considerations for the
Company and its shareholders with respect to the treatment of the Company as a
REIT. The information set forth below, to the extent that it constitutes mat-
ters of law, summaries of legal matters or legal conclusions, is based on the
opinion of Mayer, Brown & Platt, counsel to the Company, as to the material
Federal income tax consequences relevant to purchasers of the Common Shares.
Based upon the matters described below, in the opinion of Mayer, Brown & Platt,
counsel to the Company, the Company has been organized in conformity with the
requirements for qualification as a REIT beginning with its taxable year ending
December 31, 1998, and its proposed method of operation as represented by the
Company to Mayer, Brown & Platt and similarly described in this Prospectus will
enable it to satisfy the requirements for such qualification. This opinion is
based on certain assumptions relating to the organization and operation of the
Company, the Operating Partnership and the Management Company as set forth in
this Prospectus, including that the Formation Transactions will be consummated
in accordance with the operative documents and such documents accurately
reflect the material facts of such transactions, and that the Company, the
Operating Partnership, and the Management Company will each be operated in the
manner described in their applicable organizational documents and in this Pro-
spectus, and that all terms and provisions of such documents will be complied
with by all parties thereto. This opinion is also conditioned upon certain rep-
resentations as set forth in this Prospectus made by the Company as to certain
factual matters relating to the Company's organization and intended or expected
manner of operation. In addition, this opinion is based on the law existing and
in effect on the date hereof and the Company's qualification and taxation as a
REIT will depend on compliance with such law existing and in effect on the date
hereof and as the same may hereafter be amended. The Company's qualification
and taxation as a REIT will further depend upon the Company's ability to meet,
on a continuing basis through actual operating results, asset composition, dis-
tribution levels and diversity of share ownership, the various qualification
tests imposed under the Code discussed below. Counsel will not review compli-
ance with these tests on a continuing basis, and thus no assurance can be given
that the Company will satisfy such tests on a continuing basis.
In brief, a corporation that invests primarily in real estate can, if it meets
the REIT provisions of the Code described below, claim a tax deduction for the
dividends it pays to its shareholders. Such a corporation generally is not
taxed on its "REIT taxable income" to the extent such income is currently dis-
tributed to shareholders, thereby substantially eliminating the "double taxa-
tion" (i.e., at both the corporate and shareholder levels) that generally
results from an investment in a corporation. However, as discussed in greater
detail below, such an entity remains subject to tax in certain circumstances
even if it qualifies as a REIT. Further, if the entity were to fail to qualify
as a REIT in any year, it would not be able to deduct any portion of the divi-
dends it paid to its shareholders and would be subject to full federal income
taxation on its earnings, thereby significantly reducing or eliminating the
cash available for distribution to its shareholders. See "--Taxation of the
Company--General" and "--Taxation of the Company--Failure to Qualify."
The Board of Trustees of the Company currently expects that the Company will
operate in a manner that permits it to elect, and that it will timely and
effectively elect, REIT status for its taxable year ending December 31, 1998,
and in each taxable year thereafter. There can be no assurance, however, that
this expectation will be fulfilled since qualification as a REIT depends on the
Company continuing to satisfy the numerous asset, income and distribution tests
described below, which in turn will be dependent on the Company's operating
results.
The following summary is based on existing law, is not exhaustive of all pos-
sible tax considerations and does not give a detailed discussion of any state,
local or foreign tax considerations, nor does it discuss all of the aspects of
federal income taxation that may be relevant to a prospective shareholder in
light of his or her particular circumstances or to certain types of share-
holders (including insurance companies, financial institutions and broker-deal-
ers, foreign corporations and persons who are not the citizens or residents of
the United States) subject to special treatment under the federal income taxa-
tion laws.
TAXATION OF THE COMPANY
General
In any year in which the Company qualifies as a REIT, in general it will not be
subject to federal income tax on that portion of its REIT taxable income or
capital gain which is distributed to shareholders. The Company may, however, be
subject to tax at normal corporate rates upon any taxable income or capital
gain not distributed. Under recently enacted
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legislation, shareholders are required to include their proportionate share of
the REIT's undistributed long-term capital gain in income but receive a credit
for their share of any taxes paid on such gain by the REIT.
Notwithstanding its qualification as a REIT, the Company also may be subject to
taxation in certain other circumstances. If the Company should fail to satisfy
either the 75% or the 95% gross income test (each as discussed below), and
nonetheless maintain its qualification as a REIT because certain other require-
ments are met, it will be subject to a 100% tax on the greater of the amount by
which the Company fails either the 75% or the 95% test, multiplied by a frac-
tion intended to reflect the Company's profitability. The Company will also be
subject to a tax of 100% on net income from any "prohibited transaction" (as
described below), and if the Company has (i) net income from the sale or other
disposition of "foreclosure property" which is held primarily for sale to cus-
tomers in the ordinary course of business or (ii) other non-qualifying income
from foreclosure property, it will be subject to tax on such income from fore-
closure property at the highest corporate rate. In addition, if the Company
should fail to distribute during each calendar year at least the sum of (i) 85%
of its REIT ordinary income for such year, (ii) 95% of its REIT capital gain
net income for such year, and (iii) any undistributed taxable income from prior
years, the Company would be subject to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. The Company also
may be subject to the corporate alternative minimum tax, as well as to tax in
certain situations not presently contemplated. The Management Company will be
taxed on its income at regular corporate rates. The Company will use the cal-
endar year both for federal income tax purposes, as is required of a newly
organized REIT, and for financial reporting purposes.
In order to qualify as a REIT, the Company must meet, among others, the fol-
lowing requirements:
Share Ownership Tests
The Company's shares of beneficial interest (which term, in the case of the
Company, currently means the Common Shares) must be held by a minimum of 100
persons for at least 335 days in each taxable year (or a proportional number of
days in any short taxable year). In addition, at all times during the second
half of each taxable year, no more than 50% in value of the outstanding shares
of beneficial interest of the Company may be owned, directly or indirectly and
including the effects of certain constructive ownership rules, by five or fewer
individuals, which for this purpose includes certain tax-exempt entities. How-
ever, for purposes of this test, any shares of beneficial interest held by a
qualified domestic pension or other retirement trust will be treated as held
directly by its beneficiaries in proportion to their actuarial interest in such
trust rather than by such trust. These share ownership requirements need not be
met until the second taxable year of the Company for which a REIT election is
made. The Company has represented to Mayer, Brown & Platt that it will satisfy
these requirements.
In order to attempt to ensure compliance with the foregoing share ownership
tests, the Company has placed certain restrictions on the transfer of its
shares of beneficial interest to prevent additional concentration of stock own-
ership. Moreover, to evidence compliance with these requirements, Treasury reg-
ulations require the Company to maintain records which disclose the actual own-
ership of its outstanding shares of beneficial interest. In fulfilling its
obligations to maintain records, the Company must and will demand written
statements each year from the record holders of designated percentages of its
shares of beneficial interest disclosing the actual owners of such shares of
beneficial interest (as prescribed by Treasury regulations). A list of those
persons failing or refusing to comply with such demand must be maintained as
part of the Company's records. A shareholder failing or refusing to comply with
the Company's written demand must submit with his tax return a similar state-
ment disclosing the actual ownership of Company shares of beneficial interest
and certain other information. In addition, the Company's Declaration of Trust
provides restrictions regarding the transfer of its shares of beneficial
interest that are intended to assist the Company in continuing to satisfy the
share ownership requirements. See "Description of Shares of Beneficial Inter-
est--Restrictions on Transfer."
Asset Tests
At the close of each quarter of the Company's taxable year, the Company must
satisfy two tests relating to the nature of its assets (determined in accor-
dance with generally accepted accounting principles). First, at least 75% of
the value of the Company's total assets must be represented by interests in
real property, interests in mortgages on real property, shares in other REITs,
cash, cash items, government securities and qualified temporary investments.
Second, although the remaining 25% of the Company's assets generally may be
invested without restriction, securities in this class may not exceed (i) in
the case of securities of any one non-government issuer, 5% of the value of the
Company's total assets (the "Value Test") or (ii) 10% of the outstanding voting
securities of any one such issuer (the "Voting Stock Test"). The Company has
represented to Mayer, Brown & Platt that it will satisfy the 75% asset test,
the Value Test, and the Voting Test at the close of each quarter of its taxable
years ending 1998 and thereafter. Where the Company invests in a partnership
(such as the Operating Partnership), it will be deemed to own a proportionate
share of the partnership's assets and the partnership interest does not consti-
tute a security for purposes of these tests. See "--Tax Aspects of the
Company's Investments in
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Partnerships--General." Accordingly, the Company's investment in the Properties
through its interest in the Operating Partnership is intended to constitute an
investment in qualified assets for purposes of the 75% asset test.
The Operating Partnership will own 100% of the non-voting preferred stock of
the Management Company, and by virtue of its partnership interest in the Oper-
ating Partnership, the Company will be deemed to own initially a pro rata share
of such non-voting preferred stock. Because the Operating Partnership will own
none of the voting common stock of the Management Company and the non-voting
preferred stock's approval right is limited to certain fundamental corporate
actions that could adversely affect the preferred stock as a class, the Voting
Stock Test should be satisfied.
Based upon its analysis of the estimated value of the stock of the Management
Company to be owned by the Operating Partnership relative to the estimated
value of the total assets to be owned by the Operating Partnership, the Company
believes that its pro rata share of the stock of the Management Company to be
held by the Operating Partnership will not exceed on the date of this Pro-
spectus 5% of the value of the Company's total assets. Mayer, Brown & Platt, in
rendering its opinion as to the qualification of the Company as a REIT, is
relying on representations of the Company to such effect with respect to the
value of such stock and assets. The Value Test must be satisfied at the end of
any quarter in which the Company so increases its interest in the Management
Company or so acquires other property. In this respect, if any Continuing
Investor exercises its conversion option to exchange Units for Common Shares,
the Company will thereby increase its proportionate (indirect) ownership
interest in the Management Company, thus requiring the Company to meet the
Value Test in any quarter in which such conversion option is exercised. A sim-
ilar result will follow in the case of any exchange of Units by the Operating
Partnership or the Management Company employees that they received pursuant to
the Company's Long Term Incentive Plan. See "Management--Long Term Incentive
Plan." Although the Company plans to take steps to ensure that it satisfies the
Value Test for any quarter with respect to which retesting is to occur, there
can be no assurance that such steps will always be successful and will not
require a reduction in the Operating Partnership's overall interest in the Man-
agement Company.
Gross Income Tests
There are two separate percentage tests relating to the sources of the
Company's gross income which must be satisfied for each taxable year. For pur-
poses of these tests, where the Company invests in a partnership, the Company
will be treated as receiving its share of the income and loss of the partner-
ship, and the gross income of the partnership will retain the same character in
the hands of the Company as it has in the hands of the partnership. See "--Tax
Aspects of the Company's Investments in Partnerships--General" below. The two
tests are separately described below:
The 75% Test At least 75% of the Company's gross income for the taxable year
must be "qualifying income." Qualifying income generally includes: (i) rents
from real property (except as modified below); (ii) interest on obligations
secured by mortgages on, or interests in, real property; (iii) gains from the
sales or other disposition of interests in real property and real estate mort-
gages, other than gain from property bought primarily for sale to customers in
the ordinary course of the Company's trade or business ("dealer property");
(iv) dividends or other distributions on shares in other REITs, as well as gain
from the sale of such shares; (v) abatements and refunds of real property
taxes; (vi) income from the operation, and gain from the sale, of property
acquired at or in lieu of a foreclosure of the mortgage secured by such prop-
erty ("foreclosure property"); and (vii) commitment fees received for agreeing
to make loans secured by mortgages on real property or to purchase or lease
real property.
Rents received from a customer will not, however, qualify as rents from real
property in satisfying the 75% gross income test (or the 95% gross income test
described below) if the Company, or an owner of 10% or more of the Company,
directly or constructively owns 10% or more of such customer. In addition, if
rent attributable to personal property leased in connection with a lease of
real property is greater that 15% of the total rent received under the lease,
then the portion of rent attributable to such personal property will not
qualify as rents from real property. Moreover, an amount received or accrued
will not qualify as rents from real property (or as interest income) for pur-
poses of the 75% and 95% gross income tests if it is based in whole or in part
on the income or profits of any person, although an amount received or accrued
generally will not be excluded from "rents from real property" solely by reason
of being based on a fixed percentage or percentages of receipts or sales.
Finally, for rents received to qualify as rents from real property for purposes
of the 75% and 95% gross income tests, the Company generally must not operate
or manage the property or furnish or render services to customers, other than
through an "independent contractor" from whom the Company derives no income,
except that the "independent contractor" requirement does not apply to the
extent that the services provided by the Company are "usually or customarily
rendered" in connection with the rental of space for occupancy only, or are not
otherwise considered "rendered to the occupant for his convenience."
The Company intends to monitor its operations in the context of these standards
so as to satisfy the 75% and 95% gross income tests and has represented to
Mayer, Brown & Platt that it will satisfy these tests for its taxable years
ending 1998
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and thereafter. The Operating Partnership will provide certain services at the
Properties that it owns and possibly at any newly acquired Properties of the
Operating Partnership. The Company believes that for purposes of the 75% and
95% gross income tests the services provided at such Properties and any other
services and amenities provided by the Operating Partnership or its agents with
respect to such Properties will be of the type usually or customarily rendered
in connection with the rental of space for occupancy only and not rendered to
the occupant for his convenience. Mayer, Brown & Platt, in rendering its
opinion as to the qualification of the Company as a REIT, is relying on repre-
sentations of the Company to such effect. The Company intends that services
that cannot be provided directly by the Operating Partnership, the Management
Company or other agents will be performed by independent contractors. The Com-
pany anticipates that the dividend income on its indirect investment in the
Management Company will not cause it to fail to satisfy the 75% gross income
test.
The 95% Test In addition to deriving 75% of its gross income from the sources
listed above, at least 95% of the Company's gross income for the taxable year
must be derived from the above-described qualifying income or from dividends,
interest, or gains from the sale or other disposition of stock or other securi-
ties that are not dealer property. Dividends and interest on any obligations
not collateralized by an interest in real property are included for purposes of
the 95% test, but not for purposes of the 75% gross income test. The Company
intends to closely monitor its non-qualifying income and anticipates that non-
qualifying income from its other activities will not result in the Company
failing to satisfy either the 75% or 95% gross income test.
For purposes of determining whether the Company complies with the 75% and the
95% gross income tests, gross income does not include income from prohibited
transactions. A "prohibited transaction" is a sale of dealer property (ex-
cluding foreclosure property); however, a sale of property will not be a pro-
hibited transaction if such property is held by the Company for at least four
years and certain other requirements (relating to the number of properties sold
in a year, their tax bases, and the cost of improvements made thereto) are sat-
isfied. See "--Taxation of the Company--General" and "--Tax Aspects of the
Company's Investments in Partnerships--Sale of the Properties."
The Company believes that, for purposes of both the 75% and the 95% gross
income tests, its investment in the Properties through the Operating Partner-
ship will in major part give rise to qualifying income in the form of rents,
and that gains on sales of the Properties, or of the Company's interest in the
Operating Partnership, generally will also constitute qualifying income.
Even if the Company fails to satisfy one or both of the 75% and 95% gross
income tests for any taxable year, it may still qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. These relief
provisions will generally be available if: (i) the Company's failure to comply
is due to reasonable cause and not to willful neglect; (ii) the Company reports
the nature and amount of each item of its income included in the tests on a
schedule attached to its tax return; and (iii) any incorrect information on
this schedule is not due to fraud with intent to evade tax. If these relief
provisions apply, however, the Company will nonetheless be subject to a 100%
tax on the greater of the amount by which it fails either the 75% or 95% gross
income test, multiplied by a fraction intended to reflect the Company's profit-
ability.
Annual Distribution Requirements
In order to qualify as a REIT, the Company is required to distribute dividends
to its shareholders each year in an amount at least equal to (A) the sum of (i)
95% of the Company's REIT taxable income (computed without regard to the divi-
dends received deduction and the Company's net capital gain) and (ii) 95% of
the net income (after tax), if any, for foreclosure property, minus (B) the sum
of certain items of non-cash income. Such distributions must be paid in the
taxable year to which they relate, or in the following taxable year if declared
before the Company timely files its tax return for such year and if paid on or
before the first regular dividend payment after the declaration. To the extent
that the Company does not distribute all of its net capital gain or distributes
at least 95%, but less than 100%, of its REIT taxable income, as adjusted, it
will be subject to tax on the undistributed amount at regular capital gain or
ordinary corporate tax rates, as the case may be.
The Company intends to make timely distributions sufficient to satisfy the
annual distribution requirements described in the first sentence of the pre-
ceding paragraph and has represented to Mayer, Brown & Platt that it will so
satisfy these distribution requirements for its taxable years ending 1998 and
thereafter. In this regard, the Operating Partnership Agreement authorizes the
Company in its capacity as general partner to take such steps as may be neces-
sary to cause the Operating Partnership to distribute to its partners an amount
sufficient to permit the Company to meet the distribution requirements. It is
possible that the Company may not have sufficient cash or other liquid assets
to meet the 95% distribution requirement, due to timing differences between the
actual receipt of income and actual payment of expenses on the one hand, and
the inclusion of such income and deduction of such expense in computing the
Company's REIT taxable income on the other hand; due to the Operating Partner-
ship's inability to control cash distributions with respect to any properties
as to which its does not have decision making control; or for other reasons.
The Company will closely monitor the relationship between its
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REIT taxable income and cash flow and, if necessary, intends to borrow funds
(or cause the Operating Partnership or other affiliates to borrow funds) in
order to satisfy the distribution requirement. However, there can be no assur-
ance that such borrowing would be available at such time.
If the Company fails to meet the 95% distribution requirement as a result of an
adjustment to the Company's tax return by the Service, the Company may retroac-
tively cure the failure by paying a "deficiency dividend" (plus applicable pen-
alties and interest) within a specified period.
Failure to Qualify
If the Company fails to qualify for taxation as a REIT in any taxable year and
the relief provisions do not apply, the Company will be subject to tax (in-
cluding any applicable alternative minimum tax) on its taxable income at reg-
ular corporate rates. Distributions to shareholders in any year which the Com-
pany fails to qualify as a REIT will not be deductible by the Company, nor gen-
erally will they be required to be made under the Code. In such event, to the
extent of current and accumulated earnings and profits, all distributions to
shareholders will be taxable as ordinary income, and subject to certain limita-
tions in the Code, corporate distributees may be eligible for the dividends
received deduction. Unless entitled to relief under specific statutory provi-
sions, the Company also will be disqualified from the re-electing taxation as a
REIT for the four taxable years following the year during which qualification
was lost.
TAX ASPECTS OF THE COMPANY'S INVESTMENTS IN PARTNERSHIPS
General. The Company will hold a partnership interest in the Operating Partner-
ship. In general, a partnership is a "pass-through" entity which is not subject
to federal income tax. Rather, partners are allocated their proportionate
shares of the items of income, gain, loss, deduction and credit of a partner-
ship, and are potentially subject to tax thereon, without regard to whether the
partnership received a distribution from the partnership. The Company will
include its proportionate share of the foregoing partnership items for purposes
of the various REIT gross income tests and in the computation of its REIT tax-
able income. See "--Taxation of the Company--General" and "--Gross Income
Tests."
Each partner's share of a partnership's tax attributes is determined in accor-
dance with the partnership agreement, although the allocations will be adjusted
for tax purposes if they do not comply with the technical provisions of Code
Section 704(b) and the regulations thereunder. The Operating Partnership's
allocations of tax attributes are intended to comply with these provisions.
Notwithstanding these allocation provisions, for purposes of complying with the
gross income and asset tests discussed above, the Company will be deemed to own
its proportionate share of each of the assets of the partnership and will be
deemed to have received a share of the income of the Partnership based on its
capital interest in the Operating Partnership.
Accordingly, any resultant increase in the Company's REIT taxable income from
its interest in the Operating Partnership (whether or not a corresponding cash
distribution is also received from the Operating Partnership) will increase its
distribution requirements (see "--Taxation of the Company--Annual Distribution
Requirements"), but will not be subject to federal income tax in the hands of
the Company provided that an amount equal to such income is distributed by the
Company to its shareholders. Moreover, for purposes of the REIT asset tests
(see "--Taxation of the Company--Asset Tests"), the Company will include its
proportionate share of assets held by the Operating Partnership.
Entity Classification Based on the representations of the Company that the
Operating Partnership will satisfy certain conditions to comply with a safe
harbor from "publicly traded partnership" status under the Code, in the opinion
of Mayer, Brown & Platt, under existing federal income tax law and regulations,
the Operating Partnership will be treated for federal income tax purposes as a
partnership, and not as an association taxable as a corporation. Such opinion,
however, is not binding on the Service.
Tax Allocations with Respect to the Properties Pursuant to Section 704(c) of
the Code, income, gain, loss and deductions attributable to appreciated or
depreciated property that is contributed to a partnership in exchange for an
interest in the partnership (such as certain of the Properties or interests
therein) must be allocated in a manner such that the contributing partner is
charged with, or benefits from, respectively, the unrealized gain or unrealized
loss associated with the property at the time of the contribution. The amount
of such unrealized gain or unrealized loss is generally equal to the difference
between the fair market value of the contributed property at the time of con-
tribution, and the adjusted tax basis of such property at the time of contribu-
tion (a "Book-Tax Difference"). Such allocations are solely for federal income
tax purposes and do not affect the book capital amounts or other economic
arrangements among the partners. The formation of the Operating Partnership
included contributions of appreciated property (including certain of the Prop-
erties or interests therein). Consequently, the Partnership Agreement requires
certain allocations to be made in a manner consistent with Section 704(c) of
the Code.
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In general, certain of the Contributing Investors and the Cabot Group Partici-
pants as contributors of certain of the Properties or interests therein will be
allocated lower amounts of depreciation deductions for tax purposes and
increased taxable income and gain on sale by the Operating Partnership on the
contributed assets (including certain of such Properties). This will tend to
eliminate the Book-Tax Difference over the life of the Operating Partnership.
However, the special allocation rules of Section 704(c) do not always entirely
rectify the Book-Tax Difference on an annual basis or with respect to a spe-
cific taxable transaction such as a sale, and accordingly variations from
normal Section 704(c) principles may arise, which could result in the alloca-
tion of additional taxable income to the Company in excess of corresponding
cash proceeds in certain circumstances.
Treasury regulations under Section 704(c) provide partnerships with a choice of
several methods of accounting for Book-Tax Differences. The Operating Partner-
ship and the Company have not yet determined which of the alternative methods
of accounting for Book-Tax Differences will be elected, and accordingly, such
determination could have differing timing and other effects on the Company.
Certain of the Properties acquired in taxable transactions will in general have
a tax basis equal to their fair market value. Section 704(c) of the Code will
not apply in such cases.
Sale of the Properties The Company's share of any gain realized by the Oper-
ating Partnership on the sale of any "dealer property" generally will be
treated as income from a prohibited transaction that is subject 100% penalty
tax. See "--Taxation of the Company--General" and "--Gross Income Tests--The
95% Test." Under existing law, whether property is dealer property is a ques-
tion of fact that depends on all the facts and circumstances with respect to
the particular transaction. The Operating Partnership intends to hold (and, to
the extent within its control, to have any joint venture to which the Operating
Partnership is a partner so hold) the Properties for investment with a view to
long-term appreciation, to engage in the business of acquiring, owning, oper-
ating and developing the Properties and other industrial properties, and to
make such occasional sales of the Properties and other properties acquired sub-
sequent to the date hereof as are consistent with the Company's investment
objectives. Based upon the Company's investment objectives, the Company
believes that overall, the Properties should not be considered dealer property
and that the amount of income from prohibited transactions, if any, will not be
material.
TAXATION OF SHAREHOLDERS
Taxation of Taxable Domestic Shareholders As long as the Company qualifies as a
REIT, distributions made to the Company's taxable domestic shareholders out of
current or accumulated earnings and profits (and not designated as capital gain
dividends) generally will be taxed to such shareholders as ordinary dividend
income and will not be eligible for the dividends received deduction for corpo-
rations. Distributions of net capital gain designated by the Company as capital
gain dividends will be taxed to such shareholders as long-term capital gain (to
the extent they do not exceed the Company's actual net capital gain for the
fiscal year) without regard to the period for which the shareholder has held
its shares of beneficial interest of the Company. However, corporate share-
holders may be required to treat up to 20% of capital gain dividends as ordi-
nary income. To the extent that the Company makes distributions in excess of
current and accumulated earnings and profits, such distributions will be
treated first as a tax-free return of capital to the shareholder, reducing the
tax basis of a shareholder's Common Shares by the amount of such excess distri-
bution (but not below zero), with distributions in excess of the shareholder's
tax basis being taxed as capital gains (if the Common Shares are held by the
shareholder as a capital asset). See "Distribution Policy." In addition, any
dividend declared by the Company in October, November or December of any year
that is payable to a shareholder of record on a specific date in any such month
shall be treated as both paid by the Company and received by the shareholder on
December 31 of such year, provided that the dividend is actually paid by the
Company during January of the following calendar year. Shareholders may not
include in their individual income tax returns any net operating losses of the
Company. Federal income tax rules may also require that certain minimum tax
adjustments and preferences be apportioned to Company shareholders.
The Company is permitted under the Code to elect to retain and pay income tax
on its net capital gain for any taxable year. Under the Taxpayer Relief Act of
1997 (the "1997 Act"), however, if the Company so elects, a shareholder must
include in income such shareholder's proportionate share of the Company's
undistributed capital gain for the taxable year, and will be deemed to have
paid such shareholder's proportionate share of the income tax paid by the Com-
pany with respect to such undistributed capital gain. Such tax would be cred-
ited against the shareholder's tax liability and subject to normal refund pro-
cedures. In addition, each shareholder's basis in such shareholder's shares of
Common Shares would be increased by the amount of undistributed capital gain
(less the tax paid by the Company) included in the shareholder's income.
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The 1997 Act also alters the taxation of capital gain income for individuals
(and for certain trusts and estates). Gain from the sale or exchange of cer-
tain investments held for more than 18 months will be taxed at a maximum cap-
ital gain rate of 20%. Gain from the sale or exchange of such investments held
for 18 months or less, but for more than one-year, will be taxed at a maximum
capital gain rate of 28%. The 1997 Act also provides a maximum rate of 25% for
"unrecaptured section 1250 gain" recognized on the sale or exchange of certain
real estate assets, introduces special rules for "qualified 5-year gain," and
makes certain other changes to prior law. On November 10, 1997, the Service
issued Notice 97-64, which provides generally that the Company may classify
portions of its designated capital gain dividend as (i) a 20% rate gain dis-
tribution (which would be taxed as capital gain in the 20% group), (ii) an
unrecaptured Section 1250 gain distribution (which would be taxed as capital
gain in the 25% group), or (iii) a 28% rate gain distribution (which would be
taxed as capital gain in the 28% group). If no designation is made, the entire
designated capital gain dividend will be treated as a 28% rate capital gain
distribution. Notice 97-64 provides that a REIT must determine the maximum
amounts that it may designate as 20% and 25% rate capital gain dividends by
performing the computation required by the Code as if the REIT were an indi-
vidual whose ordinary income was subject to a marginal tax rate of at least
28%.
In general, any loss upon a sale or exchange of Common Shares by a shareholder
who has held such Common Shares for six months or less (after applying certain
holding period rules) will be treated as a long-term capital loss, to the
extent of distributions from the Company required to be treated by such share-
holders as long-term capital gains.
Backup Withholding The Company will report to its domestic shareholders and to
the Service the amount of dividends paid for each calendar year, and the
amount of tax withheld, if any, with respect thereto. Under the backup with-
holding rules, a shareholder may be subject to backup withholding at a rate of
31% with respect to dividends paid unless such shareholder (i) is a corpora-
tion or comes with certain other exempt categories and, when required, demon-
strates this fact or (ii) provides a taxpayer identification number, certifies
as to no loss of exemption from backup withholding, and otherwise complies
with applicable requirements of the backup withholding rules. A shareholder
that does not provide the Company with its correct taxpayer identification
number may also be subject to penalties imposed by the Service. Any amount
paid as backup withholding is available as a credit against the shareholder's
income tax liability. In addition, the Company may be required to withhold a
portion of capital gain distributions made to any shareholders who fail to
certify their non-foreign status to the Company. See "--Taxation of the Share-
holders--Taxation of Foreign Shareholders" below.
Taxation of Tax-Exempt Shareholders The Service has issued a revenue ruling in
which it held that amounts distributed by a REIT to a tax-exempt employees'
pension trust do not constitute unrelated business taxable income ("UBTI").
Subject to the discussion below regarding a "pension-held REIT," based upon
such ruling and the statutory framework of the Code, distributions by the Com-
pany to a shareholder that is a tax-exempt entity should not constitute UBTI,
provided that the tax-exempt entity has not financed the acquisition of its
shares with "acquisition indebtedness" within the meaning of the Code, that
the shares are not otherwise used in an unrelated trade or business of the
tax-exempt entity, and that the Company, consistent with its present intent,
does not hold a residual interest in a real estate mortgage investment conduit
("REMIC") that is an entity or arrangement that satisfies the standards set
forth in Section 860D of the Code.
If any pension or other retirement trust that qualifies under Section 401(a)
of the Code (a "qualified pension trust") holds more than 10% by value of the
interests in a "pension-held REIT" at any time during a taxable year, a por-
tion of the dividends paid to the qualified pension trust by such REIT may
constitute UBTI. For these purposes, a "pension-held REIT" is defined as a
REIT (i) which would not have qualified as a REIT but for the provisions of
the Code which look through such a qualified pension trust in determining own-
ership of shares of the REIT and (ii) as to which at least one qualified pen-
sion trust holds more than 25% by value of the interests of such REIT or one
or more qualified pension trusts (each owning more than a 10% interest by
value in the REIT) hold in the aggregate more than 50% by value of the inter-
ests in such REIT.
The Company may constitute a "pension-held REIT" immediately after the closing
of the Offering and Formation Transaction. In addition, no assurance can be
given that the Company will not become a "pension-held REIT" in the future.
Taxation of Foreign Shareholders The rules governing United States federal
income taxation of nonresident alien individuals, foreign corporations, for-
eign partnerships and other foreign shareholders (collectively, "Non-U.S.
Shareholders") are highly complex and the following is only a summary of such
rules. Prospective Non-U.S. Shareholders should consult with their own tax
advisors to determine the impact of federal, state and local income tax laws
with regard to an investment in Common Shares, including any reporting
requirements. The Company will qualify as a "domestically-controlled REIT" so
long as less than 50% in value of its shares of beneficial interest are held
by foreign persons (i.e., non-resident aliens, and foreign corporations, part-
nerships, trusts and estates). The Company currently anticipates that it will
qualify as a domestically-controlled REIT. Under these circumstances, gain
from the sale of Common Shares by a foreign person should not be
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subject to United States taxation, unless such gain is effectively connected
with such person's United States trade or business or, in the case of an indi-
vidual foreign person, such person is present within the United States for
more than 182 days during the taxable year. However, notwithstanding the
Company's current anticipation that the Company will qualify as a domesti-
cally-controlled REIT, because the Common Shares will be publicly traded no
assurance can be given that the Company will continue to so qualify.
Distributions of cash generated by the Company's real estate operations (but
not by the sale or exchange of properties) that are paid to foreign persons
generally will be subject to United States withholding tax at a rate of 30%,
unless (i) an applicable tax treaty reduces that tax and the foreign share-
holder files with the Company the required form evidencing such lower rate, or
(ii) the foreign shareholder files an Internal Revenue Service Form 4224 with
the Company claiming that the distribution is "effectively connected" income.
Distributions of proceeds attributable to the sale or exchange of United
States real property interests by the Company are subject to income and with-
holding taxes pursuant to the Foreign Investment in Real Property Tax Act of
1980 ("FIRPTA"), and may also be subject to branch profits tax in the hands of
a shareholder which is a foreign corporation if it is not entitled to treaty
relief or exemption. The Company is required by applicable Treasury regula-
tions to withhold 35% of any distribution to a foreign person that could be
designated by the Company as a capital gain dividend. This amount is credit-
able against the foreign shareholder's FIRPTA tax liability.
The federal income taxation of foreign persons is a highly complex matter that
may be affected by other considerations. Accordingly, foreign investors in the
Company should consult their own tax advisor regarding the income and with-
holding tax considerations with respect to their investments in the Company.
OTHER TAX CONSIDERATIONS
Management Company The income of the Management Company will be subject to
federal and state income tax at full corporate rates, and the Management Com-
pany cannot claim a deduction for the dividends it pays to its shareholders,
including the Operating Partnership. To the extent that the Management Company
pays federal, state or local taxes, it will have less cash available to dis-
tribute to its shareholders, thereby reducing cash available for distribution
by the Company to its shareholders. The Management Company will attempt to
minimize the amount of such taxes, but there can be no assurance whether or
the extent to which the measures it takes to minimize taxes will be success-
ful.
The 1997 Act The 1997 Act modifies many of the provisions relating to the
requirements for qualification as, and the taxation of, a REIT. Among other
things, the 1997 Act (i) replaces the rule that disqualifies a REIT for any
year in which the REIT fails to comply with United States Treasury regulations
that are intended to enable a REIT to ascertain its ownership, with an inter-
mediate penalty for failing to do so; (ii) permits a REIT to render a de
minimis amount of impermissible services to tenants, or in connection with the
management of property, and still treat amounts received with respect to that
property as rents from real property; (iii) permits a REIT to elect to retain
and pay income tax on net long-term capital gains; (iv) repeals a rule that
required that less than 30% of a REIT's gross income be derived from gain from
the sale or other disposition of stock or securities held for less than one
year, certain real property held for less than four years, and property that
is sold or disposed of in a prohibited transaction; (v) lengthens the original
grace period for foreclosure property from two years after the REIT acquired
the property to a period ending on the last day of the third full taxable year
following the taxable year in which the property was acquired; (vi) treats
income from all hedges that reduce the interest rate risk of REIT liabilities,
not just interest rate swaps and caps, as qualifying income under the 95%
gross income test; and (vii) permits any corporation wholly-owned by a REIT to
be treated as a qualified subsidiary, regardless of whether the corporation
has always been owned by a REIT. The changes are effective for taxable years
beginning after the date of enactment. Thus, these changes will apply to the
formation and operation of the Company.
Possible Legislative or Other Actions Affecting Tax Consequences Prospective
shareholders should recognize that the present federal income tax treatment of
an investment in the Company may be modified by legislative, judicial or
administrative action at any time and that any such action may affect invest-
ments and commitments previously made. The rules dealing with federal income
taxation are constantly in review by persons involved in the legislative
process and by the Service and the Treasury Department resulting in revisions
of regulations and revised interpretations of established concepts as well as
statutory changes. No assurance can be given as to the form or content (in-
cluding with respect to effective dates) of any tax legislation which may be
enacted. Revisions in federal tax laws and interpretations thereof can
adversely affect the tax consequences of an investment in the Company.
State and Local Taxes The Company and its shareholders may be subject to state
or local taxation, the Company and the Operating Partnership may be subject to
state or local tax withholding requirements in various jurisdictions,
including
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those in which it or they transact business or reside. The state and local tax
treatment of the Company and its shareholders may not conform to the federal
income tax consequences discussed above. Consequently, prospective shareholders
should consult their own tax advisors regarding the effect of state and local
tax laws on an investment in Common Shares.
IT IS SUGGESTED THAT EACH PROSPECTIVE PURCHASER CONSULT WITH SUCH PURCHASER'S
TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO SUCH PURCHASER OF THE
PURCHASE, OWNERSHIP AND SALE OF COMMON SHARES IN AN ENTITY ELECTING TO BE TAXED
AS A REAL ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN
AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION AND
OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
ERISA CONSIDERATIONS
THE FOLLOWING IS INTENDED TO BE A SUMMARY ONLY AND IS NOT A SUBSTITUTE FOR
CAREFUL PLANNING WITH A PROFESSIONAL. Employee benefit plans subject to ERISA
("ERISA Plans"), governmental plans, Individual Retirement Accounts and Indi-
vidual Retirement Annuities ("IRAs") and certain other non-ERISA plans (collec-
tively, "Plans") considering purchasing the Common Shares should consult with
their own legal counsel regarding specific considerations arising under ERISA,
the Code or state law with respect to their purchase of the Common Shares.
GENERAL FIDUCIARY CONSIDERATIONS
The fiduciary requirements of Title I of ERISA require the investments of an
ERISA Plan to be (i) prudent and in the best interest of the ERISA Plan, its
participants and beneficiaries; (ii) diversified in order to avoid the risk of
large losses, unless it is clearly prudent not to do so; and (iii) authorized
under the terms of the governing documents of the ERISA Plan. Each fiduciary of
an ERISA Plan should carefully consider whether an investment in the Common
Shares is consistent with his or her fiduciary duties.
PROHIBITED TRANSACTIONS
ERISA and the Code prohibit certain transactions that involve an ERISA Plan and
a "party in interest" or "disqualified person" (collectively referred to herein
as a "party in interest") with respect to the plan. A party in interest who
engages in a prohibited transaction with a plan is subject to an excise tax of
15% of the amount involved in the prohibited transaction. If the prohibited
transaction is not corrected by undoing the transaction to the extent possible
and, in any case, putting the plan in a financial position not worse than that
in which it would have been had the party in interest acted in accordance with
the requirements of ERISA, the party in interest is subject to a further excise
tax of 100%. Cabot Partners is a party in interest with respect to one ERISA
plan that is a Contributing Investor. It is not clear that the Formation Trans-
actions would constitute a prohibited transaction with respect to such plan.
Nevertheless, such plan has informed the Company that it is relying on Prohib-
ited Transaction Exemption 84-14 ("PTE 84-14") and has retained a Qualified
Professional Asset Manager ("QPAM") to decide whether or not to enter into the
Formation Transactions. The applicability of such exemption in certain circum-
stances recently has been questioned by the Department of Labor. If it were
ultimately determined that the Formation Transactions constitute a prohibited
transaction, and also that PTE 84-14 does not apply to such plan's participa-
tion in the Formation Transactions, then sanctions could be imposed on Cabot
Partners and the fiduciaries of such plan that could include reallocation of
Units between Cabot Partners and such plan or other remedies, possibly
including rescission of the Property transfers from such plan, intended to put
such plan in a financial position not worse than that in which it would have
been if the parties had acted in accordance with the requirements of ERISA.
Cabot Partners and the Company have received an opinion from Mayer, Brown &
Platt that PTE 84-14 applies to the Formation Transactions with respect to such
plan; however, such opinion is not binding on the Department of Labor, the
Service or any court.
PLAN ASSETS ISSUES
A regulation promulgated by the Department of Labor (the "Regulation") provides
that, except under certain circumstances set forth therein, investment by an
ERISA Plan in a corporation, partnership or other entity may result in the
assets of that entity being treated as the assets of the investing ERISA Plan.
The Regulation provides that an entity's assets will not be treated as "plan
assets" because of an ERISA Plan's investment if the ERISA Plan acquires an
equity interest in the entity which is a "publicly offered security." Under the
Regulation, a "publicly-offered security" is a security that is freely trans-
ferable, part of a class of securities that is widely held and either (i) part
of a class of securities that is registered under section 12(b) or 12(g) of the
Exchange Act, or (ii) sold pursuant to an
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effective registration statement under the Securities Act (provided that the
securities are registered under the Exchange Act within 120 days after the end
of the fiscal year of the issuer during which the offering occurred). The
Common Shares are expected to be registered under section 12(b) of the
Exchange Act.
A security is "widely held" if it is part of a class of securities owned by
100 or more investors independent of the issuer and of each other. The Company
believes that the Common Shares will be widely held upon the closing of the
Offering.
Whether a security is considered "freely transferable" is a factual question
determined upon the relevant facts and circumstances. The Regulation provides
that when a security is part of an offering in which the minimum investment is
$10,000 or less, as is the case with the Offering, certain restrictions ordi-
narily will not affect, alone or in combination, the finding that the securi-
ties are freely transferable. The Company believes that the restrictions
imposed under the Company's Declaration of Trust on the transfer of the Common
Shares are limited to restrictions on transfer generally permitted under the
Regulation and will not result in the failure of the Common Shares to be
"freely transferable." The Company also believes that the restrictions that
apply to the Common Shares that derive from contractual arrangements requested
by the Underwriters in connection with the Offering will not result in the
failure of the Common Shares to be "freely transferable." The Regulation only
establishes a presumption in favor or free transferability, and no assurance
can be given that the Department of Labor or the U.S. Treasury Department will
not reach a contrary conclusion.
Assuming that the Common Shares will be "widely held" and that no facts and
circumstances other than those referred to in the preceding paragraph exist
that restrict transferability, the Company believes that, while the issue is
not entirely free of doubt because of its factual nature, the Common Shares
will be publicly offered securities and the assets of the Company will not be
deemed to be "plan assets" of any Plan which invests in the Common Shares.
The Regulation also provides exceptions to the rule that an entity will hold
plan assets if the entity qualifies as an operating company or a real estate
operating company ("REOC"). A REOC is an entity which, on certain specified
valuation dates, has at least 50 percent of it assets, valued at cost (other
than short term investments pending long term commitment or distribution)
invested in real estate which is managed or developed and with respect to
which the REOC has the right to substantially participate in the management or
development activities; and which throughout the year(s) is engaged directly
in real estate management or development. As the Company will be self-managed,
it may qualify under the Regulation as a REOC. The Company may also constitute
an "operating company" within the meaning of the Regulation.
Notwithstanding the foregoing, if the assets of the Company were deemed to be
"plan assets" under ERISA, the Company's ability to engage in business trans-
actions could be hampered because (i) certain persons exercising discretion as
to the Company's assets might be considered fiduciaries of the ERISA Plans;
and (ii) transactions involving the Company undertaken at their discretion or
transactions that the Company might enter into in the ordinary course of its
business might constitute prohibited transactions under ERISA and the Code.
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UNDERWRITING
Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the Under-
writers named below, for whom J.P. Morgan Securities Inc., Goldman, Sachs &
Co., Prudential Securities Incorporated and Smith Barney Inc. are acting as
representatives (the "Representatives"), have severally agreed to purchase, and
the Company has agreed to sell to them, the respective number of Common Shares
set forth opposite their names below:
<TABLE>
<CAPTION>
---------
NUMBER OF
COMMON
SHARES
UNDERWRITERS ---------
<S> <C>
J.P. Morgan Securities Inc.........................................
Goldman, Sachs & Co. ..............................................
Prudential Securities Incorporated.................................
Smith Barney Inc...................................................
---------
Total............................................................. 7,500,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several Under-
writers to purchase Common Shares are subject to approval of certain legal
matters by counsel and certain other conditions. The Underwriters are obli-
gated to take and pay for all of the Common Shares, if any are taken.
The Underwriters propose initially to offer the Common Shares directly to the
public at the public offering price set forth on the cover page of this Pro-
spectus and to certain dealers at such price less a concession not in excess of
$ per Common Share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per Common Share to certain other
dealers. After the Common Shares are released for sale to the public, the
offering price and such concessions may be changed.
The Company has granted to the Underwriters an option, expiring at the close of
business on the 30th day after the date of this Prospectus, to purchase up to
an additional 1,125,000 Common Shares at the initial public offering price,
less the underwriting discount. The Underwriters may exercise such option
solely to cover over-allotments, if any. To the extent that the Underwriters
exercise such option, each Underwriter will have a firm commitment, subject to
certain conditions, to purchase approximately the same percentage of such
additional Common Shares as the number set forth next to such Underwriter's
name in the preceding table bears to the total number of Common Shares offered
hereby.
The Company and Operating Partnership have agreed not to (i) issue, offer for
sale, contract to sell, sell, register the sale of, pledge or grant any option
for the sale of, or otherwise dispose of (including without limitation upon
exchange of Units), directly or indirectly, any Common Shares or Units or any
securities convertible into or exchangeable or exercisable for any Common
Shares or Units (other than (a) the Common Shares offered hereby, (b) Common
Shares issued pursuant to the Company's Long Term Incentive Plan or a dividend
reinvestment plan, (c) any Units or Common Shares that may be issued in con-
nection with any acquisition of a property or business entity and (d) Units or
Common Shares issued at least six months after the date of this Prospectus in
private placements; provided that the purchasers of such Units or Common
Shares agree not to sell, offer for sale, contract to sell, or otherwise dis-
pose of such Units or Common Shares, or sell or grant options, rights or war-
rants with respect to any such Common Shares or Units for a period of 12
months after the date of this Prospectus), (ii) sell or grant options, rights
or warrants with respect to any Common Shares (other than the grant of options
pursuant to the Company's Long Term Incentive Plan) or (iii) enter into any
swap or other agreement that transfers, in whole or in part, any of the eco-
nomic consequences of ownership of Common Shares or Units, whether or not such
transaction is to be settled by delivery of Common Shares, Units or otherwise,
for a period of 12 months after the date of this Prospectus, without the prior
written consent of J.P. Morgan Securities Inc. Each of the Company's officers
and Trustees has entered into agreements with the Underwriters providing that,
subject to certain exceptions, such person may not sell any Common Shares or
Units prior to 24 months after the date of this Prospectus, without the con-
sent of the Company and J.P. Morgan Securities Inc. In addition, the Company
has agreed not to waive any of the restrictions set forth in the registration
rights agreement described under "Shares Available for Future Sale," including
the limitation of Contributing Investors offering for sale or selling any
Common Shares or Units, without the prior written consent of J.P. Morgan Secu-
rities Inc.
The Company and the Operating Partnership have agreed to indemnify the Under-
writers against certain liabilities, including liabilities under the Securities
Act of 1933.
107
<PAGE>
The Underwriters have informed the Company that they do not expect sales to
accounts over which they exercise discretionary authority to exceed five per-
cent of the total number of shares offered by them.
In connection with the Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Shares.
Specifically, the Underwriters may overallot the offering, creating a syndicate
short position. In addition, the Underwriters may bid for, and purchase, Common
Shares in the open market to cover syndicate shorts or to stabilize the price
of the Common Shares. Finally, the underwriting syndicate may reclaim selling
concessions allowed for distributing the Common Shares in the Offering, if the
syndicate repurchases previously distributed Common Shares in syndicate cov-
ering transactions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the Common Shares
above independent market levels. The Underwriters are not required to engage in
these activities, and may end any of these activities at any time.
The Common Shares have been approved for listing on the NYSE under the symbol
"CTR," subject to official notice of issuance. In order to meet one of the
requirements for listing the Common Shares on the NYSE, the Underwriters have
undertaken to sell lots of 100 or more Common Shares to a minimum of 2,000 ben-
eficial holders.
Prior to the Offering, there has been no public market for the Common Shares.
Consequently, the Offering Price was determined by negotiations among the Com-
pany and the Representatives. Among the factors considered in such negotiations
in addition to prevailing market conditions, were estimated cash available for
distribution and FFO, multiples of comparable publicly traded REITs, the reve-
nues and earnings of the Company, including the historical revenues and earn-
ings of the Properties contributed by the Contributing Investors in recent
periods, the current financial position of the Company and estimates of the
business potential and earnings prospects of the Company. Additionally, consid-
eration was given to the general status of the securities market, the market
conditions for new issues of securities and the demand for securities of compa-
rable companies at the times the offerings for such companies were made. There
can be no assurance that an active trading market will develop for the Common
Shares or that the Common Shares will trade in the public market subsequent to
the Offering at or above the initial public offering price.
At the request of the Company, the Underwriters have reserved up to 375,000
Common Shares for sale at the Offering Price to Trustees, officers and
employees of the Company and its affiliates. The number of Common Shares avail-
able to the general public will be reduced to the extent such persons purchase
such reserved Common Shares. Any reserved Common Shares that are not so pur-
chased by such persons at the closing of the Offering will be offered by the
Underwriters to the general public on the same terms as the Common Shares
offered by this Prospectus.
Certain of the Underwriters and their affiliates have from time to time per-
formed, and may continue to perform in the future, various investment banking
services for Cabot Partners, for which customary compensation has been
received. The Company will pay an advisory fee equal to 0.5% of the gross pro-
ceeds of the Offering (including any exercise of the Underwriters'
overallotment option) to J.P. Morgan for advisory services in connection with
the evaluation, analysis and structuring of the Company's formation as a REIT
in connection with the Offering. J.P. Morgan Capital Corporation, Inc., an
affiliate of J.P. Morgan, has an ownership interest in the Argo Fund, which is
one of the Contributing Investors. In addition, The Prudential Insurance Com-
pany of America, an affiliate of Prudential Securities Incorporated ("Pruden-
tial Securities"), is one of the Contributing Investors. Upon consummation of
the Formation Transactions, the Argo Fund and The Prudential Insurance Company
of America will receive less than 3.8% and 5.3%, respectively, of the ownership
interest of the Company on a fully diluted basis. In addition, Prudential Prop-
erties Group II, an affiliate of Prudential Securities, will receive, directly
or indirectly, approximately $33.3 million of the net proceeds of the Offering
as consideration for the sale of certain Properties in connection with the Com-
pany Acquisitions. J.P. Morgan and Prudential Securities will receive standard
underwriter's compensation in connection with the Offering.
LEGAL MATTERS
Certain legal matters, including the validity of the Common Shares offered
hereby will be passed upon for the Company by Mayer, Brown & Platt, Chicago,
Illinois and for the Underwriters by Cahill Gordon & Reindel (a partnership
including a professional corporation), New York, New York. Mayer, Brown & Platt
and Cahill Gordon & Reindel will rely on Ballard Spahr Andrews & Ingersoll,
Baltimore, Maryland, as to certain matters of Maryland law. The description of
Federal income tax consequences contained in the Prospectus, to the extent that
it constitutes matters of law, summaries of legal matters or legal conclusions,
constitutes the opinion of Mayer, Brown & Platt as to such matters.
108
<PAGE>
EXPERTS
The audited financial statements and schedules (if applicable) of Cabot Indus-
trial Trust, Cabot Partners Limited Partnership, Existing Investors Property
Group, Prudential Properties Group, West Coast Industrial, LLC, Blue Ash Office
L.L.C. and Blue Ash Industrial L.L.C, Seefried Properties Group, Prudential
Properties Group II, DFW Trade Center I, L.P., Buildings 1, 2 and 3, 1055
Dornoch Court, San Diego, CA, Hampden I and II Properties Group, South Royal
Associates Properties Group, Joseph A. Leroy Family LP Property, Raco/Melaver,
L.L.C. and TLI/Cahill Partnership--Spiral Drive included in the Registration
Statement have been audited by Arthur Andersen LLP, independent public accoun-
tants, as indicated in their reports and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
reports.
The financial statements and related schedule of Pennsylvania Public School
Employes' Retirement System Industrial Properties Portfolio included in this
Prospectus and elsewhere in the Registration Statement, have been audited by
KPMG Peat Marwick LLP, independent certified public accountants, to the extent
and for the periods indicated in their report thereon also appearing elsewhere
herein and in the Registration Statement. Such financial statements and related
schedule have been included herein in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The historical cost basis combined statements of assets and liabilities of
Orlando Central Park and 500 Memorial Drive as of December 31, 1996 and 1995
and the related historical cost basis combined statements of income, changes in
net assets, and cash flows for the years then ended, included in this Prospec-
tus, have been included herein in reliance on the report of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as experts
in accounting and auditing.
The historical cost basis balance sheets of Knickerbocker Properties, Inc. II
as of December 31, 1996 and 1995 and the related historical cost basis state-
ments of operations, stockholder's equity and cash flows for the years then
ended, included in this Prospectus, have been included herein in reliance on
the report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
The statement of revenue and certain expenses of Herrod Associates for the year
ended December 31, 1996 has been audited by Grant Thornton LLP, independent
certified public accountants, whose report thereon is included herein in reli-
ance upon the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement with the Commission on Form S-11
under the Securities Act with respect to the Common Shares offered hereby. In
accordance with the rules and regulations of the Commission, this Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits and financial statement schedules thereto. For further infor-
mation with respect to the Company and the Common Shares, reference is made to
the Registration Statement and such exhibits and financial statement schedules,
copies of which may be examined without charge at or obtained upon payment of
prescribed fees from, the Public Reference Section of the Commission at Judi-
ciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and will also be
available for inspection and copying at the regional offices of the Commission
located at 13th Floor, 7 World Trade Center, New York, New York 10048 and at
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. The Commis-
sion maintains a Website at http://www.sec.gov, and reports, proxy and informa-
tion statements and other information regarding registrants, including the Com-
pany, that file electronically with the Commission can be obtained from that
site. The Registration Statement, including exhibits and financial statements
thereto, is available at such Website.
Statements contained in this Prospectus as to the contents of any contract or
other document that is filed as an exhibit to the Registration Statement are
not necessarily complete, and each such statement is qualified in its entirety
by reference to the full text of such contract or document.
The Company will be required to file reports and other information with the
Commission pursuant to the Securities Exchange Act of 1934. Reports, proxy
statements and other information concerning the Company filed with the Commis-
sion pursuant to the Exchange Act may be inspected and copied, or obtained
from, the above described officer of the Commission. Such materials may also be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
109
<PAGE>
GLOSSARY
Unless the context otherwise requires, the following capitalized terms shall
have the meanings set forth below for the purposes of this Prospectus.
"401(k) Plan" means the Cabot Partners Employee Savings Plan that will be
assumed and continued by the Company.
"ACMs" means asbestos-containing materials.
"Acquisition Facility" means a revolving credit facility, which the Company is
negotiating with several financial institutions, under which the Company would
be permitted to borrow up to $325 million.
"ADA" means the Americans with Disabilities Act of 1990.
"Additional Acquisitions" means the Properties acquired or to be acquired after
September 30, 1997 by Cabot Partners on behalf of the Existing Investors.
"Administrator" means the Compensation Committee of the Board of Trustees or
its delegate, as appropriate as administrator of the Company's Long Term Incen-
tive Plan.
"Advisory Contracts" means the investment advisory and property management con-
tracts entered into between Cabot Partners and certain advisory clients.
"Affiliate" means (i) any person that, directly or indirectly, controls or is
controlled by or is under common control with such person, (ii) any other
person that owns, beneficially, directly or indirectly, five percent or more of
the outstanding capital stock, shares or equity interests of such person, or
(iii) any officer, director, employee, partner or trustee of such person or any
person controlling, controlled by or under common control with such person (ex-
cluding trustees and persons serving in similar capacities who are not other-
wise an Affiliate of such person). The term "person" means and includes indi-
viduals, corporations, general and limited partnerships, stock companies or
associations, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other entities and governments and
agencies and political subdivisions thereof. For the purposes of this defini-
tion, "control" (including the correlative meanings of the terms "controlled
by" and "under common control with"), as used with respect to any person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such person, through the owner-
ship of voting securities, partnership interests or other equity interests.
"Annualized Base Rent" means annual contractual rent.
"Annualized Net Rent" means annualized monthly Net Rent from leases in effect
as of September 30, 1997.
"Annualized Net Effective Rent" means Annualized Net Rent, less amortization of
the related leasing costs, as adjusted to reflect the effect of any rent con-
cessions and straight-lining of rent steps.
"Base Line Properties" means properties that were held during the entire period
for both periods being compared in "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
"Beneficiary" means the beneficiary of the Share Trust.
"Book-Tax Difference" means the difference between the fair market value of the
contributed property at the time of contribution, and the adjusted tax basis of
such property at the time of contribution.
"Board of Trustees" means Board of Trustees of the Company.
"Bylaws" means the Company's Bylaws.
"Cabot Advisors" means Cabot, Cabot & Forbes Realty Advisors, Inc.
"Cabot Group" means Cabot Partners and certain affiliated partnerships.
"Cabot Group Participants" means Ferdinand Colloredo-Mansfeld and his wife,
Franz Colloredo-Mansfeld and his siblings, Robert E. Patterson, Andrew D.
Ebbott, Howard B. Hodgson, Jr., Eugene F. Reilly, Neil E. Waisnor, Gerald F.
Ianetta, John F. Malloy and Peter F. Tague.
110
<PAGE>
"Cabot Partners" means Cabot Partners Limited Partnership, a Massachusetts
limited partnership.
"CB Commercial/Torto Wheaton Research" means the CB Commercial Real Estate
Group, Inc./Torto Wheaton Research.
"CC&F" means Cabot, Cabot & Forbes Company.
"Closing Date" means the date of the closing of the Offering.
"C-M Holdings" means C-M Holdings L.P.
"C-M Property Partnerships" means C-M Holdings and its affiliated partner-
ships, in which Ferdinand Colloredo-Mansfeld owns 97% of the partnership
interests, Franz Colloredo-Mansfeld owns 1% of the partnership interests and
members of their immediate family own in the aggregate 2% of the partnership
interests..
"Cognetics" means Cognetics Real Estate, Inc.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Common Shares" means common shares of beneficial interest, $.01 par value per
share, of the Company.
"Company" means Cabot Industrial Trust and its operating subsidiaries,
including the Operating Partnership, of which the Company is the sole general
partner, and the Management Company.
"Compensation Committee" means the committee comprised of two or more of the
Independent Trustees established by the Board of Trustees to determine compen-
sation for the Company's executive officers and to implement the Company's
Long Term Incentive Plan.
"Concurrent Investor" means Morgan Stanley Asset Management Inc., on behalf of
certain of its institutional clients.
"Concurrent Placement" means the Company's sale of $20 million of Common
Shares at the Offering Price to the Concurrent Investor in a private placement
concurrently with the sale of the Common Shares in the Offering.
"Contributing Investors" means (i) the following Cabot Partners advisory cli-
ents who are contributing Properties in the Formation Transactions: CP Invest-
ment Properties, Inc. (the title holding entity of IBM Retirement Plan Trust),
nine title holding entities of New York State Teachers' Retirement System,
State of Wisconsin Investment Board, CP REPROP Corp. (the title holding entity
of the Leland Stanford Jr. Endowment Fund), (ii) the following additional
entities that are contributing Properties in the Formation Transactions: West
Coast Industrial, L.L.C. (the title holding entity of Argo Partnership II,
L.P.), Keystone-New Jersey Property Holding Corp., Keystone-Ohio Property
Holding Corp. and Keystone-Illinois Property Holding Corp. (the title holding
entities of Pennsylvania Public School Employees' Retirement System), Herrod
Associates, and The Prudential Insurance Company of America and (iii) the C-M
Property Partnerships.
"Contribution Agreement" means the Contribution Agreement relating to the Cap-
italization of Cabot Industrial Trust, dated as of October 10, 1997, among the
Company, the Operating Partnership, Cabot Partners and various Contributing
Investors identified therein.
"Control Share Acquisition" means the acquisition of Control Shares, subject
to certain exceptions.
"Control Shares" means shares of beneficial interest that, if aggregated with
all other such shares of beneficial interest of the Company previously
acquired by the acquiror, would entitle the acquiror to exercise voting power
in electing trustees within one of the following ranges of voting power: (i)
one-fifth or more but less than one-third, (ii) one-third or more but less
than a majority, or (iii) a majority of all voting power, but does not include
shares which the acquiring person is then entitled to vote as a result of
having previously obtained shareholder approval.
"Debt Limitation" means the Company's policy limiting its Debt-to-Total Market
Capitalization Ratio to 40%.
"Debt-to-Total Market Capitalization Ratio" means a ratio calculated based on
the Company's total consolidated and unconsolidated debt as a percentage of
the market value of outstanding Common Shares and Units (not owned by the Com-
pany) plus total consolidated and unconsolidated debt, but excluding (i) all
nonrecourse consolidated debt in excess of the Company's proportionate shares
of such debt and (ii) all nonrecourse unconsolidated debt of partnerships in
which the Company is a limited partner.
111
<PAGE>
"Declaration of Trust" means the Declaration of Trust of the Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"ERISA Plans" means employee benefit plans subject to ERISA.
"Excess Shares" means Common or Preferred Shares which are transferred automat-
ically to the Share Trust.
"Exchange Rights" means the right, which is subject to certain exceptions, of
Limited Partners to exchange all or a portion of their Units for Common Shares
on a one-for-one basis pursuant to the terms of the Operating Partnership
Agreement.
"Existing Investors" means those Contributing Investors that are to contribute
Properties which were managed by Cabot Partners as of September 30, 1997 con-
sisting of IBM Retirement Plan Trust, New York State Teachers' Retirement Sys-
tem, State of Wisconsin Investment Board, Leland Stanford Jr. Endowment Fund,
and C-M Property Partnerships.
"Existing Investors Property Group" means the Properties of the Contributing
Investors that were managed by Cabot Partners as of September 30, 1997.
"FIRPTA" means the Foreign Investment in Real Property Tax Act of 1980, as
amended.
"Formation Transactions" means the transactions relating to the formation of
the Company and the acquisition of the Properties and certain other assets.
"FFO" means Funds from Operations which represents net income before minority
interests and extraordinary items, adjusted for depreciation on real property
and amortization of tenant improvements costs and lease commissions, gains from
the sale of properties and FFO attributable to minority interests in consoli-
dated joint ventures whose interests are not convertible into shares of Common
Stock. In addition to cash flow and net income, management generally considers
FFO to be one additional measure of the performance of an equity REIT because
together with net income and cash flows, FFO provides investors with an addi-
tional basis to evaluate the ability of an entity to incur and service debt and
to fund acquisitions and other capital expenditures. However, FFO does not
measure whether cash flow is sufficient to fund all of an entity's cash needs
including principal amortization, capital improvements and distributions to
stockholders. FFO also does not represent cash generated from operating,
investing or financing activities as determined in accordance with GAAP. FFO
should not be considered as an alternative to net income as an indicator of an
entity's operating performance or as an alternative to cash flow as a measure
of liquidity. Further, FFO as disclosed by other REITs may not be comparable to
the Company's calculation of FFO. The Company calculates FFO in accordance with
the White Paper on Funds from Operations approved by the Board of Governors of
NAREIT in March 1995.
"GAAP" means generally accepted accounting principles.
"GP Units" means general partnership interests in the Operating Partnership.
"Indemnitee" means each individual made a party to a proceeding by reason of
his status as a general partner or an officer of the Operating Partnership or a
trustee or officer of the Company or any other Person as the Company may desig-
nate from time to time in its sole and absolute discretion.
"Independent Trustee" means a Trustee of the Company who is not an officer or
employee of the Company.
"Interested Shareholder" means a beneficial owner of ten percent or more of the
voting power of the then outstanding voting shares of beneficial interest of a
trust or an Affiliate thereof.
"IRAs" means government plans, Individual Retirement Accounts and Individual
Retirement Annuities.
"J.P. Morgan" means J.P. Morgan Securities Inc.
"Limited Partners" means the limited partners of the Operating Partnership.
"LC" means leasing commissions.
"Long Term Incentive Plan" means the Long Term Incentive Plan of the Company.
"Management Company" means Cabot Advisors, Inc., a Delaware corporation.
112
<PAGE>
"Market Price" means the last reported sales price reported on the NYSE for a
particular class of Shares on the trading day immediately preceding the rele-
vant date, or if not then traded on the NYSE, the last reported sales price for
such class of Shares on the trading day immediately preceding the relevant date
as reported on any exchange or quotation system over or through which such
class of Shares may be traded, or if not then traded over or through any
exchange or quotation system, then the market price of such class of Shares on
the relevant date as determined in good faith by the Board of Trustees.
"Maryland REIT Law" means Title 8 of the Corporations and Associations Article
of the Annotated Code of Maryland, as amended.
"MGCL" means the Maryland General Corporation Law, as amended.
"Named Executive Officers" means those officers named in the Summary Compensa-
tion Table in the Management-Executive Compensation section.
"NAREIT" means National Association of Real Estate Investment Trusts, Inc.
"NCREIF" means National Council of Real Estate Investment Fiduciaries.
"New Investors Property Group" means the Properties of Contributing Investors
which were not property management clients of Cabot Partners at or prior to
September 30, 1997.
"Net Rent" means contractual rent, excluding any reimbursements for real estate
taxes or operating expenses.
"Non-employee Trustees" means members of the Board of Trustees who are not
employees of the Company.
"Non-U.S. Shareholders" means nonresident alien individuals, foreign corpora-
tions, foreign partnerships and other foreign shareholders.
"NYSE" means the New York Stock Exchange.
"Offering" means the offering of Common Shares hereby.
"Offering Price" means $20.00 per Common Share (the midpoint of the range set
forth in the cover page of this Prospectus).
"Operating Partnership" means Cabot Industrial Properties, L.P., a Delaware
limited partnership.
"Operating Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of the Operating Partnership.
"Ownership Limit" means the direct or indirect ownership of no more than 9.8%
of the Company's number of issued and outstanding shares of beneficial interest
or 9.8% of the total equity value of such shares.
"Participating Employer" means the Company and the Operating Partnership and
designated subsidiaries, including the Management Company.
"Participants" means the individuals who will participate in the Plan.
"Party in Interest" means persons who have specified relationships with a Plan,
"Parties in Interest" under ERISA and "Disqualified Persons" under the Code.
"Phase I ESAs" means Phase I environmental site assessments.
"Plans" means certain employee benefit plans and individual retirement accounts
and individual retirement arrangements.
"Preferred Shares" means the preferred shares of beneficial interest, $.01 par
value per share, of the Company.
"Properties" means, collectively, the industrial buildings acquired by or con-
tributed to the Company or the Operating Partnership in the Formation Transac-
tions.
"Prudential Properties Group" means a combination of assets, liabilities and
operations for seven Properties that are owned by The Prudential Insurance Com-
pany of America on behalf of single client separate accounts which The Pruden-
tial Insurance Company of America has agreed to contribute to the Company in
the Formation Transactions.
"Prudential Properties Group II" means a combination of assets, liabilities and
operations for two Properties that are owned by The Prudential Insurance Com-
pany of America on behalf of single client separate accounts and one Property
owned by a title holding corporation, for which The Prudential Insurance Com-
pany of America provides advisory services.
"Prudential Securities" means Prudential Securities Incorporated.
"PTE 84-14" means Prohibited Transaction Exemption.
113
<PAGE>
"Purported Transferee" means the record holder of the Common or Preferred
Shares that are designated as Excess Shares.
"QPAM" means Qualified Professional Asset Manager.
"qualified pension trust" means a pension or other retirement trust that quali-
fies under Section 401(a) of the Code.
"R&D" means research and development.
"REIT" means a real estate investment trust.
"REOC" means a real estate operating company.
"Regulation" means the United States Department of Labor regulation which pro-
vides that, except under certain circumstances set forth therein, investment by
an ERISA Plan in a corporation, partnership or other entity may result in the
assets of that entity being treated as the assets of the investing ERISA Plan.
"REMIC" means a Real Estate Mortgage Investment Conduit that is an entity or
arrangement that satisfies the standards set forth in Section 860D of the Code.
"Representatives" means J.P. Morgan Securities Inc., Goldman, Sachs & Co., Pru-
dential Securities Incorporated and Smith Barney Inc, in their capacities as
representatives for the Underwriters.
"Restricted Shares" means restricted Common Shares of the Company.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Service" means the U.S. Internal Revenue Service.
"Share Trust" means a trust which holds Common or Preferred Shares of the Com-
pany which have been designated as Excess Shares.
"Share Trustee" means the trustee of the Share Trust.
"Shares" means shares of beneficial interest of the Company.
"The 1997 Act" means the Taxpayer Relief Act of 1997.
"Trustees" means trustees of the Company.
"TI" means tenant improvements.
"UBTI" means unrelated business taxable income.
"Underwriters" means the underwriters named in this Prospectus.
"Underwriting Agreement" means the underwriting agreement whereby the Company
has agreed to sell to the Underwriters, and each of the Underwriters has sever-
ally agreed to purchase, a certain number of Common Shares as set forth
therein.
"Units" means limited partnership interests in the Operating Partnership.
"UPREIT" means the structure of the Company as a REIT that owns all of its
properties through the Operating Partnership.
"Value Test" means 5% of the value of the Company's total assets in the case of
securities of any one non-government issuer.
"Voting Stock Test" means 10% of the outstanding voting securities of any one
non-government issuer.
"White Paper" means the White Paper on Funds from Operations approved by the
Board of Governors of NAREIT in March 1995.
"Workspace" means light assembly and flex/R&D.
114
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CABOT INDUSTRIAL TRUST
Pro Forma Condensed Combined Financial Statements (unaudited).......................................... 38
Pro Forma Condensed Combined Balance Sheet as of September 30, 1997.................................. 39
Notes to Pro Forma Condensed Combined Balance Sheet.................................................. 40
Pro Forma Condensed Combined Statement of Operations for the nine months ended September 30, 1997.... 43
Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 1996............ 44
Notes to Pro Forma Condensed Combined Statements of Operations....................................... 45
Historical:
Report of Independent Auditors...................................................................... F-4
Balance Sheet as of November 30, 1997............................................................... F-5
Notes to Balance Sheet.............................................................................. F-6
CABOT PARTNERS LIMITED PARTNERSHIP
Report of Independent Public Accountants.............................................................. F-8
Balance Sheets as of September 30, 1997, (unaudited) December 31, 1996 and 1995....................... F-9
Statements of Operations for the nine months ended September 30, 1997 (unaudited) and 1996
(unaudited), and the years ended December 31, 1996, 1995 and 1994................................... F-10
Statements of Partners' Capital for the nine months ended September 30, 1997 (unaudited) and the
years ended December 31, 1996, 1995 and 1994....................................................... F-11
Statements of Cash Flows for the nine months ended September 30, 1997 (unaudited) and 1996
(unaudited), and the years ended December 31, 1996, 1995 and 1994................................. F-12
Notes to Financial Statements........................................................................ F-13
EXISTING INVESTORS PROPERTY GROUP
Report of Independent Public Accountants............................................................. F-16
Combined Balance Sheets as of September 30, 1997, December 31, 1996 and 1995......................... F-17
Combined Statements of Income for the nine months ended September 30, 1997 and September 30, 1996
(unaudited), and the years ended December 31, 1996, 1995 and 1994.................................. F-18
Combined Statements of Owners' Equity for the nine months ended September 30, 1997 and the years
ended December 31, 1996, 1995 and 1994............................................................. F-19
Combined Statements of Cash Flows for the nine months ended September 30, 1997 and September 30, 1996
(unaudited), and the years ended December 31, 1996, 1995 and 1994.................................. F-20
Notes to Combined Financial Statements............................................................... F-21
Schedule III -- Real Estate and Accumulated Depreciation as of December 31, 1996..................... F-26
NEW INVESTORS PROPERTY GROUP
ORLANDO CENTRAL PARK AND 500 MEMORIAL DRIVE
Report of Independent Accountants.................................................................... F-30
Combined Statement of Assets and Liabilities as of September 30, 1997 (unaudited), December 31,
1996 and 1995...................................................................................... F-31
Combined Statements of Income for the nine months ended September 30, 1997 and 1996 (unaudited), and
the years ended December 31, 1996, and 1995........................................................ F-32
Combined Statement of Changes in Net Assets for the nine months ended September 30, 1997 (unaudited),
and the years ended December 31, 1996, and 1995..................................................... F-33
Combined Statement of Cash Flows for the nine months ended September 30, 1997 and 1996 (unaudited),
and the years ended December 31, 1996, and 1995..................................................... F-34
Notes to Combined Financial Statements................................................................ F-35
</TABLE>
F-1
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
KNICKERBOCKER PROPERTIES, INC. II
Report of Independent Accountants.......................................................... F-38
Balance Sheets as of September 30, 1997 (unaudited), December 31, 1996 and 1995............ F-39
Statements of Operations for the nine months ended September 30, 1997 and 1996 (unaudited),
and the years ended December 31, 1996, and 1995.......................................... F-40
Statements of Stockholder's Equity for the nine months ended September 30, 1997 (unaudited),
and the years ended December 31, 1996, and 1995.......................................... F-41
Statements of Cash Flows for the nine months ended September 30, 1997 and 1996 (unaudited),
and the years ended December 31, 1996, and 1995.......................................... F-42
Notes to Financial Statements.............................................................. F-43
PENNSYLVANIA PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM INDUSTRIAL
PROPERTIES PORTFOLIO
Independent Auditors' Report............................................................... F-45
Combined Balance Sheets as of September 30, 1997, December 31, 1996 and 1995............... F-46
Combined Statements of Operations for the nine months ended September 30, 1997, the nine
months ended September 30, 1996 (unaudited), and the years ended December 31, 1996 and
the period from July 6, 1995 (date of Acquisition) to December 31, 1995.................. F-47
Combined Statements of Owner's Equity for the nine months ended September 30, 1997, and the
years ended December 31, 1996 and the period from July 6, 1995 (date of Acquisition) to
December 31, 1995........................................................................ F-48
Combined Statements of Cash Flows for the nine months ended September 30, 1997, the nine
months ended September 30, 1996 (unaudited), and the years ended December 31, 1996 and
the period from July 6, 1995 (date of Acquisition) to December 31, 1995.................. F-49
Notes to Combined Financial Statements..................................................... F-50
Schedule III -- Combined Real Estate and Accumulated Depreciation as of September 30, 1997. F-53
PRUDENTIAL PROPERTIES GROUP
Report of Independent Public Accountants.................................................... F-54
Combined Balance Sheets as of September 30, 1997, December 31, 1996 and 1995................ F-55
Combined Statements of Operations for the nine months ended September 30, 1997 and
September 30, 1996 (unaudited), and the years ended December 31, 1996, and 1995........... F-56
Combined Statements of Owners' Equity for the nine months ended September 30, 1997, and the
years ended December 31, 1996, and 1995................................................... F-57
Combined Statements of Cash Flows for the nine months ended September 30, 1997 and September
30, 1996 (unaudited), and the years ended December 31, 1996, and 1995..................... F-58
Notes to Combined Financial Statements...................................................... F-59
Schedule III -- Real Estate and Accumulated Depreciation as of December 31, 1996............ F-62
WEST COAST INDUSTRIAL, LLC
Report of Independent Public Accountants .................................................... F-63
Statements of Revenues and Certain Expenses for the nine months ended September 30, 1997
(unaudited), and the year ended December 31, 1996.......................................... F-64
Notes to Statements of Revenues and Certain Expenses......................................... F-65
FINANCIAL STATEMENTS FOR PROPERTY ACQUISITIONS
HERROD ASSOCIATES
Report of Independent Certified Public Accountants........................................... F-66
Statement of Revenues and Certain Expenses for the nine months ended September 30, 1997
(unaudited), and the year ended December 31, 1996.......................................... F-67
Notes to Statement of Revenues and Certain Expenses.......................................... F-68
BLUE ASH OFFICE L.L.C. AND BLUE ASH INDUSTRIAL L.L.C.
Report of Independent Public Accountants.................................................... F-69
Combined Statements of Revenue and Certain Expenses for the nine months ended September 30,
1997 (unaudited), and the year ended December 31, 1996.................................... F-70
Notes to Combined Statements of Revenue and Certain Expenses................................ F-71
</TABLE>
F-2
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SEEFRIED PROPERTIES GROUP
Report of Independent Public Accountants.............................................................. F-72
Combined Statements of Revenues and Certain Expenses for the nine months ended September 30, 1997
(unaudited), and the year ended December 31, 1996.................................................... F-73
Notes to Combined Statements of Revenues and Certain Expenses......................................... F-74
PRUDENTIAL PROPERTIES GROUP II
Report of Independent Public Accountants.............................................................. F-75
Combined Statements of Revenue and Certain Expenses for the nine months ended September 30, 1997
(unaudited) and the year ended December 31, 1996.................................................... F-76
Notes to Combined Statement of Revenues and Certain Expenses.......................................... F-77
DFW TRADE CENTER I, L.P., BUILDINGS 1, 2 AND 3
Report of Independent Public Accountants.............................................................. F-78
Combined Statements of Revenue and Certain Expenses for the nine months ended September 30, 1997
(unaudited) and from the date of inception to December 31, 1996..................................... F-79
Notes to Combined Statement of Revenues and Certain Expenses.......................................... F-80
1055 DORNOCH COURT, SAN DIEGO, CA
Report of Independent Public Accountants............................................................. F-81
Statements of Revenue and Certain Expenses for the nine months ended September 30, 1997 (unaudited)
and the year ended December 31, 1996............................................................... F-82
Notes to Statement of Revenues and Certain Expenses.................................................. F-83
HAMPDEN I AND II PROPERTIES GROUP
Report of Independent Public Accountants............................................................ F-84
Combined Statements of Revenue and Certain Expenses for the nine months ended September 30, 1997
(unaudited) and the year ended December 31, 1996.................................................. F-85
Notes to Combined Statement of Revenues and Certain Expenses........................................ F-86
SOUTH ROYAL ASSOCIATES PROPERTIES GROUP
Report of Independent Public Accountants............................................................ F-87
Combined Statements of Revenue and Certain Expenses for the nine months ended September 30, 1997
(unaudited) and the year ended December 31, 1996.................................................. F-88
Notes to Combined Statement of Revenues and Certain Expenses........................................ F-89
JOSEPH A. LEROY FAMILY LP PROPERTY
Report of Independent Public Accountants............................................................ F-90
Statements of Revenue and Certain Expenses for the nine months ended September 30, 1997 (unaudited)
and the year ended December 31, 1996.............................................................. F-91
Notes to Statement of Revenues and Certain Expenses................................................. F-92
RACO/MELAVER, L. L. C.
Report of Independent Public Accountants............................................................ F-93
Combined Statements of Revenue and Certain Expenses for the nine months ended September 30, 1997
(unaudited) and the year ended December 31, 1996.................................................. F-94
Notes to Combined Statement of Revenues and Certain Expenses........................................ F-95
TLI/CAHILL PARTNERSHIP--SPIRAL DRIVE
Report of Independent Public Accountants........................................................... F-96
Combined Statements of Revenue and Certain Expenses for the nine months ended September 30, 1997
(unaudited) and the year ended December 31, 1996................................................. F-97
Notes to Combined Statement of Revenues and Certain Expenses....................................... F-98
</TABLE>
F-3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees
of Cabot Industrial Trust:
We have audited the accompanying balance sheet of Cabot Industrial Trust (the
Company), a Maryland real estate investment trust, as of November 30, 1997.
This balance sheet is the responsibility of the Company's management. Our
responsibility is to express an opinion on this balance sheet based on our
audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material mis-
statement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by man-
agement, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Cabot Industrial Trust as of
November 30, 1997, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
December 18, 1997
F-4
<PAGE>
CABOT INDUSTRIAL TRUST
BALANCE SHEET
<TABLE>
<CAPTION>
------------
NOVEMBER 30,
1997
------------
<S> <C>
ASSETS
Cash $ 1,000
------------
$ 1,000
============
Commitments (Note 4)
SHAREHOLDERS' EQUITY
Common Shares, $0.01 par value; 150,000,000 shares authorized,
50 shares issued and outstanding $ 1
Additional Paid in Capital 999
------------
$ 1,000
============
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-5
<PAGE>
CABOT INDUSTRIAL TRUST
NOTES TO BALANCE SHEET
1. ORGANIZATION
Cabot Industrial Trust (the Company), a Maryland real estate investment trust,
was formed on October 10, 1997. The Company will be the managing general
partner of a newly formed limited partnership, Cabot Industrial Properties,
L.P. (the Operating Partnership) and will conduct substantially all of its busi-
ness through the Operating Partnership. The Company will be a fully integrated,
internally managed real estate company formed to continue and expand the
national real estate business of Cabot Partners Limited Partnership. The Com-
pany expects to qualify as a real estate investment trust (a REIT) for federal
income tax purposes.
The Company has had no operations to date.
2. THE FORMATION TRANSACTIONS AND THE OFFERING
The Formation Transactions
Under a Contribution Agreement executed by the Company, the Operating Partner-
ship, Cabot Partners, L.P. and various other contributors, real estate proper-
ties and other assets will be 1) contributed to the Operating Partnership in
exchange for Units in the Operating Partnership that may, subject to certain
restrictions, be exchanged for common shares of the Company or 2) in certain
cases, contributed to the Company in exchange for common shares. The properties
contributed to the Company will be contributed to the Operating Partnership in
exchange for the number of general partnership interests in the Operating Part-
nership equal to the number of common shares exchanged for the property.
The Offering
The Company has filed a registration statement on Form S-11 with the Securities
and Exchange Commission with respect to the offering of 7,500,000 common shares
(exclusive of 1,125,000 shares subject to the underwriters' over-allotment
option) at an assumed offering price of $20 per share. In addition, the Company
will sell 1,000,000 common shares to a single investor in a private offering at
the assumed offering price. The Company will contribute the net proceeds of the
offerings to the Operating Partnership in exchange for the number of general
partnership interests in the Operating Partnership equal to the number of
common shares sold in the offerings.
3. INCOME TAXES
The Company intends to make an election to be taxed as a REIT under Sections
856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code").
As a REIT, the Company generally will not be subject to federal income tax if
it distributes at least 95% of its taxable income for each tax year to its
shareholders. REITs are subject to a number of organizational and operational
requirements. If the Company fails to qualify as a REIT in any taxable year,
the Company will be subject to federal income tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate tax rates.
Even if the Company qualifies for taxation as a REIT, the Company may be sub-
ject to state and local income taxes and to federal income tax and excise tax
on its undistributed income.
F-6
<PAGE>
CABOT INDUSTRIAL TRUST
NOTES TO BALANCE SHEETS (CONTINUED)
4. COMMITMENTS
The Company has executed commitments to acquire the following industrial prop-
erties with proceeds from the Offering and the Concurrent Placement:
<TABLE>
<CAPTION>
-------------------------------------------------
EXPECTED
SQUARE ACQUISITION
PROPERTY LOCATION BUILDING TYPE FEET COST
----------------- ------------- ------ -----------
<S> <C> <C> <C>
Grapevine, TX Bulk Distribution/Workspace 1,182,361 $ 52,279
Mira Loma, CA, Dacula, GA,
Mechanicsburg, PA Bulk Distribution 916,603 34,452
Mechanicsburg, PA Bulk Distribution 494,400 16,730
San Diego, CA Bulk Distribution 220,000 10,885
Orlando, FL Workspace Properties 213,430 9,210
Tucker, GA Workspace Properties 134,163 5,615
Atlanta, GA Workspace Properties 128,000 5,350
Florence, KY Workspace Properties 61,555 4,030
Tempe, AZ Workspace Properties 81,817 3,298
-----------
Total acquisition cost 141,849
Less: Debt assumed 8,392
-----------
Proceeds to fund acquisitions $133,457
===========
</TABLE>
F-7
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Cabot Partners Limited Partnership:
We have audited the accompanying balance sheets of Cabot Partners Limited Part-
nership as of December 31, 1996 and 1995, and the related statements of opera-
tions, partners' capital, and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the responsi-
bility of the management of the Partnership. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence sup-
porting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cabot Partners Limited Part-
nership as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
March 20, 1997 (except with respect to certain matters discussed
in Notes 3 and 6, as to which the date is November 24, 1997)
F-8
<PAGE>
CABOT PARTNERS LIMITED PARTNERSHIP
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
-----------------------------------
DECEMBER 31,
SEPTEMBER 30, ---------------------
1997 1996 1995
------------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and Cash Equivalents $ 1,589 $ 1,709 $ 1,382
Accounts receivable 2,095 1,637 942
Investments 809 836 1,026
Cost of Investment Advisory Contracts
acquired, net of accumulated amortization
of $3,137, $2,425 and $2,034,
respectively 1,017 1,729 2,121
Other assets 98 164 157
---------- --------- ---------
Total Assets $ 5,608 $ 6,075 $ 5,628
========== ========= =========
LIABILITIES AND PARTNERS' CAPITAL
Accrued compensation $ 746 $ 385 $ 457
Accrued liabilities 138 100 106
---------- --------- ---------
Total Liabilities 884 485 563
---------- --------- ---------
Commitments
Partners' Capital 4,724 5,590 5,065
---------- --------- ---------
Total Liabilities and Partners' Capital $ 5,608 $ 6,075 $ 5,628
========== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
CABOT PARTNERS LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
-------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
--------------------- --------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Advisory fees $ 6,778 $ 5,729 $ 7,871 $ 6,482 $ 4,149
Other income 40 14 37 34 10
--------- --------- --------- --------- ---------
Total Revenues 6,818 5,743 7,908 6,516 4,159
--------- --------- --------- --------- ---------
EXPENSES
Compensation 3,138 2,847 3,887 3,416 2,553
Other general and
administrative 1,761 1,515 2,001 1,653 1,714
Depreciation and amor-
tization 732 315 419 453 474
--------- --------- --------- --------- ---------
Total Expenses 5,631 4,677 6,307 5,522 4,741
--------- --------- --------- --------- ---------
Income (loss) before
income (loss) from
unconsolidated
subsidiary 1,187 1,066 1,601 994 (582)
Equity in income (loss)
from unconsolidated
subsidiary 16 (16) (7) 63 46
--------- --------- --------- --------- ---------
Net income (loss) $ 1,203 $ 1,050 $ 1,594 $ 1,057 $ (536)
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
CABOT PARTNERS LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED) AND THE YEARS ENDED
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
---------------------------------------------
GENERAL LIMITED PARTNERS PARTNERS'
PARTNER CLASS A CLASS B CAPITAL
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Partners' Capital, January 1, 1994 $ -- $ 4,544 $ -- $ 4,544
Net loss for the year ended December 31, 1994 -- (536) -- (536)
--------- --------- --------- ---------
Partners' Capital, December 31, 1994 -- 4,008 -- 4,008
Net income for the year ended December 31, 1995 -- 1,057 -- 1,057
--------- --------- --------- ---------
Partners' Capital, December 31, 1995 -- 5,065 -- 5,065
Net income for the year ended December 31, 1996 10 1,194 390 1,594
Distributions -- (1,069) -- (1,069)
--------- --------- --------- ---------
Partners' Capital, December 31, 1996 10 5,190 390 5,590
Net income for the nine months ended
September 30, 1997 (unaudited) -- 1,203 -- 1,203
Distributions (unaudited) (10) (1,669) (390) (2,069)
--------- --------- --------- ---------
Partners' Capital, September 30, 1997
(unaudited) $ -- $ 4,724 $ -- $ 4,724
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
CABOT PARTNERS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
---------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
--------------------- ---------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 1,203 $ 1,050 $ 1,594 $ 1,057 $ (536)
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities:
Depreciation and
amortization 732 315 419 453 474
Unrealized equity in
(income) loss of
investment (16) 16 7 (63) (46)
(Increase) Decrease in
accounts receivable (459) (876) (695) (315) 183
Increase (Decrease) in
accrued liabilities 408 332 (70) 265 (59)
(Decrease) Increase in
accounts payable (9) (18) (9) 6 (28)
Decrease (Increase) in
other assets 49 56 37 (52) --
--------- --------- --------- --------- ---------
Net cash provided by
(used in) operating
activities 1,908 875 1,283 1,351 (12)
--------- --------- --------- --------- ---------
INVESTING ACTIVITIES
Dividends received 43 33 183 77 50
Purchase of furniture,
fixtures and equipment (2) (50) (50) (63) --
Additional cost-basis
investments -- (20) (20) (20) (10)
--------- --------- --------- --------- ---------
Net cash provided by
(used in) investing
activities 41 (37) 113 (6) 40
--------- --------- --------- --------- ---------
FINANCING ACTIVITIES
Distribution to
partners (2,069) (1,069) (1,069) -- --
--------- --------- --------- --------- ---------
Net (decrease) increase
in cash and cash
equivalents (120) (231) 327 1,345 28
Cash and cash equiva-
lents, beginning of
period 1,709 1,382 1,382 37 9
--------- --------- --------- --------- ---------
Cash and cash equiva-
lents, end of period $ 1,589 $ 1,151 $ 1,709 $ 1,382 $ 37
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE>
CABOT PARTNERS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. ORGANIZATION
Cabot Partners Limited Partnership (the Partnership), a Massachusetts limited
partnership, was formed as of July 11, 1990 to provide a variety of real estate
investment advisory and management services, primarily to a small number of
pension and profit-sharing plans and other institutional investors. Nine
investors represented 77% of fee revenues for 1996, eleven investors repre-
sented 81% of fee revenues for 1995 and nine investors represented 56% of fee
revenues for 1994.
The Partnership has two classes of limited partners. The Class A limited part-
ners contributed cash on a disproportionate basis to their ownership interest
and are entitled to a cumulative guaranteed return on their Adjusted Capital
Contributions, as defined, of 10% through December 31, 1995 and 5% thereafter,
payable only out of available cash. In addition, the Class A limited partners
are entitled to a 5% return of their Adjusted Capital Contributions prior to
distributions of available cash to all the partners in accordance with their
ownership interest. As of December 31, 1996, the cumulative unpaid and unrecog-
nized return was $3,978.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Income Taxes
No provision for federal and state income taxes has been recorded relating to
the Partnership, as the partners report their respective shares of the net tax-
able income on their individual tax returns. The tax basis of assets and lia-
bilities does not significantly differ from their historical cost basis.
Furniture, Fixtures and Equipment
Furniture and equipment additions are recorded at cost and are depreciated over
an estimated useful life of five years. Fixtures include leasehold improvements
that are recorded at cost and amortized over the shorter of their useful life
or the remaining lease term.
Cost of Investment Advisory Contracts Acquired
The investment advisory contracts acquired are recorded at their fair market
value at the date of acquisition, based on independent appraisals, and are
being amortized over their estimated lives, which range from eight to sixteen
years.
Allocation of Profits and Losses
Income and losses have been allocated to the partners in accordance with the
provisions of the partnership agreement.
Cash Equivalents
At December 31, 1996, the Partnership had invested excess funds in money market
mutual funds, which have an original maturity of less than three months. For
purposes of the statement of cash flows, this investment has been considered a
cash equivalent.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
The carrying amounts reported on the accompanying balance sheets for cash and
cash equivalents, receivables, accounts payable and accrued expenses approxi-
mate fair value, due to the short-term nature of these investments.
3. INVESTMENTS
The Partnership owns a 1% managing general partnership interest in a real
estate operating company, CP Private Partners, L.P.-I (Private Partners), and
accounts for this investment under the equity method. Under this method of
accounting, the Partnership's pro rata share of Private Partners' income (loss)
is recorded each year as an increase (decrease) in the carrying value of its
investment, and any distributions received are recorded as decreases in the
carrying value.
F-13
<PAGE>
CABOT PARTNERS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
3. INVESTMENTS (CONTINUED)
The condensed unaudited historical cost balance sheets of Private Partners at
December 31, 1996 and December 31, 1995 are as follows:
<TABLE>
<CAPTION>
---------------------
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 186 $ 51
Real estate assets, net 58,776 80,537
Other assets 18,203 25,402
--------- ---------
Total Assets $ 77,165 $ 105,990
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 453 $ 605
Note payable -- 9,665
--------- ---------
Total Liabilities 453 10,270
--------- ---------
PARTNERS' CAPITAL
The Partnership 767 957
Other Partners 75,945 94,763
--------- ---------
Total Partners' Capital 76,712 95,720
--------- ---------
Total Liabilities and Partners' Capital $ 77,165 $ 105,990
========= =========
</TABLE>
The difference between the Partnership's share of the historical partners' cap-
ital and the investment on the balance sheets is due to stating the investment
at fair market value at the time of purchase.
The condensed unaudited historical cost income statements of Private Partners
for the years ended December 31, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
---------------------------------
YEARS ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Sale of real estate assets $ 20,817 $ -- $ --
Rental revenues 11,726 12,778 11,344
Cost of real estate sold (20,411) -- --
Note receivable reduction (7,688) -- --
Operating expenses (5,163) (6,483) (6,761)
--------- --------- ---------
Net (loss) income $ (719) $ 6,295 $ 4,583
========= ========= =========
Dividends paid $ 18,292 $ 7,700 $ 5,000
========= ========= =========
The Partnership's share of:
Net (loss) income $ (7) $ 63 $ 46
========= ========= =========
Dividends paid $ 183 $ 77 $ 50
========= ========= =========
</TABLE>
On September 30, 1997, Private Partners sold real estate assets with a net
book value of $49,480 for a gross purchase price of $60,288. A distribution of
the net sales proceeds of $58,733 was paid to the partners in October, 1997,
and the Partnership received $587.
F-14
<PAGE>
CABOT PARTNERS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
4. MINIMUM FUTURE LEASE OBLIGATIONS
Minimum future lease obligations under noncancelable operating leases for each
of the next five years ending December 31 and thereafter are as follows:
<TABLE>
<CAPTION>
---------
<S> <C>
1997 $ 262
1998 295
1999 311
2000 323
2001 310
</TABLE>
The Partnership incurred rental expense of $304, $242 and $258 for the years
ended December 31, 1996, 1995 and 1994, respectively. The Partnership's only
significant lease is for its office space. The lease provides for the payment
of base rent and operating and real estate taxes over stated base amounts.
5. RELATED PARTY FEES
Under two separate agreements, the Partnership provides acquisition, asset man-
agement and property management services to a partnership and a company sepa-
rately controlled by two Class A limited partners. The agreements are cancel-
able by either party with 30 days notice. After a recent amendment, one agree-
ment provides for annual fixed fees of $158. The other agreement provides for
an acquisition fee of .25% of acquisition cost and an asset management fee of
5% of net operating income. The Partnership received acquisition fees from
related parties of $345 for the nine months ended September 30, 1997, and other
related party fees of $164, $153, $70 and $73 for the nine months ended Sep-
tember 30, 1997 and the years ended December 31, 1996, 1995 and 1994, respec-
tively.
6. SUBSEQUENT EVENTS
Formation Transactions
Under the provisions of the Contribution Agreement executed by each Contrib-
uting Investor, Cabot Partners will contribute its Advisory Contracts and cer-
tain of its other net assets to Cabot Industrial Properties, L.P. (the Oper-
ating Partnership), a subsidiary partnership of Cabot Industrial Trust (the
Company) and will receive Units from the Operating Partnership. The remainder
of the Partnership's net assets will be distributed to its partners. The con-
summation of these proposed transactions is subject to the completion of an
offering of Common Shares of the Company to the public and various other condi-
tions of the Contribution Agreement. The impact of these proposed transactions
is not reflected in the accompanying financial statements.
It is anticipated that the cumulative unpaid and unrecognized return discussed
in Note 1 will be settled through the distribution of Common Shares or Units to
be received in conjunction with the transactions.
Sale of Assets Under Management
Under the terms of the investment advisory agreements, investors have the right
to terminate the Partnership as advisor with 30 days notice. In addition, a
significant portion of the Partnership's assets under management may be trans-
ferred to other advisors or sold as a part of the portfolio's investment strat-
egy.
During 1997, all the properties of three portfolios have been or are expected
to be sold. These portfolios accounted for recurring advisory fees of $2,334
for the nine months ended September 30, 1997 and $3,141, $2,632 and $2,191 for
the years ended December 31, 1996, 1995 and 1994, respectively.
F-15
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Owners of the
Existing Investors Property Group:
We have audited the accompanying combined balance sheets of the Existing
Investors Property Group, as defined in Note 1, as of September 30, 1997,
December 31, 1996 and 1995, and the related combined statements of income, own-
ers' equity and cash flows for the nine months ended September 30, 1997 and
each of the three years in the period ended December 31, 1996. These combined
financial statements are the responsibility of the management of the Existing
Property Investors. Our responsibility is to express an opinion on these com-
bined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence sup-
porting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of the Existing
Investors Property Group at September 30, 1997, December 31, 1996 and 1995, and
the combined results of its operations and its cash flows for the nine months
ended September 30, 1997 and each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic com-
bined financial statements taken as a whole. The schedule listed in the index
of financial statements is presented for the purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic finan-
cial statements. This schedule has been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
December 13, 1997
F-16
<PAGE>
EXISTING INVESTORS PROPERTY GROUP
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
---------------------------------
DECEMBER 31,
SEPTEMBER 30, ------------------
1997 1996 1995
------------- -------- --------
<S> <C> <C> <C>
ASSETS
Rental properties $358,498 $336,836 $301,059
Accumulated depreciation (37,542) (32,528) (26,430)
------------- -------- --------
320,956 304,308 274,629
Cash and Cash Equivalents 1,140 2,423 2,598
Rents and other receivables, net of allow-
ance for doubtful accounts of $253, $339
and $294, respectively 5,515 4,810 6,041
Restricted cash 9 71 353
Lease acquisition costs, net of accumulated
amortization of $6,982, $5,721 and $4,505,
respectively 6,564 6,808 5,307
Other assets 385 312 409
------------- -------- --------
Total Assets $334,569 $318,732 $289,337
============= ======== ========
LIABILITIES AND OWNERS' EQUITY
Mortgage debt $ 18,655 $ 19,292 $ 20,083
Due to Related Parties 3,703 3,668 3,407
Accounts payable and accrued expenses 3,733 3,608 3,606
Other liabilities 977 878 612
------------- -------- --------
Total Liabilities 27,068 27,446 27,708
------------- -------- --------
Contingencies
Owners' Equity 307,501 291,286 261,629
------------- -------- --------
Total Liabilities and Owners' Equity $334,569 $318,732 $289,337
============= ======== ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-17
<PAGE>
EXISTING INVESTORS PROPERTY GROUP
COMBINED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
--------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------- --------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Rental $ 23,968 $ 21,947 $ 29,736 $ 24,691 $ 22,552
Tenant reimbursements 4,343 3,776 4,917 3,759 3,473
Other rental 331 313 334 199 2,035
Interest 94 102 193 145 149
-------- -------- -------- -------- --------
Total Revenues 28,736 26,138 35,180 28,794 28,209
-------- -------- -------- -------- --------
EXPENSES
Real estate taxes 4,005 3,649 5,037 3,979 3,769
Management fees 1,682 1,380 1,889 1,522 1,306
Property operating costs 382 555 755 648 563
Maintenance and repairs 343 324 504 393 502
Grounds care 206 239 298 218 189
Professional services 259 150 214 194 158
Insurance 226 158 210 151 78
Other 186 197 453 231 267
Interest 1,399 1,430 1,931 2,097 2,082
Depreciation and amortization 6,473 5,864 7,966 7,118 6,606
-------- -------- -------- -------- --------
Total Expenses 15,161 13,946 19,257 16,551 15,520
-------- -------- -------- -------- --------
Income before gain on sale of
properties 13,575 12,192 15,923 12,243 12,689
Gain on sale of properties -- -- -- -- 186
-------- -------- -------- -------- --------
Net income $ 13,575 $ 12,192 $ 15,923 $ 12,243 $ 12,875
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-18
<PAGE>
EXISTING INVESTORS PROPERTY GROUP
COMBINED STATEMENTS OF OWNERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND THE YEARS ENDED DECEMBER 31,
1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
---------
<S> <C>
Owners' Equity, January 1, 1994 $ 220,621
Contributions 10,005
Distributions (30,298)
Net income for the year ended December 31, 1994 12,875
---------
Owners' Equity, December 31, 1994 213,203
Contributions 50,326
Distributions (14,143)
Net income for the year ended December 31, 1995 12,243
---------
Owners' Equity, December 31, 1995 261,629
Contributions 35,228
Distributions (21,494)
Net income for the year ended December 31, 1996 15,923
---------
Owners' Equity, December 31, 1996 291,286
Contributions 21,880
Distributions (19,240)
Net income for the nine months ended September 30, 1997 13,575
---------
Owners' Equity, September 30, 1997 $ 307,501
=========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-19
<PAGE>
EXISTING INVESTORS PROPERTY GROUP
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
---------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
--------------------- --------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 13,575 $ 12,192 $ 15,923 $ 12,243 $ 12,875
Adjustments to reconcile
net income to net cash
provided by operating
activities--
Depreciation and amorti-
zation adjustments 6,473 5,864 7,966 7,118 6,606
Rent normalization
adjustments (316) (454) (519) (993) (452)
Gain on sale of real
estate -- -- -- -- (186)
Changes in assets--(in-
crease) decrease--
Rents and other receiv-
ables (389) 1,100 1,750 196 (1,071)
Restricted cash 62 285 282 265 (268)
Other assets (132) (2,102) 25 184 (83)
Changes in liabilities--
increase (decrease)--
Accounts payable and
accrued liabilities 125 (348) 2 705 260
Other liabilities 99 (12) 266 (317) (129)
--------- --------- --------- --------- ---------
Net cash provided by
operations 19,497 16,525 25,695 19,401 17,552
--------- --------- --------- --------- ---------
INVESTING ACTIVITIES
Property acquisitions (19,016) (21,406) (33,485) (49,677) (9,240)
Payments for capital
expenditures and
lease acquisition costs (3,802) (3,411) (5,581) (4,038) (3,545)
Proceeds on the sale of
real estate -- -- -- -- 14,841
Deferred financing costs -- (8) (8) (153) (19)
--------- --------- --------- --------- ---------
Net cash (used in)
provided by investing
activities (22,818) (24,825) (39,074) (53,868) 2,037
--------- --------- --------- --------- ---------
FINANCING ACTIVITIES
Capital contributions 21,880 24,750 35,228 50,326 10,005
Distributions (19,240) (17,304) (21,494) (14,143) (30,298)
Mortgage loan proceeds -- -- -- 10,865 14,950
Repayments of mortgage
loans (637) (587) (791) (11,390) (14,892)
Advances from (repayments
to) related
parties, net 35 209 261 22 639
--------- --------- --------- --------- ---------
Net cash provided by
(used in)
financing activities 2,038 7,068 13,204 35,680 (19,596)
--------- --------- --------- --------- ---------
Net (decrease) increase
in Cash and Cash
Equivalents (1,283) (1,232) (175) 1,213 (7)
Cash and Cash
Equivalents, Beginning
of Period 2,423 2,598 2,598 1,385 1,392
--------- --------- --------- --------- ---------
Cash and Cash Equiva-
lents, End of Period $ 1,140 $ 1,366 $ 2,423 $ 2,598 $ 1,385
========= ========= ========= ========= =========
Supplemental Information
Interest paid during the
period $ 1,220 $ 1,296 $ 1,730 $ 1,909 $ 1,927
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these combined financial state-
ments.
F-20
<PAGE>
EXISTING INVESTORS PROPERTY GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. BUSINESS AND ORGANIZATION
Existing Investors Property Group (EIP Group) is not a legal entity but rather
a combination of all the assets, liabilities and operations for 72 industrial
buildings (as of September 30, 1997) that are owned by certain real estate
title holding corporations, general partnerships and a retirement plan. EIP
Group properties are located in selected markets in the United States and are
managed, leased and renovated by Cabot Partners Limited Partnership (Cabot
Partners), the investment manager, under separate investment management agree-
ments with each owner. The accompanying financial statements include all of the
direct and indirect costs of the business of EIP Group. Refer to Schedule III
for a detailed listing of the industrial properties included in the financial
statements for the year ended December 31, 1996. A summary of EIP Group as of
September 30, 1997 is as follows:
<TABLE>
<CAPTION>
----------------------
NUMBER OF
PROPERTY OWNER BUILDINGS SQUARE FEET
- -------------- --------- -----------
<S> <C> <C>
CP Investment Properties, Inc. 47 5,376,068
CP REPROP, Corp. 9 1,800,400
Properties owned by two real estate title holding
companies and a limited partnership owned by the New
York State Teachers' Retirement System 7 1,245,007
Six general partnerships owned by C-M Holdings Limited
Partnership 7 895,169
State of Wisconsin Investment Board 2 376,440
--------- ----------
Total 72 9,693,084
========= ==========
</TABLE>
2. FORMATION TRANSACTION
Under the provisions of the Contribution Agreement executed by each property
owner, EIP Group will contribute all of its properties to Cabot Industrial
Trust (the Company) or a subsidiary partnership, Cabot Industrial Properties,
L.P. (the Operating Partnership) and will receive common shares from the Com-
pany or units from the Operating Partnership. The consummation of these pro-
posed transactions is subject to the completion of an offering of common shares
of the Company to the public and various other conditions of the Contribution
Agreement. It is anticipated that the Company will seek to qualify as a real
estate investment trust under the Internal Revenue Code of 1986, as amended.
The impact of these proposed transactions is not reflected in the accompanying
combined financial statements.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Combination
The accompanying financial statements have been presented on a combined basis,
at historical cost, because EIP Group is under the common management of Cabot
Partners through investment advisory agreements. All significant intercompany
transactions and balances have been eliminated in combination.
The combined financial statements and information included in these notes to
the combined financial statements for the nine months ended September 30, 1996
are unaudited. In the opinion of management, such combined financial statements
and information reflect all adjustments necessary for a fair presentation of
the results of the interim period. All such adjustments are of a normal, recur-
ring nature.
F-21
<PAGE>
EXISTING INVESTORS PROPERTY GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Rental Properties
Rental properties, which consist of industrial warehouses, are stated at cost.
Expenditures for ordinary maintenance and repairs are expensed to operations as
incurred. Significant renovations and improvements that improve or extend the
useful life of the assets are capitalized. Except for amounts attributed to
land, rental property and improvements are depreciated over their estimated
useful lives using the straight-line method. The estimated useful lives by
asset category are as follows:
<TABLE>
<CAPTION>
-----------
ASSET CATEGORY ESTIMATED
-------------- USEFUL LIFE
-----------
<S> <C>
Buildings and improvements 10 - 40 years
Tenant improvements Life of lease
</TABLE>
Properties consisted of the following at September 30, 1997, December 31, 1996
and 1995:
<TABLE>
<CAPTION>
---------------------------------
DECEMBER 31,
SEPTEMBER 30, -------------------
1997 1996 1995
------------- --------- ---------
<S> <C> <C> <C>
Land $ 78,231 $ 74,939 $ 69,602
Buildings and
improvements 280,267 261,897 231,457
--------- --------- ---------
Total $ 358,498 $ 336,836 $ 301,059
========= ========= =========
</TABLE>
EIP Group adopted the provisions of Statement of Financial Accounting Standards
(SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of, on January 1, 1996. This statement
requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Adoption of this
statement did not have an impact on EIP Group's financial position, results of
operations or liquidity.
Lease Acquisition Costs
Capitalized lease acquisition costs are recorded at cost. These costs are amor-
tized over the respective lives of the leases. Unamortized costs are charged to
expense in the event of any early termination of the lease.
Loan Costs
Capitalized loan costs are recorded at cost and are included in other assets.
These costs are amortized over the term of the respective financings on a
straight-line basis. Loan costs, net of accumulated amortization of $313, $253
and $173 as of September 30, 1997, December 31, 1996 and 1995, respectively,
were approximately $133, $194 and $266, respectively.
Rental Income
All leases are classified as operating leases. Certain leases provide for min-
imum rent payments that increase during the term of the lease and tenant occu-
pancy during periods for which no rent is due. EIP Group records rental income
for the full term of each lease on a straight-line basis. As of September 30,
1997, December 31, 1996 and 1995, the receivables from tenants, net of
reserves, which EIP Group expects to collect over the remaining life of these
leases rather than currently, were approximately $4,414, $4,098 and $3,579,
respectively (Deferred Rent). The amounts included in rental income for the
nine months ended September 30, 1997 and 1996, and for the years ended December
31, 1996, 1995 and 1994, which are not currently due, were approximately $316,
$454, $519, $993 and $452, respectively. Deferred Rent is not recognized for
income tax purposes until received.
Cash Equivalents
EIP Group invests excess funds in short-term investments with original maturi-
ties of less than three months. For the purpose of the statements of cash
flows, all such investments are considered cash equivalents.
F-22
<PAGE>
EXISTING INVESTORS PROPERTY GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Restricted Cash
Restricted cash represents amounts committed for security deposits and utility
deposits. Certain of these amounts may be reduced upon the fulfillment of cer-
tain obligations.
Fair Value of Financial Instruments
Management believes that the carrying basis of EIP Group mortgage loans approx-
imated their respective fair market values as of September 30, 1997 and
December 31, 1996 and 1995. The current value of debt was computed by dis-
counting the projected debt service payments for each loan based on the spread
between the market rate and the effective rate, including the amortization of
loan origination costs, for each year. In addition, the carrying values of cash
and cash equivalents, restricted cash, escrow deposits, rents receivable (ex-
cluding Deferred Rent), accounts payable and accrued expenses are reasonable
estimates of their fair value.
Income Taxes
The properties are owned in tax-exempt real estate title holding companies,
general partnerships or directly by qualified pension plans. Since the taxable
operating results of EIP Group are either included in the income tax returns of
tax-exempt entities or the owners, no provision for state and federal income
taxes has been reflected in these combined financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
4. MORTGAGE DEBT
As of September 30, 1997, December 31, 1996 and 1995, EIP Group had outstanding
fixed rate mortgage indebtedness as follows:
<TABLE>
<CAPTION>
-----------------------------------
DECEMBER 31,
SEPTEMBER 30, ---------------------
1997 1996 1995
------------- --------- ---------
<S> <C> <C> <C>
Three mortgage loans at fixed interest
rate of 8.375% due February 1, 1998 $13,353 $13,813 $14,383
Three mortgage loans at fixed interest
rates ranging from 7.95% to 8.05% due
January 1, 2003 5,302 5,479 5,700
------------- --------- ---------
Total mortgage loans payable $18,655 $19,292 $20,083
============= ========= =========
</TABLE>
Payments on mortgage debt are due in monthly installments of principal and
interest. The weighted average interest rate was approximately 8.3% as of Sep-
tember 30, 1997, December 31, 1996 and 1995. The mortgage loans are secured by
deeds of trust on six properties and all the loans are subject to prepayment
penalties based on a yield maintenance formula in the event of early repayment.
Scheduled payments of principal on mortgage debt as of September 30, 1997 can
be summarized as follows:
<TABLE>
<CAPTION>
------
<S> <C> <C>
For the three months ended December 31, 1997 $221
1998 13,452
1999 281
2000 304
2001 329
2002 4,068
</TABLE>
F-23
<PAGE>
EXISTING INVESTORS PROPERTY GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
5. FUTURE MINIMUM RENTS
Future minimum rental receipts due on noncancellable operating leases for the
industrial properties as of September 30, 1997 were as follows:
<TABLE>
<CAPTION>
-------
<S> <C> <C>
For the three months ended
December 31, 1997 $10,850
1998 30,524
1999 24,988
2000 19,196
2001 15,316
2002 11,213
Thereafter 33,059
</TABLE>
The above amounts do not include additional rental receipts that will become
due as a result of the expense pass-through and escalation provisions in the
leases. EIP Group is subject to the usual business risks associated with the
collection of the above scheduled rents.
6. TRANSACTIONS WITH THE INVESTMENT MANAGER
Under the provisions of the separate investment management agreements, EIP
Group is obligated to pay Cabot Partners acquisition, asset management and
property management fees. Acquisition fees are payable based on a percentage of
acquisition cost (ranging from .90 to 1.50%), asset management fees are payable
based on a percentage (ranging from .4 to .6%) of the properties' fair market
value or a percentage (ranging from 6 to 7%) of the properties' net operating
income and property management fees are payable on certain properties based on
2.25% of gross receipts. Fees incurred under the agreements were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
--------------------- -----------------------------------
1997 1996 1996 1995 1994
--------- --------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
FEE INCURRED
Asset management $ 1,073 $ 805 $ 1,244 $ 981 $ 769
Acquisition 214 139 360 504 100
Property management 452 340 482 437 503
</TABLE>
At September 30, 1997, December 31, 1996 and 1995, total fees payable to Cabot
Partners were $502, $343 and $311, respectively.
Acquisition fees are capitalized to Rental Properties in the accompanying
combined balance sheets and property and asset management fees are expensed as
incurred and included in Management Fees in the accompanying combined
statements of income.
7. DUE TO RELATED PARTIES
Four properties held in general partnerships incurred capital expenditures,
leasing costs and operating deficits that were funded through cash advances
from the general partners. The advances accrue interest at prime plus 1.5% (10%
as of September 30, 1997) and are payable out of cash flows after third-party
debt service of the property. Interest expense related to the advances was
$299, $314 and $265 for the years ended December 31, 1996, 1995 and 1994,
respectively, and $218 and $199 for the nine months ended September 30, 1997
and 1996, respectively.
F-24
<PAGE>
EXISTING INVESTORS PROPERTY GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
8. COMMITMENTS AND CONTINGENCIES
Concentration of Credit Risk
EIP Group maintains its cash and cash equivalents at financial institutions.
The combined account balances at each institution periodically exceed FDIC
insurance coverage, and as a result, there is a concentration of credit risk
related to amounts on deposit in excess of FDIC insurance coverage. Management
of EIP Group believes the risk is not significant.
Environmental
EIP Group, as an owner of real estate, is subject to various environmental
laws of federal and local governments. Compliance by EIP Group with existing
laws has not had a material adverse effect on EIP Group's financial condition
and results of operations, and management does not believe it will have such
an impact in the future. However, EIP Group cannot predict the impact of new
or changed laws or regulations on its current properties or on properties that
it may acquire in the future.
Litigation
Management of EIP Group does not believe there is any litigation threatened
against it other than routine litigation arising out of the ordinary course of
business, some of which is expected to be covered by liability insurance, none
of which is expected to have a material adverse effect on the operating
results or financial position of EIP Group.
Commitments
Subsequent to September 30, 1997, EIP Group has acquired, or has executed com-
mitments to acquire, the following industrial properties:
<TABLE>
<CAPTION>
-----------------------------------------------------
EXPECTED
ACQUISITION
PROPERTY LOCATION BUILDING TYPE SQUARE FEET COST
----------------- ------------------- ----------- -----------
<S> <C> <C> <C>
Herrod Boulevard, South Brunswick, NJ Bulk Distribution 418,000 $18,321
Blue Ash, OH Bulk Distribution
and Workspace 482,942 15,565
Remington Street, Bolingbrook, IL Bulk Distribution 212,333 8,625
Ambassador Road, Naperville, IL Bulk Distribution 203,500 8,106
Luna Road, Carrollton, TX Bulk Distribution 205,400 7,514
----------- -----------
1,522,175 $58,131
=========== ===========
</TABLE>
Pursuant to the Contribution Agreement, EIP Group will contribute the proper-
ties to the Company or the Operating Partnership and will receive common
shares from the Company or units from the Operating Partnership.
F-25
<PAGE>
SCHEDULE III
EXISTING INVESTORS PROPERTY GROUP
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
COSTS
CAPITALIZED
SUBSEQUENT
INITIAL COST TO ACQUISITION
--------------------- ------------------
BUILDINGS AND BUILDINGS AND
PROPERTY NAME(8) LOCATION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS
- ---------------- -------- ------------ ------- ------------- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
South 63rd Avenue Phoenix, AZ -- $ 528 $ 3,953 -- --
North 104th Avenue Tolleson, AZ -- 651 5,948 -- --
South 84th Avenue Tolleson, AZ -- 553 5,116 -- $ 187
Brisbane Industrial Park(1) Brisbane, CA -- 10,519 17,011 -- 409
South Vintage Avenue(2) Ontario, CA -- 2,896 15,836 -- 92
East Jurupa Street Ontario, CA -- 409 2,217 -- --
Santa Anita Avenue Rancho Cucamonga, CA -- 1,200 6,491 -- --
East Dyer Road Santa Ana, CA -- 8,160 10,432 -- 2,162
Pepes Farm Road Milford, CT -- 1,637 8,787 -- 558
Kingspointe Parkway Orlando, FL -- 600 2,581 -- 6
West 73rd Street, Building 1 Bedford Park, IL -- 1,333 4,819 -- 35
West 73rd Street, Building 2 Bedford Park, IL -- 2,148 8,258 -- 45
West 73rd Street, Building 3 Bedford Park, IL -- 986 5,395 -- 77
Harvester Drive Chicago, IL -- 763 5,604 -- 156
Arthur Avenue Elk Grove, IL -- 2,160 4,777 -- 825
Western Avenue Lisle, IL -- 700 1,922 -- 131
Mark Street Wood Dale, IL -- 2,844 9,668 -- --
High Grove Lane Naperville, IL -- 800 3,334 -- 5
North State Road #9(6) Howe, IN 4,620 239 6,112 -- 28
Holton Drive Independence, KY -- 2,100 8,294 -- --
<CAPTION>
----------------------------------------------------------------------------------------------------------
GROSS AMOUNT
CARRIED AS OF
DECEMBER 31, 1996 DEPRECI-
------------------------------ DATE ABLE
BUILDINGS AND ACCUMULATED CONSTRUCTED/ DATE LIVES
PROPERTY NAME(8) LAND IMPROVEMENTS TOTAL(7) DEPRECIATION RENOVATED ACQUIRED IN YEARS(9)
- ---------------- ----- -------------- -------- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
South 63rd Avenue $ 528 $ 3,953 $ 4,481 $ 262 1990 05/27/94 10-40
North 104th Avenue 651 5,948 6,599 15 1995 11/26/96 10-40
South 84th Avenue 553 5,303 5,856 227 1989 04/03/95 10-40
Brisbane Industria 10,519 17,420 27,939 2,781 1965 08/10/90 10-40
South Vintage Aven 2,896 15,928 18,824 3,127 1986 11/20/89 10-40
East Jurupa Street 409 2,217 2,626 10 1986 11/19/96 10-40
Santa Anita Avenue 1,200 6,491 7,691 95 1988 06/27/96 10-40
East Dyer Road 8,160 12,594 20,754 2,173 1954/1965 04/24/89 10-40
Pepes Farm Road 1,637 9,345 10,982 1,795 1980 11/07/88 10-40
Kingspointe Parkwa 600 2,587 3,187 -- 1991 12/30/96 10-40
West 73rd Street, 1,333 4,854 6,187 757 1982 09/13/90 10-40
West 73rd Street, 2,148 8,303 10,451 1,296 1986 09/13/90 10-40
West 73rd Street, 986 5,472 6,458 850 1979 09/13/90 10-40
Harvester Drive 763 5,760 6,523 1,276 1974 07/05/88 10-40
Arthur Avenue 2,160 5,602 7,762 1,166 1978 06/27/88 10-40
Western Avenue 700 2,053 2,753 419 1970/1985 06/27/88 10-40
Mark Street 2,844 9,668 12,512 1,468 1985 12/14/90 10-40
High Grove Lane 800 3,339 4,139 166 1994 01/11/95 10-40
North State Road # 239 6,140 6,379 1,084 1988 12/01/89 10-40
Holton Drive 2,100 8,294 10,394 52 1996 07/6/96 10-40
</TABLE>
F-26
<PAGE>
SCHEDULE III--(CONTINUED)
EXISTING INVESTORS PROPERTY GROUP
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
COSTS
CAPITALIZED GROSS AMOUNT
SUBSEQUENT CARRIED AS OF
INITIAL COST TO ACQUISITION DECEMBER 31, 1996
------------------- ------------------ ----------------------------
BUILDINGS AND BUILDINGS AND BUILDINGS AND
PROPERTY NAME(8) LOCATION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS TOTAL(7)
- ---------------- -------- ------------ ----- ------------- ---- ------------- ----- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Empire Drive Florence, KY -- 212 2,456 -- 57 212 2,513 2,725
Technology Drive Auburn, MA -- 663 2,050 -- 344 663 2,394 3,057
First Avenue Needham, MA -- 2,530 3,120 -- 873 2,530 3,993 6,523
John Hancock
Road(6) Taunton, MA $1,607 257 1,753 -- 133 257 1,886 2,143
Tar Bay Drive Jessup, MD -- 1,415 5,111 -- 13 1,415 5,124 6,539
The Crysen
Center(3) Jessup, MD -- 1,662 4,470 -- 201 1,662 4,671 6,333
Oceano Avenue Jessup, MD -- 1,629 7,940 -- 49 1,629 7,989 9,618
Sysco Court(6) Grand Rapids, MI 2,324 354 2,452 -- -- 354 2,452 2,806
Lakefront Drive Earth City, MO -- 1,320 4,799 -- -- 1,320 4,799 6,119
Industrial Drive
South(6) Gluckstadt, MS 3,742 320 4,325 -- -- 320 4,325 4,645
Old Charlotte
Highway(4)(6) Monroe, NC 5,451 2,311 6,137 -- -- 2,311 6,137 8,448
Reames Road Charlotte, NC -- 365 2,939 -- -- 365 2,939 3,304
Birch Creek Road Bridgeport, NJ -- 24 4,858 $330 -- 354 4,858 5,212
South Middlesex
Avenue, Building
1 Cranbury, NJ -- 1,300 6,817 -- 19 1,300 6,836 8,136
South Middlesex
Avenue, Building
2 Cranbury, NJ -- 1,400 5,470 -- 31 1,400 5,501 6,901
Pierce Street Franklin Township, NJ -- 1,400 5,635 -- 6 1,400 5,641 7,041
International
Street Columbus, OH -- 517 3,537 -- -- 517 3,537 4,054
Twin Creek Drive Columbus, OH -- 705 4,071 -- 8 705 4,079 4,784
Ritter Road(6) Mechanicsburg, PA 1,549 332 1,460 -- -- 332 1,460 1,792
Pilot Drive Memphis, TN -- 1,364 6,334 -- -- 1,364 6,334 7,698
113th Street Arlington, TX -- 506 1,855 -- 18 506 1,873 2,379
---------------------------------------------------------------------------------------------------
<CAPTION>
DEPRECI-
DATE ABLE
ACCUMULATED CONSTRUCTED/ DATE LIVES IN
PROPERTY NAME(8) DEPRECIATION RENOVATED ACQUIRED YEARS(9)
- ---------------- ------------ ------------ -------- --------
<S> <C> <C> <C> <C>
Empire Drive 236 1991 04/06/93 10-40
Technology Drive 436 1973 01/30/89 10-40
First Avenue 636 1961/1992 01/16/90 10-40
John Hancock
Road(6) 316 1986 12/01/89 10-40
Tar Bay Drive 768 1990 12/20/90 10-40
The Crysen
Center(3) 728 1985 08/09/90 10-40
Oceano Avenue 1,290 1987 06/28/90 10-40
Sysco Court(6) 431 1985 12/01/89 10-40
Lakefront Drive 190 1995 06/15/95 10-40
Industrial Drive
South(6) 760 1988 12/01/89 10-40
Old Charlotte
Highway(4)(6) 1,078 1957/1972 12/01/89 10-40
Reames Road 73 1994 02/22/96 10-40
Birch Creek Road 509 1991/1997 10/22/92 10-40
South Middlesex
Avenue, Building
1 341 1989 01/17/95 10-40
South Middlesex
Avenue, Building
2 274 1982 06/02/95 10-40
Pierce Street 141 1984 08/18/95 10-40
International
Street 96 1988 11/21/95 10-40
Twin Creek Drive 212 1989 12/01/94 10-40
Ritter Road(6) 257 1986 12/01/89 10-40
Pilot Drive 212 1987 09/05/95 10-40
113th Street 213 1979 07/20/92 10-40
</TABLE>
F-27
<PAGE>
SCHEDULE III--(CONTINUED)
EXISTING INVESTORS PROPERTY GROUP
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
COSTS
CAPITALIZED
SUBSEQUENT
INITIAL COST TO ACQUISITION
---------------------- ------------------
BUILDINGS AND BUILDINGS AND
PROPERTY NAME(8) LOCATION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS
- ---------------- -------- ------------ -------- ------------- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Airline Drive, Building 1 Coppell, TX -- $ 316 $ 1,850 -- --
Airline Drive, Building 2 Coppell, TX -- 696 3,491 -- --
North Lake Drive Coppell, TX -- 1,165 3,636 $ 68 --
Oakville Industrial Park(5) Alexandria, VA -- 10,552 19,806 -- 2,502
------- -------- -------- ---- ------
Totals $19,293 $ 74,541 $252,927 $398 $8,970
======= ======== ======== ==== ======
<CAPTION>
----------------------------------------------------------------------------------
GROSS AMOUNT
CARRIED AS OF
DECEMBER 31, 1996
--------------------------------- DATE DEPRECIABLE
BUILDINGS AND ACCUMULATED CONSTRUCTED/ DATE LIVES IN
PROPERTY NAME(8) LAND IMPROVEMENTS TOTAL(7) DEPRECIATION RENOVATED ACQUIRED YEARS(9)
- ---------------- -------- ------------- -------- --------------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Airline Drive, Building 1 $ 316 $ 1,850 $ 2,166 $ 171 1991 04/23/93 10-40
Airline Drive, Building 2 696 3,491 4,187 323 1990 04/23/93 10-40
North Lake Drive 1,233 3,636 4,869 337 1982 05/12/93 10-40
Oakville Industrial Park(5) 10,552 22,308 32,860 3,481 1948 02/28/90 10-40
-------- -------- -------- --------
Totals $ 74,939 $261,897 $336,836 $32,528
======== ======== ======== ========
</TABLE>
- ----
(1) Brisbane Industrial Park consists of fifteen buildings.
(2) South Vintage Avenue consists of two buildings.
(3) The Crysen Center consists of two buildings.
(4) Old Charlotte Highway consists of two buildings.
(5) Oakville Industrial Park consists of six buildings.
(6) The loans encumbering these properties are subject to cross default provi-
sions.
(7) The aggregate cost for federal income tax purposes as of December 31, 1996
was approximately $337 million
(8) All buildings within schedule are industrial properties.
(9) Buildings are depreciated over 40 years and certain improvements are depre-
ciated over their expected life.
F-28
<PAGE>
SCHEDULE III--(CONTINUED)
EXISTING INVESTORS PROPERTY GROUP
REAL ESTATE AND ACCUMULATED DEPRECIATION
(DOLLARS IN THOUSANDS)
The changes in the total investment in real estate for the years ended December
31, 1996, 1995, 1994 are as follows:
<TABLE>
<CAPTION>
--------------------------
DECEMBER 31,
--------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Balance, beginning of the year $301,059 $250,387 $255,050
Acquisitions 33,485 49,677 9,240
Improvements 2,292 995 2,290
Properties disposed of -- -- (16,193)
-------- -------- --------
Balance, end of year $336,836 $301,059 $250,387
======== ======== ========
</TABLE>
The changes in accumulated depreciation for the years ended December 31, 1996,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
-----------------------
DECEMBER 31,
-----------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Balance, beginning of the year $26,430 $20,936 $17,949
Depreciation 6,098 5,494 4,821
Properties disposed of -- -- (1,834)
------- ------- -------
Balance, end of year $32,528 $26,430 $20,936
======= ======= =======
</TABLE>
F-29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Members of the State of Wisconsin
Investment Board:
We have audited the accompanying historical cost basis combined statements of
assets and liabilities of ORLANDO CENTRAL PARK and 500 MEMORIAL DRIVE (the
"Properties") as of December 31, 1996 and 1995, and the related historical cost
basis combined statements of income, changes in net assets and cash flows for
the years then ended. These financial statements are the responsibility of the
Properties' investment advisor. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence sup-
porting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the historical cost basis combined financial
position of Orlando Central Park and 500 Memorial Drive as of December 31, 1996
and 1995, and the historical cost basis combined results of their operations
and their cash flows for the years then ended, in conformity with generally
accepted accounting principles.
As indicated in Note 2, these financial statements have been prepared on the
historical cost basis to comply with Regulation S-X of the Securities and
Exchange Commission.
Coopers & Lybrand L.L.P.
New York, New York
October 6, 1997.
F-30
<PAGE>
ORLANDO CENTRAL PARK AND 500 MEMORIAL DRIVE
COMBINED STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
---------------------------------------
DECEMBER 31,
SEPTEMBER 30, ------------------------
1997 1996 1995
------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Real estate investments
Land $ 8,847,965 $ 8,847,965 $ 8,847,965
Building and improvements 40,743,523 40,720,252 40,650,198
Accumulated depreciation (7,089,882) (6,316,118) (5,285,497)
------------- ----------- -----------
42,501,606 43,252,099 44,212,666
Cash and cash equivalents 108,716 591,653 229,262
Accounts receivable and accrued
investment income 56,046 109,938 92,105
Deferred leasing costs, net of
accumulated amortization of
$2,643,292, $2,135,209 and
$1,420,455 at September 30, 1997,
December 31, 1996 and December
31, 1995, respectively 2,860,706 3,392,025 3,331,155
Deferred rent concessions 1,074,538 838,408 985,175
Other assets 65,082 62,815 21,929
------------- ----------- -----------
Total Assets $46,666,694 $48,246,938 $48,872,292
============= =========== ===========
LIABILITIES AND NET ASSETS
Accounts payable and accrued
expenses $ 569,040 597,561 176,895
Security deposits 216,875 211,363 273,105
Unearned rental income 197,265 247,756 120,156
------------- ----------- -----------
Total Liabilities 983,180 1,056,680 570,156
------------- ----------- -----------
Net Assets 45,683,514 47,190,258 48,302,136
------------- ----------- -----------
Total Liabilities and Net Assets $46,666,694 $48,246,938 $48,872,292
============= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE>
ORLANDO CENTRAL PARK AND 500 MEMORIAL DRIVE
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
-----------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
--------------------- -------------------------------
1997 1996 1996 1995
---------- ---------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE
Rental income $4,563,630 $4,315,620 $ 5,521,188 $ 5,757,490
Other income 20,370 90,609 99,749 233,998
---------- ---------- --------------- ---------------
Total Revenue 4,584,000 4,406,229 5,620,937 5,991,488
OPERATING EXPENSES
Property taxes 512,787 502,653 653,797 640,810
Operating expenses 718,686 802,388 1,045,704 928,209
Depreciation and
amortization 1,360,074 1,284,250 1,745,376 1,693,022
---------- ---------- --------------- ---------------
Total Operating
Expenses 2,591,547 2,589,291 3,444,877 3,262,041
---------- ---------- --------------- ---------------
Net income $1,992,453 $1,816,938 $ 2,176,060 $ 2,729,447
========== ========== =============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE>
ORLANDO CENTRAL PARK AND 500 MEMORIAL DRIVE
COMBINED STATEMENT OF CHANGES IN NET ASSETS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED) AND THE YEARS ENDED
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
-----------
<S> <C>
Net assets, January 1, 1995 $49,237,627
Asset advisory fees paid by owner 281,062
Distributions (3,946,000)
Net income for the year ended December 31, 1995 2,729,447
-----------
Net assets, January 1, 1996 48,302,136
Asset advisory fees paid by owner 275,062
Distributions (3,563,000)
Net income for the year ended December 31, 1996 2,176,060
-----------
Net assets, January 1, 1997 47,190,258
Asset advisory fees paid by owner (unaudited) 240,803
Distributions (unaudited) (3,740,000)
Net income for the nine months ended September 30, 1997
(unaudited) 1,992,453
-----------
Net assets, September 30, 1997 (unaudited) $45,683,514
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
ORLANDO CENTRAL PARK AND 500 MEMORIAL DRIVE
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
----------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------ --------------------------
1997 1996 1996 1995
----------- ----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income $ 1,992,453 $ 1,816,938 $ 2,176,060 $ 2,729,447
Adjustments to reconcile
net income to net cash
provided by operating
activities-
Depreciation and
amortization 1,360,074 1,284,250 1,745,376 1,693,022
Asset advisory fee paid
by owner 240,803 206,227 275,062 281,062
Changes in operating
assets and liabilities
Accounts receivable 53,892 (23,676) (17,833) 85,920
Other assets (2,267) (58,011) (40,886) 344
Deferred rent
concessions (236,130) (28,195) 146,767 (197,855)
Accounts payable and
accrued expenses (28,521) 377,760 420,666 (73,095)
Security deposits 5,512 (49,675) (61,742) 5,919
Unearned rental income (50,491) 72,973 127,600 (3,394)
----------- ----------- ------------ ------------
Net cash provided by
operations 3,335,325 3,598,591 4,771,070 4,521,370
----------- ----------- ------------ ------------
CASH FLOWS FROM
INVESTING ACTIVITIES
Payments for capital
expenditures and
leasing commissions (78,262) (85,933) (845,679) (908,717)
----------- ----------- ------------ ------------
Net cash used in
investing activities (78,262) (85,933) (845,679) (908,717)
----------- ----------- ------------ ------------
CASH FLOWS FROM
FINANCING ACTIVITIES
Distributions (3,740,000) (3,134,000) (3,563,000) (3,946,000)
----------- ----------- ------------ ------------
Net cash used in
financing activities (3,740,000) (3,134,000) (3,563,000) (3,946,000)
----------- ----------- ------------ ------------
Net (decrease)
increase in cash (482,937) 378,658 362,391 (333,347)
Cash and cash
equivalents, beginning
of period 591,653 229,262 229,262 562,609
----------- ----------- ------------ ------------
Cash and cash
equivalents, end of
period $ 108,716 $ 607,920 $ 591,653 $ 229,262
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE>
ORLANDO CENTRAL PARK AND 500 MEMORIAL DRIVE
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
The properties known as Orlando Central Park and 500 Memorial Drive (the
"Properties") are owned by the State of Wisconsin Investment Fixed Retirement
Trust Fund ("SWIB") which was established for the benefit of the participants
in the Wisconsin Retirement System. The State of Wisconsin Investment Board has
exclusive control over all monies in the Fixed Retirement Trust Fund. Clarion
Partners, formerly known as Jones Lang Wootton Realty Advisors ("Realty
Advisors"), manages the Properties under an investment advisory agreement.
These financial statements include the combined assets, liabilities and
operations of the Properties which comprise Orlando Central Park (six
industrial bulk warehouse buildings and associated land located in an
industrial park in Orlando, Florida) and 500 Memorial Drive (an industrial
building and associated land located in an industrial park in Franklin
Township, New Jersey).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
These financial statements of the Properties have been combined since they are
under common ownership and management and they are expected to be acquired in a
business combination by a newly formed real estate investment trust in
connection with a public offering of securities.
SWIB is a pension fund and prepares the financial statements, including those
of the Properties, on the fair value basis pursuant to Statement of Financial
Accounting Standards No. 35 and Statement of Government Accounting Standards
No. 25. However, these financial statements have been restated utilizing the
historical cost basis in accordance with the requirement of Regulation S-X
promulgated by of the Securities and Exchange Commission.
Real Estate
Rental property is presented in the balance sheet at cost, which includes fees
for services related to the acquisition of the rental property. Depreciation of
the buildings is computed using the straight-line method over the estimated
useful lives of the property, generally 40 years. Depreciation of improvements
to the rental property is computed using the straight-line method over the
remaining useful lives of the buildings, or the useful life of the improvement,
if shorter. Tenant improvements, including commissions paid for services
related to the signing of new leases, are amortized using the straight-line
method over the lesser of their useful lives or the remaining term of the lease
to which they relate.
Expenditures for major renewals and betterments are capitalized and
expenditures for repairs and maintenance are expensed when incurred. Sales and
dispositions of assets are recorded by removing the related costs and
accumulated depreciation amounts with any resulting gain or loss reflected in
income.
Revenue Recognition
The Properties earn rental income from tenants under leasing arrangements which
generally provide for minimum rents, escalations and charges to tenants for
their pro-rata share of real estate taxes and operating expenses. All leases
have been accounted for as operating leases.
The Properties recognize rental income from leases with scheduled rent
increases on a straight-line basis over the lease term. Deferred rent
concessions represent the difference between the straight-line rent and amounts
currently due.
Investment Advisory Fees:
Fees earned by Jones Lang Wootton Realty Advisors in its role as investment
advisor are paid directly by SWIB. These financial statements reflect those
fees as expenses with a corresponding capital contribution. The asset
management fees for the years ended December 31, 1996 and 1995 were $275,062
and $281,062, respectively. The asset management fees for the nine months ended
September 30, 1997 and 1996 were $240,803 and $206,227, respectively
(unaudited).
Income Taxes
SWIB and the entities through which the Properties are owned are not subject to
income taxes, therefore no income taxes have been provided in the accompanying
financial statements.
F-35
<PAGE>
ORLANDO CENTRAL PARK AND 500 MEMORIAL DRIVE
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Cash and Cash Equivalents
The Properties consider all highly liquid investments purchased with original
maturities of three months or less, at the date of purchase, to be cash equiva-
lents. At times, cash and cash equivalent balances at a limited number of banks
and financial institutions may exceed insurable amounts. The Properties' Man-
agement believes it mitigates its risks by depositing cash or investing cash
equivalents through major financial institutions.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of con-
tingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. The most
significant estimates relate to the recoverability of the real estate invest-
ments. Actual results could differ from those estimates.
3. LEASES
Minimum future rental receipts under noncancelable operating leases which
extend for more than one year at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
-----------
<S> <C>
1997 $ 4,381,000
1998 4,350,000
1999 3,665,000
2000 2,065,000
2001 1,634,000
Thereafter 3,797,000
-----------
$19,892,000
===========
</TABLE>
Minimum rentals above do not include recoveries of operating expenses and real
estate taxes. Recoveries of operating expenses and real estate taxes, included
in base rental income, amounted to approximately $1,068,000 and $1,015,000 for
the years ended December 31, 1996 and 1995, respectively, and approximately
$776,000 and $831,000 for the nine month periods ended September 30, 1997 and
1996, respectively (unaudited).
4. PROPERTY MANAGEMENT FEES
Orlando Central Park
SWIB has retained Trammell Crow Realty Associates, Inc. ("Trammell Crow") to
provide management services to Orlando Central Park on a year-to-year basis.
For its services, Trammell Crow receives a base management fee equal to 3% of
base rents collected, as defined. SWIB has the right to terminate the agree-
ment, with written notice, under certain conditions, as defined in the manage-
ment agreement. For the years ended December 31, 1996 and 1995, fees incurred
under this agreement were $104,590 and $112,083, respectively. For the nine
month periods ended September 30, 1997 and 1996, fees incurred under this
agreement were $84,056 and $77,286, respectively (unaudited).
Trammell Crow earns leasing commissions when it provides services in negoti-
ating and obtaining, on behalf of SWIB, leases with tenants for Orlando Central
Park in accordance with provisions of the management agreement.
Trammell Crow also earns fees for providing construction management services at
the request of SWIB. The Construction Management fee is equal to (i) 8% of the
construction costs of each Capital Repair in excess of $10,000, as defined in
the agreement, and (ii) 8% of the construction costs of alterations, additions
and improvement work made by SWIB on behalf of tenants, as defined in the
agreement.
F-36
<PAGE>
ORLANDO CENTRAL PARK AND 500 MEMORIAL DRIVE
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
500 Memorial Drive
SWIB retained Jones Lang Wootton USA ("JLW USA") to provide management services
to 500 Memorial Drive on a year-to-year basis. For its services, JLW USA
received a management fee equal to 3% of gross income collected, as defined in
the management agreement. For the years ended December 31, 1996 and 1995, fees
incurred under these agreements were $38,595 and $37,259, respectively, of
which $3,194 is included in accrued expenses at December 31, 1995. For the nine
month periods ended September 30, 1997 and 1996, fees under these agreements
were $27,685 and $29,028, respectively (unaudited).
JLW USA earned fees from leasing commissions when it provides services in nego-
tiating and obtaining, on behalf of SWIB, leases with tenants for 500 Memorial
Drive in accordance with provisions of the management agreement, as defined. No
such fees for leasing commissions were incurred in 1997 (unaudited), 1996 and
1995.
Effective January 1, 1997, SWIB entered into an agreement with Institutional
Realty Management, L.L.C., an affiliate of Realty Advisors, to provide manage-
ment services to 500 Memorial Drive on a month-to-month basis which is cancel-
able by either party with 30 days written notice.
5. UNAUDITED PERIODS
The unaudited combined financial statements as of September 30, 1997 and for
the nine months ended September 30, 1997 and 1996 have been prepared pursuant
to the requirements of Article 10 of Regulation S-X promulgated by the Securi-
ties and Exchange Commission. Pursuant to such rules, certain information and
disclosures required by generally accepted accounting principles has been omit-
ted. Such financial statements are unaudited, but in the opinion of the invest-
ment advisor and management, all adjustments (consisting solely of normal
recurring adjustments) necessary for a fair presentation of such combined
financial statements have been included. The results of the combined operations
for the nine months ended September 30, 1997 and 1996 are not necessarily
indicative of the future results of operations for the full year ending
December 31, 1997.
F-37
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder
Knickerbocker Properties, Inc. II
We have audited the accompanying historical cost basis balance sheets of Knick-
erbocker Properties, Inc. II as of December 31, 1996 and 1995, and the related
historical cost basis statements of income, stockholder's equity, and cash
flows for the years then ended. These financial statements are the responsi-
bility of the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence sup-porting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the historical cost basis financial position of
Knickerbocker Properties, Inc. II at December 31, 1996 and 1995, and the
historical cost basis results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Atlanta, Georgia
April 25, 1997
F-38
<PAGE>
KNICKERBOCKER PROPERTIES, INC. II
BALANCE SHEETS
<TABLE>
<CAPTION>
---------------------------------------
DECEMBER 31,
SEPTEMBER 30, ------------------------
1997 1996 1995
------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Real estate investments
Land $ 3,691,118 $ 3,691,118 $ 3,691,118
Building and improvements 17,225,462 16,865,157 16,855,791
Accumulated depreciation (3,253,212) (2,888,428) (2,392,331)
------------- ----------- -----------
17,663,368 17,667,847 18,154,578
Cash and Cash Equivalents 74,019 80,186 66,853
Deferred rent concessions 135,627 148,959 163,944
Other assets 4,374 13,414 --
------------- ----------- -----------
Total Assets $17,877,388 $17,910,406 $18,385,375
============= =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 98,689 33,125 47,759
Security deposits 148,812 146,996 146,527
Dividend payable -- -- 25,090
Unearned rental income 64,856 58,930 17,463
------------- ----------- -----------
Total Liabilities 312,357 239,051 236,839
------------- ----------- -----------
Stockholder's Equity
Common Stock $1 par value; 500 shares
authorized, issued and outstanding 500 500 500
Additional Paid in Capital 17,564,531 17,670,855 18,148,036
Retained Earnings -- -- --
------------- ----------- -----------
17,565,031 17,671,355 18,148,536
------------- ----------- -----------
Total Liabilities and Stockholder's
Equity $17,877,388 $17,910,406 $18,385,375
============= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-39
<PAGE>
KNICKERBOCKER PROPERTIES, INC. II
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
---------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
------------------------------- -------------------------------
1997 1996 1996 1995
--------------- --------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE
Rental income $1,706,917 $ 1,613,475 $ 2,171,445 $ 2,250,490
Other income 5,469 1,004 1,372 1,371
--------------- --------------- --------------- ---------------
Total Revenue 1,712,386 1,614,479 2,172,817 2,251,861
OPERATING EXPENSES
Property taxes 224,106 222,147 296,291 291,804
Operating Expenses 144,363 134,860 178,487 195,505
Depreciation and
amortization 364,784 374,387 496,096 460,397
--------------- --------------- --------------- ---------------
Total Operating
Expenses 733,253 731,394 970,874 947,706
--------------- --------------- --------------- ---------------
Net income $ 979,133 $ 883,085 $ 1,201,943 $ 1,304,155
=============== =============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-40
<PAGE>
KNICKERBOCKER PROPERTIES, INC. II
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED) AND THE YEARS ENDED
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
--------------------------------------------
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 $500 $18,619,408 $ -- $18,619,908
Net income 1,304,155 1,304,155
Dividends (471,372) (1,304,155) (1,775,527)
------ ----------- ----------- -----------
Balance at December 31, 1995 500 18,148,036 -- 18,148,536
Net income 1,201,943 1,201,943
Capital contributions 139,904 139,904
Dividends (617,085) (1,201,943) (1,819,028)
------ ----------- ----------- -----------
Balance at December 31, 1996 500 17,670,855 -- 17,671,355
Net income (unaudited) 979,133 979,133
Capital contributions (unau-
dited) 141,718 -- 141,718
Dividends (unaudited) (248,042) (979,133) (1,227,175)
------ ----------- ----------- -----------
Balance at September 30, 1997
(unaudited) $500 $17,564,531 $ -- $17,565,031
====== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE>
KNICKERBOCKER PROPERTIES, INC. II
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
--------------------------------------------------
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------ ------------------------
1997 1996 1996 1995
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 979,133 $ 883,085 $ 1,201,943 $ 1,304,155
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amorti-
zation 364,784 374,387 496,096 460,397
Changes in assets--(In-
crease) Decrease:
Other assets 9,040 -- (13,414) 8,029
Deferred rent conces-
sions 13,332 (11,985) 14,985 71,580
Changes in liabilities--
Increase (Decrease):
Accounts payable and
accrued expenses 65,564 51,201 (14,634) 12,835
Unearned rental income 5,926 4,274 41,467 (42,622)
Tenant security deposits 1,816 468 469 (1,596)
----------- ----------- ----------- -----------
Net cash provided by oper-
ating activities 1,439,595 1,301,430 1,726,912 1,812,778
----------- ----------- ----------- -----------
INVESTING ACTIVITIES
Capital and tenant
improvements (360,305) (2,528) (9,365) (83,030)
----------- ----------- ----------- -----------
Net cash used for
investing activities (360,305) (2,528) (9,365) (83,030)
----------- ----------- ----------- -----------
FINANCING ACTIVITIES
Capital contributions 141,718 -- 139,904 --
Dividends (1,227,175) (1,273,610) (1,844,118) (1,750,437)
----------- ----------- ----------- -----------
Net cash used in financing
activities (1,085,457) (1,273,610) (1,704,214) (1,750,437)
----------- ----------- ----------- -----------
Net increase (decrease) in
cash (6,167) 25,292 13,333 (20,689)
Cash at beginning of
period 80,186 66,853 66,853 87,542
----------- ----------- ----------- -----------
Cash at end of period $ 74,019 $ 92,145 $ 80,186 $ 66,853
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-42
<PAGE>
KNICKERBOCKER PROPERTIES, INC. II
NOTES TO FINANCIAL STATEMENTS
1. GENERAL
The Company
Knickerbocker Properties, Inc. II (the Company) was incorporated under the
laws of the State of Delaware in June 1990. The Company, which was formed to
acquire real estate, is wholly owned by New York State Teachers' Retirement
System (the Parent), a pension benefit organization for New York State teach-
ers. Capital contributions were made by the Parent to fund real estate pur-
chases.
On June 28, 1990, the Company purchased the property and improvements known as
Kent West Corporate Park, a multi-tenant industrial park located in Kent,
Washington containing five buildings with approximately 400,000 total square
feet. As of December 31, 1996, the Property was fully leased. Cash flow in
excess of operating requirements is distributed to the Parent.
Basis of Presentation
The Company is expected to be acquired in a business combination by a newly
formed real estate investment trust in connection with a public offering of
securities. As such, these financial statements have been prepared utilizing
the historical cost basis in accordance with the requirement of Regulation S-X
promulgated by the Securities and Exchange Commission.
2. SIGNIFICANT ACCOUNTING POLICIES
Rental Property
Rental property is presented in the balance sheets at cost, which includes
fees for services related to the acquisition of the rental property. Deprecia-
tion of the buildings is computed using the straight-line method over the
estimated useful lives of the property, generally 40 years. Depreciation of
improvements to the rental property is computed using the straight-line method
over the remaining useful lives of the buildings, or the useful life of the
improvement, if shorter. Tenant improvements, including commissions paid for
services related to the signing of new leases, are amortized using the
straight-line method over the remaining term of the lease to which they
relate.
Expenditures for major renewals and betterments are capitalized and expendi-
tures for repairs and maintenance are expensed when incurred. Sales and dis-
posals of assets are recorded by removing the related cost and accumulated
depreciation amounts with any resulting gain or loss reflected in income.
Revenue Recognition
Rental revenue is recognized by amortizing future minimum lease payments over
the lease term using the straight-line method. Amounts recorded as straight-
line rent in excess of amounts currently due are included in deferred lease
concessions. Tenants are required to reimburse their pro rata share of the
majority of operating expenses of the industrial park. The Company recognizes
such reimbursement of expenses by tenants as revenue when earned.
Investment Advisors Fees
Fees earned by Equitable Real Estate Management, Inc. ("Equitable"), in its
role as investment advisor, are paid directly by the Parent and, therefore,
are not included in the statements of Operations. Certain other expenses are
paid by Equitable and reimbursed by the Company. Certain officers of Equitable
are also officers of the Company.
Cash and Cash Equivalents
The Company classifies as cash equivalents any investments which can be
readily converted to cash and have an original maturity of less than three
months. At times, cash and cash equivalent balances at a limited number of
banks and financial institutions may exceed insurable amounts. The Company
believes it mitigates its risks by depositing cash or investing cash equiva-
lents through major financial institutions.
Income Taxes
The Company is exempt from income taxation pursuant to Section 501(c)(25) of
the Internal Revenue Code. Accordingly, no income taxes have been provided in
the accompanying financial statements.
F-43
<PAGE>
KNICKERBOCKER PROPERTIES, INC. II
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of con-
tingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported period. The most
significant estimates relate to the recoverablility of the operating property
and the unbilled rent receivable. Actual results could differ from these esti-
mates.
Financial Instruments
The fair value of the Company's financial instruments, including cash and cash
equivalents, approximates carrying value. Fair values were estimated based on
quoted market prices, where available.
Reclassification
Certain reclassifications have been made to the 1995 financial statements to
conform to the 1996 presentation.
3. LEASES
The Company's property is being leased to ten tenants under operating leases
that expire at various dates through 2001. The Company expects that the leases
will be renewed or replaced by other leases in the normal course of business.
Three tenants currently lease 48%, 23% and 10% of the total leaseable space.
Expected future minimum rental on noncancelable long-term leases in effect at
December 31, 1996 are as follows:
<TABLE>
----------
<S> <C>
1997 $1,678,049
1998 1,380,941
1999 758,718
2000 74,421
2001 7,194
</TABLE>
4. COMMITMENTS
The property has been assessed local improvement district costs by the local
county authorities totaling $194,758, of which $103,585 is outstanding at
December 31, 1996. The Company's policy is to bill tenants for their pro rata
share of these assessments. To the extent the property is not fully leased, the
Company would have to incur a pro rata portion of these costs. Since the Com-
pany anticipates having the ability to bill all costs, these amounts are not
included as liabilities on the balance sheet. The payments, including interest
ranging from 7.85% to 7.98%, for each of the next five years and thereafter are
as follows:
<TABLE>
---------
<S> <C>
1997 $ 16,418
1998 15,768
1999 15,118
2000 14,468
2001 13,787
Thereafter 84,961
----------
$ 160,520
==========
</TABLE>
The total amount of interest included in the above minimum payments is $56,935
to be paid through May 2009.
5. MANAGEMENT AGREEMENT
The Company entered into a Real Estate Management Agreement with Crow-Wash-
ington Management Limited Partnership ("Crow") to manage the operations of the
property. In accordance with this agreement, Crow is paid a management fee
based on the rental income collected, as defined. Total management fees for the
nine months ended September 30, 1997 and the years ended December 31, 1996 and
1995 amounted to $47,840 (unaudited), $61,832 and $63,440, respectively.
6. UNAUDITED PERIODS
The unaudited financial statements as of September 30, 1997 and for the nine
months ended September 30, 1997 and 1996 have been prepared pursuant to the
requirements of Article 10 of Regulation S-X promulgated by the Securities and
Exchange Commission. Pursuant to such rules, certain information and disclo-
sures required by generally accepted accounting principles has been omitted.
Such financial statements are unaudited, but in the opinion of the investment
advisor and management, all adjustments (consisting solely of normal recurring
adjustments) necessary for a fair presentation of such financial statements
have been included. The results of the operations for the nine months ended
September 30, 1997 and 1996 are not necessarily indicative of the future
results of operations for the full year ending December 31, 1997.
F-44
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Retirement Board
Pennsylvania Public School Employes' Retirement System:
We have audited the accompanying combined balance sheets of Pennsylvania Public
School Employes' Retirement System Industrial Properties Portfolio Managed by
RREEF America L.L.C. (the Portfolio, as defined in Note 1) as of September 30,
1997, December 31, 1996 and 1995, and the related combined statements of opera-
tions, combined owner's equity, and combined cash flows for the nine months
ended September 30, 1997, the year ended December 31, 1996 and the period from
July 6, 1995 (date of acquisition) to December 31, 1995. In connection with our
audits of the aforementioned combined financial statements, we have also
audited the accompanying Schedule III, Combined Real Estate and Accumulated
Depreciation as of September 30, 1997. These combined financial statements and
combined financial statement schedule are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence sup-
porting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the Port-
folio as of September 30, 1997, December 31, 1996 and 1995, and the combined
results of its operations and its combined cash flows for the nine months ended
September 30, 1997, the year ended December 31, 1996 and the period from July
6, 1995 (date of acquisition) to December 31, 1995 in conformity with generally
accepted accounting principles. Also in our opinion, the related combined
financial statement schedule, when considered in relation to the basic combined
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG Peat Marwick LLP
Chicago, Illinois
December 15, 1997
F-45
<PAGE>
PENNSYLVANIA PUBLIC SCHOOL
EMPLOYES' RETIREMENT SYSTEM
INDUSTRIAL PROPERTIES PORTFOLIO
MANAGED BY RREEF AMERICA L.L.C.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
----------------------------------------
DECEMBER 31,
SEPTEMBER 30, -------------------------
1997 1996 1995
------------- ------------ -----------
<S> <C> <C> <C>
ASSETS
Real estate:
Land $ 21,148,662 $ 21,148,662 $19,116,603
Building and improvements 84,839,709 83,748,432 77,994,039
Accumulated depreciation (6,442,309) (4,142,761) (1,304,717)
------------- ------------ -----------
99,546,062 100,754,333 95,805,925
Cash and cash equivalents 570,685 1,431,677 2,688,020
Rents and other tenant receivables,
net 232,433 462,457 299,613
Accrued rents receivable (note 3) 2,297,972 1,901,037 699,246
Deferred expenses (note 2) 465,555 331,426 1,360
Other assets 41,571 184,028 93,152
------------- ------------ -----------
Total Assets $103,154,278 $105,064,958 $99,587,316
============= ============ ===========
LIABILITIES AND OWNER'S EQUITY
Accounts payable and accrued
expenses $ 1,978,482 $ 1,255,294 $ 500,296
Tenant security deposits 364,047 327,400 303,604
Other liabilities 58,511 42,344 167,679
------------- ------------ -----------
Total Liabilities 2,401,040 1,625,038 971,579
------------- ------------ -----------
Owner's Equity 100,753,238 103,439,920 98,615,737
------------- ------------ -----------
Total Liabilities and Owner's
Equity $103,154,278 $105,064,958 $99,587,316
============= ============ ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-46
<PAGE>
PENNSYLVANIA PUBLIC SCHOOL
EMPLOYES' RETIREMENT SYSTEM
INDUSTRIAL PROPERTIES PORTFOLIO
MANAGED BY RREEF AMERICA, L.L.C.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
-------------------------------------------------
FOR THE
NINE MONTHS ENDED FOR THE YEAR PERIOD FROM
SEPTEMBER 30, ENDED JULY 6, TO
----------------------- DECEMBER 31, DECEMBER 31,
1997 1996 1996 1995
----------- ----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
INCOME
Rental income (note 3) $ 9,214,198 $ 9,187,839 $12,348,207 $5,859,691
Tenant reimbursements 784,769 905,294 1,389,320 333,724
Interest 71,277 121,544 139,190 95,901
Other 13,820 632,207 633,066 2,667
----------- ----------- ------------ ------------
Total Income 10,084,064 10,846,884 14,509,783 6,291,983
EXPENSES
Property taxes 703,198 788,772 1,234,230 271,316
Operating expenses 632,407 720,867 853,074 271,920
Advisor fees (note 4) 1,904,182 544,382 731,836 339,440
Depreciation and amortiza-
tion 2,359,949 2,148,889 2,858,119 1,304,717
----------- ----------- ------------ ------------
Total Expenses 5,599,736 4,202,910 5,677,259 2,187,393
----------- ----------- ------------ ------------
Net income $ 4,484,328 $ 6,643,974 $ 8,832,524 $4,104,590
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-47
<PAGE>
PENNSYLVANIA PUBLIC SCHOOL
EMPLOYES' RETIREMENT SYSTEM
INDUSTRIAL PROPERTIES PORTFOLIO
MANAGED BY RREEF AMERICA L.L.C.
COMBINED STATEMENT OF OWNER'S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997, THE YEAR ENDED
DECEMBER 31, 1996, AND THE PERIOD FROM JULY 6, TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
------------
<S> <C>
Beginning balance $ --
Contributions 98,561,147
Distributions (4,050,000)
Net income 4,104,590
------------
Balance at December 31, 1995 98,615,737
Contributions 7,147,878
Distributions (11,156,219)
Net income 8,832,524
------------
Balance at December 31, 1996 $103,439,920
Contributions 558,990
Distributions (7,730,000)
Net income for the nine months ended September 30, 1997 4,484,328
------------
Balance at September 30, 1997 $100,753,238
============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-48
<PAGE>
PENNSYLVANIA PUBLIC SCHOOL
EMPLOYES' RETIREMENT SYSTEM
INDUSTRIAL PROPERTIES PORTFOLIO
MANAGED BY RREEF AMERICA, L.L.C.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
-------------------------------------------------------
FOR THE YEAR FOR THE PERIOD
NINE MONTHS ENDED ENDED FROM JULY 6, TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------------------ ------------ ---------------
1997 1996 1996 1995
----------- ----------- ------------ ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPER-
ATING ACTIVITIES
Net income $ 4,484,328 $ 6,643,974 $ 8,832,524 $ 4,104,590
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amor-
tization 2,359,949 2,148,889 2,858,119 1,304,717
Accrued rents receiv-
able (396,935) (899,681) (1,201,791) (699,246)
Changes in:
Rents and other tenant
receivables, net 230,024 (3,674) (162,845) (299,613)
Other assets 142,457 (8,557) (90,876) (93,152)
Accounts payable and
accrued expenses 723,188 285,865 754,998 500,296
Tenant security
deposits 36,647 23,846 23,796 303,604
Other liabilities 16,167 (98,295) (125,335) 167,679
----------- ----------- ------------ ---------------
Net cash provided by
operating activities 7,595,825 8,092,367 10,888,590 5,288,875
----------- ----------- ------------ ---------------
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of real estate
investment property
(note 1) -- (6,268,069) (6,268,069) (96,049,051)
Additions and improve-
ments to real estate (1,091,277) (1,302,103) (1,518,383) (1,061,591)
Payment of deferred
expenses (194,530) (108,288) (350,140) (1,360)
----------- ----------- ------------ ---------------
Net cash used in
investing activities (1,285,807) (7,678,460) (8,136,592) (97,112,002)
----------- ----------- ------------ ---------------
CASH FLOWS FROM
FINANCING ACTIVITIES
Contributions 558,990 6,962,217 7,147,878 98,561,147
Distributions (7,730,000) (8,136,219) (11,156,219) (4,050,000)
----------- ----------- ------------ ---------------
Net cash (used in) pro-
vided by financing
activities (7,171,010) (1,174,002) (4,008,341) 94,511,147
----------- ----------- ------------ ---------------
Net increase (decrease)
in cash and cash equiv-
alents (860,992) (760,095) (1,256,343) 2,688,020
Cash and cash equiva-
lents, at beginning of
period 1,431,677 2,688,020 2,688,020 --
----------- ----------- ------------ ---------------
Cash and cash equiva-
lents, at end of period $ 570,685 $ 1,927,925 $ 1,431,677 $ 2,688,020
=========== =========== ============ ===============
</TABLE>
The accompanying notes are an integral part of these combined financial state-
ments.
F-49
<PAGE>
PENNSYLVANIA PUBLIC SCHOOL
EMPLOYES' RETIREMENT SYSTEM
INDUSTRIAL PROPERTIES PORTFOLIO
MANAGED BY RREEF AMERICA L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997, DECEMBER 31, 1996 AND 1995
1. ORGANIZATION
The accompanying combined financial statements include the accounts of the
industrial real estate investment properties and related title holding compa-
nies, collectively referred to as the Portfolio, which are managed by RREEF
America L.L.C. (Advisor) for Pennsylvania Public School Employes' Retirement
System (PSERS). At September 30, 1997, the Portfolio includes the following
wholly owned real estate investment properties:
<TABLE>
<CAPTION>
-----------------------
NAME OF PROPERTIES IN PORTFOLIO LOCATION
------------------------------- -----------------------
<S> <C>
Medinah Roselle, Illinois
Port Jersey Jersey City, New Jersey
Westbelt Columbus, Ohio
</TABLE>
On July 6, 1995, PSERS acquired industrial properties aggregating to approxi-
mately 2,881,000 square feet located in Roselle, Illinois, Jersey City, New
Jersey and Columbus, Ohio for a cash purchase price including closing costs of
approximately $96,049,000.
On January 30, 1996, the Portfolio acquired a 225,000 square foot industrial
property located in Bayonne, New Jersey for a cash purchase price including
closing costs of approximately $6,268,000. The property is included in the Port
Jersey Industrial Properties.
2. SIGNIFICANT ACCOUNTING POLICIES
Depreciation of buildings and improvements is provided using a 30-year life on
a straight-line basis for financial reporting purposes.
Tenant improvement costs, included in buildings and improvements in the accom-
panying balance sheets, are amortized using the straight-line method over the
term of the lease to which they relate.
Maintenance and repair expenses are charged to operations as incurred. Expendi-
tures which extend the economic life or represent additional capital invest-
ments benefiting future periods, including tenant improvements and leasing com-
missions, are capitalized.
Deferred expenses are comprised of leasing commissions and other costs directly
attributable to obtaining tenants are amortized over the terms of the leases to
which they relate.
For purposes of the combined statements of cash flows, the Portfolio considers
all highly liquid marketable securities purchased with a maturity of three
months or less to be cash equivalents.
The preparation of combined financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and dis-
closure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires all entities to disclose the SFAS 107
value of all financial assets and liabilities for which it is practicable to
estimate. Value is defined in the Statement as the amount at which the instru-
ment could be exchanged in a current transaction between willing parties, other
than in a forced or liquidation sale. The Portfolio believes the carrying
amount of its financial instruments approximates SFAS 107 value due to the rel-
atively short maturity of these instruments.
The Portfolio adopted the provisions of Statement of Financial Accounting Stan-
dards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of (SFAS 121), on January 1, 1996. This Statement
requires
F-50
<PAGE>
PENNSYLVANIA PUBLIC SCHOOL
EMPLOYES' RETIREMENT SYSTEM
INDUSTRIAL PROPERTIES PORTFOLIO
MANAGED BY RREEF AMERICA L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997, DECEMBER 31, 1996 AND 1995
that long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or change in circumstances indicate that the car-
rying amount of an asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceed the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Adoption of this Statement did not
have an impact on the Portfolio's combined financial position, combined results
of operations, or liquidity.
The combined financial statements and the related footnotes for the nine months
ended September 30, 1996 are unaudited. In the opinion of management all
adjustments (consisting solely of normal recurring adjustments) necessary for a
fair presentation of such combined financial statements have been included.
Pennsylvania Public School Employes' Retirement System and the Portfolio's
title holding companies are exempt from taxes, and accordingly, no income tax
provision is required.
3. LEASES
The Portfolio has determined that all leases relating to the Portfolio's
investment properties are to be classified as operating leases; therefore,
rental income is reported when earned. Leases range from two to thirteen years
and provide, with the exception of one tenant, for fixed base rent, partial
reimbursement of operating costs, including real estate taxes. The lease of one
tenant provides for the payment of base rent, additional rents related to
increases in the Consumer Price Index and the direct payment of all operating
costs, real estate taxes and insurance related to the property.
The approximate future minimum rentals on noncancelable long-term operating
leases in effect, based on a fiscal year ended September 30, (exclusive of
expense reimbursements), are as follows:
<TABLE>
<CAPTION>
-----------
AMOUNT
-----------
FISCAL
YEAR
<S> <C>
1998 $10,928,411
1999 8,923,333
2000 7,405,415
2001 4,819,145
2002 2,686,121
Thereafter 12,942,560
-----------
Total $47,704,985
===========
</TABLE>
A number of tenant leases contain provisions for scheduled rent increases
during the term of the lease. Generally accepted accounting principles require
that rental income be recorded for the period of occupancy using the effective
monthly rent, which is the average monthly rent for the entire period of occu-
pancy during the term of the lease. Accrued rents receivable represents future
amounts receivable related to scheduled future rent increases. The net
increases in accrued rents receivable during the year ended December 31, 1996
and the period from July 6, 1995 to December 31, 1995, of $1,201,791 and
$699,246, respectively, and for the nine months ended September 30, 1997 and
1996 of $396,935 and $899,681, respectively, represent increases to base rent
revenue.
F-51
<PAGE>
PENNSYLVANIA PUBLIC SCHOOL
EMPLOYES' RETIREMENT SYSTEM
INDUSTRIAL PROPERTIES PORTFOLIO
MANAGED BY RREEF AMERICA L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997, DECEMBER 31, 1996 AND 1995--(CONTINUED)
4. ADVISOR'S AND AFFILIATES FEES
The annual advisor's fee for the Portfolio is calculated in accordance with the
agreement as a percentage of PSERS' original cash investment for those proper-
ties. All fees are paid quarterly in arrears.
The Advisor may also be entitled in future years to receive an incentive fee
based primarily on cumulative unrealized appreciation related to the Portfolio.
An affiliate of the Advisor acts as the property manager, as well as performs
leasing and construction supervisory services. A property management fee is
paid based upon methods and rates that the Advisor believes is consistent with
industry practice. Management fees for the year ended December 31, 1996 and the
period from July 6, 1995 to December 31, 1995 amounted to $287,879 and
$119,055, respectively, and $217,074 and $218,369 for the nine months ended
September 30, 1997 and 1996, respectively. Leasing commissions for the year
ended December 31, 1996 and the period from July 6, 1995 to December 31, 1995
amounted to $216,380 and $1,360, respectively, and $351,528 and $94,858 for the
nine months ended September 30, 1997 and 1996, respectively. Construction
supervisory services for the year ended December 31, 1996 and the period from
July 6, 1995 to December 31, 1995, amounted to $53,981 and $0, respectively,
and $88,850 and $46,263 for the nine months ended September 30, 1997 and 1996,
respectively.
In June 1997, an estimate of the incentive fee became determinable and approxi-
mately $1,345,000 was accrued at September 30, 1997.
F-52
<PAGE>
SCHEDULE III
PENNSYLVANIA PUBLIC SCHOOL EMPLOYES' RETIREMENT
INDUSTRIAL PROPERTIES PORTFOLIO
MANAGED BY RREEF AMERICA L.L.C.
COMBINED REAL ESTATE AND ACCUMULATED DEPRECIATION
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
COSTS CAPITALIZED
SUBSEQUENT TO GROSS AMOUNT AT WHICH CARRIED
INITIAL COST(A) ACQUISITION AT CLOSE OF PERIOD
------------------------- ----------------- -------------------------------------
LAND
BUILDINGS AND BUILDING AND BUILDING AND
DESCRIPTION LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS TOTAL(B)
- ----------- ----------- ------------- ----------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Industrial Property:
Medinah Industrial Park $ 3,120,000 $17,668,584 $ 195,457 $ 3,120,000 $17,864,041 $ 20,984,041
(Roselle, Illinois)
Port Jersey Industrial Park 15,230,059 37,593,965 1,546,093 15,230,059 39,140,058 54,370,117
(Jersey City, New Jersey)
Westbelt Business Park 2,798,603 25,905,909 1,929,701 2,798,603 27,835,610 30,634,213
(Columbus, Ohio)
----------- ------------ ---------------- ----------- ----------- ------------
$21,148,662 $81,168,458 $3,671,251 $21,148,662 $84,839,709 $105,988,371
=========== ============ ================ =========== =========== ============
<CAPTION>
------------------------------------------
LIFE ON WHICH
DEPRECIATION IN
STATEMENT
ACCUMULATED DATE OF OPERATIONS IS
DESCRIPTION DEPRECIATION(C) ACQUIRED COMPUTED
- ----------- --------------- -------- ----------------
<S> <C> <C> <C>
Industrial Property:
Medinah Industrial Park $1,339,252 7/6/95 30 years
(Roselle, Illinois)
Port Jersey Industrial Park 2,914,728 7/6/95 2-30 years
(Jersey City, New Jersey)
Westbelt Business Park 2,188,329 7/6/95 2-30 years
(Columbus, Ohio)
--------------
$6,442,309
==============
</TABLE>
- ---------
Notes
(A) The initial cost to the Portfolio represents the original purchase price of
the properties
(B) Reconciliation of real estate owned:
<TABLE>
<CAPTION>
-------------------------------------
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Balance at beginning of period $104,897,094 $ 97,110,642 --
Additions during period 1,091,277 7,786,452 $97,110,642
------------ ------------ -----------
Balance at end of period $105,988,371 $104,897,094 $97,110,642
============ ============ ===========
</TABLE>
(C) Reconciliation of accumulated depreciation:
<TABLE>
-------------------------------------
<S> <C> <C> <C>
Balance at beginning of period $4,142,761 $1,304,717 --
Depreciation expense 2,299,548 2,838,044 $1,304,717
------------ ------------ -----------
Balance at end of period $6,442,309 $4,142,761 $1,304,717
============ ============ ===========
</TABLE>
F-53
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Owners of the Prudential Properties Group:
We have audited the accompanying combined balance sheets of Prudential Proper-
ties Group, as defined in Note 1, as of September 30, 1997 and December 31,
1996 and 1995, and the related combined statements of operations, owners'
equity and cash flows for the nine months ended September 30, 1997, and each of
the two years in the period ended December 31, 1996. These combined financial
statements are the responsibility of the management of the Prudential Proper-
ties Group. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence sup-
porting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of the Prudential Prop-
erties Group at September 30, 1997 and December 31, 1996 and 1995, and the com-
bined results of its operations and its cash flows for the nine months ended
September 30, 1997, and each of the two years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
combined financial statements taken as a whole. The schedule listed in the
index of financial statements is presented for the purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
Boston, Massachusetts
December 15, 1997
F-54
<PAGE>
PRUDENTIAL PROPERTIES GROUP
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
---------------------------------------
DECEMBER 31,
SEPTEMBER 30, ------------------------
1997 1996 1995
------------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Real Estate Investments
Land $ 8,302,419 $ 8,302,419 $ 7,071,873
Buildings and improvements 35,656,389 35,656,389 25,312,335
------------- ----------- -----------
43,958,808 43,958,808 32,384,208
Accumulated depreciation (4,666,487) (3,997,931) (3,128,071)
------------- ----------- -----------
39,292,321 39,960,877 29,256,137
------------- ----------- -----------
Cash and Cash Equivalents 52,422 61,377 95,161
Accounts Receivable and Accrued
Investment Income 55,500 53,272 89,083
Deferred Leasing Costs 408,925 181,461 72,198
Deferred Rent Concessions 398,752 345,406 190,308
Other Assets 10,225 6,284 6,306
------------- ----------- -----------
Total assets $40,218,145 $40,608,677 $29,709,193
============= =========== ===========
LIABILITIES
Accounts Payable and Accrued Expenses $ 373,313 $ 557,563 $ 381,874
Other Liabilities 121,782 75,000 75,000
------------- ----------- -----------
Total liabilities 495,095 632,563 456,874
------------- ----------- -----------
OWNERS' EQUITY 39,723,050 39,976,114 29,252,319
------------- ----------- -----------
Total Liabilities and Owners' Equity $40,218,145 $40,608,677 $29,709,193
============= =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-55
<PAGE>
PRUDENTIAL PROPERTIES GROUP
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
-------------------------------------------
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
--------------------- ---------------------
1997 1996 1996 1995
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE
Rental income $3,584,600 $3,374,711 $4,433,557 $3,776,468
Other income (1,182) -- 1,975 --
---------- ---------- ---------- ----------
Total revenue 3,583,418 3,374,711 4,435,532 3,776,468
OPERATING EXPENSES
Property taxes 257,842 271,071 371,771 290,962
Operating expenses 479,766 534,570 823,830 482,778
Depreciation and amortization 731,751 725,462 928,406 686,548
---------- ---------- ---------- ----------
Total operating expenses 1,469,359 1,531,103 2,124,007 1,460,288
---------- ---------- ---------- ----------
Net income $2,114,059 $1,843,608 $2,311,525 $2,316,180
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these combined financial state-
ments.
F-56
<PAGE>
PRUDENTIAL PROPERTIES GROUP
COMBINED STATEMENTS OF OWNERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND THE YEARS ENDED DECEMBER 31,
1996 AND 1995
<TABLE>
<S> <C>
-----------
Owners' Equity, December 31, 1994 $29,998,086
Net transfers to owners (3,061,947)
Net income for the year ended December 31, 1995 2,316,180
-----------
Owners' Equity, December 31, 1995 29,252,319
Net transfers from owners 8,412,270
Net income for the year ended December 31, 1996 2,311,525
-----------
Owners' Equity, December 31, 1996 39,976,114
Net transfers to owners (2,367,123)
Net income for the nine months ended September 30, 1997 2,114,059
-----------
Owners' Equity, September 30, 1997 $39,723,050
===========
</TABLE>
The accompanying notes are an integral part of these combined financial state-
ments.
F-57
<PAGE>
PRUDENTIAL PROPERTIES GROUP
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
----------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------- -------------------------
1997 1996 1996 1995
----------- ------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,114,059 $ 1,843,608 $ 2,311,525 $ 2,316,180
Adjustments to reconcile
net income to net cash
provided by operating
activities-
Depreciation and amorti-
zation 731,751 725,462 928,406 686,548
Changes in assets--(in-
crease) decrease
Accounts receivable (2,228) 40,002 35,811 (122,243)
Other assets (3,941) (7,108) 22 (1,621)
Deferred rent conces-
sions (53,346) (148,728) (155,098) (83,760)
Changes in liabilities--
increase (decrease)-
Accounts payable and
accrued expenses (184,251) (2,992) 175,689 193,561
Other liabilities 46,782 -- -- --
----------- ------------ ------------ -----------
Net cash provided by
operations 2,648,826 2,450,244 3,296,355 2,988,665
----------- ------------ ------------ -----------
INVESTING ACTIVITIES
Property acquisitions -- (11,574,600) (11,574,600) --
Payments for capital and
tenant improvements (290,658) (167,809) (167,809) --
----------- ------------ ------------ -----------
Net cash used in
investing activities (290,658) (11,742,409) (11,742,409) --
----------- ------------ ------------ -----------
FINANCING ACTIVITIES
Net transfers (to) from
owners (2,367,123) 9,286,247 8,412,270 (3,061,947)
----------- ------------ ------------ -----------
Net increase (decrease)
in cash (8,955) (5,918) (33,784) (73,282)
Cash, beginning of period 61,377 95,161 95,161 168,443
----------- ------------ ------------ -----------
Cash, end of period $ 52,422 $ 89,243 $ 61,377 $ 95,161
=========== ============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these combined financial state-
ments.
F-58
<PAGE>
PRUDENTIAL PROPERTIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
Prudential Properties Group (Prudential Group) is not a legal entity but rather
a combination of all the assets, liabilities and operations for seven warehouse
buildings some of which are owned by a title holding corporation and some of
which are owned by The Prudential Insurance Company of America on behalf of a
single client separate account. As of October 1, 1997, title to the properties
owned by the title holding corporation was transferred to The Prudential
Insurance Company of America on behalf of a single client separate account.
Prudential Group properties are managed, leased and operated by The
Prudential's Private Asset Management Group--Real Estate Division (PAMG), the
investment manager, pursuant to contracts with its pension fund clients. The
accompanying financial statements include all of the direct and indirect costs
of the business of Prudential Group. A summary of the holdings of Prudential
Group is as follows (each location has one building):
<TABLE>
<CAPTION>
---------------------
BULK DISTRIBUTION NUMBER OF
PROPERTIES TENANTS SQUARE FEET
----------------- --------- -----------
<S> <C> <C>
Ontario, CA 1 284,599
Hebron, KY 1 192,000
Cincinnati, OH 1 192,000
Cincinnati, OH 1 204,800
Columbus, OH 3 205,109
Columbus, OH 1 156,000
Fulton County, GA 1 231,835
--------- -----------
Total 9 1,466,343
--------- -----------
</TABLE>
2. FORMATION TRANSACTION
Under the provisions of the Contribution Agreement executed by each property
owner, Prudential Group will contribute all of its properties to Cabot Indus-
trial Trust (the Company) or a subsidiary partnership, Cabot Industrial Proper-
ties, L.P. (the Operating Partnership) and will receive common shares from the
Company or units from the Operating Partnership. The consummation of these pro-
posed transactions is subject to the completion of an offering of common shares
of the Company to the public and various other conditions of the Contribution
Agreement. It is anticipated that the Company will seek to qualify as a real
estate investment trust under the Internal Revenue Code of 1986, as amended.
The impact of these proposed transactions is not reflected in the accompanying
financial statements.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Combination
The accompanying financial statements have been presented on a combined basis,
at historical cost, because Prudential Group is under the common management of
PAMG through investment advisory agreements. All significant intercompany
transactions and balances have been eliminated in combination.
The combined financial statements and information included in these notes to
the combined financial statements for the nine months ended September 30, 1996
are unaudited. In the opinion of management, such financial statements and
information reflect all adjustments necessary for a fair presentation of the
results of the interim period. All such adjustments are of a normal, recurring
nature.
Real Estate Investments
Real estate investments, which consist of industrial warehouses, are stated at
cost. Expenditures for ordinary maintenance and repairs are expensed to opera-
tions as incurred. Significant renovations and improvements that improve or
extend the useful life of the assets are capitalized. Except for amounts
attributed to land, rental property and improvements are depreciated over their
estimated useful lives using the straight-line method. The estimated useful
lives by asset category are as follows:
<TABLE>
<CAPTION>
-------------
ESTIMATED
USEFUL LIFE
ASSET CATEGORY -------------
<S> <C>
Buildings and improvements 40 years
Tenant improvements Life of lease
</TABLE>
F-59
<PAGE>
PRUDENTIAL PROPERTIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Prudential Group adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets To Be Disposed Of, on January 1, 1996. This statement
requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Adoption of this
statement did not have an impact on Prudential Group's financial position,
results of operations or liquidity.
Lease Acquisition Costs
Capitalized lease acquisition costs are recorded at cost. These costs are amor-
tized over the respective lives of the leases. Unamortized costs are charged to
expense in the event of any early termination of the lease.
Rental Income
All leases are classified as operating leases. Certain leases provide for min-
imum rent payments that increase during the term of the lease and tenant occu-
pancy during periods for which no rent is due. Prudential Group records rental
income for the full term of each lease on a straight-line basis. As of Sep-
tember 30, 1997, and December 31, 1996 and 1995, the receivables from tenants,
net of reserves, which Prudential Group expects to collect over the remaining
life of these leases rather than currently, were approximately $399,000,
$345,000 and $190,000, respectively (Deferred Rent). The amounts included in
rental income for the nine months ended September 30, 1997, and the years ended
December 31, 1996 and 1995, which are not currently due, were approximately
$53,000, $155,000 and $84,000, respectively. Deferred Rent is not recognized
for income tax purposes until received.
Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, rents receivable (excluding
Deferred Rent), accounts payable and accrued expenses are reasonable estimates
of their fair value.
Income Taxes
The properties are owned in tax-exempt real estate title holding companies or
directly by other legal entities not subject to tax. Since the taxable oper-
ating results of Prudential Group are either included in the income tax returns
of tax-exempt entities or the owners, no provision for state and federal income
taxes has been reflected in these financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
4. FUTURE MINIMUM RENTS
Future minimum rental receipts due on noncancellable operating leases for the
industrial properties as of September 30, 1997 were as follows:
<TABLE>
<CAPTION>
----------
<S> <C> <C>
For the three months ended
December 31, 1997 $ 940,967
1998 4,329,812
1999 3,472,172
2000 2,942,526
2001 2,003,584
2002 1,552,436
Thereafter 2,474,062
</TABLE>
The above amounts do not include additional rental receipts that will become
due as a result of the expense pass-through and escalation provisions in the
leases. Prudential Group is subject to the usual business risks associated with
the collection of the above scheduled rents.
F-60
<PAGE>
PRUDENTIAL PROPERTIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
5. TRANSACTIONS WITH THE INVESTMENT MANAGER
Under the provisions of the separate investment management agreements, Pruden-
tial Group is obligated to pay PAMG acquisition and asset management fees.
Acquisition fees are payable based on a percentage of acquisition cost (ranging
from .75% to .80%), and asset management fees are payable based on a percentage
(ranging from .20% to .40%) of the properties' net cost and/or a percentage
(ranging from 0% to 7.5%) of the properties' net operating income. Incentive
fees are based on performance in excess of various levels of internal rates of
return. Fees incurred under the agreements were as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
-------------------- --------------------------------
FEE INCURRED 1997 1996 1996 1995 1994
- ------------------- ---------- --------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Asset management $ 186,102 185,000 274,410 168,796 205,836
Acquisition -- 93,000 93,000 -- --
Property management 50,648 47,126 62,835 60,302 59,969
Incentive 14,121 -- 76,514 3,400 --
</TABLE>
At September 30, 1997, December 31, 1996 and December 31, 1995, total fees pay-
able to PAMG were $106,139, $308,103 and $124,505, respectively.
All property and asset management fees are expensed as incurred and included in
management fees in the accompanying statements of operations.
6. COMMITMENTS AND CONTINGENCIES
Environmental
Prudential Group, as an owner of real estate, is subject to various environ-
mental laws of federal and local governments. Compliance by the Prudential
Group with existing laws has not had a material adverse effect on either finan-
cial condition or results of operations, and management does not believe it
will have such an impact in the future. However, Prudential Group cannot pre-
dict the impact of new or changed laws or regulations on its current properties
or on properties that it may acquire in the future.
Litigation
Management of Prudential Group does not believe there is any litigation threat-
ened against it other than routine litigation arising out of the ordinary
course of business, some of which is expected to be covered by liability insur-
ance, none of which is expected to have a material adverse effect on the oper-
ating results or financial position of Prudential Group.
F-61
<PAGE>
PRUDENTIAL PROPERTIES GROUP
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
----------------------------------------------------------------
COSTS CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO GROUP ACQUISITION
-------------------------- ------------------
BUILDINGS AND BUILDINGS AND
DESCRIPTION(1) LOCATION LAND IMPROVEMENTS LAND IMPROVEMENTS
- -------------- ------------- ---------- --------------- ---- -------------
<S> <C> <C> <C> <C> <C>
Vintage Avenue Ontario CA $ 3,761 $ 6,918 -- --
Westgate Parkway Fulton Co. GA 1,619 4,196 -- --
International Way Hebron KY 663 4,483 -- --
International
Blvd., Building 1 Cincinnati OH 564 4,858 -- --
International
Blvd., Building 2 Cincinatti OH 464 4,858 -- --
Port Road, Building 1 Columbus OH 651 5,974 -- --
Port Road, Building 2 Columbus OH 580 4,370 -- --
---------- --------------- ---- -------------
$ 8,302 $ 35,657 -- --
========== =============== ==== =============
<CAPTION>
-------------------------------------------------------------------------
GROSS AMOUNT CARRIED AT DECEMBER 31,1996
-----------------------------------------
BUILDINGS AND ACCUMULATED DATE DATE DEPRECIABLE
DESCRIPTION(1) LAND IMPROVEMENTS TOTAL(2) DEPRECIATION CONSTRUCTED ACQUIRED LIVES
- -------------- ----- ------------- -------- ------------ ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Vintage Avenue $3,761 $ 6,918 $10,679 $1,384 1988 1998 40
Westgate Parkway 1,619 4,196 5,815 839 1988 1998 40
International Way 663 4,483 5,146 486 1990 1992 40
International
Blvd., Building 1 564 4,858 5,422 526 1990 1992 40
International
Blvd., Building 2 464 4,858 5,322 526 1990 1992 40
Port Road, Building 1 651 5,974 6,625 137 1995 1996 40
Port Road, Building 2 580 4,370 4,950 100 1995 1996 40
------ ----------- -------- ------------
$8,302 $35,657 $43,959 $3,998
====== =========== ======== ============
</TABLE>
- --------
(1) All properties consist of single buildings which are considered to be Indus-
trial
(2) The aggregate cost for Federal Income Tax purposes as of December 31, 1996
was approximately $44 million
The changes in the total Investment in real estate for the years ended December
31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
--------------
DECEMBER 31,
--------------
1996 1995
---- ----
<S> <C> <C>
Balance, beginning of the year $32,384 $32,384
Acquisitions 11,575 --
------- -------
Balance, end of year $43,959 $32,384
======= =======
</TABLE>
The changes in accumulated depreciation for the years ended December 31, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
------------
DECEMBER 31,
------------
1996 1995
---- ----
<S> <C> <C>
Balance, beginning of the year $3,128 $2,495
Depreciation 870 633
------ ------
Balance, end of year $3,998 $3,128
====== ======
</TABLE>
F-62
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Owners of West Coast Industrial, LLC:
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of West Coast Industrial, LLC (the Portfolio) for the year ended
December 31, 1996. The Combined Statement of Revenue and Certain Expenses is
the responsibility of the Portfolio's management. Our responsibility is to
express an opinion on the Combined Statement of Revenue and Certain Expenses
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Combined Statement of Revenue and
Certain Expenses is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures made in the
Combined Statement of Revenue and Certain Expenses. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the Combined
Statement of Revenue and Certain Expenses. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying Combined Statement of Revenue and Certain Expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the registration statement
on Form S-11 of Cabot Industrial Trust as described in Note 2 and is not
intended to be a complete presentation of the Portfolio's revenue and expenses.
In our opinion, the Combined Statement of Revenue and Certain Expenses referred
to above presents fairly, in all material respects, the revenue and certain
expenses of the Portfolio described in Note 2 for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
September 10, 1997
F-63
<PAGE>
WEST COAST INDUSTRIAL, LLC
COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
--------------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
REVENUES
Base Rent $2,376,075 $3,154,050
Tenant Reimbursements 209,829 488,767
Other Income 14,646 (1,133)
------------- ------------
Total Revenues 2,600,550 3,641,684
------------- ------------
EXPENSES
Property, Operating and Maintenance 106,496 241,665
Real Estate Taxes 271,950 332,503
Management Fees 46,424 74,323
Insurance 177,862 135,953
------------- ------------
Total Expenses 602,732 784,444
------------- ------------
Revenue in Excess of Certain Expenses $1,997,818 $2,857,240
============= ============
</TABLE>
The accompanying notes are an integral part of this combined financial
statement.
F-64
<PAGE>
WEST COAST INDUSTRIAL, LLC
NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
1. BUSINESS
The accompanying Combined Statements of Revenue and Certain Expenses relates to
the operations of West Coast Industrial, LLC (the Portfolio). The Portfolio
consists of nine buildings totaling approximately 700,000 rentable square feet,
which are located at the following addresses:
<TABLE>
<S> <C> <C>
--------------
East Howell Avenue, Building 1 Anaheim CA
East Howell Avenue, Building 2 Anaheim CA
Commonwealth Avenue Fullerton CA
Artesia Avenue, Building 1 Fullerton CA
Artesia Avenue, Building 2 Fullerton CA
Avenida Encinas, Building 1 Carlsbad CA
Avenida Encinas, Building 2 Carlsbad CA
Reed Avenue, Building 1 Sacramento CA
Reed Avenue, Building 2 Sacramento CA
</TABLE>
These properties were acquired by the Portfolio on August 12, 1997, from an
unrelated party.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying Combined Statements of Revenue and Certain Expenses was pre-
pared for the purpose of complying with the rules and regulations of the Secu-
rities and Exchange Commission for inclusion in the registration statement on
Form S-11 of Cabot Industrial Trust. The statement is not representative of the
actual operations of the Portfolio for the period presented nor indicative of
future operations as certain expenses, primarily depreciation, amortization and
interest expenses, which may not be comparable to the expenses expected to be
incurred by Cabot Industrial Trust in future operations of the Portfolio, have
been excluded.
The combined financial statement, and information included in these notes to
the combined financial statement, for the nine months ended September 30, 1997
is unaudited. In the opinion of management, such financial statement and infor-
mation reflect all adjustments necessary for a fair presentation of the results
of the interim period. All such adjustments are of a normal, recurring nature.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related
leases. Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the Combined Statements of Revenue and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
3. RENTAL REVENUES
The property has entered into tenant leases that provide for tenants to share
in the operating expenses and real estate taxes on a pro rata basis, as
defined.
4. FUTURE MINIMUM RENTS
Future minimum rental receipts due on noncancellable operating leases for the
Portfolio as of December 31, 1996 were as follows:
<TABLE>
<S> <C>
----------
1997 $3,180,528
1998 3,007,911
1999 2,659,887
2000 2,512,865
2001 2,475,949
Thereafter 9,189,156
</TABLE>
The above amounts do not include additional rental receipts that will become
due as a result of the expense pass-through and escalation provisions in the
leases. The Portfolio is subject to the usual business risks associated with
the collection of the above scheduled rents.
F-65
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners of Herrod Associates:
We have audited the accompanying statement of revenues and certain expenses of
Herrod Associates (a general partnership) for the year ended December 31, 1996.
The financial statement is the responsibility of the Partnership's management.
Our responsibility is to express an opinion on this financial statement based
on our audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of revenues and certain
expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the statement of
revenues and certain expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evalu-
ating the overall presentation of the statement of revenues and certain
expenses. We believe that our audit provides a reasonable basis for our opin-
ion.
The accompanying statement of revenues and certain expenses was prepared for
the purposes of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Form S-11 of Cabot Industrial Trust
and excludes material amounts, described in note B to the statement of revenues
and certain expenses, that would not be comparable to those resulting from the
proposed future operations of the property.
In our opinion, the statement of revenues and certain expenses referred to
above presents fairly, in all material respects, the revenues and certain
expenses of Herrod Associates for the year ended December 31, 1996 in confor-
mity with generally accepted accounting principles.
Grant Thornton LLP
Philadelphia, Pennsylvania
March 5, 1997
F-66
<PAGE>
HERROD ASSOCIATES
(A GENERAL PARTNERSHIP)
STATEMENT OF REVENUES AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
--------------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
REVENUES
Rental income
Affiliate $ 589,744 $ 968,530
Other 694,049 845,222
Tenant-reimbursed expenses
Affiliate 1,130 19,371
Other 171,428 191,631
------------- ------------
1,456,351 2,024,754
------------- ------------
CERTAIN EXPENSES
General operating 92,847 92,483
Real estate taxes and licenses 234,850 293,800
------------- ------------
327,697 386,283
------------- ------------
REVENUES IN EXCESS OF CERTAIN EXPENSES $1,128,654 $1,638,471
============= ============
</TABLE>
The accompanying notes are an integral part of this statement.
F-67
<PAGE>
HERROD ASSOCIATES
(A GENERAL PARTNERSHIP)
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
NOTE A--ORGANIZATION
Herrod Associates (the Partnership), a New Jersey general partnership, owns and
operates a building in New Jersey which is leased to two tenants, one of whom
is a related party. The related party accounts for approximately 49% of 1996
revenues. The building has an aggregate net leasable area of approximately
418,000 square feet.
NOTE B--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statement is not representative of the actual opera-
tions of the Partnership for the period presented as certain expenses, which
may not be comparable to the expenses to be incurred by the Cabot Industrial
Trust in the proposed future operation of the property, have been excluded.
Expenses excluded consist of interest, depreciation and amortization. After
reasonable inquiry, the Partnership is not aware of any material factors that
would cause reported financial information not to be necessarily indicative of
future operating results.
The statement of revenues and certain expenses for the nine months ended Sep-
tember 30, 1997 is unaudited. In the opinion of management, all adjustments
consisting solely of normal recurring adjustments necessary for a fair presen-
tation of the financial statements for the interim period have been included.
The results for the interim period are not necessarily indicative of the
results for the full year.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE C--LEASING ACTIVITIES
The Partnership leases warehouse space to tenants under operating leases.
Leases generally provide for minimum rents, as well as reimbursement of the
lessor for certain operating expenses and real estate taxes. The minimum future
rentals on the existing long-term noncancellable operating leases as of
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
----------
<S> <C>
1997 $ 869,700
1998 869,700
1999 869,700
2000 579,800
----------
$3,188,900
==========
</TABLE>
Minimum future rentals above exclude amounts related to a lease with an affili-
ated company which is on a month-to-month basis.
F-68
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Owners of the
Blue Ash Office L.L.C. and Blue Ash Industrial L.L.C.:
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of Blue Ash Office L.L.C. and Blue Ash Industrial L.L.C. (the Portfo-
lio) for the year ended December 31, 1996. The Combined Statement of Revenue
and Certain Expenses is the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on the Combined Statement of Revenue
and Certain Expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Combined Statement of Revenue and Cer-
tain Expenses is free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures made in the Com-
bined Statement of Revenue and Certain Expenses. An audit also includes
assessing the accounting principles used and significant estimates made by man-
agement, as well as evaluating the overall presentation of the Combined State-
ment of Revenue and Certain Expenses. We believe that our audit provides a rea-
sonable basis for our opinion.
The accompanying Combined Statement of Revenue and Certain Expenses was pre-
pared for the purpose of complying with the rules and regulations of the Secu-
rities and Exchange Commission for inclusion in the registration statement on
Form S-11 of Cabot Industrial Trust as described in Note 2 and is not intended
to be a complete presentation of the Portfolio's revenue and expenses.
In our opinion, the Combined Statement of Revenue and Certain Expenses referred
to above presents fairly, in all material respects, the revenue and certain
expenses of the Portfolio described in Note 2 for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
November 24, 1997
F-69
<PAGE>
BLUE ASH OFFICE L.L.C. AND BLUE ASH INDUSTRIAL L.L.C.
COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
----------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER DECEMBER
30, 1997 31, 1996
----------- ----------
(UNAUDITED)
<S> <C> <C>
REVENUES
Base Rent $1,246,579 $1,783,748
Tenant Reimbursements 99,873 147,842
Other Income 38,829 33,178
----------- ----------
Total Revenues 1,385,281 1,964,768
----------- ----------
EXPENSES
Property Operating Costs 197,396 194,668
Maintenance and Repairs 109,027 129,276
Real Estate Taxes 181,698 242,262
Management Fees 35,887 56,866
Professional Services 17,359 42,630
Insurance 12,811 17,317
----------- ----------
Total Expenses 554,178 683,019
----------- ----------
Revenue in Excess of Certain Expenses $ 831,103 $1,281,749
=========== ==========
</TABLE>
The accompanying notes are an integral part of this combined financial
statement.
F-70
<PAGE>
BLUE ASH OFFICE L.L.C. AND BLUE ASH INDUSTRIAL L.L.C.
NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
1. BUSINESS
The accompanying Combined Statements of Revenue and Certain Expenses relate to
the operations of Blue Ash Office L.L.C. and Blue Ash Industrial L.L.C. (the
Portfolio). The Portfolio consists of three buildings totaling approximately
482,942 rentable square feet.
These properties were acquired by the Portfolio during 1995, from an unrelated
party.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying Combined Statement of Revenue and Certain Expenses was pre-
pared for the purpose of complying with the rules and regulations of the Secu-
rities and Exchange Commission for the inclusion in the registration statement
on Form S-11 of Cabot Industrial Trust. The statement is not representative of
the actual operations of the Portfolio for the period presented nor indicative
of future operations as certain expenses, primarily depreciation, amortization
and interest expenses, which may not be comparable to the expenses expected to
be incurred by Cabot Industrial Trust in future operations of the Portfolio,
have been excluded.
The combined financial statement, and information included in these notes to
the combined financial statement, for the nine months ended September 30, 1997
is unaudited. In the opinion of management, such financial statement and infor-
mation reflect all adjustments necessary for a fair presentation of the results
of the interim period. All such adjustments are of a normal, recurring nature.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related
leases. Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the Combined Statement of Revenue and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
3. RENTALS
The Portfolio has entered into tenant leases that provide for tenants to share
in the operating expenses and real estate taxes on a pro rata basis, as
defined.
4. FUTURE MINIMUM RENTAL RECEIPTS
Future minimum rental receipts due on noncancelable operating leases for the
Portfolio as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
----------
<S> <C>
1997 $1,775,684
1998 1,885,204
1999 1,739,235
2000 1,118,855
2001 770,296
Thereafter 134,742
----------
$7,424,016
==========
</TABLE>
The above amounts do not include additional rental receipts that will become
due as a result of the expense pass-through and escalation provisions in the
leases. The Portfolio is subject to the usual business risks associated with
the collection of the above scheduled rents.
F-71
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Owners of the
Seefried Properties Group:
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of Seefried Properties Group (the Portfolio) for the year ended
December 31, 1996. The Combined Statement of Revenue and Certain Expenses is
the responsibility of the Portfolio's management. Our responsibility is to
express an opinion on the Combined Statement of Revenue and Certain Expenses
based on our audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Combined Statement of Revenue and Cer-
tain Expenses is free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures made in the Com-
bined Statement of Revenue and Certain Expenses. An audit also includes
assessing the accounting principles used and significant estimates made by man-
agement, as well as evaluating the overall presentation of the Combined State-
ment of Revenue and Certain Expenses. We believe that our audit provides a rea-
sonable basis for our opinion.
The accompanying Combined Statement of Revenue and Certain Expenses was pre-
pared for the purpose of complying with the rules and regulations of the Secu-
rities and Exchange Commission for inclusion in the registration statement on
Form S-11 of Cabot Industrial Trust as described in Note 2 and is not intended
to be a complete presentation of the Portfolio's revenue and expenses.
In our opinion, the Combined Statement of Revenue and Certain Expenses referred
to above presents fairly, in all material respects, the revenue and certain
expenses of the Portfolio described in Note 2 for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
November 24, 1997
F-72
<PAGE>
SEEFRIED PROPERTIES GROUP
COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
--------------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
REVENUES
Base rent $575,751 $399,029
Tenant reimbursements 68,953 36,451
Other income 39,790 4,860
------------- ------------
Total revenues 684,494 440,340
------------- ------------
EXPENSES
Property operating costs 83,461 37,112
Maintenance and repairs 9,342 --
Real estate taxes 55,013 32,305
Management fees 53,145 14,094
Professional services 27,944 --
Insurance 4,260 4,364
------------- ------------
Total expenses 233,165 87,875
------------- ------------
Revenue in Excess of Certain Expenses $451,329 $352,465
============= ============
</TABLE>
The accompanying notes are an integral part of this combined financial
statement.
F-73
<PAGE>
SEEFRIED PROPERTIES GROUP
NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
DECEMBER 31, 1996
1. BUSINESS
Seefried Properties Group (the Portfolio) is not a legal entity but rather a
combination of the operations of four warehouse buildings that are owned by a
real estate title holding corporation. The accompanying financial statement
includes all of the direct costs of the business (as defined in Note 2) of the
Portfolio. A summary of the holdings of the Portfolio is as follows:
<TABLE>
<CAPTION>
----------------------
NUMBER OF
PROPERTY LOCATION TENANTS SQUARE FEET
----------------- --------- -----------
<S> <C> <C>
Boggy Creek - Building 1, Orlando, FL 6 52,069
Boggy Creek - Building 2, Orlando, FL 2 55,456
Landstreet - Building 2, Orlando, FL 2 55,456
Landstreet - Building 3, Orlando, FL 1 50,018
-----------
212,999
===========
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying Combined Statement of Revenue and Certain Expenses was pre-
pared for the purpose of complying with the rules and regulations of the Secu-
rities and Exchange Commission for inclusion in the registration statement on
Form S-11 of Cabot Industrial Trust. The statement is not representative of the
actual operations of the Portfolio for the period presented nor indicative of
future operations as certain expenses, primarily depreciation, amortization and
interest expenses, which may not be comparable to the expenses expected to be
incurred by Cabot Industrial Trust in future operations of the Portfolio, have
been excluded.
The combined financial statement, and information included in these notes to
the combined financial statement, for the nine months ended September 30, 1997
is unaudited. In the opinion of management, such financial statement and infor-
mation reflect all adjustments necessary for a fair representation of the
results of the interim period. All such adjustments are of a normal, recurring
nature.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related
leases. Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the Combined Statement of Revenue and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
3. RENTAL REVENUES
All leases are classified as operating leases.
4. FUTURE MINIMUM RENTAL RECEIPTS
Future minimum rental receipts due on noncancelable operating leases for the
Portfolio as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
----------
<S> <C>
1997 $ 798,106
1998 959,052
1999 901,504
2000 770,454
2001 575,338
Thereafter 309,441
----------
$4,313,895
==========
</TABLE>
The above amounts do not include additional rental receipts that will become
due as a result of the expense pass-through and escalation provisions in the
leases. The Portfolio is subject to the usual business risks associated with
the collection of the above scheduled rents.
F-74
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Owners of the
Prudential Properties Group II:
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of Prudential Properties Group II (the Portfolio) for the year ended
December 31, 1996. The Combined Statement of Revenue and Certain Expenses is
the responsibility of the Portfolio's management. Our responsibility is to
express an opinion on the Combined Statement of Revenue and Certain Expenses
based on our audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Combined Statement of Revenue and Cer-
tain Expenses is free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures made in the Com-
bined Statement of Revenue and Certain Expenses. An audit also includes
assessing the accounting principles used and significant estimates made by man-
agement, as well as evaluating the overall presentation of the Combined State-
ment of Revenue and Certain Expenses. We believe that our audit provides a rea-
sonable basis for our opinion.
The accompanying Combined Statement of Revenue and Certain Expenses was pre-
pared for the purpose of complying with the rules and regulations of the Secu-
rities and Exchange Commission for inclusion in the registration statement on
Form S-11 of Cabot Industrial Trust as described in Note 2 and is not intended
to be a complete presentation of the Portfolio's revenue and expenses.
In our opinion, the Combined Statement of Revenue and Certain Expenses referred
to above presents fairly, in all material respects, the revenue and certain
expenses of the Portfolio described in Note 2 for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
November 24, 1997
F-75
<PAGE>
PRUDENTIAL PROPERTIES GROUP II
COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
--------------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
REVENUES
Base Rent $2,223,205 $2,908,620
Tenant Reimbursements 183,044 209,074
---------- ----------
Total Revenues 2,406,249 3,117,694
---------- ----------
EXPENSES
Property Operating Costs 13,208 19,722
Maintenance and Repairs 39 716
Real Estate Taxes 165,606 209,074
Management Fees 9,317 14,070
Professional Services 5,076 1,068
Insurance 721 1,397
---------- ----------
Total Expenses 193,967 246,047
---------- ----------
Revenue in Excess of Certain Expenses $2,212,282 $2,871,647
========== ==========
</TABLE>
The accompanying notes are an integral part of this combined financial
statement.
F-76
<PAGE>
PRUDENTIAL PROPERTIES GROUP II
NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1996
1. BUSINESS
Prudential Properties Group II (the Portfolio) is not a legal entity but rather
a combination of the operations for three warehouse buildings that are owned by
a title holding corporation. As of October 1, 1997, title to two of these prop-
erties was transferred to The Prudential Insurance Company of America on behalf
of a single client separate account. Prudential Group II properties are man-
aged, leased and operated by The Prudential's Private Asset Management Group -
Real Estate Division (PAMG), the investment manager, pursuant to contracts with
its pension fund clients. The accompanying financial statements include all of
the direct costs of the business of the Portfolio (as defined in Note 2). A
summary of the holdings of the Portfolio is as follows (each location has one
building):
<TABLE>
<CAPTION>
----------------------
NUMBER OF
PROPERTY LOCATION TENANTS SQUARE FEET
----------------- --------- -----------
<S> <C> <C>
Dacula, GA 1 326,019
Mira Loma, CA 1 250,584
Mechanicsburg, PA 1 340,000
-----------
916,603
===========
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying Combined Statement of Revenue and Certain Expenses was pre-
pared for the purpose of complying with the rules and regulations of the Secu-
rities and Exchange Commission for inclusion in the registration statement on
Form S-11 of Cabot Industrial Trust. The statement is not representative of the
actual operations of Prudential Group II for the period presented nor indica-
tive of future operations as certain expenses, primarily depreciation, amorti-
zation and interest expenses, which may not be comparable to the expenses
expected to be incurred by Cabot Industrial Trust in future operations of the
Portfolio, have been excluded.
The combined financial statement, and information included in these notes to
the combined financial statement, for the nine months ended September 30, 1997,
is unaudited. In the opinion of management, such financial statement and infor-
mation reflect all adjustments necessary for a fair presentation of the results
of the interim period. All adjustments are of a normal, recurring nature.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related
leases. Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the Combined Statement of Revenue and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
3. RENTAL REVENUE
All leases are classified as operating leases.
4. FUTURE MINIMUM RENTAL RECEIPTS
Future minimum rental receipts due on noncancelable operating leases for (the
Portfolio) as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
-----------
<S> <C>
1997 $ 2,944,067
1998 2,944,067
1999 2,854,934
2000 2,854,934
2001 2,854,934
Thereafter 1,571,221
-----------
$16,024,157
===========
</TABLE>
The above amounts do not include additional rental receipts that will become
due as a result of the expense pass-through and escalation provisions in the
leases. The Portfolio is subject to the usual business risks associated with
the collection of the above scheduled rents.
F-77
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Owners of the
DFW Trade Center I, L.P., Buildings 1, 2 and 3:
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of the DFW Trade Center I, L.P., Buildings 1, 2 and 3 (the Portfolio)
from the date of inception (July 1, 1996) to December 31, 1996. The Combined
Statement of Revenue and Certain Expenses is the responsibility of the
Portfolio's management. Our responsibility is to express an opinion on the
Combined Statement of Revenue and Certain Expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Combined Statement of Revenue and
Certain Expenses is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures made in the
Combined Statement of Revenue and Certain Expenses. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the Combined
Statement of Revenue and Certain Expenses. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying Combined Statement of Revenue and Certain Expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the registration statement
on Form S-11 of Cabot Industrial Trust as described in Note 2 and is not
intended to be a complete presentation of the Portfolio's revenue and expenses.
In our opinion, the Combined Statement of Revenue and Certain Expenses referred
to above presents fairly, in all material respects, the revenue and certain
expenses of the Portfolio described in Note 2 for the period from inception to
December 31, 1996, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
November 24, 1997
F-78
<PAGE>
DFW TRADE CENTER I, L.P., BUILDINGS 1, 2 AND 3
COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
-------------------------------
FROM THE DATE
NINE MONTHS OF INCEPTION
ENDED (JULY 1, 1996) TO
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- -----------------
(UNAUDITED)
<S> <C> <C>
REVENUES
Base Rent $1,289,844 $315,038
Tenant Reimbursements 304,903 32,400
------------- -----------------
Total Revenues 1,594,747 347,438
------------- -----------------
EXPENSES
Property, Operating Costs 93,369 38,177
Maintenance and Repairs 20,256 4,397
Real Estate Taxes 306,802 40,993
Management Fees 44,392 10,580
Insurance 24,802 8,064
------------- -----------------
Total Expenses 489,621 102,211
------------- -----------------
Revenue in Excess of Certain Expenses $1,105,126 $245,227
============= =================
</TABLE>
The accompanying notes are an integral part of this combined financial
statement.
F-79
<PAGE>
DFW TRADE CENTER I, L.P., BUILDINGS 1, 2 AND 3
NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1996
1. BUSINESS
The accompanying Combined Statement of Revenue and Certain Expenses relates to
the operations of DFW Trade Center I, L.P., Buildings 1, 2 and 3 (the Portfo-
lio). The Portfolio consists of three buildings in Grapevine, Texas totaling
approximately 1,182,361 rentable square feet as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------
PROPERTY TYPE # TENANTS DATE OF INCEPTION SQUARE FEET
------------- -------------- ----------------- --------------
<S> <C> <C> <C>
Workspace Industrial 3 February 7, 1997 202,361
Bulk Warehouse 2 July 1, 1996 540,000
Bulk Warehouse 2 June 30, 1997 440,000
--------------
1,182,361
==============
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying Combined Statement of Revenue and Certain Expenses was pre-
pared for the purpose of complying with the rules and regulations of the Secu-
rities and Exchange Commission for inclusion in the registration statement on
Form S-11 of Cabot Industrial Trust. The statement is not representative of the
actual operations of the Portfolio for the period presented nor indicative of
future operations as certain expenses, primarily depreciation, amortization and
interest expenses, which may not be comparable to the expenses expected to be
incurred by Cabot Industrial Trust in future operations of the Portfolio, have
been excluded.
The combined financial statement, and information included in these notes to
the combined financial statement, for the nine months ended September 30, 1997,
is unaudited. In the opinion of management, such financial statement and infor-
mation reflect all adjustments necessary for a fair presentation of the results
of the interim period. All adjustments are of a normal, recurring nature.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related
leases. Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the Combined Statement of Revenue and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
3. RENTAL REVENUE
All leases are classified as operating leases.
4. FUTURE MINIMUM RENTAL RECEIPTS
Future minimum rental receipts due on noncancelable operating leases for the
Portfolio as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
-----------
<S> <C>
1997 $ 2,113,650
1998 4,052,194
1999 4,189,944
2000 4,275,444
2001 3,906,861
Thereafter 15,741,473
-----------
$34,279,566
===========
</TABLE>
The above amounts do not include additional rental receipts that will become
due as a result of the expense pass-through and escalation provisions in the
leases. The Portfolio is subject to the usual business risks associated with
the collection of the above scheduled rents.
F-80
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Owners of
1055 Dornoch Court, San Diego, CA:
We have audited the accompanying Statement of Revenue and Certain Expenses of
1055 Dornoch Court, San Diego, CA (the Property) for the year ended December
31, 1996. The Statement of Revenue and Certain Expenses is the responsibility
of the Property's management. Our responsibility is to express an opinion on
the Statement of Revenue and Certain Expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Statement of Revenue and Certain
Expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures made in the State-
ment of Revenue and Certain Expenses. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the Statement of Revenue and
Certain Expenses. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying Statement of Revenue and Certain Expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the registration statement on Form S-11 of
Cabot Industrial Trust as described in Note 2 and is not intended to be a com-
plete presentation of the Property's revenue and expenses.
In our opinion, the Statement of Revenue and Certain Expenses referred to above
presents fairly, in all material respects, the revenue and certain expenses of
the Property described in Note 2 for the year ended December 31, 1996, in con-
formity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
December 16, 1997
F-81
<PAGE>
1055 DORNOCH COURT, SAN DIEGO, CA
STATEMENTS OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
--------------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
REVENUES
Base Rent $ 739,620 $ 986,160
------------- ------------
TOTAL REVENUES 739,620 986,160
EXPENSES (Note 2) -- --
------------- ------------
Net Income $ 739,620 $ 986,160
============= ============
</TABLE>
The accompanying notes are an integral part of this combined financial state-
ment.
F-82
<PAGE>
1055 DORNOCH COURT, SAN DIEGO, CA
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1996
1. BUSINESS
1055 Dornoch Court, San Diego, CA (the Property) is not a legal entity but
rather a single tenant, 220,000 square foot warehouse owned by a Delaware cor-
poration.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying Statement of Revenue and Certain Expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the registration statement on Form S-11 of
Cabot Industrial Trust. The statement is representative of the lease in place
which requires that all expenses be paid directly by the Tenant. The statement
is not representative of the actual operations of the Property for the periods
presented nor indicative of future operations because certain expenses, pri-
marily depreciation, amortization and interest expenses, which may not be com-
parable to the expenses expected to be incurred by Cabot Industrial Trust in
future operations of the Property, have been excluded.
The financial statement, and information included in these notes to the finan-
cial statement, for the nine months ended September 30, 1997, is unaudited. In
the opinion of management, such financial statement and information reflect all
adjustments necessary for a fair representation of the results of the interim
period. All adjustments are of a normal, recurring nature.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related
leases. All expenses are paid by the tenant, and therefore are excluded from
the accompanying financial statement.
Use of Estimates
The preparation of the Statement of Revenue and Certain Expenses in conformity
with generally accepted accounting principles requires management to make esti-
mates and assumptions that affect the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates.
3. RENTAL REVENUES
All leases are classified as operating leases.
4. FUTURE MINIMUM RENTAL RECEIPTS
Future minimum rental receipts due on noncancelable operating leases for the
Property as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
----------
<S> <C>
1997 $ 964,093
1998 1,002,658
1999 1,042,764
2000 1,084,476
2001 1,127,854
Thereafter 971,000
----------
$6,192,845
==========
</TABLE>
The above amounts do not include additional rental receipts that may become due
as a result of the escalation provisions in the leases. The Property is subject
to the usual business risks associated with the collection of the above sched-
uled rents.
F-83
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Owners of the
Hampden I and II Properties Group:
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of Hampden I and II Properties Group (the Portfolio) for the year
ended December 31, 1996. The Combined Statement of Revenue and Certain Expenses
is the responsibility of the Portfolio's management. Our responsibility is to
express an opinion on the Combined Statement of Revenue and Certain Expenses
based on our audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Combined Statement of Revenue and Cer-
tain Expenses is free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures made in the Com-
bined Statement of Revenue and Certain Expenses. An audit also includes
assessing the accounting principles used and significant estimates made by man-
agement, as well as evaluating the overall presentation of the Combined State-
ment of Revenue and Certain Expenses. We believe that our audit provides a rea-
sonable basis for our opinion.
The accompanying Combined Statement of Revenue and Certain Expenses was pre-
pared for the purpose of complying with the rules and regulations of the Secu-
rities and Exchange Commission for inclusion in the registration statement on
Form S-11 of Cabot Industrial Trust as described in Note 2 and is not intended
to be a complete presentation of the Portfolio's revenue and expenses.
In our opinion, the Combined Statement of Revenue and Certain Expenses referred
to above presents fairly, in all material respects, the revenue and certain
expenses of the Portfolio described in Note 2 for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
December 15, 1997
F-84
<PAGE>
HAMPDEN I AND II PROPERTIES GROUP
COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
--------------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
REVENUES
Base Rent $1,212,044 $1,616,059
------------- ------------
TOTAL REVENUES: 1,212,044 1,616,059
EXPENSES (Note 2) -- --
------------- ------------
Net Income $1,212,044 $1,616,059
============= ============
</TABLE>
The accompanying notes are an integral part of this combined financial state-
ment.
F-85
<PAGE>
HAMPDEN I AND II PROPERTIES GROUP
NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1996
1. BUSINESS
Hampden I and II Properties Group (the Portfolio) is not a legal entity but
rather a combination of the operations of two warehouse buildings that are
owned by a real estate title holding corporation. A summary of the holdings of
Hamden Group is as follows:
<TABLE>
<CAPTION>
-----------------
NUMBER OF SQUARE
PROPERTY LOCATION TENANTS FEET
----------------- --------- -------
<S> <C> <C>
Mechanicsburg, PA 1 259,200
Mechanicsburg, PA 1 235,200
-------
494,400
=======
</TABLE>
Both buildings are occupied by the same tenant.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying Combined Statement of Revenue and Certain Expenses was pre-
pared for the purpose of complying with the rules and regulations of the Secu-
rities and Exchange Commission for inclusion in the registration statement on
Form S-11 of Cabot Industrial Trust. The statement is representative of the
leases in place which require that all expenses be paid directly by the tenant.
The statement is not representative of the actual operations of the Portfolio
for the periods presented nor indicative of future operations because certain
expenses, primarily depreciation, amortization and interest expenses, which may
not be comparable to the expenses expected to be incurred by Cabot Industrial
Trust in future operations of the Portfolio, have been excluded.
The combined financial statement, and information included in these notes to
the combined financial statement, for the nine months ended September 30, 1997,
is unaudited. In the opinion of management, such financial statement and infor-
mation reflect all adjustments necessary for a fair presentation of the results
of the interim period. All adjustments are of a normal, recurring nature.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related
leases. All expenses are paid by the tenant, and therefore are excluded from
the accompanying financial statement.
Use of Estimates
The preparation of the Combined Statement of Revenue and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
3. RENTAL REVENUES
All leases are classified as operating leases.
4. FUTURE MINIMUM RENTAL RECEIPTS
Future minimum rental receipts due on noncancelable operating leases for the
Portfolio as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
-----------
<S> <C>
1997 $1,593,720
1998 1,600,077
1999 1,670,000
2000 1,670,000
2001 1,670,000
Thereafter 9,880,833
-----------
$18,084,630
===========
</TABLE>
The above amounts do not include additional rental receipts that may become due
as a result of the Consumer Price Index escalation provisions in the leases.
The Portfolio is subject to the usual business risks associated with the col-
lection of the above scheduled rents.
F-86
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Owners of the
South Royal Associates Properties Group:
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of South Royal Associates Properties Group (the Portfolio) for the
year ended December 31, 1996. The Combined Statement of Revenue and Certain
Expenses is the responsibility of the Portfolio's management. Our responsi-
bility is to express an opinion on the Combined Statement of Revenue and Cer-
tain Expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Combined Statement of Revenue and Cer-
tain Expenses is free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures made in the Com-
bined Statement of Revenue and Certain Expenses. An audit also includes
assessing the accounting principles used and significant estimates made by man-
agement, as well as evaluating the overall presentation of the Combined State-
ment of Revenue and Certain Expenses. We believe that our audit provides a rea-
sonable basis for our opinion.
The accompanying Combined Statement of Revenue and Certain Expenses was pre-
pared for the purpose of complying with the rules and regulations of the Secu-
rities and Exchange Commission for inclusion in the registration statement on
Form S-11 of Cabot Industrial Trust as described in Note 2 and is not intended
to be a complete presentation of the Portfolio's revenue and expenses.
In our opinion, the Combined Statement of Revenue and Certain Expenses referred
to above presents fairly, in all material respects, the revenue and certain
expenses of the Portfolio described in Note 2 for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
December 15, 1997
F-87
<PAGE>
SOUTH ROYAL ASSOCIATES PROPERTIES GROUP
COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
--------------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
REVENUES
Base Rent $379,474 $554,566
Tenant Reimbursements 8,302 28,290
------------- ------------
TOTAL REVENUES 387,776 582,856
------------- ------------
EXPENSES
Property Operating Costs 8,809 10,445
Maintenance and Repairs 15,978 21,982
Real Estate Taxes 41,232 64,253
Professional Fees 4,637 2,550
Management Fees 9,166 12,221
Insurance 6,403 7,663
------------- ------------
TOTAL EXPENSES 86,225 119,114
------------- ------------
REVENUE IN EXCESS OF CERTAIN
EXPENSES $301,551 $463,742
============= ============
</TABLE>
The accompanying notes are an integral part of this combined financial state-
ment.
F-88
<PAGE>
SOUTH ROYAL ASSOCIATES PROPERTIES GROUP
NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1996
1. BUSINESS
South Royal Associates Properties Group (the Portfolio) is not a legal entity
but rather a combination of the operations for three warehouse buildings that
are owned by a limited partnership. The accompanying financial statements
include all of the direct costs of the business (as defined in Note 2) of the
Portfolio. A summary of the holdings of the Portfolio is as follows:
<TABLE>
<CAPTION>
---------------------
PROPERTY NUMBER OF
LOCATION TENANTS SQUARE FEET
-------- --------- -----------
<S> <C> <C>
Tucker, GA 3 37,041
Tucker, GA 3 43,720
Tucker, GA 7 53,402
-----------
134,163
===========
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying Combined Statement of Revenue and Certain Expenses was pre-
pared for the purpose of complying with the rules and regulations of the Secu-
rities and Exchange Commission for inclusion in the registration statement on
Form S-11 of Cabot Industrial Trust. The statement is not representative of the
actual operations of the Portfolio for the periods presented nor indicative of
future operations because certain expenses, primarily depreciation, amortiza-
tion and interest expenses, which may not be comparable to the expenses
expected to be incurred by Cabot Industrial Trust in future operations of the
Portfolio, have been excluded.
The combined financial statement, and information included in these notes to
the combined financial statement, for the nine months ended September 30, 1997
is unaudited. In the opinion of management, such financial statement and
information reflect all adjustments necessary for a fair representation of the
results of the interim period. All such adjustments are of a normal, recurring
nature.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related
leases. Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the Combined Statement of Revenue and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
3. RENTAL REVENUES
All leases are classified as operating leases.
4. FUTURE MINIMUM RENTAL RECEIPTS
Future minimum rental receipts due on noncancelable operating leases for the
Portfolio as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
-----------
<S> <C>
1997 $ 476,895
1998 558,521
1999 413,164
2000 264,944
2001 144,726
Thereafter 21,162
-----------
$ 1,879,412
===========
</TABLE>
The above amounts do not include additional rental receipts that will become
due as a result of the expense pass-through provisions in the leases. The Port-
folio is subject to the usual business risks associated with the collection of
the above scheduled rents.
F-89
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Owners of the
Joseph A. Leroy Family LP Property:
We have audited the accompanying Statement of Revenue and Certain Expenses of
Joseph A. Leroy Family LP Property (the Property) for the year ended December
31, 1996. The Statement of Revenue and Certain Expenses is the responsibility
of the Property's management. Our responsibility is to express an opinion on
the Statement of Revenue and Certain Expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Statement of Revenue and Certain
Expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures made in the State-
ment of Revenue and Certain Expenses. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the Statement of Revenue and
Certain Expenses. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying Statement of Revenue and Certain Expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the registration statement on Form S-11 of
Cabot Industrial Trust as described in Note 2 and is not intended to be a com-
plete presentation of the Property's revenue and expenses.
In our opinion, the Statement of Revenue and Certain Expenses referred to above
presents fairly, in all material respects, the revenue and certain expenses of
the Property as described in Note 2 for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
December 15, 1997
F-90
<PAGE>
JOSEPH A. LEROY FAMILY LP PROPERTY
STATEMENTS OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
--------------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
REVENUES
Base Rent $ 228,891 $ 305,189
Expense Reimbursements 76,949 98,800
------------- ------------
Total revenues 305,840 403,989
------------- ------------
EXPENSES
Property Operating Costs 8,532 10,074
Maintenance and Repairs 8,017 0
Real Estate Taxes 60,366 82,456
Professional Services 2,482 2,175
Insurance 2,904 3,771
------------- ------------
Total expenses 82,301 98,476
------------- ------------
REVENUE IN EXCESS OF CERTAIN EXPENSES $ 223,539 $ 305,513
============= ============
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-91
<PAGE>
JOSEPH A. LEROY FAMILY LP PROPERTY
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1996
1. BUSINESS
Joseph A. Leroy Family LP Property (the Property) is not a legal entity but
rather the operations for one 81,817 square foot warehouse building located in
Tempe, Arizona. The Property is leased to three tenants and is owned by a real
estate title holding corporation. The accompanying financial statements
include all of the direct costs of the Property (as defined in Note 2).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying Statement of Revenue and Certain Expenses was prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the registration statement on Form S-11
of Cabot Industrial Trust. The statement is not representative of the actual
operations of the Property for the periods presented nor indicative of future
operations because certain expenses, primarily depreciation, amortization and
interest expenses, which may not be comparable to the expenses expected to be
incurred by Cabot Industrial Trust in future operations of the Property, have
been excluded.
The financial statement, and information included in these notes to the finan-
cial statement, for the nine months ended September 30, 1997 is unaudited. In
the opinion of management, such financial statement and information reflect
all adjustments necessary for a fair representation of the results of the
interim period. All such adjustments are of a normal, recurring nature.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related
leases. Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the Statement of Revenue and Certain Expenses in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
3. RENTAL REVENUES
All leases are classified as operating leases.
4. FUTURE MINIMUM RENTAL RECEIPTS
Future minimum rental receipts due on noncancelable operating leases for the
Property as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
--------
<S> <C>
1997 $306,637
1998 250,168
1999 51,337
--------
$608,142
========
</TABLE>
The above amounts do not include additional rental receipts that will become
due as a result of the expense pass-through provisions in the leases. The
Property is subject to the usual business risks associated with the collection
of the above scheduled rents.
F-92
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Owners of the
Raco/Melaver, L.L.C.:
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of Raco/Melaver, L.L.C. (the Portfolio) for the period from the date
of inception (May 1, 1996) to December 31, 1996. The Combined Statement of Rev-
enue and Certain Expenses is the responsibility of the Portfolio's management.
Our responsibility is to express an opinion on the Combined Statement of Rev-
enue and Certain Expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Combined Statement of Revenue and Cer-
tain Expenses is free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures made in the Com-
bined Statement of Revenue and Certain Expenses. An audit also includes
assessing the accounting principles used and significant estimates made by man-
agement, as well as evaluating the overall presentation of the Combined State-
ment of Revenue and Certain Expenses. We believe that our audit provides a rea-
sonable basis for our opinion.
The accompanying Combined Statement of Revenue and Certain Expenses was pre-
pared for the purpose of complying with the rules and regulations of the Secu-
rities and Exchange Commission for inclusion in the registration statement on
Form S-11 of Cabot Industrial Trust as described in Note 2 and is not intended
to be a complete presentation of the Portfolio's revenue and expenses.
In our opinion, the Combined Statement of Revenue and Certain Expenses referred
to above presents fairly, in all material respects, the revenue and certain
expenses of the Portfolio described in Note 2 for the period from inception to
December 31, 1996, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
December 15, 1997
F-93
<PAGE>
RACO/MELAVER, L.L.C.
COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
------------------------------
FROM THE DATE OF
NINE MONTHS INCEPTION
ENDED (MAY 1, 1996) TO
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ----------------
(UNAUDITED)
<S> <C> <C>
REVENUES
Base Rent $254,983 $154,113
Tenant Reimbursements 9,395 3,762
------------- ----------------
TOTAL REVENUES 264,378 157,875
------------- ----------------
EXPENSES
Property Operating Costs 20,235 10,154
Maintenance and Repairs 607 768
Real Estate Taxes 41,524 8,542
Management Fees 7,329 4,624
Insurance 3,029 4,066
------------- ----------------
TOTAL EXPENSES 72,724 28,154
------------- ----------------
REVENUE IN EXCESS OF CERTAIN EXPENSES $191,654 $129,721
============= ================
</TABLE>
The accompanying notes are an integral part of this combined financial state-
ment.
F-94
<PAGE>
RACO/MELAVER, L.L.C.
NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1996
1. BUSINESS
Raco/Melaver, L.L.C. (the Portfolio) is not a legal entity but rather a combi-
nation of the operations of two warehouse buildings that are owned by a real
estate title holding corporation. The accompanying financial statements include
all of the direct costs of the business (as defined in Note 2) of the Portfo-
lio. A summary of the holdings of Raco/Melaver Group is as follows:
<TABLE>
<CAPTION>
-----------------
NUMBER OF SQUARE
PROPERTY LOCATION TENANTS FEET
----------------- --------- -------
<S> <C> <C>
Atlanta, GA 4 68,000
Atlanta, GA 5 60,000
-------
128,000
=======
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying Combined Statement of Revenue and Certain Expenses was pre-
pared for the purpose of complying with the rules and regulations of the Secu-
rities and Exchange Commission for inclusion in the registration statement on
Form S-11 of Cabot Industrial Trust. The statement is not representative of the
actual operations of the Portfolio for the periods presented nor indicative of
future operations because certain expenses, primarily depreciation, amortiza-
tion and interest expenses, which may not be comparable to the expenses
expected to be incurred by Cabot Industrial Trust in future operations of the
Portfolio, have been excluded.
The combined financial statement, and information included in these notes to
the combined financial statement, for the nine months ended September 30, 1997
is unaudited. In the opinion of management, such financial statement and infor-
mation reflect all adjustments necessary for a fair representation of the
results of the interim period. All such adjustments are of a normal, recurring
nature.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related
leases. Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the Combined Statement of Revenue and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
3. RENTAL REVENUES
All leases are classified as operating leases.
4. FUTURE MINIMUM RENTAL RECEIPTS
Future minimum rental receipts due on noncancelable operating leases for the
Portfolio as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
----------
<S> <C>
1997 $ 331,021
1998 493,983
1999 431,071
2000 374,453
2001 279,122
Thereafter 145,010
----------
$2,054,660
==========
</TABLE>
The above amounts do not include additional rental receipts that will become
due as a result of the expense pass-through provisions in the leases. The Port-
folio is subject to the usual business risks associated with the collection of
the above scheduled rents.
F-95
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Owners of the
TLI/Cahill Partnership - Spiral Drive:
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of TLI/Cahill Partnership- Spiral Drive (the Portfolio) for the year
ended December 31, 1996. The Combined Statement of Revenue and Certain Expenses
is the responsibility of the Portfolio's management. Our responsibility is to
express an opinion on the Combined Statement of Revenue and Certain Expenses
based on our audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Combined Statement of Revenue and Cer-
tain Expenses is free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures made in the Com-
bined Statement of Revenue and Certain Expenses. An audit also includes
assessing the accounting principles used and significant estimates made by man-
agement, as well as evaluating the overall presentation of the Combined State-
ment of Revenue and Certain Expenses. We believe that our audit provides a rea-
sonable basis for our opinion.
The accompanying Combined Statement of Revenue and Certain Expenses was pre-
pared for the purpose of complying with the rules and regulations of the Secu-
rities and Exchange Commission for inclusion in the registration statement on
Form S-11 of Cabot Industrial Trust as described in Note 2 and is not intended
to be a complete presentation of the Portfolio's revenue and expenses.
In our opinion, the Combined Statement of Revenue and Certain Expenses referred
to above presents fairly, in all material respects, the revenue and certain
expenses of the Portfolio described in Note 2 for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
December 15, 1997
F-96
<PAGE>
TLI/CAHILL PARTNERSHIP - SPIRAL DRIVE
COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
--------------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
REVENUES
Base Rent $394,554 $534,325
Tenant Reimbursements 53,282 49,581
------------- ------------
TOTAL REVENUES 447,836 583,906
------------- ------------
EXPENSES
Property Operating Costs 10,586 18,838
Maintenance and Repairs 35,692 51,861
Real Estate Taxes 30,931 42,599
Management Fees 13,916 17,827
Insurance 4,760 6,263
------------- ------------
TOTAL EXPENSES 95,885 137,388
------------- ------------
REVENUE IN EXCESS OF CERTAIN EXPENSES $351,951 $446,518
============= ============
</TABLE>
The accompanying notes are an integral part of this combined financial state-
ment.
F-97
<PAGE>
TLI/CAHILL PARTNERSHIP - SPIRAL DRIVE
NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1996
1. BUSINESS
TLI/Cahill Partnership - Spiral Drive (the Portfolio) is not a legal entity
but rather a combination of the operations of two warehouse buildings that are
owned by a real estate title holding corporation. A summary of the holdings of
the Portfolio is as follows (each location has one building):
<TABLE>
<CAPTION>
----------------
NUMBER OF SQUARE
PROPERTY LOCATION TENANTS FEET
----------------- --------- ------
<S> <C> <C>
Florence, KY 4 26,556
Florence, KY 8 34,999
------
61,555
======
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying Combined Statement of Revenue and Certain Expenses was pre-
pared for the purpose of complying with the rules and regulations of the Secu-
rities and Exchange Commission for inclusion in the registration statement on
Form S-11 of Cabot Industrial Trust. The statement is not representative of the
actual operations of TLI/Cahill Group-Spiral Drive for the periods presented
nor indicative of future operations because certain expenses, primarily depre-
ciation, amortization and interest expenses, which may not be comparable to the
expenses expected to be incurred by Cabot Industrial Trust in future operations
of the Portfolio, have been excluded.
The combined financial statement, and information included in these notes to
the combined financial statement, for the nine months ended September 30, 1997
is unaudited. In the opinion of management, such financial statement and infor-
mation reflect all adjustments necessary for a fair representation of the
results of the interim period. All such adjustments are of a normal, recurring
nature.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related
leases. Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the Combined Statement of Revenue and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
3. RENTAL REVENUES
All leases are classified as operating leases.
4. FUTURE MINIMUM RENTAL RECEIPTS
Future minimum rental receipts due on noncancelable operating leases for the
Portfolio as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
-----------
<S> <C>
1997 $ 536,479
1998 426,011
1999 222,743
2000 152,018
2001 44,127
-----------
$ 1,381,378
===========
</TABLE>
The above amounts do not include additional rental receipts that will become
due as a result of the expense pass-through and escalation provisions in the
leases. The Portfolio is subject to the usual business risks associated with
the collection of the above scheduled rents.
F-98
<PAGE>
PHOENIX, ARIZONA/WEST REGION
[Picture of Building]
OHIO/KENTUCKY/MIDWEST REGION
[Picture of Building]
TEXAS/SOUTHWEST REGION
[Picture of Building]
ONTARIO, CA/WEST REGION
[Picture of Building]
TEXAS/SOUTHWEST REGION
[Picture of Building]
CHICAGO, IL/MIDWEST REGION
[Picture of Building]
<PAGE>
[CABOT INDUSTRIAL LOGO APPEARS HERE]
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 31. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth estimates of the expenses that will be incurred
by the Registrant in connection with the issuance and distribution of the
Shares being registered.
<TABLE>
------
<CAPTION>
AMOUNT
----------
<S> <C>
SEC Registration Fee................................................ $ 50,888
NASD Filing Fee..................................................... 18,613
NYSE Fee............................................................ 217,000
Legal Fees and Expenses............................................. 1,400,000
Accounting Fees and Expenses........................................ 830,000
Printing and Engraving Expense...................................... 450,000
Transfer Agent and Registrar Fees................................... 5,000
Blue Sky Fees and Expense........................................... 15,000
Other Miscellaneous................................................. 1,692,499
Title, Insurance and Expenses....................................... 942,000
Property Transfer Fees.............................................. 879,000
----------
Total............................................................. $6,500,000
==========
</TABLE>
ITEM 32. SALES TO SPECIAL PARTIES.
See Item 33.
ITEM 33. RECENT SALES OF UNREGISTERED SECURITIES.
Immediately prior to the consummation of the Offering, as part of the Formation
Transactions, the Contributing Investors will be issued an aggregate of
8,961,714 unregistered Common Shares and 22,958,735 Units. In addition, concur-
rently with the consummation of the Offering, the Company will issue 1,000,000
Common Shares (assuming the actual Offering Price is $20.00) to Concurrent
Investor as part of the Concurrent Placement. In October 1997 the Company
issued 50 Common Shares to one of the officers, for total consideration of
$1,000. All of the above sales will be made to "accredited investors" and
"QIBs" as defined in Regulation D and Rule 144A, respectively, under the Secu-
rities Act in transactions not involving a public offering pursuant to Regula-
tion D. See "Formation and Other Transactions."
ITEM 34. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 9, Section 1 of the Registrant's Declaration of Trust provides as fol-
lows with respect to the limitation of liability for Trustees and officers and
indemnification:
"To the maximum extent that Maryland law in effect from time to time per-
mits limitation of the liability of trustees and officers of a REIT, no
trustee or officer of the Trust shall be liable to the Trust or to any
shareholder for money damages. Neither the amendment nor the repeal of this
Section 1, nor the adoption or amendment of any other provision of this
Declaration of Trust inconsistent with this Section 1, shall apply to or
affect in any respect the applicability of the preceding sentence with
respect to any act or failure to act which occurred prior to such amend-
ment, repeal or adoption. In the absence of any Maryland statute limiting
the liability of trustees or officers of a Maryland REIT for money damages
in a suit by or on behalf of the Trust or by any shareholder, no trustee or
officer of the Trust shall be liable to the Trust or to any shareholder for
money damages except to the extent that (a) the trustee or officer actually
received an improper benefit or profit in money, property or services, for
the amount of the benefit or profit in money, property or services actually
received or (b) a judgment or other final adjudication adverse to the
trustee or officer is entered in a proceeding based on a finding in the
proceeding that the trustee's or officer's action or failure to act was the
result of active and deliberate dishonesty and was material to the cause of
the action adjudicated in the proceeding."
Article 9, Section 3 of the Registrant's Declaration of Trust provides as fol-
lows with respect to the indemnification of Trustees and officers:
"Notwithstanding any other provisions of this Declaration of Trust, the
Trust, for the purpose of providing indemnification for its Trustees and
officers, shall have the authority, without specific shareholder approval,
to enter into insur-
II-1
<PAGE>
ance or other arrangements to indemnify all Trustees and officers of the
Trust against any and all liabilities and expenses incurred by them by
reason of their being Trustees or officers of the Trust, whether or not the
Trust would otherwise have the power under this Declaration of Trust or
under Maryland law to indemnify such persons against such liability.
Without limiting the power of the Trust to procure or maintain any kind of
insurance or other arrangement, the Trust may, for the benefit of persons
indemnified by it, (a) create a trust fund, (b) establish any form of self-
insurance, (c) secure its indemnity obligation by grant of any security
interest or other lien on the assets of the Trust, or (d) establish a
letter of credit, guaranty or surety arrangement. Any such insurance or
other arrangement may be procured, maintained or established within the
Trust or with any insurer or other person deemed appropriate by the Board
regardless of whether all or part of the stock or other securities thereof
are owned in whole or in part by the Trust. In the absence of fraud, the
judgment of the Board as to the terms and conditions of insurance or other
arrangement and the identity of the insurer or other person participating
in any arrangement shall be conclusive, and such insurance or other
arrangement shall not be subject to voidability, nor subject the Trustees
approving such insurance or other arrangement to liability on any ground,
regardless of whether Trustees participating and approving such insurance
or other arrangement shall be beneficiaries thereof."
The Registrant will enter into indemnity agreements with each of its officers
and Trustees which provide for reimbursement of all expenses and liabilities of
such officer or Trustee, arising out of any lawsuit or claim against such
officer or Trustee due to the fact that he was or is serving as an officer or
Trustee, except for such liabilities and expenses (a) the payment of which is
judicially determined to be unlawful, (b) relating to claims under Section
16(b) of the Securities Exchange Act of 1934, or (c) relating to judicially
determined criminal violations.
The form of Underwriting Agreement to be filed as an exhibit to this Registra-
tion Statement will provide for the reciprocal indemnifications by the Under-
writers of the Registrant, and its Trustees, officers and controlling persons,
and by the Registrant of the Underwriters, and their respective directors,
officers and controlling persons, against certain liabilities under the Securi-
ties Act.
ITEM 35. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED.
The consideration to be received by the Registrant from sales of the Shares
hereby registered will be credited to the appropriate capital accounts of the
Registrant.
ITEM 36. FINANCIAL STATEMENTS AND EXHIBITS.
See Index to Financial Statements and Index to Exhibits.
ITEM 37. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide the underwriters at the
closing specified in the underwriting agreements certificates in such denomina-
tion and registered in such names as required by the underwriters to permit
prompt deliver to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to trustees, officers and controlling persons of the Reg-
istrant 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 Act and is, there-
fore, 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 trustee, officer or controlling person of the Registrant in the suc-
cessful defense of any action, suit or proceeding) is asserted by such trustee,
officer or controlling person in connection with the securities being regis-
tered, the Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate juris-
diction the question of whether such indemnification is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
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 purpose 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 securi-
ties offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant cer-
tifies 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 No. 3
to Registration Statement to be signed on its behalf by the undersigned, there-
unto duly authorized, in the City of Boston, State of Massachusetts, on January
22, 1998.
CABOT INDUSTRIAL TRUST
By: _______________________________
/s/ Robert E. Patterson
ROBERT E. PATTERSON, PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT NO.
3 TO REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
<S> <C> <C>
* Chairman of the
- ----------------------------------- Board, Chief January 22, 1998
FERDINAND COLLOREDO-MANSFELD Executive
Officer, Trustee
President, Trustee
/s/ Robert E. Patterson (Principal January 22, 1998
- ----------------------------------- Executive
ROBERT E. PATTERSON ATTORNEY-IN Officer)
FACT *
* Chief Financial
- ----------------------------------- Officer January 22, 1998
FRANZ COLLOREDO-MANSFELD (Principal
Financial
Officer)
* Senior Vice
- ----------------------------------- President-- January 22, 1998
NEIL E. WAISNOR Finance,
Treasurer,
Secretary
(Principal
Accounting
Officer)
</TABLE>
II-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DOCUMENT DESCRIPTION PAGE NO.
------- -------------------- ----------
<C> <S> <C>
1 Form of Underwriting Agreement between Company, the
Operating Partnership, the Operating Partnership and the
Underwriters named therein.*
3.1 Amended and Restated Cabot Industrial Trust Declaration
of Trust, dated January , 1998.*
3.2 Bylaws of the Company.***
3.3 Form of Registration Rights and Lock-Up Agreement, dated
as of , 1998, between the Company, the
Contributing Investors and various other persons
identified therein (included as Exhibit B to
Exhibit 4.1).
3.4 Form of share certificate for Common Shares of the
Company.*
3.5 Second Amended and Restated Agreement of Limited
Partnership Agreement of Cabot Industrial Properties,
L.P., dated February , 1998 by and among .*
4.1 Contribution Agreement relating to the Capitalization of
Cabot Industrial Trust, dated as of October 10, 1997,
among the Company, the Operating Partnership, Cabot
Partners and Various Contributors and Title Holding
Entities Identified Therein.*
5.1 Opinion of Mayer, Brown & Platt as to legality of Shares
being registered.*
8.1 Opinion of Mayer, Brown & Platt as to certain tax
matters.*
10.1 Form of Indemnification Agreement entered into between
the Company and the Trustees.*
10.2 Share Purchase Agreement, dated as of December 17, 1997,
between the Company and Morgan Stanley Asset Management
Inc., on behalf of certain of its institutional
investors.*
10.3 Form of Registration Rights and Lock-Up Agreement,
between the Company and Morgan Stanley Asset Management
Inc., on behalf of certain of its institutional
investors.*
10.4 Cabot Industrial Trust Long Term Incentive Plan.*
10.5 Form of Employment Agreement between Cabot Industrial
Properties, L.P. and Ferdinand
Colloredo-Mansfeld.*
10.6 Form of Employment Agreement between Cabot Industrial
Properties, L.P. and Robert E. Patterson.*
10.7 Form of Employment Agreement between Cabot Industrial
Properties, L.P. and Franz
Colloredo-Mansfeld.*
10.8 Form of Employment Agreement between Cabot Industrial
Properties, L.P. and Andrew D. Ebbott, Howard B. Hodgson,
Jr., Neil E. Waisnor or Eugene F. Reilly.*
23.1 Consent of Mayer, Brown & Platt (included in the opinions
filed as Exhibits 5.1 and 8.1).
23.2 Consent of Arthur Andersen LLP.*
23.3 Consent of KPMG Peat Marwick LLP.*
23.4.1 Consent of Coopers & Lybrand L.L.P.*
23.4.2 Consent of Coopers & Lybrand L.L.P.*
23.5 Consent of Grant Thornton LLP.*
23.6 Consent of Noah T. Herndon.***
23.7 Consent of Christopher C. Milliken.***
23.8 Consent of Maurice Segall.***
23.9 Consent of W. Nicholas Thorndike.***
23.10 Consent of Ronald L. Skates.***
23.11 Consent of Ballard Spahr Andrews & Ingersoll (included in
the opinion filed as Exhibit A to Exhibit 5.1).
24.1 Power of Attorney pursuant to which amendments to this
Registration Statement may be filed.***
</TABLE>
- -------
*Filed herewith.
***Previously filed.
<PAGE>
EXHIBIT 1
UNDERWRITING AGREEMENT
CABOT INDUSTRIAL TRUST
7,500,000 Common Shares of Beneficial Interest
(Par Value $.01 Per Share)
January , 1998
J.P. MORGAN SECURITIES INC.
Goldman, Sachs, & Co.
Prudential Securities Incorporated
Smith Barney Inc.
as Representatives of the
several Underwriters
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
Cabot Industrial Trust, a Maryland real estate investment trust (the
"Company"), proposes to issue and sell to the several Underwriters listed in
Schedule I hereto (collectively, the "Underwriters"), for whom you are acting as
representatives (the "Representatives"), an aggregate of 7,500,000 common shares
of beneficial interest (the "Underwritten Shares"), par value $.01 per share, of
the Company (the "Common Shares") and, for the sole purpose of covering over-
allotments in connection with the sale of the Underwritten Shares, at the option
of the Underwriters, up to an additional 1,125,000 Common Shares (the "Option
Shares"). The Underwritten Shares and the Option Shares are herein referred to
collectively as the "Shares."
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Securities Act"), a registration
statement on Form S-11 (File No. 333-38383), including a prospectus, relating to
the Shares. The registration statement, as amended at the time when it becomes
effective, or, if a post-effective amendment is filed with respect thereto, as
amended by such post-effective amendment at the time of effectiveness of such
post-effective amendment, including in each case information (if any) deemed to
be part of the registration statement at the
<PAGE>
-2-
time of effectiveness pursuant to Rule 430A under the Securities Act, is
referred to in this Agreement as the "Registration Statement," any preliminary
prospectus filed as part of the Registration Statement as originally filed or as
part of any amendment thereto, or filed pursuant to Rule 424 under the
Securities Act is referred to in this Agreement as a "Preliminary Prospectus,"
and the prospectus in the form first used to confirm sales of Shares is referred
to in this Agreement as the "Prospectus." If the Company has filed an
abbreviated registration statement pursuant to Rule 462(b) under the Securities
Act (a "Rule 462 Registration Statement"), then any reference herein to the term
"Registration Statement" shall be deemed to include such Rule 462 Registration
Statement.
The Company and Cabot Industrial Properties, L.P. (the "Operating
Partnership") hereby agree with the Underwriters as follows:
1. The Company hereby agrees to issue and sell the Underwritten
Shares to the several Underwriters as hereinafter provided, and each
Underwriter, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees to purchase,
severally and not jointly, from the Company, the respective number of
Underwritten Shares set forth opposite such Underwriter's name in Schedule I
hereto at a purchase price per share of $[ ] (the "Purchase Price").
In addition, the Company hereby agrees to issue and sell the Option
Shares to the several Underwriters as hereinafter provided, and the
Underwriters, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, shall have the
option to purchase, severally and not jointly, from the Company up to an
aggregate of 1,125,000 Option Shares at the Purchase Price, for the sole purpose
of covering over-allotments (if any) in the sale of Underwritten Shares by the
several Underwriters.
If any Option Shares are to be purchased, the number of Option Shares
to be purchased by each Underwriter shall be the number of Option Shares which
bears the same ratio to the aggregate number of Option Shares being purchased as
the number of Underwritten Shares set forth opposite the name of such
Underwriter in Schedule I hereto (or such number increased as set forth in
Section 9 hereof) bears to the aggregate number of Underwritten Shares being
purchased from the Company by the several Underwriters, subject, however, to
such adjustments to
<PAGE>
-3-
eliminate any fractional Shares as the Representatives in their sole discretion
shall make.
The Underwriters may exercise the option to purchase the Option Shares
at any time (but not more than once) on or before the thirtieth day following
the date of this Agreement, by written notice from the Representatives to the
Company. Such notice shall set forth the aggregate number of Option Shares as
to which the option is being exercised and the date and time when the Option
Shares are to be delivered and paid for, which may be the same date and time as
the Closing Date (as hereinafter defined) but shall not be earlier than the
Closing Date or later than the tenth full Business Day (as hereinafter defined)
after the date of such notice (unless such time and date are postponed in
accordance with the provisions of Section 9 hereof). Any such notice shall be
given at least two Business Days prior to the date and time of delivery
specified therein.
2. The Company and the Operating Partnership each understand that
the Underwriters intend (i) to make a public offering of their respective
portions of the Shares as soon after (A) the Registration Statement has become
effective and (B) the parties hereto have executed and delivered this Agreement
as in the judgment of the Representatives is advisable and (ii) initially to
offer the Shares upon the terms set forth in the Prospectus.
3. Payment for the Shares shall be made to the Company by wire
transfer in immediately available funds to the account specified by the Company
to the Representatives, no later than noon on the Business Day (as hereinafter
defined) prior to the Closing Date (as hereinafter defined) in the case of the
Underwritten Shares, on , 1998, or at such other time on the same or
such other date, not later than the fifth Business Day thereafter, as the
Representatives and the Company may agree upon in writing or, in the case of the
Option Shares, on the date and time specified by the Representatives in the
written notice of the Underwriters' election to purchase such Option Shares.
The time and date of such payment for the Underwritten Shares are referred to
herein as the "Closing Date" and the time and date of such payment for the
Option Shares, if other than the Closing Date, are referred to herein as the
"Additional Closing Date." As used herein, the term "Business Day" means any
day other than a day on which banks are permitted or required to be closed in
New York City.
<PAGE>
-4-
Payment for the Shares to be purchased on the Closing Date or the
Additional Closing Date, as the case may be, shall be made against delivery to
the Representatives for the respective accounts of the several Underwriters of
the Shares to be purchased on such date registered in such names and in such
denominations as the Representatives shall request in writing not later than two
full Business Days prior to the Closing Date or the Additional Closing Date, as
the case may be, with any transfer taxes payable in connection with the transfer
to the Underwriters of the Shares duly paid by the Company. The certificates
for the Shares will be made available for inspection and packaging by the
Representatives at the office of J.P. Morgan Securities Inc. set forth above not
later than 1:00 P.M., New York City time, on the Business Day prior to the
Closing Date or the Additional Closing Date, as the case may be.
4. (a) The Company and the Operating Partnership jointly and
severally represent and warrant to each Underwriter that:
(i) no order preventing or suspending the use of any Preliminary Prospectus
has been issued by the Commission, and each Preliminary Prospectus filed as part
of the Registration Statement, as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act, complied when
so filed in all material respects with the Securities Act, and did not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided,
--------
however, that this representation and warranty shall not apply to any statements
- -------
or omissions made in reliance upon and in conformity with information relating
to any Underwriter furnished to the Company in writing by such Underwriter
through the Representatives expressly for use therein;
(ii) (a) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been instituted
or, to the knowledge of the Company or the Operating Partnership, threatened by
the Commission; (b) the Registration Statement and the Prospectus (as amended or
supplemented if the Company shall
<PAGE>
-5-
have furnished any amendments or supplements thereto) comply, or will comply, as
the case may be, in all material respects with the Securities Act and do not and
will not, as of the applicable effective date of the Registration Statement and
any amendment thereto and as of the date of the Prospectus and any amendment or
supplement thereto, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus and any amendments or
supplements thereto, in the light of the circumstances under which they were
made) not misleading, (c) the Prospectus, as amended or supplemented at the
Closing Date and the Additional Closing Date, as the case may be, if applicable,
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that clauses (b) and (c) of this representation
-------- -------
and warranty shall not apply to any statements or omissions in the Registration
Statement or the Prospectus or any amendment or supplement thereto made in
reliance upon and in conformity with information relating to any Underwriter
furnished to the Company in writing by such Underwriter through the
Representatives expressly for use therein and (d) in connection with the offer
and sale of the Shares, the Company has not made offers for the sale of Shares
by any means other than the Registration Statement and the Prospectus (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto);
(iii) there are no contracts or other documents required by the
Securities Act to be filed as exhibits to the Registration Statement or required
to be described in the Registration Statement or Prospectus which have not been
so filed or described as required; each contract to which the Company, the
Operating Partnership, the Subsidiaries or the Management Company is a party and
to which reference is made in the Prospectus or which is filed as an exhibit to
the Registration Statement has been duly and validly executed by the Company,
the Operating Partnership, the Subsidiaries, or the Management Company, as the
case may be, and to the knowledge of
<PAGE>
-6-
the Company the other parties thereto and is in full force and effect in all
material respects in accordance with its terms, and no such contracts have been
assigned by the Company except as contemplated in the Prospectus; the Company
knows of no present situation or condition or fact which would prevent
compliance by the Company in all material respects with the terms of any such
contract;
(iv) other than the subsidiaries listed on Exhibit A hereto (the
"Subsidiaries"), the Company does not own, beneficially or of record, any
material interest in, or control, any partnership, joint venture, limited
liability company, unincorporated association, corporation or other entity;
(v) each of Arthur Andersen LLP, KPMG Peat Marwick LLP, Coopers & Lybrand
L.L.P. and Grant Thornton LLP, the accounting firms that certified the financial
statements and supporting schedules included in the Registration Statement, is
an independent public accountant as required by the Securities Act;
(vi) (a) the audited historical balance sheet of the Company included in
the Registration Statement and the Prospectus presents fairly, in all material
respects, the financial position of the Company as of the date indicated; (b)
the audited historical financial statements of Herrod Associates ("Herrod");
Blue Ash Office L.L.C. and Blue Ash Industrial L.L.C. ("Blue Ash"), Seefried
Properties Group ("Seefried"), Prudential Properties Group II ("Prudential II"),
DFW Trade Center I, L.P., Buildings 1, 2 and 3 ("DFW"), 1055 Dornoch Court, San
Diego, CA ("1055 Dornoch"), Hampden I and II Properties Group ("Hampden"), South
Royal Associates Properties Group ("South Royal"), Joseph A. Leroy Family LP
Property ("Leroy"), Raco/Malever, L.L.C. ("Raco") and TLI/Cahill Partnership-
Spiral Drive (together with Herrod, Blue Ash, Seefried, Prudential II, DFW, 1055
Dornoch, South Royal, Leroy and Raco the "Acquisition Properties") each
included in the Registration Statement and the Prospectus present fairly, in all
material respects, the financial position of each of the above-referenced
entities as of the respective dates indicated and the results of the respective
operations and cash flows of each such en-
<PAGE>
-7-
tity for the respective periods specified; and (c) the audited historical
combined financial statements of the Existing Investors Property Group; Orlando
Central Park and 500 Memorial Drive; Knickerbocker Properties, Inc. II;
Pennsylvania Public School Employees' Retirement System Industrial Properties
Portfolio; Prudential Properties Group; and West Coast Industrial, LLC
(collectively, the "Investor Properties") each included in the Registration
Statement and the Prospectus present fairly, in all material respects, the
combined financial position of each of such entities as of the respective dates
indicated and the combined results of their respective operations and their
respective cash flows for the respective periods specified and (d) the audited
historical financial statements of Cabot Partners Limited Partnership ("Cabot
Partners"), included in the Registration Statement and the Prospectus present
fairly, in all material respects, the financial position of Cabot Partners as of
the respective dates indicated and the results of Cabot Partners operations and
cash flows for the respective periods specified; each of the foregoing audited
historical financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis; the supporting
schedules included in the Registration Statement present fairly the information
required to be stated therein; the pro forma financial statements included in
the Registration Statement and the Prospectus are based upon good faith
estimates and assumptions believed by the Company and the Operating Partnership
to be reasonable; such pro forma financial statements (i) have been prepared in
accordance with the applicable requirements of Rule 11-02 of Regulation S-X of
the Commission in accordance with the Commission's rules and guidelines with
respect to pro forma financial information and (ii) was properly computed on the
bases described therein and in the opinion of the Company, the assumptions used
in the preparation of such pro forma financial information (including, without
limitation, the notes thereto) were reasonable and the adjustments therein were
appropriate to give effect to the transactions or circumstances referred to
therein; the unaudited historical balance sheet of Cabot Partners included in
the Registration Statement and the Prospectus presents fairly, in all ma-
<PAGE>
-8-
terial respects, the financial position of Cabot Partners as of the date
indicated; said unaudited historical balance sheet has been prepared on a basis
consistent with that of the audited balance sheet of Cabot Partners included in
the Registration Statement and the Prospectus; the unaudited historical combined
interim financial statements of each of the Investor Properties included in the
Registration Statement and the Prospectus present fairly, in all material
respects, the combined financial position of such entities as of the respective
dates indicated and the combined results of their respective operations and
their respective cash flows for the periods specified; said unaudited historical
combined interim financial statements have been prepared on a basis consistent
with that of the audited combined financial statements included in the
Registration Statement and the Prospectus; and the unaudited historical
financial statements of each of the Acquisition Properties included in the
Registration Statement and the Prospectus present fairly, in all material
respects, the financial position of such entities as of the date indicated and
the results of such entities' operations and cash flows for the periods
specified; said unaudited historical interim financial statements have been
prepared on a basis consistent with that of the audited financial statements
included in the Registration Statement and the Prospectus; and the statistical
and market related data included in the Registration Statement and the
Prospectus are based on or derived from sources which the Company and the
Operating Partnership believe to be reliable and accurate;
(vii) since the respective dates as of which information is given in
the Registration Statement and the Prospectus and except as set forth or
contemplated therein, (A) there has not been any material adverse change in or
affecting the business, management, condition (financial or otherwise) or
results of operations of the Company or any of its Subsidiaries, taken as a
whole (each, a "Material Adverse Change," and any event or state of facts which
could reasonably be expected to result in a Material Adverse Change being herein
referred to as a "Prospective Material Adverse Change"); (B) no casualty loss,
condemnation or other adverse event with respect to any Property (as defined in
the Pro-
<PAGE>
-9-
spectus) which is material to the Company and its Subsidiaries, taken as a
whole, has occurred; (C) neither the Company nor any of its Subsidiaries has
entered into any transaction or agreement (whether or not in the ordinary course
of business) which is material to the Company and its Subsidiaries, taken as a
whole; (D) there has been no dividend or distribution of any kind declared, paid
or made by the Company or any Subsidiary on any class of its capital stock or by
the Operating Partnership with respect to its partnership interests; and (E)
there has been no change in the capital stock of the Company or the partnership
interests of the Operating Partnership, or any increase in the indebtedness of
the Company or the Operating Partnership or the indebtedness encumbering the
Properties;
(viii) the Company has been duly organized and is validly existing as a
real estate investment trust in good standing under the laws of the State of
Maryland, with the trust power and authority to own, lease and operate its
properties, to conduct the business in which it is engaged and proposes to
engage as described in the Registration Statement and the Prospectus and to
enter into and perform its obligations under this Agreement and the Transaction
Documents (as hereinafter defined) to which it is a party, and is duly qualified
as a foreign trust and is in good standing under the laws of each other
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure to be so qualified or in good standing would not reasonably be expected
to have a material adverse effect on the business, management, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries, taken as a whole (a "Material Adverse Effect");
(ix) the Operating Partnership has been duly formed and is validly
existing as a limited partnership in good standing under the laws of the State
of Delaware, with partnership power and authority to own, lease and operate its
properties, to conduct the business in which it is engaged and proposes to
engage as described in the Registration Statement and the Prospectus and to
enter into and perform its obligations under this Agreement and the Transaction
<PAGE>
-10-
Documents (as hereinafter defined) to which it is a party; the Operating
Partnership is duly qualified or registered as a limited partnership and is in
good standing under the laws of each other jurisdiction in which such
qualification or registration is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure to be
so qualified or registered or in good standing would not have a Material Adverse
Effect; the Company is the sole general partner of the Operating Partnership;
immediately after the Closing Date, the Company will be the holder of a general
partnership interest in the Operating Partnership constituting approximately [
]% of all of the general and limited partnership interests (the "Units") in the
Operating Partnership assuming that no Option Shares are purchased on the
Closing Date (to the extent any portion of the Option Shares are purchased, the
percentage of Units set forth above will be adjusted accordingly, and, to the
extent that any of the Option Shares is purchased, the Company will contribute
the net proceeds therefrom to the Operating Partnership in exchange for an
equivalent number of Units); and all of the Units owned by the Company at the
Closing Date and the Additional Closing Date will be owned free and clear of all
liens, encumbrances, security interests, mortgages, pledges, restrictions and
claims (each of the foregoing, a "Lien"; and collectively, the "Liens");
(x) each of the Subsidiaries has been duly organized and is validly
existing under the laws of its jurisdiction of organization, with power and
authority (corporate, partnership or other) to own, lease and operate its
properties, to conduct the business in which it is engaged and proposes to
engage as described in the Registration Statement and the Prospectus and to
enter into and perform its obligations under the Transaction Documents to which
it is a party, and has been duly qualified to do business and is in good
standing under the laws of each other jurisdiction in which it owns, leases or
operates properties, or conducts any business, so as to require such
qualification, other than where the failure to be so qualified or in good
standing, singly or in the aggregate with all other such failures, would not
have a Material Adverse Effect; and
<PAGE>
-11-
all the outstanding shares of capital stock, and Units of each Subsidiary have
been duly authorized and validly issued, are fully paid, and are owned by the
Company, directly or indirectly, free and clear of all Liens except as otherwise
described in the Registration Statement and the Prospectus;
(xi) all the outstanding shares of capital stock of the Management Company
have been duly authorized and validly issued, are fully paid and non-assessable,
and are owned as described in the Registration Statement and the Prospectus,
free and clear of all Liens;
(xii) consummation of each of the Formation Transactions, the execution
and delivery of the Transaction Documents and the Share Purchase Agreement
dated December 17, 1997 between the Company and the Morgan Stanley Real Estate
Special Situations Fund I, L.P. and the other parties named therein (the "MSAM
Agreement")and the performance by the Company, its Subsidiaries and the
Management Company of their respective obligations thereunder have been duly
authorized by all necessary corporate and partnership action, and, except for
such matters as are set forth in the Prospectus and except for such matters as
will not result in a Material Adverse Effect, did not and will not violate or
conflict with or, with the giving of notice or lapse of time or both, constitute
a breach of, or default under, or result in the creation or imposition of any
Lien upon any of the Properties or any other properties or assets of the Company
or any of its Subsidiaries pursuant to, any contract, indenture, mortgage, deed
of trust, loan agreement, note, lease or other agreement or instrument (except
mortgages, notes, loans and other agreements or instruments to which the
Properties are subject which will be prepaid, including any applicable
prepayment penalties thereon, promptly following the Closing Date) to which the
Company or any of its Subsidiaries or the Management Company is or was a party
or by which it or any of them may be bound or affected, or to which any of the
Properties or any other properties or assets of the Company or any of its
Subsidiaries is subject; none of the Formation Transactions or the execution,
delivery and performance of the Transaction Documents, the MSAM Agreement or the
credit fa-
<PAGE>
-12-
cility to be executed between the Company and [ ] on the Closing Date (the
"Credit Facility") resulted or will result in the violation of any of the
provisions of the declaration of trust, charter, by-laws or partnership
agreement, as the case may be, of the Company or any of its Subsidiaries or any
applicable law, rule, order, administrative regulation or administrative or
court decree; all authorizations, consents and approvals necessary to consummate
the Formation Transactions and to enter into the Transaction Documents, the MSAM
Agreement and the Credit Facility will be timely obtained, except where the
failure to obtain any such authorization, consent or approval, individually or
in the aggregate, would not have a Material Adverse Effect;
(xiii) this Agreement has been duly authorized, executed and delivered
by the Company and the Operating Partnership and, assuming due authorization,
execution and delivery by the Representatives, constitutes the valid and binding
agreement of the Company and the Operating Partnership, enforceable against the
Company and the Operating Partnership in accordance with its terms;
(xiv) the authorized shares of beneficial interest of the Company conform
as to legal matters to the description thereof set forth in the Registration
Statement and the Prospectus, and all of the outstanding shares of beneficial
interest of the Company have been duly authorized and validly issued, are fully
paid and non-assessable and are not subject to any preemptive or similar rights;
and, except as described in or expressly contemplated by the Registration
Statement and the Prospectus, there are no outstanding rights, warrants or
options to acquire, or instruments convertible into or exchangeable or
exercisable for, any shares of beneficial interest of, or equity interest in,
the Company or any of its Subsidiaries, or any contract, commitment, agreement,
understanding or arrangement of any kind relating to the issuance, directly or
indirectly, of any beneficial interest of, or equity interest in, the Company or
any of its Subsidiaries, or any such convertible or exchangeable securities or
any such rights, warrants or options;
<PAGE>
-13-
(xv) the Shares have been approved for listing on the New York Stock
Exchange ("NYSE"), subject only to official notice of issuance;
(xvi) the Shares to be issued and sold by the Company hereunder have
been duly authorized and, when delivered to and paid for by the Underwriters in
accordance with the terms of this Agreement, will be validly issued, fully paid
and non-assessable and will conform to the description thereof in the
Registration Statement and the Prospectus, and the Common Shares to be issued
and sold in connection with the Formation Transactions and pursuant to the MSAM
Agreement in the Concurrent Placement (the "Concurrent Placement"), have been
duly authorized for issuance to the holders or the prospective holders thereof,
and on the Closing Date will be validly issued, fully paid and non-assessable;
the form of share certificate used to evidence the Common Shares is in due and
proper form and complies in all material respects with all applicable legal
requirements; and the issuance of such Shares is not subject to any preemptive
or similar right; the offer, issuance and sale of Common Shares (other than
pursuant to this Agreement) at or prior to the Closing Date was or will be, as
the case may be, exempt from the registration requirements of the Securities Act
and applicable state securities, real estate syndication and blue sky laws;
(xvii) the Units to be issued in connection with the Formation
Transactions, including, without limitation, the Units to be issued to the
Company, have been duly authorized for issuance by the Operating Partnership to
the holders or the prospective holders thereof, and on the Closing Date will be
validly issued and fully paid and will be issued to the respective holders free
and clear of all security interests, liens and encumbrances (other than any
liens, such holders may have arranged for prior to receipt thereof); immediately
after the Closing Date, [ ] Units (subject to adjustment to reflect the purchase
of any Option Shares) will be issued and outstanding; the issuance and sale of
all of such Units was or will be, as the case may be, exempt from the
registration requirements of the Securities Act and applicable state securities,
real estate syndication and blue sky laws;
<PAGE>
-14-
(xviii) neither the Company, any of its Subsidiaries nor the Management
Company is in violation of its declaration of trust, charter, by-laws or
partnership agreement, as the case may be, and, except as disclosed in the
Registration Statement and the Prospectus, neither the Company, any of its
Subsidiaries nor the Management Company is, or with the giving of notice or
lapse of time or both would be, in violation of, or in default under, any
contract, indenture, mortgage, deed of trust, loan agreement, note, lease or
other agreement or instrument to which it is a party or by which it or any of
its respective properties or assets is bound or affected, except for violations
and defaults which, individually or in the aggregate, will not have a Material
Adverse Effect; the issuance and sale of the Shares by the Company and the Units
by the Operating Partnership and the performance by the Company and the
Operating Partnership of their obligations under this Agreement and the
consummation of the transactions contemplated herein will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a default
under, any contract, indenture, mortgage, deed of trust, loan agreement, note,
lease or other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound or affected or to which any of the property or assets of the Company or
any of its Subsidiaries is subject, except for any such violation, conflict,
breach or default which, individually or in the aggregate, would not have a
Material Adverse Effect, or result in the creation or imposition of any material
Lien upon any of the Properties, nor will any such action result in any
violation of the provisions of the trust agreement, certificate of
incorporation, the by-laws or the partnership agreement, as the case may be, of
the Company or any of its Subsidiaries or any applicable law or statute or,
except for such matters or would not result in a Material Adverse Effect, any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its Subsidiaries or any of their
respective properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental agency
or body is required for the issue and sale of the Shares and the Units or the
<PAGE>
-15-
consummation by the Company and the Operating Partnership of the transactions
contemplated by this Agreement, except such consents, approvals, authorizations,
registrations and qualifications as have been obtained under the Securities Act
and as may be required under applicable state securities, real estate
syndication or blue sky laws in connection with the purchase and distribution of
the Shares by the Underwriters;
(xix) other than as set forth or contemplated in the Registration
Statement and the Prospectus, there are no legal or governmental actions, suits
or proceedings pending or, to the knowledge of the Company or the Operating
Partnership, threatened to which the Company or any of its Subsidiaries or the
Management Company is or may be a party or of which any property of the Company
or any of its Subsidiaries or the Management Company or any Property is or may
be the subject, which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, and, to the knowledge of the Company
and the Operating Partnership, no such proceedings are threatened or
contemplated by governmental authorities or others;
(xx) as of the Closing Date the Operating Partnership will have coverage
under title insurance policies on each of the Properties in an amount at least
equal to the aggregate of (a) the cost of acquisition of such Property and (b)
the cost of construction of the improvements thereon subsequent to such
acquisition;
(xxi) immediately following the application of the proceeds from the
sale of the Shares in the manner set forth under "Use of Proceeds" in the
Registration Statement and the Prospectus, the mortgages and deeds of trust
encumbering the Properties will not be convertible into an equity ownership
interest in the Company or any of its Subsidiaries and neither the Company, any
of its Subsidiaries nor any other person affiliated therewith will hold a
participating interest therein and said mortgages and deeds of trust will not be
cross-defaulted or cross-collateralized with any property not owned, directly or
indirectly by the Company or any of its Subsidiaries;
<PAGE>
-16-
(xxii) no labor dispute with the employees of the Company, any of its
Subsidiaries or the Management Company exists or, to the knowledge of the
Company or the Operating Partnership, is threatened which could reasonably be
expected to have a Material Adverse Effect; and neither the Company nor the
Operating Partnership is aware of any existing or threatened labor disturbance
by the employees of any of the entities described in the Registration Statement
and the Prospectus as current or prospective tenants of the Properties which
will have a Material Adverse Effect;
(xxiii) the Company will be organized in conformity with the requirements
for qualification as a real estate investment trust under the Internal Revenue
Code of 1986, as amended (the "Code"), and its proposed method of operation will
enable it to meet the requirements for qualification and taxation as a real
estate investment trust under the Code commencing with the Company's taxable
year ending December 31, 1998;
(xxiv) the Company, each of its Subsidiaries and the Management Company
possess such certificates, authorizations or permits issued by the appropriate
federal, state, local or foreign regulatory agencies or bodies as are necessary
to conduct the business now operated or proposed to be operated by each of them,
except where the failure to obtain any such certificate, authorization or
permit, individually or in the aggregate, would not have a Material Adverse
Effect, and neither the Company, any of its Subsidiaries nor the Management
Company has received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit which, individually or
in the aggregate, if the subject of an adverse decision, ruling or finding,
would have a Material Adverse Effect;
(xxv) except as described in the Registration Statement and the
Prospectus, there are no persons with registration or other similar rights to
have any securities registered pursuant to the Registration Statement or
otherwise registered by the Company under the Securities Act;
<PAGE>
-17-
(xxvi) at the Closing Date, the Company and the Operating Partnership
will have the rights contemplated in the Contribution Agreement dated as of
October 10, 1997 by and among the Company, the Operating Partnership and certain
other parties (the "Contribution Agreement"), and such rights are free and clear
of any Lien; at the Closing Date, the Contribution Agreement will be in full
force and effect and will be a valid and binding agreement of the parties
thereto, enforceable IN accordance with its terms; at the Closing Date, neither
the Company, the Operating Partnership nor any other party will be in default
under the Contribution Agreement in any respect and neither the Company nor the
Operating Partnership will have received any notice of any claim asserted
thereunder or with respect thereto by any party, which claim is material and
adverse to the rights or interest of the Company or the Operating Partnership
thereunder; at the Closing Date, no material rights of the Company or the
Operating Partnership under the Contribution Agreement will have been waived;
the Contribution Agreement (including the merger and conveyance documents
referred to therein) and the Registration Rights and Lock-Up Agreement to be
entered into by the Company and the Contributing Investors in substantially the
form filed as an exhibit to the Registration Statement (the "Registration Rights
Agreement") are the only agreements relating to the transfer of the assets,
properties and other interests referred to in the Contribution Agreement to
which the Company or the Operating Partnership is a party; consummation of the
transactions contemplated by the Contribution Agreement will not constitute a
breach of, or default under, the charter, by-laws or partnership agreement, as
the case may be, of any party thereto or except for such matters as will not
result in a Material Adverse Effect, any material contract, lease or other
instrument to which Cabot Partners, the Company and the Operating Partnership is
a party or by which any of them or any of their properties may be bound or any
law, administrative regulation or administrative or court decree;
(xxvii) at the Closing Date, the Amended and Restated Agreement of
Limited Partnership of the Operating Partnership, substantially in the form
filed as an exhibit to the Registration Statement (the
<PAGE>
-18-
"Operating Partnership Agreement" and, together with the Contribution Agreement
(including the merger, conveyance and other documents to be executed and
delivered in connection therewith) and the Registration Rights Agreement, the
"Transaction Documents"), and the other Transaction Documents will have been
duly and validly authorized, will be in full force and effect and will be valid
and binding agreements of the parties thereto, enforceable against the Company
and the Operating Partnership in accordance with their terms;
(xxviii) (A) immediately following the Closing Date, the Operating
Partnership will hold good and marketable title to each of the Properties and
the Management Company will hold good and marketable title to the Cabot Partner
Assets (as defined in the Contribution Agreement), in each case free and clear
of all Liens, other than those which the Registration Statement and the
Prospectus indicate will then affect the Properties and subject, however, to (1)
utility easements serving such Properties, (2) Liens for taxes not due and
payable as of the Closing Date, (3) zoning and similar governmental land use
matters affecting such Properties that are consistent with the current uses of
such Properties, (4) matters of title not adversely affecting the use, value or
marketability of title to such Properties, (5) other statutory liens not due and
payable as of the Closing Date and (6) liens that are not material in character,
amount or extent and do not materially detract from the value or interfere with
the use of the Properties or otherwise materially impair the business operations
being conducted or proposed to be conducted thereon (the liens described in
clauses (1) through (6) of this subsection (xxix)(A), collectively, the
"Permitted Exceptions"); (B) all Liens which are required to be disclosed in the
Registration Statement and the Prospectus are disclosed therein; (C) none of the
Company, the Operating Partnership or, to the knowledge of the Company and the
Operating Partnership, any other party to any lease relating to any Property is
in default under any such lease and neither the Company nor the Operating
Partnership is aware of any event which, with the giving of notice or the
passage of time, or both, would constitute a default under any such lease,
except in each case such de-
<PAGE>
-19-
faults that, individually or in the aggregate, would not have a Material Adverse
Effect; (D) each of the leases pursuant to which all or any portion of the
Properties are demised is in full force and effect in all material respects and,
except as set forth in the Registration Statement or the Prospectus no tenant
thereunder has a right of first refusal to purchase the premises demised
thereunder which has not been waived with respect to the transactions
contemplated hereby; (E) none of the Company, the Operating Partnership or, to
the knowledge of the Company or the Operating Partnership, any other party to
any mortgages or other security documents or other agreements encumbering or
otherwise recorded against the Properties is in default thereunder and neither
the Company nor the Operating Partnership is aware of any event which, with the
giving of notice or the passage of time, or both, would constitute a default
under any such mortgage, document or agreement, except in each case such
defaults that, individually or in the aggregate, would not have a Material
Adverse Effect; (F) each of the Properties is in compliance with all applicable
codes, laws and regulations (including, without limitation, building and zoning
codes, laws and regulations), except for such failures to comply that,
individually or in the aggregate, would not have a Material Adverse Effect; (G)
neither the Company nor the Operating Partnership has knowledge of any pending
or threatened condemnation, zoning change or other proceeding or action that
will in any manner affect the size of, use of, improvements on, construction on
or access to the Properties, except such proceedings or actions that,
individually or in the aggregate, would not have a Material Adverse Effect; and
(H) any real property and buildings held under lease by the Company and its
Subsidiaries and described in the Prospectus are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere in any material respect with the use made and proposed to be
made of such property and buildings by the Company and its Subsidiaries;
(xxix) (A) except as disclosed in the Registration Statement and the
Prospectus and except for activities, conditions, circumstances or other matters
that, individually or in the aggregate, would not
<PAGE>
-20-
have a Material Adverse Effect, the Company, the Subsidiaries and the Management
Company have complied and are in compliance with all Environmental Laws (as
hereinafter defined); (B) the Company, the Subsidiaries and the Management
Company have not used, and have not permitted the use of, the Properties or any
other real property owned or operated by any of them for activities or
operations which involve the handling, use, processing, manufacturing,
generating, producing, storing, refining, recycling, transporting, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, burying,
escaping, leaching, dumping, disposing of or releasing into the environment or
otherwise dealing with Hazardous Materials (as hereinafter defined), except for
Hazardous Materials utilized in the ordinary course of maintaining such
Properties or property, provided such use would not, in the ordinary course of
--------
business, give rise to liability under any Environmental Law; (C) except as
disclosed in the Registration Statement and the Prospectus, neither the Company
nor the Operating Partnership has knowledge of any seepage, leaking, escaping,
leaching, discharging, injection, release, emission, spill, pumping, pouring,
emptying, dumping or other release of Hazardous Materials into the environment
relating to activities or operations at or from the Properties or any other real
property owned or occupied by the Company including, without limitation any land
or water on, at, under or adjacent to such Properties or property owned or
operated by the Company, the Subsidiaries or the Management Company, or on, at,
under or from land or water from which Hazardous Materials might seep, flow or
drain into such land or water, except such as, individually or in the aggregate,
would not have a Material Adverse Effect; (D) except as disclosed in the
Registration Statement and the Prospectus, neither the Company, any of the
Subsidiaries nor the Management Company has received any notice of, and neither
the Company nor the Operating Partnership has any knowledge of, any occurrence
or circumstance which, with notice or passage of time or both, would give rise
to a claim or liability under or pursuant to any Environmental Law except such
as, individually or in the aggregate, would not have a Material Adverse Effect;
and (E) none of the Properties are included or, to the knowledge of the Company
or the Operating Partner-
<PAGE>
-21-
ship, proposed for inclusion on the National Priorities List issued by the
United States Environmental Protection Agency (the "EPA") pursuant to CERCLA (as
hereinafter defined) or on the Comprehensive Environmental Response,
Compensation and Liability Information System list, and no such Property or
property has otherwise been publicly identified by the EPA as a potential CERCLA
site or to the knowledge of the Company included, or proposed for inclusion, on
any list or inventory issued pursuant to any other Environmental Law or issued
by any other governmental authority having or claiming jurisdiction under
Environmental Laws or with respect to such Property or property.
As used herein, "Hazardous Material" shall include, without limitation, any
and all substances, materials and wastes including, without limitation,
asbestos, and petroleum products, constituents and wastes, regulated, pursuant
to the common law or any federal, state or local environmental or worker health
or safety law, ordinance, rule or regulation including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
42 U.S.C. (S)(S) 9601 et seq. ("CERCLA"), the Hazardous Materials Transportation
-- ---
Act, 49 U.S.C. (S)(S) 1801 et seq., the Resource Conservation and Recovery Act,
-- ---
42 U.S.C. (S)(S) 9601 et seq., the Emergency Planning and Community Right-to-
-- ---
Know Act of 1986, 42 U.S.C. (S)(S) 11001 et seq., the Toxic Substances Control
-- ---
Act, 15 U.S.C. (S)(S) 2601 et seq., the Federal Insecticide, Fungicide and
-- ---
Rodenticide Act, 7 U.S.C. (S)(S) 136 et seq., the Clean Air Act, 42 U.S.C.
-- ---
(S)(S) 7401 et seq., the Clean Water Act (Federal Water Pollution Control Act),
-- ---
33 U.S.C. (S)(S) 1251 et seq., the Safe Drinking Water Act, 42 U.S.C.(S)(S)
-- ---
300f-300j-11, and the Occupational Safety and Health Act, 29 U.S.C. (S)(S) 651
et seq., as any of the above statutes may have been amended from time to time,
- -- ---
and in the regulations adopted and publications promulgated pursuant to each of
the foregoing (the foregoing, collectively, "Environmental Laws");
(xxx) neither the Company, the Operating Partnership nor any of their
affiliates or related persons has taken or will take, directly or indirectly,
any action designed to, or that might be reasonably expected to, cause or result
in stabilization or manipulation of the price of the Common Shares;
<PAGE>
-22-
(xxxi) neither the Company nor any of its Subsidiaries is, or will after
the Closing Date be, subject to registration as an "investment company" or an
entity "controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended;
(xxxii) no relationship, direct or indirect, exists between or among the
Company or any of its Subsidiaries on the one hand, and the trustees, officers,
shareholders, customers, clients, tenants or suppliers of the Company or any of
its Subsidiaries on the other hand, which is required by the Securities Act to
be described in the Registration Statement and the Prospectus which is not so
described;
(xxxiii) the statements set forth in the Prospectus under the caption
"Description of Shares of Beneficial Interest," insofar as they purport to
constitute a summary of the terms of the Shares, and under the captions "Federal
Income Tax Considerations," "ERISA Considerations" "Certain Provisions of
Maryland Law and of the Company's Declaration of Trust and Bylaws", and
"Underwriting" to the extent such statements purport to describe matters of law
or regulation or constitute summaries of documents described therein, are
accurate and complete in all material respects;
(xxxiv) the Company has and will maintain property and casualty insurance
in favor of the Company and its Subsidiaries (as the case may be) with respect
to each of the Properties, in an amount and on such terms as is reasonable and
customary for businesses of the type proposed to be conducted by the Company and
the Subsidiaries; the Company has not received from any insurance company
written notice of any material defects or deficiencies affecting the
insurability of any such Properties;
(xxxv) The Company and each of the Subsidiaries has filed all material
foreign, federal, state and local tax returns that are required to be filed or
have requested extensions thereof (except in any case in which the failure so to
file would not, upon consummation of the Formation Transactions, have a Material
Adverse Effect) and has paid all taxes required to be paid by it and any other
assessment,
<PAGE>
-23-
fine or penalty levied against it, to the extent that any of the foregoing is
due and payable, except for any such assessment, fine or penalty that is
currently being contested in good faith or as described in or contemplated by
the Prospectus;
(xxxvi) each employee benefit plan, within the meaning of Section 3(3) of
ERISA, that is maintained, administered or contributed to by the Company or any
of its affiliates for employees or former employees of the Company and its
affiliates has been maintained in compliance with its terms and the requirements
of any applicable statutes, orders, rules and regulations, including but not
limited to ERISA and the Code, except where such noncompliance would not,
individually or in the aggregate, have a material adverse effect on the general
affairs, business, prospects, management, financial position, stockholders'
equity or results of operation of the Company and the Subsidiaries, taken as a
whole. No prohibited transaction, within the meaning of Section 406 of ERISA or
Section 4975 of the Code has occurred with respect to any such plan. For each
such plan which is subject to the funding rules of Section 412 of the Code or
Section 302 of ERISA, no "accumulated funding deficiency" as defined in Section
412 of the Code has been incurred, whether or not waived, and the fair market
value of the assets of each such plan (excluding for these purposes accrued but
unpaid contributions) exceeded the present value of all benefits accrued under
such plan determined using reasonable actuarial assumptions;
(xxxvii) except for compensation to be paid to the Underwriters under this
Agreement and the advisory fee paid to J.P. Morgan Securities Inc., as described
in the Prospectus, the Company knows of no outstanding claims for services,
either in the nature of a finder's fee or origination fee, with respect to any
of the transactions contemplated hereby; and
(xxxviii) except as set forth in the Prospectus, each of the Company and
the Subsidiaries owns or possesses the patents, patent rights, licenses,
inventions, trademarks, service marks, trade names, copyrights and know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
<PAGE>
-24-
confidential information, systems or procedures (collectively, the "Intellectual
------------
Property")) necessary to conduct the business in which it is engaged and
- --------
proposes to engage as described in the Prospectus and the Registration
Statement, except to the extent that the failure to own or possess such
Intellectual Property would not have a Material Adverse Effect and, except as
described in the Registration Statement and the Prospectus, neither the Company
nor any Subsidiary has received any notice of infringement of or conflict with
asserted rights of others with respect to any Intellectual Property, except for
notices the content of which, if accurate, would not have a Material Adverse
Effect; and
(xxxix) each Property is served by all utilities necessary for its use
and operation as currently used or proposed to be used and is accessible from a
public road or right of way.
(b) Any certificate signed by or on behalf of the Company or the
Operating Partnership and delivered to the Representatives or to counsel for the
Underwriters shall be deemed a representation and warranty by the Company or the
Operating Partnership, as applicable, to each Underwriter as to matters covered
therein.
5. The Company and the Operating Partnership jointly and severally
covenant and agree with the several Underwriters as follows:
(a) if the Registration Statement is not effective at the time of
execution hereof, to use its commercially reasonable best efforts to cause
the Registration Statement to become effective at the earliest possible time;
and, if required, to file the final Prospectus with the Commission within the
time periods specified by Rule 424(b) and Rule 430A under the Securities Act
and to use its commercially reasonable best efforts to furnish copies of the
Prospectus to the Underwriters in New York City, on the Business Day next
succeeding the date of this Agreement in such quantities as the
Representatives may reasonably request;
(b) to deliver, at the expense of the Company, to the Representatives
a total of four signed copies of the Registration Statement (as originally
filed) and each amendment thereto, in each case including exhibits, and to
each other Underwriter a conformed copy of the Registration Statement (as
originally filed) and each amendment thereto, in each case without exhib-
<PAGE>
-25-
its, and, during the period mentioned in paragraph (e) below, to each of the
Underwriters and to dealers effecting transactions in the Shares as many
copies of the Prospectus (including all amendments and supplements thereto)
as the Representatives may reasonably request;
(c) before filing any amendment or supplement to the Registration
Statement or the Prospectus, whether before or after the time the
Registration Statement becomes effective, to furnish to the Representatives a
copy of the proposed amendment or supplement for review and not to file any
such proposed amendment or supplement to which the Representatives reasonably
object;
(d) to advise the Representatives promptly, and to confirm such advice
in writing, (i) when the Registration Statement shall have become or becomes
effective, (ii) when any amendment to the Registration Statement shall have
become effective, (iii) when any supplement to the Prospectus or any
amendment to the Prospectus has been filed and to furnish the Representatives
with copies thereof, (iv) of any request by the Commission for any amendment
to the Registration Statement or any amendment or supplement to the
Prospectus or for any additional information, (v) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus or the initiation or threatening of any
proceeding for that purpose, (vi) of the occurrence of any event, within the
period referenced in paragraph (e) below, as a result of which the Prospectus
as then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in light of the circumstances in which such
statements are made, not misleading, and (vii) of the receipt by the Company
of any notification with respect to any suspension of the qualification of
the Shares for offer and sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and to use its commercially
reasonable best efforts to prevent the issuance of any such stop order, or of
any order preventing or suspending the use of any Preliminary Prospectus or
the Prospectus, or of
<PAGE>
-26-
any order suspending any such qualification of the Shares, or notification of
any such order thereof and, if issued, to use its commercially reasonable
best efforts to obtain as soon as possible the withdrawal thereof;
(e) if, during such period of time after the first date of the public
offering of the Shares as in the reasonable opinion of counsel for the
Underwriters a prospectus relating to the Shares is required by law to be
delivered in connection with sales by the Underwriters or any dealer, any
event shall occur as a result of which it is necessary to amend or supplement
the Prospectus in order to make the statements therein, in the light of the
circumstances in which such statements are made, not misleading, or if it is
necessary to amend or supplement the Prospectus to comply with applicable
federal and state securities law, to reasonably promptly prepare and furnish,
to the Underwriters and to the dealers (whose names and addresses the
Representatives will furnish to the Company) to which Shares may have been
sold by the Underwriters and to any other dealers upon request, such
amendments or supplements to the Prospectus as may be necessary so that the
statements in the Prospectus as so amended or supplemented will comply with
applicable federal and state securities law; provided, however, any
amendments or supplements made more than one year after the first date of the
public offering of the Shares shall be made at the expense of the
Underwriters;
(f) to use its commercially reasonable best efforts to qualify the
Shares for offer and sale under the securities or Blue Sky and real estate
syndication laws of such jurisdictions as the Representatives shall
reasonably request and to continue such qualification in effect so long as
reasonably required for distribution of the Shares and to pay all fees and
expenses (inc1uding commercially reasonable fees and disbursements of counsel
to the Underwriters) incurred in connection with such qualification; provided
--------
that the Company shall not be required to file a general consent to service
of process in any jurisdiction or to qualify as a foreign corporation in any
jurisdiction, and provided, further, that all fees and expenses incurred in
-------- -------
connection with qualifying the Shares for offer and sale after the first
anniversary of the public offering of such Shares shall be paid by the
Underwriters;
<PAGE>
-27-
(g) to make generally available to its security holders and to the
Representatives, as soon as practicable, an earnings statement covering a
period of at least twelve months beginning with the first fiscal quarter of
the Company occurring after the effective date of the Registration Statement,
which shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 of the Commission promulgated thereunder;
(h) for two years from the date of this Agreement, to furnish to the
Representatives copies of all reports or other communications (financial or
other) furnished to holders of the Shares; and copies of any reports and
financial statements furnished to or filed with the Commission, the National
Association of Securities Dealers, Inc. (the "NASD") or any national
securities exchange;
(i) for a period of 12 months after the date of this Agreement, neither the
Company nor the Operating Partnership will, directly or indirectly, (i)
issue, offer for sale, contract to sell, sell, register the sale of, pledge
or grant any option for the sale of, or otherwise dispose of (including
without limitation upon exchange of Units), directly or indirectly, any
Common Shares or Units or any securities convertible into or exchangeable or
exercisable for any Common Shares or Units (other than (a) the Common Shares
offered hereby, (b) Common Shares issued pursuant to the Company's Long Term
Incentive Plan or a dividend reinvestment plan, (c) any Units or Common
Shares that may be issued in connection with any acquisition of a property or
business entity and (d) Units or Common Shares issued at least six months
after the date hereof in private placements, provided that the purchasers of
such Units or Common Shares agree with J.P. Morgan Securities, Inc. that they
will not to sell, offer for sale, contract to sell, or otherwise dispose of
such Units or Common Shares, or sell or grant options, rights or warrants
with respect to any such Common Shares or Units for a period of 12 months
after the date of this Prospectus), (ii) sell or grant options, rights or
warrants with respect to any Common Shares (other than the grant of options
pursuant to the Company's Long Term Incentive Plan) or (iii) enter into any
swap or other agreement that transfers, in whole or in part, any of the
economic consequences of ownership of Common Shares or Units, whether or not
such transaction is to be set-
<PAGE>
-28-
tled by delivery of Common Shares, Units or otherwise, for a period of 12
months after the date of this Prospectus, without the prior written consent
of J.P. Morgan Securities, Inc.
(j) for a period of 24 months after the date of this Agreement, neither the
Company nor the Operating Partnership will amend the Registration Rights
Agreement, waive any provisions of such agreement or release any of the
parties thereto from their obligations thereunder without the prior written
consent of J.P. Morgan Securities Inc., except as contemplated in the
Registration Rights Agreement;
(k) whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
costs and expenses incident to the performance of the obligations of the
Company and the Operating Partnership hereunder, including without limiting
the generality of the foregoing, all costs and expenses (i) incident to the
preparation, issuance, execution and delivery of the Shares, (ii) incident to
the preparation, printing and filing under the Securities Act of the
Registration Statement, the Prospectus and any preliminary prospectus
(including in each case all exhibits, amendments and supplements thereto),
(iii) incurred in connection with the registration or qualification of the
Shares under the applicable securities laws of such jurisdictions as the
Representatives may reasonably designate (including reasonable fees of
counsel for the Underwriters and its reasonable disbursements in connection
therewith), (iv) in connection with the listing of the Shares on any stock
exchange, (v) related to the required filing with, and review by, the NASD,
(vi) in connection with the printing (including word processing and
duplication costs) and delivery of this Agreement, all other agreements
relating to underwriting and syndication arrangements and the Blue Sky Survey
and the furnishing to the Underwriters and dealers of copies of the
Registration Statement and the Prospectus, including mailing and shipping, as
herein provided, (vii) any expenses incurred by the Company in connection
with a "road show" presentation to potential investors and (viii) the cost
and charges of any transfer agent and any registrar;
<PAGE>
-29-
(l) the Company and the Operating Partnership will use the net proceeds
received by them from the sale of the Shares pursuant to this Agreement in
the manner specified in the Registration Statement and the Prospectus under
the caption "Use of Proceeds";
(m) the Company will meet the requirements to qualify, effective for the
fiscal year ending December 31, 1998, as a "real estate investment trust"
under the Code; and
(n) the Company will use its reasonable best efforts to effect the listing
of the Shares on the NYSE.
6. The several obligations of the Underwriters hereunder to purchase
the Shares on the Closing Date or the Additional Closing Date, as the case may
be, are subject to the performance by the Company and the Operating Partnership
of their respective obligations hereunder and to the following additional
conditions:
(a) the Registration Statement (excluding the Rule 462 Registration
Statement) shall have become effective (or if a post-effective amendment is
required to be filed under the Securities Act, such post-effective amendment
shall have become effective) not later than 5:00 P.M., New York City time, on
the date hereof; if the Company has elected to rely on Rule 462(b), the Rule
462 Registration Statement shall have become effective not later than 10:00
p.m., New York City time, on the date hereof; and no stop order suspending
the effectiveness of the Registration Statement or any post-effective
amendment shall be in effect, and no proceedings for such purpose shall be
pending before or threatened by the Commission; the Prospectus shall have
been filed with the Commission pursuant to Rule 424(b) within the applicable
time period prescribed for such filing by the rules and regulations under the
Securities Act and in accordance with Section 5(a) hereof; and all requests
for additional information by the Commission shall have been complied with to
the reasonable satisfaction of the Representatives;
(b) the representations and warranties of the Company and the Operating
Partnership contained herein shall be true and correct on and as of the
Closing Date or the Additional Closing Date, as the case may be, as
<PAGE>
-30-
if made on and as of the Closing Date or the Additional Closing Date, as the
case may be, and the Company and the Operating Partnership shall have
complied with all agreements and all conditions on their part to be performed
or satisfied hereunder at or prior to the Closing Date or the Additional
Closing Date, as the case may be;
(c) at or prior to the Closing Date, the Formation Transactions (as defined
in the Prospectus) will have been consummated as described in the
Registration Statement and the Prospectus, including those under the caption
"Formation Transactions";
(d) since the respective dates as of which information is given in the
Prospectus, there shall not have been any change in the capital stock or
long-term debt of the Company or the Operating Partnership or any Material
Adverse Change or any Prospective Material Adverse Change, otherwise than as
set forth or contemplated in the Registration Statement and the Prospectus,
the effect of which in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares on the Closing Date or the Additional Closing Date, as
the case may be, on the terms and in the manner contemplated in the
Prospectus; and neither the Company, the Operating Partnership, nor any of
the Subsidiaries shall have sustained since the date of the latest audited
financial statements included in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus;
(e) the Representatives shall have received on and as of the Closing Date
and the Additional Closing Date, as the case may be, a certificate of an
executive officer of the Company with specific knowledge about the Company's
financial matters reasonably satisfactory to the Representatives to the
effect set forth in subsections (a) through (d) (with respect to the
respective representations, warranties, agreements and conditions of the
Company and the Operating Partnership) of this Section and to the further
effect that there has not occurred any Material Adverse Change, or any
devel-
<PAGE>
-31-
opment involving a Prospective Material Adverse Change, from that set forth
or contemplated in the Registration Statement;
(f) Mayer Brown & Platt, counsel for the Company and the Operating
Partnership, shall have furnished to the Representatives its written opinion
addressed to the Underwriters, dated the Closing Date or the Additional
Closing Date, as the case may be, in form and substance reasonably
satisfactory to the Representatives, to the effect that:
(i) the Company is a duly organized and validly existing real estate
investment trust in good standing under the laws of the state of Maryland,
with power and authority to own, lease and operate its properties, to
conduct the businesses in which it is engaged and proposes to engage, as
described in the Registration Statement and the Prospectus and to enter
into and perform its obligations under this Agreement and the Transaction
Documents to which it is a party;
(ii) the Operating Partnership has been duly formed and is validly
existing as a limited partnership in good standing under the laws of the
State of Delaware, with partnership power and authority to own, lease and
operate its properties, to conduct the business in which it is engaged and
proposes to engage, as described in the Registration Statement and the
Prospectus and to enter into and perform its obligations under this
Agreement and the Transaction Documents to which it is a party;
(iii) each Subsidiary of the Company set forth on Exhibit A hereto
and the Management Company has been duly organized and is validly existing
and in good standing under the laws of its jurisdiction of organization
with power and authority (corporate, partnership or other, as applicable)
to own, lease and operate its properties, to conduct its business as
described in the Prospectus and to enter into and perform its obligations
under this Agreement and the Transaction Documents to which it is a party;
and all of the issued shares of capital stock,
<PAGE>
-32-
Units or other partnership interests of each such Subsidiary have been
duly and validly authorized and issued, are fully paid and, with respect
to Subsidiaries that are corporations, nonassessable, and (except as
otherwise set forth in the Prospectus) are owned directly or indirectly by
the Company, free and clear of all Liens;
(iv) each of the Company, the Operating Partnership, the Subsidiaries
and the Management Company has been duly qualified for the transaction of
business and is in good standing under the laws of each jurisdiction in
which such qualification or good standing is required, based on its
ownership or leasing of property or the conduct of its business, other
than where the failure to be so qualified or in good standing would not
have a Material Adverse Effect;
(v) all of the outstanding shares of capital stock of the Management
Company have been duly authorized and issued, are fully paid and non-
assessable and are owned as described in the Registration Statement and
the Prospectus, free and clear of all Liens;
(vi) the Units or Common Shares to be issued on the Closing Date in
connection with the Formation Transactions (including, without limitation,
the Units which will be owned by the Company) have been duly authorized
and, on the Closing Date after giving effect to the transactions
contemplated by this Agreement and the other Formation Transactions,
holders of Units (other than the Company) will have been properly admitted
as limited partners under the terms of the Operating Partnership
Agreement, and such holders will have no agreed upon but unpaid capital
contributions thereunder, and the Units which will be owned by the Company
will be owned free and clear of all Liens, and the Units to be issued as
part of the Formation Transactions, which will be the only Units
outstanding on the Closing Date, will be owned as described in the
Prospectus;
<PAGE>
-33-
(vii) the issuance and sale of the Units to be issued as part of the
Formation Transactions are exempt from the registration requirements of
the Securities Act and applicable state securities, real estate
syndication and Blue Sky laws;
(viii) the issuance and sale of Common Shares (other than pursuant to
this Agreement) at or prior to the Closing Date are exempt from the
registration requirements of the Securities Act and applicable state
securities, real estate syndication and Blue Sky laws;
(ix) other than as set forth or contemplated in the Registration
Statement and the Prospectus, to such counsel's knowledge, there are no
legal or governmental investigations, actions, suits or proceedings
pending, or threatened to which the Company, the Operating Partnership,
any of the Subsidiaries or the Management Company is or may be a party or
to which any property of the Company, the Operating Partnership, the
Subsidiaries, the Management Company or any Property is or may be the
subject which, if determined adversely to the Company, the Operating
Partnership, the Subsidiaries, the Management Company or any Property,
individually or in the aggregate, would have a Material Adverse Effect;
(x) such counsel does not know of any contracts or other documents
of a character required to be filed as an exhibit to the Registration
Statement or required to be described in the Prospectus which are not so
filed or described as required;
(xi) this Agreement has been duly authorized, executed and delivered
by the Company and the Operating Partnership and is a valid, binding
agreement thereof enforceable against each such party in accordance with
its terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium and other similar laws
affecting the rights and remedies of creditors generally and general
principles of equity (re-
<PAGE>
-34-
gardless of whether such enforceability is considered in a proceeding in
equity or at law), and except as rights to indemnity thereunder may be
limited by applicable law;
(xii) the authorized Capital Stock of the Company conforms in all
material respects as to legal matters to the description thereof contained
in the Prospectus;
(xiii) the Common Shares of the Company outstanding prior to the
issuance of the Shares to be sold by the Company hereunder have been duly
authorized and are validly issued, fully paid and non-assessable;
(xiv) the authorized, issued and outstanding shares of beneficial
interest of the Company are as set forth in the Prospectus under the
caption "Capitalization" as of the dates stated therein; and the Shares to
be issued and sold by the Company hereunder have been duly authorized, and
when delivered to and paid for by the Underwriters in accordance with the
terms of this Agreement, will be validly issued, fully paid and non-
assessable and will not be subject to any preemptive or similar statutory
rights;
(xv) the Registration Statement is effective under the Securities Act
and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued under the
Securities Act or proceedings therefor initiated or threatened by the
Commission;
(xvi) the Registration Statement at the time it became effective and
the Prospectus and any amendments or supplements thereto (other than the
financial statements, supporting schedules and other financial,
statistical and market data included therein, as to which such counsel
need not express any opinion) at their respective dates complied as to
form in all material respects with the requirements of the Securities Act;
<PAGE>
-35-
(xvii) to such counsel's knowledge, neither the Company, the
Operating Partnership, any of the Subsidiaries nor the Management Company
is in violation of its declaration of trust, certificate of incorporation,
by-laws or partnership agreement, as the case may be, and, except as
disclosed in the Prospectus, neither the Company, the Operating
Partnership, any of the Subsidiaries nor the Management Company is, or
with the giving of notice or lapse of time or both would be, in violation
of, or in default under, any contract, indenture, mortgage, deed of trust,
loan agreement, note, lease or other agreement or instrument known to such
counsel to which the Company, the Operating Partnership, any of the
Subsidiaries or the Management Company is a party or by which it or any of
them is bound or affected or to which any of the Properties or any other
properties or assets of the Company, the Operating Partnership, any of the
Subsidiaries or the Management Company is bound, except for any such
violations and defaults as would, individually or in the aggregate, not
reasonably be expected to have a Material Adverse Effect on the Company;
the issuance and sale of the Shares by the Company and the Units by the
Operating Partnership and the performance by the Company and the Operating
Partnership of their obligations under this Agreement and the consummation
of the transactions contemplated herein will not conflict with or, with
the giving of notice or lapse of time or both, result in a breach of any
of the terms or provisions of, or constitute a default under, any
contract, indenture, mortgage, deed of trust, loan agreement, note, lease
or other agreement or instrument, known to such counsel, to which the
Company or any of its Subsidiaries is a party or by which the Company or
any of the Subsidiaries is bound or affected to which any of the property
or assets of the Company or any of the Subsidiaries is subject, nor will
such action result in any violations of any applicable law or statute or
any order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of the Subsidiaries or any of
their respective properties except for
<PAGE>
-36-
any such violation, conflict, breach or default which individually or in
the aggregate, would not have a Material Adverse Effect, or result in the
creation or imposition of any material Lien upon any of the Properties,
nor will any such action result in any violation of the provisions of the
declaration of trust, certificate of incorporation, the by-laws or the
partnership agreement, as the case may be, of the Company, the Operating
Partnership or any of the Subsidiaries;
(xviii) no consent, approval, authorization, order, license,
registration or qualification of or with any court or governmental agency
or body is required for the issuance once and sale of the Shares and the
Units or the consummation by the Company and the Operating Partnership of
the transactions contemplated by this Agreement, except such consents,
approvals, authorizations, registrations and qualifications as have been
obtained under the Securities Act and as may be required under applicable
state securities, real estate syndication or blue sky laws in connection
with the purchase and distribution of the Shares by the Underwriters and
such additional steps as may be required by the NASD;
(xix) the Transaction Documents were duly and validly authorized,
executed and delivered by each of the Company, the Operating Partnership
and the Management Company, to the extent the foregoing are parties
thereto and, assuming the authorization, execution and delivery by the
other parties thereto, constitute valid and binding agreements of the
Company, the Operating Partnership and the Management Company, as
applicable, enforceable in accordance with their respective terms, except
as such enforceability may be limited by bankruptcy, insolvency,
reorganization, liquidation, moratorium and other similar laws affecting
the rights and remedies of creditors generally and general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law), and except as rights
<PAGE>
-37-
to indemnity thereunder may be limited by applicable law;
(xx) the consummation of the Formation Transactions and the
execution, delivery and performance of the Transaction Documents do not
conflict with or constitute a breach or violation of, or default under,
the declaration of trust, the charter, the by-laws or the partnership
agreement, as the case may be, of each of the Company, the Operating
Partnership or the Management Company or any contract, indenture,
mortgage, deed of trust, loan agreement, note, lease or other agreement or
instrument, known to such counsel, to which any of such parties is a party
or by which any of them or any of their properties or assets may be bound
or any law, administrative regulation or administrative or court decree,
except for such conflict, breach or violation or default which
individually or in the aggregate would not have a Material Adverse Effect;
(xxi) to such counsel's knowledge, no person has any right to require
the Company to include any securities owned by such person in the
securities registered pursuant to the Registration Statement;
(xxii) the statements in the Prospectus under the captions "Risk
Factors-Antitakeover Effects of Ownership Limit, Staggered Board and Power
to Issue Additional Shares; Taxation as a Corporation if the Company Fails
to Qualify as a REIT; Other Tax Risks; Real Estate Investment Risks;
Possible Changes in Policies Without Shareholder Approval; No Limitation
on Debt; Conflicts of Interest in the Formation Transactions and the
Business of the Company; ERISA Risks; and Management Company Risk,"
"Federal Income Tax Considerations," "ERISA Considerations," "Description
of Shares of Beneficial Interest," and "Certain Provisions of Maryland Law
and the Company's Declaration of Trust and Bylaws," insofar as such
statements constitute a summary of the legal matters, legal conclusions,
documents or proceedings referred to therein, are accurate in all material
respects
<PAGE>
-38-
and fairly present in all material respects the information called for
with respect to such legal matters, legal conclusions, documents or
proceedings;
(xxiii) neither the Company nor any of its subsidiaries is, or will
after the Closing Date be subject to registration as, an "investment
company" or an entity "controlled" by an "investment company" as such
terms are defined in the Investment Company Act of 1940, as amended;
(xxiv) the opinion of such counsel described under the heading
"Federal Income Tax Considerations" is thereby confirmed; and
(xxv) the Shares have been approved for listing on the NYSE.
Such opinion shall also contain a statement that no information has
come to the attention of such counsel that causes such counsel to believe
that the Registration Statement (other than the financial statements,
supporting schedules and other financial, statistical and market data
included therein, as to which such counsel need not express any opinion) at
the time the Registration Statement became effective, contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, or that the Prospectus, as amended and supplemented, if
applicable, contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading.
In addition, Mayer Brown & Platt shall reconfirm the opinion filed as
Exhibit 8 to the Registration Statement as of the date hereof and permit
the Underwriters to rely on such opinion as if it were addressed to the
Underwriters.
In rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws (i) of the state of Maryland on an
opinion of Ballard Spahr Andrews & Ingersoll, and (ii) other than the laws
of the United States and the States of Delaware and Illinois, to the extent
such counsel deems proper and to the extent specified
<PAGE>
-39-
in such opinion, if at all, upon an opinion or opinions (in form and
substance reasonably satisfactory to Underwriters' counsel) of other
counsel reasonably acceptable to the Underwriters, familiar with the
applicable laws; (B) as to matters of fact, to the extent such counsel
deems proper, on certificates or statements of responsible officers of the
Company and certificates or other written statements of officials of
jurisdictions having custody of documents respecting corporate existence or
good standing. The opinion of such counsel for the Company shall state that
the opinion of any such other counsel is in form satisfactory to such
counsel and, in such counsel's opinion, the Underwriters and they are
reasonably justified in relying thereon.
(g) Mayer Brown & Platt, counsel for the Company and the Operating
Partnership, shall have furnished to the Representatives their written
opinion with respect to certain ERISA matters, addressed to the Underwriters,
dated the Closing Date and the Additional Closing Date, as the case may be,
in substantially the form set forth in Exhibit C;
(h) on the effective date of the Registration Statement and the effective
date of the most recently filed post-effective amendment, if any, to the
Registration Statement, and also on the Closing Date and the Additional
Closing Date, as the case may be, each of Arthur Andersen, LLP, KPMG Peat
Marwick, LLP, Coopers & Lybrand L.L.P. and Grant Thornton L.L.P. shall have
furnished to you letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to the Representatives, containing statements
and information of the type customarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and certain
financial information contained in the Registration Statement and the
Prospectus, including statements with respect to a review in accordance with
SAS 71 of any interim financial information contained in the Registration
Statement and the Prospectus;
(i) the Representatives shall have received on and as of the Closing Date
or the Additional Closing Date, as the case may be, an opinion addressed to
the Underwriters of Cahill Gordon & Reindel, counsel to the Underwriters,
with respect to the due authorization and valid issuance of the Shares, the
Registration State-
<PAGE>
-40-
ment, the Prospectus and other related matters as the Representatives may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters. In rendering such opinion, such counsel may rely as to matters
involving the application of the laws of the state of Maryland on an opinion
of Ballard Spahr Andrews & Ingersoll;
(j) the Shares shall have been approved for listing on the NYSE, subject
only to official notice of issuance;
(k) each of the Formation Transactions (other than the repayment of
indebtedness) and each of the other transactions described in the Prospectus
shall have occurred prior to, or shall occur on, the Closing Date, in the
manner described in the Prospectus;
(l) separate "lock-up" agreements, each substantially in the form of
Exhibit B hereto, between you and the officers and trustees of the Company
relating to sales and certain other dispositions of Common Shares, Units or
certain other securities, delivered to you on or before the date hereof,
shall be in full force and effect on the Closing Date and the Additional
Closing Date, as the case may be;
(m) on or before the Closing Date, the Company and its Subsidiaries shall
have delivered or caused to be delivered to the Representatives with respect
to each Property:
(i) with respect to each property to be contributed to the Operating
Partnership pursuant to Section 2.3 of the Contribution Agreement, (x) a
copy of the deed therefor and (y) a copy of the Bill of Sale and
Assignment of Leases, Contracts and Intangible Property, each naming the
Operating Partnership as the grantee thereunder;
(ii) with respect to each Property to be contributed to the Operating
partnership pursuant to Section 2.1, Section 2.2 and Section 2.4 of the
Contribution Agreement, a copy of the Partnership Agreement and Plan of
Merger, Subsidiary Agreement and Plan of Merger or Cer-
<PAGE>
-41-
tificate of Dissolution (each as defined in the Contribution Agreement),
as appropriate;
(iii) a policy of title insurance (or a commitment to issue such a
policy) or endorsements to an existing policy of title insurance
satisfying the requirements set forth in Section 2.6 of the Contribution
Agreement, in either case naming the Operating Partnership as named
insured and insuring (or committing to insure) that the Operating
Partnership owns fee title to the real property and fixtures comprising
such Property in an amount not less than the acquisition price paid for
such Property, which policy (or commitment) shall be in form and substance
reasonable satisfactory to the Representatives;
(iv) a survey of the Property in form and substance reasonably
satisfactory to the Representatives;
(v) policies or certificates of insurance relating to such Property
evidencing coverages and in amounts customarily obtained by owners of
similar properties;
(vi) UCC, judgment and tax lien searches confirming that the
personal property comprising a part of the Property is subject to no Liens
other than Permitted Exceptions;
(vii) such affidavits, certificates and instruments of
indemnification as shall reasonably be required to induce the title
insurance company to issue the policy (or commitment) contemplated in
subparagraph (ii) above;
(viii) checks payable to the appropriate public officials in payment
of all recording costs and transfer taxes (or checks or wire transfers to
the title insurance company in respect of such amounts) due in respect of
the recording of any instruments to be recorded in connection with the
Formation Transactions, together with a check or wire transfer for the
title insurance company in payment of the title insurance company's
premium, search and exami-
<PAGE>
-42-
nation charges, survey costs and any other amounts due in connection with
the issuance of its policy (or commitment);
(ix) an estoppel certificate or officer's certificate of the type
required by Section 7.3 of the Contribution Agreement from each tenant or
landlord, as appropriate, with respect to each Property, in form and
substance reasonably satisfactory to counsel for the Representatives; and
(x) a certificate signed by an officer of the Company or an
appropriate local official attaching a copy of the certificate of
occupancy for such Property, or other evidence reasonably satisfactory to
the Representatives that the Property may be legally occupied for its
current use;
(n) on or prior to the Closing Date, the Company shall have furnished to
the Representatives such further certificates and documents as the
Representatives shall reasonably request.
The several obligations of the Underwriters to purchase Option Shares
hereunder are subject to satisfaction of the conditions set forth in paragraphs
(a)-(n) above on and as of the Additional Closing Date (references therein to
the Closing Date shall be deemed references to the Additional Closing Date for
this purpose), except that the certificate called for by paragraph (d) above,
the opinions called for by paragraphs (e), (f) and (h) above and the third
letter called for by paragraph (g) above shall be dated the Additional Closing
Date.
7. The Company and the Operating Partnership agree, jointly and
severally, to indemnify and hold harmless each Underwriter, its officers and
directors, and each person, if any, who controls any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all losses, claims, damages and liabilities (including, without
limitation, the reasonable legal fees and other expenses incurred in connection
with any suit, action or proceeding or any claim asserted) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments
<PAGE>
-43-
or supplements thereto) or any preliminary prospectus, or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with information relating to any Underwriter furnished to
the Company in writing by such Underwriter through the Representatives expressly
for use therein; provided, however, that the Company shall not be liable to any
-------- -------
Underwriter under this Section 7 to the extent that any such loss, claim, damage
or liability results solely from an untrue statement of a material fact
contained in, or the omission of a material fact from, a preliminary prospectus
if (i) such untrue statement or omission was completely corrected in the
Prospectus prior to the written confirmation of the sale of the Shares giving
rise to such liability, (ii) such Underwriter sold Shares to the person alleging
such loss, claim, damage or liability without sending or giving the Prospectus
at or prior to the written confirmation of the sale of the Shares giving rise to
such liability, (iii) the Company had furnished copies of the Prospectus to such
Underwriter prior to the written confirmation of the sale of the Shares giving
rise to such liability and (iv) such Underwriter would not have been subject to
such liability if it had delivered the Prospectus to such person at or prior to
the written confirmation of such sale.
Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its trustees, its officers who sign the Registration
Statement, the Operating Partnership and each person who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the Company
and the Operating Partnership to each Underwriter, but only with reference to
information relating to such Underwriter furnished to the Company in writing by
such Underwriter through the Representatives expressly for use in the
Registration Statement, the Prospectus, any amendment or supplement thereto, or
any preliminary prospectus.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of the
two proceeding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person or persons against whom such indemnity may be sought (each an
"Indemnifying Person") in writing,
<PAGE>
-44-
and such Indemnifying Person, upon request of the Indemnified Person, shall
retain counsel reasonably satisfactory to the Indemnified Person to represent
the Indemnified Person and any others the Indemnifying Person may designate in
such proceeding and shall pay the reasonable fees and expenses of such counsel
related to such proceeding. In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) such
Indemnifying Person and the Indemnified Person shall have mutually agreed to the
contrary, (ii) such Indemnifying Person has failed within a reasonable time to
retain counsel reasonably satisfactory to such Indemnified Person or (iii) the
named parties in any such proceeding (including any impleaded parties) include
an Indemnifying Person and an Indemnified Person and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that an Indemnifying Person
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm (in addition to any local counsel) for all Indemnified Persons,
and that all such fees and expenses shall be reimbursed as they are incurred.
Any such separate firm for the Underwriters and such control persons of
Underwriters shall be designated in writing by J.P. Morgan Securities Inc., and
any such separate firm for the Company, its directors, its officers who sign the
Registration Statement, the Operating Partnership and such control persons of
the Company shall be designated in writing by the Company. The Indemnifying
Person shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, such Indemnifying Person agrees to indemnify each
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the preceding sentence, if at any time
an Indemnified Person shall have requested an Indemnifying Person to reimburse
the Indemnified Person for fees and expenses of counsel as contemplated by the
third sentence of this paragraph, such Indemnifying Person agrees that it shall
be liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 90 days after receipt
by such Indemnifying Person of the aforesaid request, (ii) such Indemnifying
Person shall not have reimbursed the Indemnified Person in accordance with such
request prior to the date of such settlement and (iii) such Indemnified Person
shall not have received actual notice in writing that such Indemnifying Person
is reasonably contesting such request. No Indemnifying Person
<PAGE>
-45-
shall, without the prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Person, unless such settlement includes an
unconditional release of such Indemnified Person from all liability on claims
that are the subject matter of such proceeding.
If the indemnification provided for in the first and second paragraphs
of this Section 7 is unavailable to an Indemnified Person in respect of any
losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Shares or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and the
Underwriters on the other in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same respective proportions as the net proceeds from the offering and
sale of the Shares (before deducting expenses) received by the Company and the
total underwriting discounts received by the Underwriters, in each case as set
forth in the table on the cover of the Prospectus. The relative fault of the
Company on the one hand and the Underwriters on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
Each of the Company, the Operating Partnership and the Underwriters
agrees that it would not be just and equitable if contribution pursuant to this
Section 7 were determined by pro rata allocation (even if the Underwriters were
--- ----
treated as one entity for such purposes) or by any other method of allocation
that does not take account of the equitable considerations
<PAGE>
-46-
referred to in the immediately preceding paragraph. The amount paid or payable
by an Indemnified Person as a result of the losses, claims, damages and
liabilities referred to in the immediately proceeding paragraph shall be deemed
to include, subject to the limitations set forth above, any reasonable legal or
other expenses incurred by such Indemnified Person in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, in no event shall an Underwriter be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages that such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 7 are several in proportion to the respective number of Shares set forth
opposite their names in Schedule I hereto, and not joint.
The remedies provided for in this Section 7 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
The indemnity and contribution agreements contained in this Section 7
and the representations and warranties of the Company and the Operating
Partnership set forth in this Agreement shall remain operative and in full force
and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter or by or on behalf of the Company, its officers or directors,
the Operating Partnership or any other person controlling the Company or the
Operating Partnership and (iii) acceptance of and payment for any of the Shares.
8. Notwithstanding anything herein contained, this Agreement (or the
obligations of the several Underwriters with respect to the Option Shares) may
be terminated in the absolute discretion of the Representatives, by notice given
to the Company, if after the execution and delivery of this Agreement and prior
to the Closing Date (or, in the case of the Option Shares, prior to the
Additional Closing Date) (i) trading generally shall have been suspended or
materially limited on or by
<PAGE>
-47-
the New York Stock Exchange, the American Stock Exchange or the NASDAQ National
Market, (ii) trading of any securities of or guaranteed by the Company or the
Operating Partnership shall have been suspended on any exchange or in any over-
the-counter market, (iii) a general moratorium on commercial banking activities
in New York shall have been declared by either Federal or New York State
authorities, or (iv) there shall have occurred any outbreak or escalation of
hostilities or any change in financial markets or any calamity or crisis that,
in the judgment of the Representatives, is material and adverse and which, in
the judgment of the Representatives, makes it impracticable to market the
Underwritten Shares on the terms and in the manner contemplated in the
Prospectus.
9. This Agreement shall become effective upon the later of (x)
execution and delivery hereof by the parties hereto and (y) release of
notification of the effectiveness of the Registration Statement (or, if
applicable, any post-effective amendment) by the Commission.
If, on the Closing Date or the Additional Closing Date, as the case
may be, any one or more of the Underwriters shall fail or refuse to purchase
Shares which it or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of Shares to be purchased on such date by all Underwriters, the
other Underwriters shall be obligated severally in the proportions that the
number of Underwritten Shares set forth opposite their respective names in
Schedule I hereto bears to the aggregate number of Underwritten Shares set forth
opposite the names of all such non-defaulting Underwriters, or in such other
proportions as the Representatives may specify, to purchase the Shares which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase on such date; provided that in no event shall the number of Shares that
--------
any Underwriter has agreed to purchase pursuant to Section 1 be increased
pursuant to this Section 9 by an amount in excess of one-ninth of the number of
Shares which such Underwriter is obligated to purchase on such date hereunder
without the written consent of such Underwriter. If, on the Closing Date or the
Additional Closing Date, as the case may be, any Underwriter or Underwriters
shall fail or refuse to purchase Shares which it or they have agreed to purchase
hereunder on such date, and the aggregate number of Shares with respect to which
such default occurs is more than one-tenth of the aggregate number of Shares to
be purchased on such date, and arrangements reasonably satisfactory to the
Representatives
<PAGE>
-48-
and the Company for the purchase of such Shares are not made within 36 hours
after such default, this Agreement (or the obligations of the several
Underwriters to purchase the Option Shares, as the case may be) shall terminate
without liability on the part of any non-defaulting Underwriter or the Company.
In any such case either the Representatives or the Company shall have the right
to postpone the Closing Date (or, in the case of the Option Shares, the
Additional Closing Date), but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and in the
Prospectus or in any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
10. If this Agreement shall be terminated by the Underwriters, or any
of them, because of any failure or refusal on the part of the Company or the
Operating Partnership to comply with the terms or to fulfill any of the
conditions of this Agreement, or if for any reason the Company or the Operating
Partnership shall be unable to perform its obligations under this Agreement or
any condition of the Underwriters' obligations cannot be fulfilled, each of the
Company and the Operating Partnership agrees, jointly and severally, to
reimburse the Underwriters or such Underwriters as have so terminated this
Agreement with respect to themselves, severally, for all reasonable out-of-
pocket expenses (including the reasonable fees and expenses of their counsel)
incurred by the Underwriters in connection with this Agreement or the offering
contemplated hereunder.
11. Any action by the Underwriters hereunder may be taken by the
Representatives jointly or by J.P. Morgan Securities Inc. alone on behalf of the
Underwriters, and any such action taken by the Representatives jointly or by
J.P. Morgan Securities Inc. alone shall be binding upon the Underwriters. All
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be given to the
Representatives, c/o J.P. Morgan Securities Inc., 60 Wall Street, New York, New
York 10260 (Facsimile: (212) 648-5705); Attention: Syndicate Department.
Notices to the Company or the Operating Partnership shall be given c/o the
Company at Two Center Plaza, Suite 200, Boston, Massachusetts 02108 (Facsimile:
(617) 723-0896); Attention: Robert E. Patterson, President.
<PAGE>
-49-
12. This Agreement shall inure to the benefit of and be binding upon
the Underwriters, the Company, the Operating Partnership and any controlling
person referred to herein and their respective successors, heirs and legal
representatives. Nothing expressed or mentioned in this Agreement is intended
or shall be construed to give any other person, firm or corporation any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. No purchaser of Shares from any Underwriter shall
be deemed to be a successor by reason merely of such purchase.
13. This Agreement may be signed in counterparts, each of which shall
be an original and all of which together shall constitute one and the same
instrument.
14. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to the conflicts
of laws provisions thereof.
<PAGE>
-50-
If the foregoing is in accordance with your understanding, please sign
and return four counterparts hereof.
Very truly yours,
CABOT INDUSTRIAL TRUST
By:______________________________
Name:
Title:
CABOT INDUSTRIAL PROPERTIES, L.P.
By: Cabot Industrial Trust,
General Partner
By:______________________________
Name:
Title:
Accepted:
J.P. MORGAN SECURITIES INC.
Goldman, Sachs & Co.
Prudential Securities Incorporated
Smith Barney Inc.
Acting severally on behalf
of themselves and as
Representatives of the other
Underwriters named in Schedule I
hereto.
By: J.P. MORGAN SECURITIES INC.
By: ______________________________
Name:
Title:
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of
Underwritten
Shares to be
Underwriter Purchased
- ----------- ------------
<S> <C>
J.P. Morgan Securities Inc. .............................
Goldman, Sachs & Co. ....................................
Prudential Securities Incorporated.......................
Smith Barney Inc. .......................................
---------
Total............................................... 7,500,000
=========
</TABLE>
<PAGE>
EXHIBIT A
---------
Subsidiaries
------------
Cabot Industrial Properties, L.P.
Cabot Advisors, Inc.
<PAGE>
EXHIBIT B
---------
Form of Lock-Up Agreement
-------------------------
January __, 1998
J.P. Morgan Securities Inc.
Goldman, Sachs & Co.
Prudential Securities Incorporated
Smith Barney Inc.
as Representatives of the
several Underwriters listed on
Schedule I to the Underwriting Agreement
c/o J.P Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
The undersigned owns and/or has the right to acquire and/or has the
right to direct the disposition of common shares of beneficial interest, par
value $.01 per share ("Common Shares"), of Cabot Industrial Trust, a Maryland
-------------
real estate investment trust (the "Company"). The undersigned understands that
-------
the Company has filed a registration statement on Form S-11 (the "Registration
------------
Statement") under the Securities Act of 1933, as amended, with respect to, among
- ---------
other things, Common Shares proposed to be sold by the Company (the "Shares") to
------
the several underwriters to be named on Schedule I to the underwriting agreement
(the "Underwriting Agreement") proposed to be entered into by the Company, Cabot
----------------------
Industrial Properties, L.P. (the "Operating Partnership") and J.P. Morgan
---------------------
Securities Inc. ("J.P. Morgan"), Goldman, Sachs & Co., Prudential Securities
Incorporated and Smith Barney, Inc., for themselves and as representatives of
the several underwriters (collectively, the "Underwriters").
------------
In order to induce the Company, the Operating Partnership and the
Underwriters to proceed with the proposed public offering of the Shares and to
enter into the Underwriting Agreement, the undersigned agrees for the equal
benefit of the Company, the Operating Partnership and each of the Underwriters
that, without the written consent of the Company and J.P. Morgan, the
undersigned will not, (i) directly or indirectly, offer to sell, contract to
sell, sell, register
<PAGE>
-2-
the sale of, pledge, grant any option, right or warrant to purchase or otherwise
dispose of any Common Shares or any securities convertible into or exercisable
or exchangeable for Common Shares (including, without limitation, (a) Units (as
defined in the Underwriting Agreement), (b) Common Shares or Units which may be
deemed to be beneficially owned by the undersigned in accordance with the rules
and regulations of the Securities and Exchange Commission and (c) securities
which may be issued upon exercise of a stock option or warrant), owned on the
date hereof or hereafter acquired by the undersigned, or (ii) enter into any
swap or other agreement that transfers, in whole or in part, any of the economic
consequences of ownership of Common Shares or Units, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Shares, Units, in cash or otherwise, for a period of 24 months from
the date of the effectiveness of the Registration Statement; provided, however,
-------- -------
that the undersigned may transfer ownership of the Common Shares or Units by
gift or charitable donation if the beneficiary of such gift or donation agrees
to be bound by the terms of this agreement for a period beginning on the date of
transfer and ending 24 months after the date hereof. In addition, the
undersigned agrees that, without the prior written consent of J.P. Morgan on
behalf of the Underwriters it will not, during the period ending 24 months after
effectiveness of the Registration Statement, make any demand for or exercise any
right with respect to, the registration of any Common Shares, Units or any other
security convertible into or exercisable or exchangeable for Common Shares.
<PAGE>
-3-
If the Underwriting Agreement does not become effective, or if the
Underwriting Agreement (other than the provisions thereof specifically
designated to survive) shall terminate prior to payment for and delivery of the
shares to be sold thereunder, the undersigned shall be relieved from all
obligations under this letter.
Very truly yours,
___________________________________
(Name)
By: _______________________________
(Authorized Signatory)
Accepted as of the date first
set forth above:
J.P. Morgan Securities Inc.
Goldman, Sachs & Co.
Prudential Securities Incorporated
Smith Barney Inc.
By: J.P. Morgan Securities Inc.
By: ______________________________
Name:
Title:
<PAGE>
Exhibit B
[Form of ERISA Opinion]
<PAGE>
EXHIBIT 3.1
-----------
CABOT INDUSTRIAL TRUST
AMENDED AND RESTATED DECLARATION OF TRUST
JANUARY ___, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RECITALS................................................................... 1
DECLARATION................................................................ 1
ARTICLE 1. THE TRUST....................................................... 1
Section 1. Name....................................................... 1
Section 2. Resident Agent............................................. 2
Section 3. Nature of the Trust........................................ 2
Section 4. Purpose of the Trust....................................... 2
ARTICLE 2. SHARES.......................................................... 2
Section 1. Shares, Certificates of Beneficial Interest................ 2
Section 2. Sale and Issuance of Shares................................ 4
Section 3. General Nature of Shares................................... 4
Section 4. Treasury Shares............................................ 5
Section 5. Transferability of Shares.................................. 5
Section 6. Fractional Shares.......................................... 5
Section 7. Divisions and Combinations of Shares....................... 5
ARTICLE 3. RESTRICTION ON TRANSFER, ACQUISITION AND REDEMPTION OF SHARES... 6
Section 1. Definitions................................................ 6
Section 2. Ownership Limitation....................................... 8
Section 3. Excess Shares.............................................. 9
Section 4. Prevention of Transfer..................................... 10
Section 5. Notice to Trust............................................ 10
Section 6. Information for Trust...................................... 10
Section 7. Other Action by Board...................................... 11
Section 8. Ambiguities................................................ 11
Section 9. Modification of Existing Holder Limits..................... 11
Section 10. Increase or Decrease in Ownership Limit.................... 12
Section 11. Limitations on Changes in Existing Holder and Ownership
Limits..................................................... 12
Section 12. Waivers by Board........................................... 12
Section 13. Legend..................................................... 13
Section 14. Severability............................................... 13
Section 15. Trust for Excess Shares.................................... 13
Section 16. Distributions on Excess Shares............................. 14
Section 17. Voting of Excess Shares.................................... 14
Section 18. Non-Transferability of Excess Shares....................... 14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 19. Call by Trust on Excess Shares.............................. 15
Section 20. Underwritten Offerings...................................... 15
ARTICLE 4. SHAREHOLDERS..................................................... 16
Section 1. Shareholders' Meetings...................................... 16
Section 2. Voting...................................................... 16
Section 3. Distributions............................................... 17
Section 4. Report to Shareholders...................................... 17
Section 5. Inspection of Trust Books................................... 17
Section 6. Nonliability and Indemnification of Shareholders............ 17
Section 7. Nonliability................................................ 18
Section 8. Declaration and Bylaws...................................... 18
ARTICLE 5. THE TRUSTEES..................................................... 18
Section 1. Number, Terms, Qualification, Compensation and Names
of Trustees................................................. 18
Section 2. Resignation, Removal and Death.............................. 19
Section 3. Vacancies................................................... 19
Section 4. Actions by and Meetings of Trustees......................... 20
Section 5. Authority of Trustees....................................... 20
Section 6. Powers of Trustees.......................................... 20
Section 7. Trustees' Right to Own Shares in Trust...................... 23
Section 8. Related Party Transactions.................................. 23
Section 9. Persons Dealing with Trustees............................... 23
Section 10. Administrative Powers of Trustees........................... 24
Section 11. Proposal of Amendments...................................... 24
ARTICLE 6. DURATION AND TERMINATION OF TRUST................................ 24
Section 1. Termination of Trust........................................ 24
Section 2. Merger...................................................... 24
Section 3. Duration of Trust........................................... 25
Section 4. Organization as a Corporation............................... 25
ARTICLE 7. AMENDMENTS....................................................... 25
Section 1. General..................................................... 25
Section 2. Amendment by Shareholders................................... 25
Section 3. Amendment by Trustees....................................... 25
Section 4. Requirements of Maryland Law................................ 25
ARTICLE 8. MISCELLANEOUS.................................................... 25
Section 1. Construction................................................ 25
Section 2. Headings for Reference Only................................. 26
Section 3. Filing and Recording........................................ 26
Section 4. Applicable Law.............................................. 26
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 5. Certifications............................................. 26
Section 6. Severability............................................... 27
Section 7. Bylaws..................................................... 27
ARTICLE 9. LIMITATION OF LIABILITY AND INDEMNIFICATION OF TRUSTEES AND
OFFICERS........................................................ 27
Section 1. Limitation of Liability.................................... 27
Section 2. Indemnification............................................ 27
Section 3. Indemnification and Insurance.............................. 28
Section 4. Conflicts.................................................. 28
Section 5. Severability............................................... 28
Section 6. No Impairment.............................................. 28
Section 7. References................................................. 29
</TABLE>
iii
<PAGE>
CABOT INDUSTRIAL TRUST
DECLARATION OF TRUST
Cabot Industrial Trust, a Maryland real estate investment trust under
Title 8 of the Corporations and Associations Article of the Annotated Code of
Maryland, desires to amend and restate its Declaration of Trust as currently in
effect and as hereinafter amended. This Amended and Restated Declaration of
Trust of Cabot Industrial Trust (this "Declaration of Trust") is made in
Chicago, Illinois, as of January ___, 1998.
The following provisions are all the provisions of the Declaration of
Trust currently in effect and as hereinafter amended.
RECITALS
I. The trustees named on Schedule A hereto (the "Trustees") desire to
create a real estate investment trust under the laws of the State of Maryland.
II. The Trustees desire that this Trust qualify as a real estate
investment trust ("REIT") under Sections 856 through 860 of the Internal Revenue
Code of 1986, as now in effect or hereafter amended (the "Code"), and under
Title 8 of the Corporations and Associations Article of the Annotated Code of
Maryland, as amended ("Title 8").
III. The beneficial interest in this Trust shall be divided into
transferable shares ("Shares") of one or more classes evidenced by certificates.
DECLARATION
NOW, THEREFORE, the Trustees hereby declare that they assume the
duties of Trustees hereunder.
ARTICLE 1. THE TRUST
SECTION 1. NAME. The name of the trust created by this Declaration of
Trust is "Cabot Industrial Trust" (the "Trust"). So far as may be practicable,
legal and convenient, the affairs of the Trust shall be conducted and transacted
under that name, which name shall refer to the Trust and not to the Trustees
individually or personally or to the beneficiaries or shareholders of the Trust,
or to any officers, employees or agents of the Trust.
Under circumstances in which the Board of Trustees (the "Board")
determines that the use of the name "Cabot Industrial Trust" is not practicable,
legal or convenient, they may as appropriate use their names with suitable
reference to their trustee status, or some other suitable designation, or they
may adopt another name under which the Trust may hold property or operate in any
jurisdiction which name shall not, to the knowledge of the Board, refer to
beneficiaries or shareholders of the
<PAGE>
Trust. Legal title to all the properties subject from time to time to this
Declaration of Trust shall be transferred to, vested in and held by the Trust in
its own name, except that the Board shall have the power to cause legal title to
any property of this Trust to be held by and/or in the name of one or more of
the Trustees, or any other person as nominee, on such terms, in such manner and
with such powers as the Board may determine, provided that the interest of the
Trust therein is appropriately protected.
The Trust shall have the authority to operate under an assumed name or
names in such state or states or any political subdivision thereof where it
would not be legal, practical or convenient to operate in the name of the Trust.
The Trust shall have the authority to file such assumed name certificates or
other instruments in such places as may be required by applicable law to operate
under such assumed name or names.
SECTION 2. RESIDENT AGENT. The name and address of the resident agent
of the Trust in the State of Maryland is The Corporation Trust Incorporated, 32
South Street, Baltimore, Maryland 21202. The Trust may have such other offices
or places of business within or without the State of Maryland as the Board may
from time to time determine.
SECTION 3. NATURE OF THE TRUST. The Trust is a REIT within the
meaning of Title 8. The Trust is not intended to be, shall not be deemed to be
and shall not be treated as a general partnership, limited partnership, joint
stock association or, except as contemplated in Section 1 of Article 8, a
corporation. The shareholders shall be beneficiaries in that capacity in
accordance with the rights conferred on them hereunder.
SECTION 4. PURPOSE OF THE TRUST. The Trust shall have all the powers
granted to REITs generally by Title 8 or any successor statute and shall have
such other and further powers as are not inconsistent with and are appropriate
to promote and attain the purposes of the Trust as set forth in this Declaration
of Trust. The purpose of the Trust is to invest in notes, bonds and other
obligations secured by mortgages on real property and to purchase, hold, lease,
manage, develop, sell, exchange, subdivide and improve real property and
interests in real property, and in general, to carry on any other lawful act in
connection with the foregoing, including, without limitation or obligation,
engaging in business as a real estate investment trust under the Code, and to
have and exercise all powers conferred by the laws of the State of Maryland on
REITs formed under Title 8, and to do any or all of the things herein set forth
to the same extent as natural persons might or could do. The Trust may act as
registered agent for service of process in any jurisdiction where permitted on
behalf of any partnership for which it is a general partner. In addition, it is
intended that the business of the Trust will be conducted so that the Trust will
qualify (so long as such qualification, in the opinion of the Board, is
advantageous to the shareholders) as a REIT as defined in the Code.
ARTICLE 2. SHARES
SECTION 1. SHARES, CERTIFICATES OF BENEFICIAL INTEREST. The
beneficial interest in the Trust shall be divided into shares of beneficial
interest designated as Shares, with a par value of
2
<PAGE>
$0.01 per Share. Ownership of Shares shall be evidenced by certificates in such
form as shall be determined by the Board from time to time in accordance with
the laws of the State of Maryland. The owners of such Shares, who are the
beneficiaries of the Trust, shall be designated as shareholders. The
certificates shall be negotiable and title thereto shall be transferred by
assignment or delivery in all respects as a stock certificate of a Maryland
corporation. The total number of Shares which the Trust has authority to issue
is 150,000,000, provided that the Board may amend this Declaration of Trust,
without shareholder consent, to increase or decrease the aggregate number of
Shares, or the number of shares of any class or series, that the Trust has
authority to issue. The Shares shall consist of common Shares and such other
types or classes of securities of the Trust as the Board may create and
authorize from time to time and designate as representing a beneficial interest
in the Trust. The consideration paid for the issuance of Shares shall be
determined by the Board and shall consist of money paid, tangible or intangible
property, labor or services actually performed, a promissory note or other
obligation for further payment or a contract for labor or services to be
performed. Shares shall not be issued until the full amount of the consideration
has been received by the Trust. The Board may authorize Share dividends or Share
splits, without consideration. All Shares issued hereunder shall be, when
issued, fully paid, and no assessment shall ever be made on the shareholders.
The Board may classify or reclassify any unissued Shares from time to
time, in one or more classes or series, by setting or changing the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends or distributions, qualifications or terms or conditions of redemption
of the Shares by filing articles supplementary pursuant to the applicable laws
of the State of Maryland. Except for Shares so classified or reclassified and
any preferred Shares issued hereunder, all other Shares shall be designated as
common Shares, each of which common Shares shall be equal in all respects to
every other common Share.
The authority of the Board with respect to each unissued series shall
include, but not be limited to, determination of the following:
(a) The number of Shares constituting that series and the distinctive
designation of that series;
(b) The rate of dividends or distributions, if any, and whether (and
if so, on what terms and conditions) dividends or distributions shall be
cumulative (and, if so, whether unpaid dividends or distributions shall
compound or accrue interest) or shall be payable in preference or in any
other relation to dividends or distributions payable on any other class or
classes of Shares or any other series of preferred Shares;
(c) Whether that series shall have voting rights in addition to the
voting rights provided by law and, if so, the terms and extent of such
voting rights;
(d) Whether the Shares of that series shall be issued with the
privilege of conversion or exchange
3
<PAGE>
and, if so, the terms and conditions of such conversion or exchange
(including, without limitation, the price or prices or the rate or rates of
conversion or exchange or any terms for adjustment thereof);
(e) Whether the Shares of that series may be redeemed and, if so, the
terms and conditions on which they may be redeemed (including, without
limitation, the dates on or after which they may be redeemed and the price
or prices at which they may be redeemed, which price or prices may be
different in different circumstances or at different redemption dates);
(f) The amounts, if any, payable on the Shares in the event of
voluntary liquidation, dissolution or winding up of the Trust in preference
of Shares of any other class or series and whether the Shares of that
series shall be entitled to participate generally in distributions on the
common Shares under such circumstances;
(g) The amounts, if any, payable on the Shares of that series in the
event of involuntary liquidation, dissolution or winding up of the Trust in
preference of Shares of any other class or series and whether the Shares of
that series shall be entitled to participate generally in distributions on
the common Shares under such circumstances;
(h) Sinking fund provisions, if any, for the redemption or purchase of
the Shares of that series (the term "sinking fund" being understood to
include any similar fund, however designated); and
(i) Any other relative rights, preferences, limitations and powers of
that series.
SECTION 2. SALE AND ISSUANCE OF SHARES. The Trust may from time to
time issue or sell or contract to issue or sell Shares, including Shares held in
the treasury, to such party or parties and for such consideration as is allowed
by the laws of the State of Maryland, at such time or times and on such terms as
the Board may deem appropriate. In connection with any issuance of Shares, the
Board, in its discretion, may provide for the issuance of fractional Shares or
may provide for the issuance of scrip for fractions of Shares and determine the
terms of such scrip, including, without limiting the generality of the
foregoing, the time within which any such scrip must be surrendered in exchange
for Shares and the right, if any, of holders of scrip upon the expiration of the
time so fixed, the right, if any, to receive proportional distributions, and the
right, if any, to redeem scrip for cash, or the Board may, in its discretion, or
if it determines, at the option of each holder, provide in lieu of scrip for the
adjustment of fractions of Shares in cash. Except as may be expressly provided
in the terms of any class or series of shares or in any agreement between the
Trust and any of its shareholders, the shareholders shall have no preemptive
rights of any kind whatsoever (including, but not limited to, the right to
purchase or subscribe for or otherwise acquire any Shares of the Trust of any
class, whether now or hereafter authorized, or any securities or obligations
convertible into or exchangeable for, or any right, warrant or option to
purchase such Shares, whether or not such Shares are issued and/or disposed of
for cash, property or other consideration of any kind).
4
<PAGE>
SECTION 3. GENERAL NATURE OF SHARES. All Shares shall be personal
property entitling the shareholders only to those rights provided in this
Declaration of Trust, including any Articles supplementary filed with respect to
such Shares. The legal ownership of the property of the Trust and the right to
conduct the business of the Trust are vested exclusively in the Trust; the
shareholders shall have no interest therein other than beneficial interest in
the Trust conferred by their Shares and shall have no right to compel any
partition, division, dividend or distribution of the Trust or any of its
property. The death of a shareholder shall not terminate the Trust or give his
or her legal representative any rights against other shareholders, the Trustees
or the Trust property, except the right, exercised in accordance with applicable
provisions of the Bylaws, to receive a new certificate for Shares in exchange
for the certificate held by the deceased shareholder.
SECTION 4. TREASURY SHARES. The Trust may repurchase or otherwise
acquire its own Shares at such price or prices as may be determined by the
Board, and for this purpose the Trust may create and maintain such reserves as
are deemed necessary and proper. Shares issued hereunder and repurchased or
otherwise acquired for the account of the Trust shall not, so long as they
belong to the Trust, either receive dividends or distributions (except that they
shall be entitled to receive dividends or distributions payable in Shares of the
Trust) or be voted at any meeting of the shareholders. Such Shares may, in the
discretion of the Board, be held in the treasury and be disposed of by the Board
at such time or times, to such party or parties and for such consideration as
the Board may deem appropriate or may be returned to the status of authorized
but unissued Shares in the Trust.
SECTION 5. TRANSFERABILITY OF SHARES. Shares in the Trust shall be
transferable (subject to the provisions of Article 3 hereunder) in accordance
with the procedure prescribed from time to time in the Trust's Bylaws. The
persons in whose name the Shares are registered on the books of the Trust shall
be deemed the absolute owners thereof and, until a transfer is effected on the
books of the Trust, the Board shall not be affected by any notice, actual or
constructive, of any transfer. Any issuance, redemption or transfer of Shares
which would operate to disqualify the Trust as a REIT for purposes of Federal
income tax purposes shall be null and void ab initio as provided in Article 3.
SECTION 6. FRACTIONAL SHARES. The Trust may, without the consent or
approval of any shareholder, issue fractional Shares, eliminate a fraction of a
Share by rounding up or down to a full Share, arrange for the disposition of a
fraction of a Share by the person entitled to it, or pay cash for the fair value
of a fraction of a Share.
SECTION 7. DIVISIONS AND COMBINATIONS OF SHARES. Subject to an
express provision to the contrary in the terms of any class or series of
beneficial interest hereafter authorized, the Board of Trustees shall have the
power to divide or combine the outstanding shares of any class or series of
beneficial interest, without a vote of shareholders.
5
<PAGE>
ARTICLE 3. RESTRICTION ON TRANSFER, ACQUISITION
AND REDEMPTION OF SHARES
SECTION 1. DEFINITIONS. For purposes of this Article 3, the following
terms shall have the following meanings:
"BENEFICIAL OWNERSHIP" shall mean ownership of Shares by a Person who
would be treated as an owner of such Shares either directly or constructively
through the application of Section 544 of the Code, as modified by Section
856(h) of the Code. The terms "Beneficial Owner," "Beneficially Owns,"
"Beneficially Own" and "Beneficially Owned" shall have correlative meanings.
"CHARITABLE BENEFICIARY" shall mean an organization or organizations
described in Sections 170(b)(1)(A) and 170(c) of the Code and identified by the
Board as the beneficiary or beneficiaries of the Excess Share Trust.
"DEBT" shall mean indebtedness of (a) the Trust or (b) Cabot
Industrial Properties, L.P., a Delaware limited partnership, or any predecessor
thereof.
"EXCESS SHARES" shall have the meaning given to it in paragraph (a) of
Section 3 of this Article 3.
"EXCESS SHARE TRUST" shall mean the trust created pursuant to Section
15 of this Article 3.
"EXCESS SHARE TRUSTEE" shall mean a person, who shall be unaffiliated
with the Trust, any Purported Beneficial Transferee and any Purported Record
Transferee, identified by the Board as the trustee of the Excess Share Trust.
"EXISTING HOLDER" shall mean (a) any Person who is, or would be upon
the exchange of Units, Debt or any security of the Trust, the Beneficial Owner
of Shares in excess of the Ownership Limit both upon and immediately after the
closing of the Initial Public Offering, so long as, but only so long as, such
Person Beneficially Owns or would, upon exchange of Units, Debt or any security
of the Trust, Beneficially Own Shares in excess of the Ownership Limit and (b)
any Person to whom an Existing Holder Transfers, subject to the limitations
provided in this Article 3, Beneficial Ownership of Shares causing such
transferee to Beneficially Own Shares in excess of the Ownership Limit.
"EXISTING HOLDER LIMIT" (a) for any Existing Holder who is an Existing
Holder by virtue of clause (a) of the definition thereof, shall mean, initially,
the percentage of the outstanding Shares Beneficially Owned, or which would be
Beneficially Owned upon the exchange of Units, Debt or any security of the
Trust, by such Existing Holder upon and immediately after the date of the
closing of the Initial Public Offering, and, after any adjustment pursuant to
Section 9 of this Article 3, shall mean such percentage of the outstanding
Shares as so adjusted, and (b) for any
6
<PAGE>
Existing Holder who becomes an Existing Holder by virtue of clause (b) of the
definition thereof, shall mean, initially, the percentage of the outstanding
Shares Beneficially Owned by such Existing Holder at the time that such Existing
Holder becomes an Existing Holder, but in no event shall such percentage be
greater than the lesser of (i) the Existing Holder Limit for the Existing Holder
who Transferred Beneficial Ownership of such Shares or, in the case of more than
one transferor, in no event shall such percentage be greater than the smallest
Existing Holder Limit of any transferring Existing Holder or (ii) the ownership
limitation if the Existing Holder is a Person other than a trust qualified under
Section 401(G) of the Code and exempt from taxation under the Section 501(a) of
the Code or a Governmental Plan as described in Section 414(d) of the Code and,
after any adjustment pursuant to Section 9 of this Article 3, shall mean such
percentage of the outstanding Shares as so adjusted. From the date of the
Initial Public Offering until the Restriction Termination Date, the Trust shall
maintain and, upon request, make available to each Existing Holder, a schedule
which sets forth the then current Existing Holder Limit for each Existing
Holder.
"INITIAL PUBLIC OFFERING" shall mean the sale of common Shares
pursuant to the Trust's first effective registration statement for common Shares
filed under the Securities Act of 1933, as amended.
"MARKET PRICE" shall mean the last reported sales price reported on
the New York Stock Exchange for a particular class of Shares on the trading day
immediately preceding the relevant date, or if not then traded on the New York
Stock Exchange, the last reported sales price for such class of Shares on the
trading day immediately preceding the relevant date as reported on any exchange
or quotation system over or through which such class of Shares may be traded, or
if not then traded over or through any exchange or quotation system, then the
market price of such class of Shares on the relevant date as determined in good
faith by the Board.
"OWNERSHIP LIMIT" shall initially mean 9.8%, in number of Shares or
value, of the outstanding Shares of the Trust, and after any adjustment as set
forth in Section 10 of this Article 3, shall mean such greater percentage of the
outstanding Shares as so adjusted. The number and value of the outstanding
Shares of the Trust shall be determined by the Board in good faith, which
determination shall be conclusive for all purposes hereof.
"PERSON" shall mean an individual, corporation, partnership, estate,
trust (including a trust qualified under Section 401(a) or 501(c)(17) of the
Code), portion of a trust permanently set aside for or to be used exclusively
for the purposes described in Section 642(c) of the Code, association, private
foundation within the meaning of Section 509(a) of the Code, joint stock company
or other entity; but does not include an underwriter which participated in a
public offering of Shares for a period of 25 days following the purchase by such
underwriter of such Shares.
"PURPORTED BENEFICIAL TRANSFEREE" shall mean, with respect to any
purported Transfer which results in Excess Shares, as defined below in Section 3
of this Article 3, the beneficial holder of the Shares, if such Transfer had
been valid under Section 2 of this Article 3.
7
<PAGE>
"PURPORTED RECORD TRANSFEREE" shall mean, with respect to any
purported Transfer which results in Excess Shares, as defined below in Section 3
of this Article 3, the record holder of the Shares, if such Transfer had been
valid under Section 2 of this Article 3.
"RESTRICTION TERMINATION DATE" shall mean the first day after the date
of the Initial Public Offering on which the Board determines that it is no
longer in the best interests of the Trust to attempt to, or continue to, qualify
as a REIT.
"TRANSFER" shall mean any sale, transfer, gift, assignment, devise or
other disposition of Shares (including (a) the granting of any option or
entering into any agreement for the sale, transfer or other disposition of
Shares, (b) the sale, transfer, assignment or other disposition of any
securities or rights convertible into or exchangeable for Shares, but excluding
the exchange of Units, Debt or any security of the Trust for Shares and (c) any
transfer or other disposition of any interest in Shares as a result of a change
in the marital status of the holder thereof), whether voluntary or involuntary,
whether of record, constructively or beneficially and whether by operation of
law or otherwise. The terms "Transfers" and "Transferred" shall have correlative
meanings.
"UNITS" shall mean units of limited partnership interest in Cabot
Industrial Properties, L.P., a Delaware limited partnership.
SECTION 2. OWNERSHIP LIMITATION.
(a) Except as provided in Sections 12 and 20 of this Article 3, and
subject to paragraph (f) of this Section 2, from the date of the Initial Public
Offering until the Restriction Termination Date, no Person (other than an
Existing Holder) shall Beneficially Own Shares in excess of the Ownership Limit
and no Existing Holder shall Beneficially Own Shares in excess of the Existing
Holder Limit for such Existing Holder.
(b) Except as provided in Sections 12 and 20 of this Article 3, and
subject to paragraph (f) of this Section 2, from the date of the Initial Public
Offering until the Restriction Termination Date, any Transfer that, if
effective, would result in any Person (other than an Existing Holder)
Beneficially Owning Shares in excess of the Ownership Limit shall be void ab
initio as to the Transfer of the Shares which would be otherwise Beneficially
Owned by such Person in excess of the Ownership Limit; and the intended
transferee shall acquire no rights in such Shares.
(c) Except as provided in Sections 9 and 12 of this Article 3, and
subject to paragraph (f) of this Section 2, from the date of the Initial Public
Offering until the Restriction Termination Date, any Transfer that, if
effective, would result in any Existing Holder Beneficially Owning Shares in
excess of the applicable Existing Holder Limit shall be void ab initio as to the
Transfer of the Shares which would be otherwise Beneficially Owned by such
Existing Holder in excess of the applicable Existing Holder Limit; and such
Existing Holder shall acquire no rights in such Shares.
(d) Subject to paragraph (f) of this Section 2, from the date of the
Initial Public Offering until the Restriction Termination Date, any Transfer
that, if effective, would result in the Shares
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being beneficially owned (as provided in Section 856(a) of the Code) by less
than 100 Persons (determined without reference to any rules of attribution)
shall be void ab initio as to the Transfer of Shares which would be otherwise
beneficially owned (as provided in Section 856(a) of the Code) by the
transferee; and the intended transferee shall acquire no rights in such Shares.
(e) Subject to paragraph (f) of this Section 2, from the date of the
Initial Public Offering until the Restriction Termination Date, any Transfer
that, if effective, would result in the Trust being "closely held" within the
meaning of Section 856(h) of the Code or otherwise failing to qualify as a REIT
(including, but not limited to, Beneficial Ownership that would result in the
Trust owning (actually or constructively) an interest in a tenant that is
described in Section 856(d)(2)(B) of the Code if the income derived by the Trust
from such tenant would cause the Trust to fail to satisfy any of the gross
income requirements of Section 856(c) of the Code), shall be void ab initio as
to the Transfer of the Shares which would cause the Trust to be "closely held"
within the meaning of Section 856(h) of the Code or which would cause the Trust
to fail to qualify as a REIT; and the intended transferee shall acquire no
rights in such Shares.
(f) Nothing contained in this Article 3 shall preclude the settlement
of any transaction entered into through the facilities of the New York Stock
Exchange. The fact that the settlement of any transaction occurs shall not
negate the effect of any other provision of this Article 3 and any transferee in
such a transaction shall be subject to all of the provisions and limitations set
forth in this Article 3.
SECTION 3. EXCESS SHARES.
(a) If, notwithstanding the other provisions contained in this Article
3, at any time from the date of the Initial Public Offering until the
Restriction Termination Date, there is a purported Transfer or other change in
the capital structure of the Trust (except for a change resulting from the
exchange of Units for Shares) such that any Person would Beneficially Own Shares
in excess of the applicable Ownership Limit or Existing Holder Limit (as
applicable), then, except as otherwise provided in Sections 9 and 12 of this
Article 3, and subject to paragraph (f) of Section 2 of this Article 3, the
Shares Beneficially Owned in excess of such Ownership Limit or Existing Holder
Limit (rounded up to the nearest whole Share) shall constitute "Excess Shares"
and be treated as provided in this Article 3. Such designation and treatment
shall be effective as of the close of business on the business day prior to the
date of the purported Transfer or change in capital structure (except for a
change resulting from the exchange of Units for Shares).
(b) If, notwithstanding the other provisions contained in this Article
3, at any time after the date of the Initial Public Offering until the
Restriction Termination Date, there is a purported Transfer or other change in
the capital structure of the Trust (except for a change resulting from the
exchange of Units for Shares) which, if effective, would cause the Trust to
become "closely held" within the meaning of Section 856(h) of the Code, then the
Shares being Transferred which would cause the Trust to be "closely held" within
the meaning of Section 856(h) of the Code (rounded up to the nearest whole
Share) shall constitute "Excess Shares" and be treated as provided in this
Article 3. Such designation and treatment shall be effective as of the close of
business on the
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business day prior to the date of the purported Transfer or change in capital
structure (except for a change resulting from the exchange of Units for Shares).
SECTION 4. PREVENTION OF TRANSFER. If the Board or its designee shall
at any time determine in good faith that a Transfer has taken place in violation
of Section 2 of this Article 3 or that a Person intends to acquire or has
attempted to acquire beneficial ownership (determined without reference to any
rules of attribution) or Beneficial Ownership of any Shares in violation of
Section 2 of this Article 3, the Board or its designee shall take such action as
it deems advisable to refuse to give effect to or to prevent such transfer,
including, but not limited to, refusing to give effect to such Transfer on the
books of the Trust or instituting proceedings to enjoin such Transfer; provided,
--------
however, that any Transfers or attempted Transfers in violation of paragraph
- -------
(b), (c), (d) or (e) of Section 2 of this Article 3 shall automatically result
in the designation and treatment described in Section 3 of this Article 3,
irrespective of any action (or non-action) by the Board.
SECTION 5. NOTICE TO TRUST. Any Person who acquires or attempts to
acquire Shares in violation of Section 2 of this Article 3, or any Person who is
a transferee such that Excess Shares result under Section 3 of this Article 3,
shall immediately give written notice or, in the event of a proposed or
attempted Transfer, shall give at least 15 days prior written notice to the
Trust of such event and shall provide to the Trust such other information as the
Trust may request in order to determine the effect, if any, of such Transfer or
attempted Transfer on the Trust's status as a REIT.
SECTION 6. INFORMATION FOR TRUST. From the date of the Initial Public
Offering and until the Restriction Termination Date:
(a) every Beneficial Owner of more than 5% (or such other percentage,
between 2 of 1% and 5%, as provided in the income tax regulations
promulgated under the Code) of the number or value of outstanding Shares of
the Trust shall, within 30 days after January 1 of each year, give written
notice to the Trust stating the name and address of such Beneficial Owner,
the number of Shares Beneficially Owned, and a description of how such
Shares are held. Each such Beneficial Owner shall provide to the Trust such
additional information as the Trust may reasonably request in order to
determine the effect, if any, of such Beneficial Ownership on the Trust's
status as a REIT.
(b) each Person who is a Beneficial Owner of Shares and each Person
(including the shareholder of record) who is holding Shares for a
Beneficial Owner shall provide to the Trust in writing such information
with respect to direct, indirect and constructive ownership of Shares as
the Board deems reasonably necessary to comply with the provisions of the
Code applicable to a REIT, to determine the Trust's status as a REIT, to
comply with the requirements of any taxing authority or governmental agency
or to determine any such compliance.
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SECTION 7. OTHER ACTION BY BOARD. Subject to paragraph (f) of Section
2 of this Article 3, nothing contained in this Article 3 shall limit the
authority of the Board to take such other action as it deems necessary or
advisable to protect the Trust and the interests of its shareholders by
preservation of the Trust's status as a REIT; provided, however, that no
-------- -------
provision of this Section 7 shall preclude the settlement of any transaction
entered into through the facilities of the New York Stock Exchange.
SECTION 8. AMBIGUITIES. In the case of an ambiguity in the
application of any of the provisions of this Article 3, including any definition
contained in Section 1, the Board shall have the power to determine the
application of the provisions of this Article 3 with respect to any situation
based on the facts known to it.
SECTION 9. MODIFICATION OF EXISTING HOLDER LIMITS. The Existing
Holder Limits may be modified as follows:
(a) Subject to the limitations provided in Section 11 of this Article
3, the Board may grant options which result in Beneficial Ownership of Shares by
an Existing Holder pursuant to an option plan approved by the Board and/or the
shareholders. Any such grant shall increase the Existing Holder Limit for the
affected Existing Holder to the maximum extent possible under Section 11 of this
Article 3 to permit the Beneficial Ownership of the Shares issuable upon the
exercise of such option.
(b) Subject to the limitations provided in Section 11 of this Article
3, an Existing Holder may elect to participate in a dividend reinvestment plan
approved by the Board which results in Beneficial Ownership of Shares by such
participating Existing Holder and any comparable reinvestment plan of Cabot
Industrial Properties, L.P., a Delaware limited partnership, wherein those
Existing Holders holding Units are entitled to purchase additional Units. Any
such participation shall increase the Existing Holder Limit for the affected
Existing Holder to the maximum extent possible under Section 11 of this Article
3 to permit Beneficial Ownership of the Shares acquired as a result of such
participation.
(c) The Board shall reduce the Existing Holder Limit for any Existing
Holder after any Transfer permitted in this Article 3 by such Existing Holder by
the percentage of the outstanding Shares so Transferred or after the lapse
(without exercise) of an option described in paragraph (a) of this Section 9 by
the percentage of the Shares that the option, if exercised, would have
represented, but in either case no Existing Holder Limit shall be reduced to a
percentage which is less than the Ownership Limit.
SECTION 10. INCREASE OR DECREASE IN OWNERSHIP LIMIT. Subject to the
limitations provided in Section 11 of this Article 3 and Section 4 of Article 1,
the Board may from time to time increase or decrease the Ownership Limit;
provided, however, that any decrease may only be made prospectively as to
- -------- -------
subsequent holders (other than a decrease as a result of a retroactive change in
existing law that would require a decrease to retain REIT status, in which case
such decrease shall be effective immediately).
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SECTION 11. LIMITATIONS ON CHANGES IN EXISTING HOLDER AND OWNERSHIP
LIMITS.
(a) Neither the Ownership Limit nor any Existing Holder Limit may be
increased (nor may any additional Existing Holder Limit be created) if, after
giving effect to such increase (or creation), five Beneficial Owners of Shares
(including all of the then Existing Holders) could Beneficially Own, in the
aggregate, more than 49.9% in number or value of the outstanding Shares.
(b) Prior to the modification of any Existing Holder Limit or
Ownership Limit pursuant to Section 9 or 10 of this Article 3, the Board may
require such opinions of counsel, affidavits, undertakings or agreements as it
may deem necessary or advisable in order to determine or ensure the Trust's
status as a REIT.
(c) No Existing Holder Limit shall be reduced to a percentage which is
less than the Ownership Limit.
SECTION 12. WAIVERS BY BOARD.
12.1 Subject to Section 2(e) of this Article 3, the Board, upon
receipt of a ruling from the Internal Revenue Service or an opinion of counsel
or other evidence satisfactory to the Board and upon at least 15 days written
notice from a transferee prior to the proposed Transfer which, if consummated,
would result in the intended transferee owning Shares in excess of the Ownership
Limit or the Existing Holder Limit, as the case may be, and upon such other
conditions as the Board may direct, may waive the Ownership Limit or the
Existing Holder Limit, as the case may be, with respect to such transferee.
12.2 In addition to waivers permitted under paragraph (a) above, the
Board shall, subject to Section 2(e) of this Article 3, waive the Ownership
Limit with respect to a Person if: (i) such Person submits to the Board
information satisfactory to the Board, in its reasonable discretion,
demonstrating that such Person is not an individual for purposes of Section
542(a)(2) of the Code (determined taking into account Section 856(h)(3)(A) of
the Code); (ii) such Person submits to the Board information satisfactory to the
Board, in its reasonable discretion, demonstrating that no Person who is an
individual for purposes of Section 542(a)(2) of the Code (determined taking into
account Section 856(h)(3)(A) of the Code) would be considered to Beneficially
Own Shares in excess of the Ownership Limit by reason of the ownership of Shares
in excess of the Ownership Limit by the Person receiving the waiver granted
under this paragraph (b); (iii) such Person submits to the Board information
satisfactory to the Board, in its reasonable discretion, demonstrating that the
ownership of Shares in excess of the Ownership Limit by the Person receiving the
waiver granted under this paragraph (b) will not result in the Trust failing to
qualify as a REIT; and (iv) such Person provides to the Board such
representations and undertakings, if any, as the Board may, in its reasonable
discretion, require to ensure that the conditions in clauses (i), (ii) and (iii)
above are satisfied and will continue to be satisfied throughout the period
during which such Person owns Shares in excess of the Ownership Limit pursuant
to any waiver granted under this paragraph (b), and such Person agrees that any
violation of such representations and undertakings or any attempted violation
thereof will result in the application of the remedies set forth in Section 3 of
this
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Article 3 with respect to Shares held in excess of the Ownership Limit by
such Person (determined without regard to the waiver granted such Person under
this paragraph (b)).
SECTION 13. LEGEND. Each certificate for Shares shall bear
substantially the following legend:
The securities represented by this certificate are subject to restrictions
on transfer for the purpose of the Trust's maintenance of its status as a
REIT under the Internal Revenue Code of 1986, as amended. Except as
otherwise provided pursuant to the Declaration of Trust of the Trust, as
amended from time to time, no Person may Beneficially Own Shares, more than
(i) 9.8% of the Company's issued and outstanding Shares, or (ii) 9.8% of
the total value of such Shares. Any Person who attempts or proposes to
Beneficially Own Shares in excess of the above limitations must notify the
Trust in writing at least 15 days prior to such proposed or attempted
Transfer. All capitalized terms in this legend have the meanings defined
in the Declaration of Trust of the Trust, a copy of which, including the
restrictions on transfer, will be sent without charge to each shareholder
who so requests. If the restrictions on transfer are violated, the
securities represented hereby shall be designated and treated as Excess
Shares which shall be held in trust by the Excess Share Trustee for the
benefit of the Charitable Beneficiary.
Instead of the foregoing legend, the certificate may state that the
Trust will furnish a full statement about certain restrictions on
transferability to a shareholder on request and without charge.
SECTION 14. SEVERABILITY. If any provision of this Article 3 or any
application of any such provision is determined to be void, invalid or
unenforceable by any court having jurisdiction over the issue, the validity and
enforceability of the remaining provisions shall be affected only to the extent
necessary to comply with the determination of such court.
SECTION 15. TRUST FOR EXCESS SHARES. Upon any purported Transfer that
results in Excess Shares pursuant to Section 3 of this Article 3, such Excess
Shares shall be deemed to have been transferred to the Excess Share Trustee, as
trustee of the Excess Share Trust for the exclusive benefit of the Charitable
Beneficiary. Excess Shares so held in trust shall be issued and outstanding
Shares of the Trust. The Purported Beneficial Transferee shall have no rights in
such Excess Shares except as provided in Section 18 of this Article 3.
SECTION 16. DISTRIBUTIONS ON EXCESS SHARES. Any distributions
(whether as dividends, distributions upon liquidation, dissolution or winding up
or otherwise) on Excess Shares shall be paid to the Excess Share Trust for the
benefit of the Charitable Beneficiary. Upon liquidation, dissolution or winding
up, the Purported Record Transferee shall receive the lesser of (a) the amount
of any distribution made upon liquidation, dissolution or winding up or (b) the
price paid by the Purported Record Transferee for the Shares, or if the
Purported Record Transferee did not give value for the Shares, the Market Price
of the Shares on the day of the event causing the
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<PAGE>
Shares to be held in trust. Any such dividend paid or distribution paid to the
Purported Record Transferee in excess of the amount provided in the preceding
sentence prior to the discovery by the Trust that the Shares with respect to
which the dividend or distribution was made had been exchanged for Excess Shares
shall be repaid to the Excess Share Trust for the benefit of the Charitable
Beneficiary.
SECTION 17. VOTING OF EXCESS SHARES. The Excess Share Trustee shall
be entitled to vote the Excess Shares for the benefit of the Charitable
Beneficiary on any matter. The Purported Record Transferee shall have no voting
rights with respect to shares held in the Excess Share Trust and, subject to
Maryland law, effective as of the date that Excess Shares have been transferred
to the Excess Share Trustee, the Excess Share Trustee shall have the authority
(at the Excess Share Trustee's sole discretion) to (i) rescind as void any vote
cast by a Purported Record Transferee prior to the discovery by the Excess Share
Trust that Excess Shares have been transferred to the Excess Share Trustee and
(ii) recast such vote in accordance with the desires of the Excess Share Trustee
acting for the benefit of the Charitable Beneficiary; provided, however, that if
the Company has already taken irreversible trust action, then the Excess Share
Trustee shall not have the authority to rescind and recast such vote.
Notwithstanding the provisions of this Article 3, until the Excess Share Trust
has received notification that Excess Shares have been transferred into a Excess
Share Trust, the Excess Share Trust shall be entitled to rely on its share
transfer and other shareholder records for purposes of preparing lists of
shareholders entitled to vote at meetings, determining the validity and
authority of proxies and otherwise conducting votes of shareholders. The owner
of the Excess Shares shall be deemed to have given an irrevocable proxy to the
Excess Share Trustee to vote the Excess Shares for the benefit of the Charitable
Beneficiary.
SECTION 18. NON-TRANSFERABILITY OF EXCESS SHARES. Excess Shares shall
be transferable only as provided in this Section 18. At the direction of the
Trust, the Excess Share Trustee shall transfer the Shares held in the Excess
Share Trust to a person whose ownership of the Shares will not violate the
Ownership Limit or Existing Holder Limit. Such transfer shall be made within 60
days after the latest of (x) the date of the Transfer which resulted in such
Excess Shares and (y) the date the Board determines in good faith that a
Transfer resulting in Excess Shares has occurred, if the Trust does not receive
a notice of such Transfer pursuant to Section 5 of this Article 3. If such a
transfer is made, the interest of the Charitable Beneficiary shall terminate and
proceeds of the sale shall be payable to the Purported Record Transferee and to
the Charitable Beneficiary. The Purported Record Transferee shall receive the
lesser of (a) the price paid by the Purported Record Transferee for the Shares
or, if the Purported Record Transferee did not give value for the Shares, the
Market Price of the Shares on the day of the event causing the Shares to be held
in trust, and (b) the price received by the Excess Share Trust from the sale or
other disposition of the Shares. Any proceeds in excess of the amount payable to
the Purported Record Transferee shall be paid to the Charitable Beneficiary.
Prior to any transfer of any Excess Shares by the Excess Share Trustee, the
Trust must have waived in writing its purchase rights under Section 19 of this
Article 3. It is expressly understood that the Purported Record Transferee may
enforce the provisions of this Section 18 against the Charitable Beneficiary.
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If any of the foregoing restrictions on transfer of Excess Shares is
determined to be void, invalid or unenforceable by any court of competent
jurisdiction, then the Purported Record Transferee may be deemed, at the option
of the Trust, to have acted as an agent of the Trust in acquiring such Excess
Shares and to hold such Excess Shares on behalf of the Trust.
SECTION 19. CALL BY TRUST ON EXCESS SHARES. Excess Shares shall be
deemed to have been offered for sale to the Trust, or its designee, at a price
per Share equal to the lesser of (a) the price per Share in the transaction that
created such Excess Shares (or, in the case of a devise, gift or other
transaction in which no value was given for such Excess Shares, the Market Price
at the time of such devise, gift or other transaction) and (b) the Market Price
of the common Shares and/or preferred Shares to which such Excess Shares relates
on the date the Trust, or its designee, accepts such offer (the "Redemption
Price"). The Trust shall have the right to accept such offer for a period of 90
days after the later of (x) the date of the Transfer which resulted in such
Excess Shares and (y) the date the Board determines in good faith that a
Transfer resulting in Excess Shares has occurred, if the Trust does not receive
a notice of such Transfer pursuant to Section 5 of this Article 3 but in no
event later than a permitted Transfer pursuant to and in compliance with the
terms of Section 18 of this Article 3. Unless the Board determines that it is in
the interests of the Trust to make earlier payments of all of the amount
determined as the Redemption Price per Share in accordance with the preceding
sentence, the Redemption Price may be payable at the option of the Board at any
time up to but not later than one year after the date the Trust accepts the
offer to purchase the Excess Shares. In no event shall the Trust have an
obligation to pay interest to the Purported Record Transferee.
SECTION 20. UNDERWRITTEN OFFERINGS. The Ownership Limit shall not
apply to the acquisition of Shares or rights, options or warrants for, or
securities convertible into, Shares by an underwriter in a public offering,
provided that the underwriter makes a timely distribution of such Shares or
- --------
rights, options or warrants for, or securities convertible into, Shares.
ARTICLE 4. SHAREHOLDERS
SECTION 1. SHAREHOLDERS' MEETINGS. There shall be an annual meeting
of the shareholders to be held at such time and place, either within or without
the State of Maryland, as the Board shall prescribe in accordance with the
Trust's Bylaws, at which Trustees shall be elected or reelected and any other
proper business may be conducted. The annual meeting of shareholders shall be
held after delivery of the annual report, at a convenient location and upon
proper notice. Special meetings of shareholders may be called by a majority of
the Board, or by any executive officer of the Trust, and shall be called upon
the written request of shareholders holding in the aggregate not less than
twenty-five percent of the outstanding Shares of the Trust entitled to vote at
such meeting in the manner provided in the Bylaws. If there shall be no
Trustees, the officers of the Trust shall promptly call a special meeting of the
shareholders for the election of successor Trustees. Written or printed notice
stating the place, date and hour of the shareholders' meeting and, in the case
of a special meeting, the purpose or purposes for which the meeting is called,
shall be delivered not less than 10 nor more than 60 days before the day of the
meeting either personally or by mail, by or at
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<PAGE>
the direction of the Board or any officer or person calling the meeting, to each
shareholder of record entitled to vote at such meeting. No other business than
that which is stated in the call for a special meeting shall be considered at
such meeting.
Holders of a majority of the outstanding Shares entitled to vote at
any meeting represented in person or by proxy shall constitute a quorum at any
such meeting. Whenever any action is to be taken by the shareholders, it shall,
except as otherwise authorized or required by law or this Declaration of Trust
or the Bylaws, be authorized by a majority of the votes cast at a meeting of
shareholders by holders of Shares entitled to vote thereon.
SECTION 2. VOTING. Subject to the provisions of any class or series
of shares then outstanding, at each meeting of the shareholders, each
shareholder entitled to vote shall have the right to vote, in person or by
proxy, the number of Shares of the Trust owned by him and entitled to vote on
each matter on which the vote of the shareholders is taken. In any election in
which more than one vacancy for the position of Trustee is to be filled, each
shareholder may vote the number of Shares of the Trust owned by him and entitled
to vote on the election of Trustees for each such vacancy to be filled. There
shall be no right of cumulative voting. Subject to the provisions of any class
or series of shares then outstanding, each outstanding common Share shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders, and the shareholders shall be entitled to vote only on the
following matters: (a) election and removal of Trustees as provided in Article
5; (b) amendment of the Declaration of Trust; (c) termination of the Trust as
provided in Section 1 of Article 6; (d) merger or consolidation of the Trust, or
the sale or disposition of substantially all of the Trust Property, as provided
in Section 2 of Article 6; and (e) such other matters with respect to which the
Board of Trustees has adopted a resolution declaring that a proposed action is
advisable and directing that the matter be submitted to the shareholders for
approval or ratification. Except with respect to the foregoing matters, no
action taken by the shareholders at any meeting shall in any way bind the Board
of Trustees.
SECTION 3. DISTRIBUTIONS. The Board may from time to time authorize
such dividends or distributions in cash, property or other assets of the Trust
or in securities of the Trust or from any other source as the Board in its
discretion shall determine. The Board shall endeavor to authorize and pay such
dividends and distributions as shall be necessary for the Trust to qualify as a
REIT under the Code (so long as such qualification, in the opinion of the Board,
is in the best interests of the shareholders); however, shareholders shall have
no right to any dividend or distribution unless and until declared by the Board.
The exercise of the powers and rights of the Board pursuant to this Section 3
shall be subject to the provisions of any class or series of Shares at the time
outstanding. The receipt by any person in whose name any Shares are registered
on the records of the Trust or by his or her duly authorized agent shall be a
sufficient discharge for all dividends or distributions payable or deliverable
in respect of such Shares and from all liability with respect to the application
thereof.
SECTION 4. REPORT TO SHAREHOLDERS. The Trust shall prepare an annual
report to the extent and in the manner required by applicable law.
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SECTION 5. INSPECTION OF TRUST BOOKS. The books and records of the
Trust shall be open to inspection upon the written demand of a shareholder at
any reasonable time for a purpose reasonably related to his or her interests as
a shareholder and shall be exhibited at any time when required by the demand at
any shareholders' meeting of ten percent of the Shares represented at the
meeting. Such inspection by a shareholder may be made in person or by agent or
attorney and the right of inspection includes the right to make extracts. Demand
of inspection other than at a Shareholders' meeting shall be made in writing on
the President or the Secretary of the Trust at the principal office of the
Trust.
SECTION 6. NONLIABILITY AND INDEMNIFICATION OF SHAREHOLDERS.
Shareholders shall not be personally or individually liable in any manner
whatsoever for any debt, act, omission or obligation incurred by the Trust or
the Trustees and shall be under no obligation to the Trust or its creditors with
respect to such Shares other than the obligation to pay to the Trust the full
amount of the consideration for which the Shares were issued or to be issued.
The shareholders shall not be liable to assessment and the Board shall have no
power to bind the shareholders personally. The Trust shall indemnify and hold
each shareholder harmless from and against all claims and liabilities, whether
they proceed to judgment or are settled or otherwise brought to a conclusion, to
which such shareholder may become subject by reason of his or her being or
having been a shareholder, and shall reimburse such shareholder for all legal
and other expenses reasonably incurred by him or her in connection with any such
claim or liability; provided, however, that no such shareholder shall be
-------- -------
indemnified or reimbursed if such claim, obligation or liability is finally
adjudged by a competent court of law to have arisen out of the shareholder=s
bad faith, willful misconduct or gross negligence; and provided, further, that
-------- -------
such shareholder must give prompt notice as to any such claims or liabilities or
suits and must take such action as will permit the Trust to conduct the defense
thereof. The rights accruing to a shareholder under this Section 6 shall not
exclude any other right to which such shareholder may be lawfully entitled, nor
shall anything contained herein restrict the right of the Trust to indemnify or
reimburse a shareholder in any appropriate situation even though not
specifically provided herein; provided, however, that the Trust shall have no
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liability to reimburse shareholders for taxes assessed against them by reason of
their ownership of Shares, nor for any losses suffered by reason of changes in
the market value of securities of the Trust. No amendment to this Declaration of
Trust increasing or enlarging the liability of the shareholders shall be made
without the unanimous vote or written consent of all of the shareholders.
SECTION 7. NONLIABILITY. The Board shall use every reasonable means
to assure that all persons having dealings with the Trust shall be informed that
the private property of the shareholders and the Board shall not be subject to
claims against and obligations of the Trust to any extent whatever. The Trustees
shall cause to be inserted in every written agreement, undertaking or obligation
made or issued on behalf of the Trust, an appropriate provision to the effect
that the shareholders and the Trustees shall not be personally liable
thereunder, and that all parties concerned shall look solely to the Trust
property for the satisfaction of any claim thereunder, and appropriate reference
shall be made to this Declaration of Trust. The omission of such a provision
from any such agreement, undertaking or obligation, or the failure to use any
other means of giving such notice, shall not, however, render the shareholders
or the Trustees personally liable.
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SECTION 8. DECLARATION AND BYLAWS. All shareholders are subject to
the provisions of the Declaration of Trust and the Bylaws of the Trust.
ARTICLE 5. THE TRUSTEES
SECTION 1. NUMBER, TERMS, QUALIFICATION, COMPENSATION AND NAMES OF
TRUSTEES. The Board shall be comprised of not less than three nor more than
fifteen Trustees. The number of Trustees shall be determined from time to time
by resolution of the Board. Except for the initial terms of Class I and Class II
Trustees, as set forth on Schedule A hereto, the term of office of each Trustee
shall be three years and until his or her successor is duly elected and
qualifies. Trustees may succeed themselves in office. Trustees shall be
individuals who are at least 21 years old and not under legal disability. No
Trustee shall be required to give bond, surety or security to secure the
performance of his or her duties or obligations hereunder. Whenever a vacancy in
the Board shall occur, until such vacancy is filled as provided in Section 3 of
this Article 5, the Trustees or Trustee continuing in office, regardless of
their number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed on the Trustees by this Declaration of Trust.
The Trustees shall receive such fees for their services and expenses as they
shall deem reasonable and proper. Immediately after the closing of the Initial
Public Offering (as such term is defined in Article 3), and at all times
thereafter in accordance with Section 3 of this Article 5, a majority of the
Trustees comprising the Board ("Independent Trustees") shall not be officers or
employees of the Trust.
The Board shall be divided into three classes, designated Class I,
Class II and Class III. Each class shall consist, as nearly as may be possible,
of one-third of the total number of Trustees comprising the entire Board. The
initial Class I Trustees shall be elected for a one-year term, the initial Class
II Trustees for a two-year term and the initial Class III Trustees for a three-
year term. At each succeeding annual meeting of shareholders, beginning with the
annual meeting in 1995, successors to the class of Trustees whose term expires
at that annual meeting shall be elected for a three-year term. If the authorized
number of Trustees is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of Trustees in each class as
nearly equal as possible, and any additional Trustee of any class elected to
fill a vacancy resulting from an increase in such class, subject to Section 3 of
this Article 5, shall hold office for a term that shall coincide with the
remaining term of that class, but in no case shall a decrease in the number of
Trustees shorten the term of any incumbent Trustee. A Trustee shall hold office
until the annual meeting for the year in which his or her term expires and until
his or her successor shall be elected and shall qualify, subject, however, to
prior death, resignation or removal from office. A majority of the entire Board
shall constitute a quorum for the transaction of business, provided that, if
--------
less than a majority of the Board are present at any meeting, a majority of the
Trustees present may adjourn the meeting from time to time without further
notice, and provided further that, if, pursuant to this Declaration of Trust or
-------- -------
the Trust Bylaws, the vote of a majority of a particular group of Trustees is
required for action, a quorum must also include a majority of such group.
SECTION 2. RESIGNATION, REMOVAL AND DEATH. A Trustee may resign at
any time by giving written notice thereof in recordable form to the other
Trustees at the principal office of the
18
<PAGE>
Trust. The acceptance of a resignation shall not be necessary to make it
effective. A Trustee may be removed with or without cause at any time by the
affirmative vote of two-thirds of all the votes entitled to be cast generally
for the election of trustees (which action shall be taken only by vote at a
meeting (including a special meeting called for such purpose) and not by
authorization without a meeting, notwithstanding anything to the contrary in
Section 4 of this Article 5). Upon the resignation or removal of any Trustee, he
or she shall execute and deliver such documents and render such accounting as
the remaining Trustees shall require and shall thereupon be discharged as
Trustee. Upon the incapacity or death of any Trustee, his or her status as a
Trustee shall immediately terminate and his legal representatives shall perform
the acts set forth in the preceding sentence.
SECTION 3. VACANCIES. The resignation, removal or death of any or all
of the Trustees shall not terminate the Trust or affect its continuity. During a
vacancy, the remaining Trustee or Trustees may exercise the powers of the Board
hereunder. Whenever there shall be a vacancy or vacancies on the Board, such
vacancy or vacancies shall be filled in the manner prescribed in the second
paragraph of this Section 3.
Any vacancy on the Board for any cause other than an increase in the
number of Trustees shall be filled by a majority of the remaining Trustees, even
if less than a quorum, or by a sole remaining Trustee. Any vacancy created by an
increase in the number of Trustees shall be filled by a majority of the entire
Board. Independent Trustees shall nominate replacements for vacancies among the
Independent Trustees' positions. In the event that, after the closing of the
Initial Public Offering (as such term is defined in Article 3), a majority of
the Board are not Independent Trustees by reason of the resignation or removal
of one or more Independent Trustees or otherwise, the remaining Independent
Trustees (or, if there are no Independent Trustees, the remaining members of the
Board) shall promptly elect that number of Independent Trustees necessary to
cause the Board to include a majority of Independent Trustees. Any Trustee
elected to fill a vacancy as provided herein shall hold office until the next
annual meeting of shareholders. A Trustee elected at an annual meeting of
shareholders to fill a vacancy shall have the same remaining term as that of his
or her predecessor.
SECTION 4. ACTIONS BY AND MEETINGS OF TRUSTEES. The Trustees may act
with or without a meeting. Except as otherwise provided herein, any action of a
majority of Trustees present at a duly convened meeting of the Board shall be
conclusive and binding as an action of the Board. A quorum for meetings of the
Board shall be a majority of all of the Trustees in office, provided that, if
--------
less than a majority of such Trustees are present at any meeting, a majority of
the Trustees present may adjourn the meeting from time to time without further
notice, and provided further that, if, pursuant to this Declaration of Trust or
--------
the Bylaws, the vote of a majority of a particular group of Trustees is required
for any action, a quorum must also include a majority of such group. Action may
be taken without a meeting only by unanimous consent of all of the Trustees in
office and shall be evidenced by a written certificate or instrument signed by
all of the Trustees in office. Meetings may otherwise be called, held and
conducted in the manner prescribed by the Trust Bylaws. Any action taken by
Trustees in accordance with the provisions of this Section 4 shall be conclusive
and binding on the Trust, the Trustees and the shareholders, as an action of all
the Trustees, collectively,
19
<PAGE>
and of the Trust. Any deed, mortgage, evidence of indebtedness or other
instrument, agreement or document of any character, whether similar or
dissimilar, executed by one or more of the Trustees, when authorized at a
meeting or by written authorization without a meeting in accordance with the
provisions of this Section 4, shall be valid and binding on the Trustees, the
Trust and the shareholders.
SECTION 5. AUTHORITY OF TRUSTEES. Subject to any express limitations
contained in this Declaration of Trust or the Trust's Bylaws, (a) the business
and affairs of the Trust shall be managed under the direction of the Board and
(b) the Board shall have full, exclusive and absolute power, control and
authority over any and all property of the Trust.
SECTION 6. POWERS OF TRUSTEES. The Trustees shall have all the powers
necessary, convenient or appropriate to effectuate the purposes of the Trust and
may take any action which they deem necessary or desirable and proper to carry
out such purposes. The Board may take any action as in its sole judgment and
discretion is necessary or appropriate to conduct the business and affairs of
the Trust. The Declaration of Trust shall be construed with the presumption in
favor of the grant of power and authority to the Board. Any construction of the
Declaration of Trust or determination made in good faith by the Board concerning
its powers and authority hereunder shall be conclusive. The enumeration and
definition of particular powers of the Trustees included in the Declaration of
Trust or in the Bylaws shall in no way be limited or restricted by reference to
or inference from the terms of this or any other provision of the Declaration of
Trust or the Bylaws or construed or deemed by inference or otherwise in any
manner to exclude or limit the powers conferred upon the Board of the Trustees
under the general laws of the State of Maryland or any other applicable laws.
Subject to the limitations contained in Article 1, and in addition to
all other powers and authority conferred by this Declaration of Trust or by law,
the Trustees' powers in the name and on behalf of the Trust shall include the
following:
(a) To purchase, acquire through the issuance of Shares in the Trust,
obligations of the Trust or otherwise, and to mortgage, sell, acquire, lease,
hold, manage, improve, lease to others, option, exchange, release and partition
real estate interests of every nature, including freehold, leasehold, mortgage,
ground rent and other interests therein; and to erect, construct, alter, repair,
demolish or otherwise change buildings and structures of every nature;
(b) To purchase, acquire through the issuance of Shares in the Trust,
obligations of the Trust or otherwise, option, sell and exchange stocks, bonds,
notes, certificates of indebtedness and securities of every nature;
(c) To purchase, acquire through the issuance of Shares in the Trust,
obligations of the Trust or otherwise, mortgage, sell, acquire, lease, hold,
manage, improve, lease to others, option and exchange personal property of every
nature;
(d) To hold legal title to property of the Trust in the name of the
Trust or in the name of any other person as nominee for the Trust, without
disclosure of the interest of the Trust therein;
20
<PAGE>
(e) To borrow money for the purposes of the Trust and to give notes or
other negotiable or nonnegotiable instruments of the Trust therefor; to enter
into other obligations or guarantee the obligations of others on behalf of and
for the purposes of the Trust; and to mortgage or pledge or cause to be
mortgaged or pledged real and personal property of the Trust to secure such
notes, debentures, bonds, instruments or other obligations;
(f) To lend money on behalf of the Trust and to invest the funds of
the Trust;
(g) To create reserve funds for such purposes as they deem advisable;
(h) To deposit funds of the Trust in banks and other depositories
without regard to whether such accounts will draw interest;
(i) To pay taxes and assessments imposed on or chargeable against the
Trust by virtue of or arising out of the existence, property, business or
activities of the Trust;
(j) To purchase, issue, sell or exchange Shares of the Trust as
provided in Article 2;
(k) To exercise with respect to property of the Trust, all options,
privileges and rights, whether to vote, assent, subscribe or convert, or of any
other nature; to grant proxies; and to participate in and accept securities
issued under any voting trust agreement;
(l) To participate in any reorganization, readjustment, consolidation,
merger, dissolution, sale or purchase of assets, lease or similar proceedings of
any corporation, partnership or other organization in which the Trust shall have
an interest and in connection therewith to delegate discretionary powers to any
reorganization, protective or similar committee and to pay assessments and other
expenses in connection therewith;
(m) To engage or employ agents, representatives and employees of any
nature, or independent contractors, including, without limiting the generality
of the foregoing, transfer agents for the transfer of Shares in the Trust,
registrars, underwriters for the sale of Shares in the Trust, independent
certified public accountants, attorneys at law, appraisers and real estate
agents and brokers; and to delegate to one or more Trustees, agents,
representatives, employees, independent contractors or other persons such powers
and duties as the Trustees deem appropriate;
(n) To determine conclusively the allocation between capital and
income of the receipts, holdings, expenses and disbursements of the Trust,
regardless of the allocation which might be considered appropriate in the
absence of this provision;
(o) To determine conclusively the value from time to time and to
revalue the real estate, securities and other property of the Trust by means of
independent appraisals;
21
<PAGE>
(p) To compromise or settle claims, questions, disputes and
controversies by, against or affecting the Trust;
(q) To solicit proxies of the shareholders;
(r) To adopt a fiscal year for the Trust and to change such fiscal
year;
(s) To adopt and use a seal;
(t) To merge the Trust with or into any other trust or corporation in
accordance with the laws of the State of Maryland;
(u) To deal with the Trust property in every way, including joint
ventures, partnerships and any other combinations or associations, that it would
be lawful for an individual to deal with the same, whether similar to or
different from the ways specified herein;
(v) To determine whether or not, at any time or from time to time, to
attempt to cause the Trust to qualify for taxation as a REIT;
(w) To make, adopt, amend or repeal Bylaws containing provisions
relating to the business of the Trust, the conduct of its affairs, its rights or
powers and the rights or powers of its shareholders, Trustees or officers not
inconsistent with law or this Declaration of Trust; and
(x) To do all such other acts and things as are incident to the
foregoing and to exercise all powers which are necessary or useful to carry on
the business of the Trust, to promote any of the purposes of the Trust and to
carry out the provisions of this Declaration of Trust.
SECTION 7. TRUSTEES' RIGHT TO OWN SHARES IN TRUST. A Trustee may
acquire, hold and dispose of Shares in the Trust for his or her individual
account and may exercise all rights of a shareholder to the same extent and in
the same manner as if he or she were not a Trustee.
SECTION 8. RELATED PARTY TRANSACTIONS. Subject to the provisions of
Section 4 of Article 1 and to any restrictions in this Declaration of Trust or
adopted by the Board in the Bylaws or by resolution, the Trust may enter into
any contract or transaction of any kind (including, without limitation, for the
purchase or sale of property or for any type of services, including those in
connection with underwriting or the offer or sale of securities of the Trust)
with any person, including any Trustee, officer, employee or agent of the Trust
or any person affiliated with a Trustee, officer, employee or agent of the
Trust, whether or not any of them has a financial interest in such transaction.
SECTION 9. PERSONS DEALING WITH TRUSTEES. No corporation, person,
transfer agent or other party shall be required to examine or investigate the
trusts, terms or conditions contained in this Declaration of Trust or otherwise
applicable to the Trust; and no such corporation, person, transfer agent or
other party dealing with the Trustees or with the Trust or Trust property and
assets
22
<PAGE>
shall have any obligation with respect to the application of any money or
property paid or delivered to any Trustee, or nominee, agent or representative
of the Trust or the Trustees. A certificate executed by or on behalf of the
Trustees or by any other duly authorized representative of the Trust, delivered
to any person or party dealing with the Trust or Trust property and assets, or,
if relating to real property, recorded in the deed records for the county or
district in which such real property lies, certifying as to the identity and
authority of the Trustees, agents or representatives of the Trust for the time
being, or as to any action of the Trustees or of the Trust, or of the
shareholders, or as to any other fact affecting or relating to the Trust or this
Declaration of Trust, may be treated as conclusive evidence thereof by all
persons dealing with the Trust. No provision of this Declaration of Trust shall
diminish or affect the obligation of the Trustees and every other representative
or agent of the Trust to deal fairly and act in good faith with respect to the
Trust and the shareholders insofar as the relationship and accounting among the
parties to the Trust is concerned; but no third party dealing with the Trust or
with any Trustee, agent or representative of the Trust shall be obliged or
required to inquire into, investigate or be responsible for the discharge and
performance of such fiduciary obligation.
SECTION 10. ADMINISTRATIVE POWERS OF TRUSTEES. The Trustees shall
have power to pay the expenses of organization and administration of the Trust,
including all legal and other expenses in connection with the preparation and
carrying out of the plan for the formation of the Trust, the acquisition of
properties thereunder and the issuance of Shares thereunder; and to employ such
officers, experts, counsel, managers, salesmen, agents, workmen, clerks and
other persons as they think best.
SECTION 11. PROPOSAL OF AMENDMENTS. Notwithstanding anything in this
Declaration of Trust to the contrary, no amendment to Section 1, 3, 8 or 11 of
this Article 5 or Section 2 of Article 7 shall be deemed to have been proposed
by the Board for approval by the shareholders unless and until such proposed
amendment has been approved by a majority of the Independent Trustees. Nothing
contained in this Section 11 shall be construed as a condition to or a
limitation on the right of the shareholders to amend any Section of this
Declaration of Trust by action taken independent of the Board in accordance with
Title 8.
ARTICLE 6. DURATION AND TERMINATION OF TRUST
SECTION 1. TERMINATION OF TRUST. The Trust may be terminated at any
time by a vote or written consent of the holders of two-thirds of the
outstanding Shares of all classes.
In connection with any termination of the Trust, the Board, upon
receipt of such releases or indemnity as they deem necessary for their
protection, shall:
(a) Sell and convert into cash the property of the Trust and
distribute the net proceeds among the shareholders ratably; or
(b) Convey the property of the Trust to one or more persons, entities,
trusts or corporations for consideration consisting in whole or in part of cash,
shares of stock, or other
23
<PAGE>
property of any kind, and distribute the net proceeds among the shareholders
ratably, at valuations fixed by the Board, in cash or in kind, or partly in cash
and partly in kind; provided that the proposal to proceed as described in this
--------
clause (b) shall have been approved in writing by shareholders holding two-
thirds of the Shares issued and outstanding.
Upon termination of the Trust and distribution to the shareholders as
herein provided, a majority of the Trustees shall execute and keep among the
records of the Trust an instrument in writing setting forth the fact of such
termination, and the Trustees shall thereupon be discharged from all further
liabilities and duties hereunder, and the right, title and interest of all
shareholders shall cease and be canceled and discharged.
SECTION 2. MERGER. The Trustees shall have the power to (a) merge the
Trust into another entity, (b) consolidate the Trust with one or more other
entities into a new entity or (c) sell or otherwise dispose of all or
substantially all of the assets of the Trust; provided that such action shall
--------
have been approved, at a meeting of the shareholders called for the purpose, by
the affirmative vote of the holders of not less than two-thirds of the Shares
then outstanding and entitled to vote thereon.
SECTION 3. DURATION OF TRUST. Subject to possible earlier termination
in accordance with the provisions of this Article 6, the duration of the Trust
shall be perpetual or, in any jurisdiction in which such duration is not
permitted, then the Trust shall terminate on the latest date permitted by the
law of such jurisdiction.
SECTION 4. ORGANIZATION AS A CORPORATION. Whenever the Board deems it
in the best interests of the shareholders that the Trust be organized as a
corporation under the laws of any state, the Board shall have full power to
organize such corporation, under the laws of such state as it may consider
appropriate, in the place and stead of the Trust without procuring the consent
of any of the shareholders, in which event the capital stock of such corporation
shall be and remain the same as fixed under this Declaration of Trust and the
shareholders shall receive and accept stock in such corporation on the same
basis as they hold Shares in the Trust.
ARTICLE 7. AMENDMENTS
SECTION 1. GENERAL. The Trust reserves the right from time to time to
make any amendment to this Declaration of Trust, now or hereafter authorized by
law, including any amendment altering the terms or contract rights, as expressly
set forth in this Declaration of Trust, of any outstanding Shares.
SECTION 2. AMENDMENT BY SHAREHOLDERS. Except as provided in Section 3
of this Article 7, this Declaration of Trust may be amended only by the
affirmative vote or written consent of the holders of at least a majority of the
Shares entitled to vote thereon.
SECTION 3. AMENDMENT BY TRUSTEES. The Trustees by a two-thirds vote
and without any action by the shareholders may amend provisions of this
Declaration of Trust from time to time to
24
<PAGE>
qualify as a REIT under the Code or under Title 8. The Trustees may amend this
Declaration of Trust without any action by the shareholders to the extent
permitted by Section 1 of Article 2.
SECTION 4. REQUIREMENTS OF MARYLAND LAW. Notwithstanding anything
contained in this Declaration of Trust to the contrary, this Declaration of
Trust may not be amended except as provided in Title 8.
ARTICLE 8. MISCELLANEOUS
SECTION 1. CONSTRUCTION. This Declaration of Trust shall be construed
in such a manner as to give effect to the intent and purposes of the Trust and
this Declaration of Trust. If any provisions hereof appear to be in conflict,
more specific provisions shall control over general provisions. This Declaration
of Trust shall govern all of the relationships among the Trustees and
shareholders of the Trust; and each provision hereof shall be effective for all
purposes and to all persons dealing with the Trust to the fullest extent
possible under applicable law in each jurisdiction in which the Trust shall
engage in business. In defining or interpreting the powers and duties of the
Trust and the Trustees and officers, reference may be made, to the extent
appropriate and not inconsistent with the Code or Title 8, to Titles 1 through 3
by the Board of Trustees or officers of the Corporations and Associations
Article of the Annotated Code of Maryland. In furtherance and not in limitation
of the foregoing, in accordance with the provisions of Title 3, Subtitles 6 and
7, of the Corporations and Associations Article of the Annotated Code of
Maryland, the Trust shall be included within the definition of "corporation" for
purposes of such provision.
SECTION 2. HEADINGS FOR REFERENCE ONLY. Headings preceding the text,
Articles and Sections hereof have been inserted solely for convenience and
reference, and shall not be construed to affect the meaning, construction or
effect of this Declaration of Trust.
SECTION 3. FILING AND RECORDING. This Declaration of Trust and any
amendment hereto shall be filed for record with the State Department of
Assessments and Taxation of Maryland and may also be filed or recorded in such
other places as the Board deems appropriate, but failure to file for record this
Declaration of Trust or any amendment hereto in any office other than in the
State of Maryland shall not affect or impair the validity or effectiveness of
this Declaration of Trust or any amendment hereto. An amended Declaration of
Trust shall, upon filing, be conclusive evidence of all amendments contained
therein and may thereafter be referred to in lieu of the original Declaration of
Trust and the various amendments thereto.
SECTION 4. APPLICABLE LAW. This Declaration of Trust has been
executed with reference to and its construction and interpretation shall be
governed by the laws of Maryland, and the rights of all parties and the
construction and effect of every provision hereof shall be subject to and
construed according to the laws of Maryland.
SECTION 5. CERTIFICATIONS. Any certificates signed by a person who,
according to the records of the State Department of Assessments and Taxation of
Maryland appears to be a Trustee hereunder, shall be conclusive evidence as to
the matters so certified in favor of any person dealing
25
<PAGE>
with the Trust or the Trustees or any one or more of them, and the successors or
assigns of such persons, which certificate may certify to any matter relating to
the affairs of the Trust, including but not limited to any of the following: A
vacancy on the Board; the number and identity of Trustees; this Declaration of
Trust and any Amendments thereto, or any restated Declaration of Trust and any
Amendments thereto, or that there are no Amendments to this Declaration of Trust
or any restated Declaration of Trust; a copy of the Bylaws of the Trust or any
Amendment thereto; the due authorization of the execution of any instrument or
writing; the vote at any meeting of the Board or a committee thereof or
shareholders; the fact that the number of Trustees present at any meeting or
executing any written instrument satisfies the requirements of this Declaration
of Trust; a copy of any Bylaw adopted by the shareholders or the identity of any
officer elected by the Board; or the existence or nonexistence of any fact or
facts which in any manner relate to the affairs of the Trust. If this
Declaration of Trust or any restated Declaration of Trust is filed or recorded
in any recording office other than the State Department of Assessments and
Taxation of Maryland, anyone dealing with real estate so located that
instruments affecting the same should be filed or recorded in such recording
office may rely conclusively on any certificate of the kind described above
which is signed by a person who according to the records of such recording
office appears to be a Trustee hereunder. In addition, the Secretary or any
Assistant Secretary of the Trust or any other officer of the Trust designated by
the Bylaws or by action of the Board may sign any certificate of the kind
described in this Section 5, and such certificate shall be conclusive evidence
as to the matters so certified in favor of any person dealing with the Trust,
and the successors and assigns of such person.
SECTION 6. SEVERABILITY. If any provision of this Declaration of
Trust shall be invalid or unenforceable, such invalidity or unenforceability
shall attach only to such provision and shall not in any manner affect or render
invalid or unenforceable any other provision of this Declaration of Trust, and
this Declaration of Trust shall be carried out, if possible, as if such invalid
or unenforceable provision were not contained therein.
SECTION 7. BYLAWS. The Bylaws of the Trust may be altered, amended or
repealed, and new Bylaws may be adopted, at any meeting of the Board by a
majority vote of the Trustees.
ARTICLE 9. LIMITATION OF LIABILITY AND INDEMNIFICATION OF TRUSTEES AND OFFICERS
SECTION 1. LIMITATION OF LIABILITY. To the maximum extent that
Maryland law in effect from time to time permits limitation of the liability of
trustees and officers of a REIT, no trustee or officer of the Trust shall be
liable to the Trust or to any shareholder for money damages. Neither the
amendment nor the repeal of this Section 1, nor the adoption or amendment of any
other provision of this Declaration of Trust inconsistent with this Section 1,
shall apply to or affect in any respect the applicability of the preceding
sentence with respect to any act or failure to act which occurred prior to such
amendment, repeal or adoption. In the absence of any Maryland statute limiting
the liability of trustees or officers of a Maryland REIT for money damages in a
suit by or on behalf of the Trust or by any shareholder, no trustee or officer
of the Trust shall be liable to the Trust or to any shareholder for money
damages except to the extent that (a) the trustee or officer actually received
an improper benefit or profit in money, property
26
<PAGE>
or services, for the amount of the benefit or profit in money, property or
services actually received or (b) a judgment or other final adjudication adverse
to the trustee or officer is entered in a proceeding based on a finding in the
proceeding that the trustee's or officer's action or failure to act was the
result of active and deliberate dishonesty and was material to the cause of the
action adjudicated in the proceeding.
SECTION 2. INDEMNIFICATION. The Trust shall have the power to
obligate itself to indemnify each trustee, officer, employee and agent, to the
fullest extent permitted by Maryland law, as amended from time to time, in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he or she was a trustee, officer, employee or agent of the Trust or is or
was serving at the request of the Trust as a director, trustee, officer,
partner, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise or employee benefit plan,
from all claims and liabilities to which such person may become subject by
reason of service in that capacity and to pay or reimburse reasonable expenses,
as such expenses are incurred, of each officer, employee or agent in connection
with any such proceedings.
SECTION 3. INDEMNIFICATION AND INSURANCE. Notwithstanding any other
provisions of this Declaration of Trust, the Trust, for the purpose of providing
indemnification for its Trustees and officers, shall have the authority, without
specific shareholder approval, to enter into insurance or other arrangements to
indemnify all Trustees and officers of the Trust against any and all liabilities
and expenses incurred by them by reason of their being Trustees or officers of
the Trust, whether or not the Trust would otherwise have the power under this
Declaration of Trust or under Maryland law to indemnify such persons against
such liability. Without limiting the power of the Trust to procure or maintain
any kind of insurance or other arrangement, the Trust may, for the benefit of
persons indemnified by it, (a) create a trust fund, (b) establish any form of
self-insurance, (c) secure its indemnity obligation by grant of any security
interest or other lien on the assets of the Trust or (d) establish a letter of
credit, guaranty or surety arrangement. Any such insurance or other arrangement
may be procured, maintained or established within the Trust or with any insurer
or other person deemed appropriate by the Board regardless of whether all or
part of the stock or other securities thereof are owned in whole or in part by
the Trust. In the absence of fraud, the judgment of the Board as to the terms
and conditions of insurance or other arrangement and the identity of the insurer
or other person participating in any arrangement shall be conclusive, and such
insurance or other arrangement shall not be subject to voidability, nor subject
the Trustees approving such insurance or other arrangement to liability on any
ground, regardless of whether Trustees participating and approving such
insurance or other arrangement shall be beneficiaries thereof.
SECTION 4. CONFLICTS. In the event that any provision or portion of a
provision of this Article 9 is determined to be in conflict with any applicable
statute, such provision or portion thereof shall be inapplicable to the extent
of such conflict.
SECTION 5. SEVERABILITY. In the event that any provision or portion
of a provision of this Article 9 is determined to be invalid, void, illegal or
unenforceable, the remainder of the
27
<PAGE>
provisions of this Article 9 shall continue to be valid and enforceable and
shall in no way be affected, impaired or invalidated.
SECTION 6. NO IMPAIRMENT. Nothing in this Article 9 shall be
construed to diminish, limit or impair any rights or defenses afforded to
officers or Trustees by common law, statute, other provisions of this
Declaration of Trust, the Trust Bylaws or otherwise, and the provisions of this
Article 9 shall be deemed to be cumulative thereto.
SECTION 7. REFERENCES. References in this Article 9 to Trustees or
officers shall be deemed to refer to any person who is or was a Trustee or
officer of the Trust and any person who, while a Trustee or officer of the
Trust, is or was serving at the request of the Trust as a director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar functionary
of another corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise.
28
<PAGE>
The undersigned ___________ acknowledges this Amended and Restated
Declaration of Trust to be the trust act of the Trust and as to all matters or
facts required to be verified under oath, the undersigned __________
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
IN WITNESS WHEREOF, the Trust has caused this Amended and Restated
Declaration of Trust to be signed in its name and on its behalf by its
___________ and attested to by its __________ on this _________ of January,
1998.
ATTEST: CABOT INDUSTRIAL TRUST
___________________ By:_______________________
Name: Name:
Title: Title:
<PAGE>
SCHEDULE A
----------
TRUSTEES
--------
Name Class Address
- ---- ----- -------
Ferdinand Colloredo-Mansfeld I Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108
Robert E. Patterson II Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108
<PAGE>
EXHIBIT 3.4
<TABLE>
<CAPTION>
TEMPORARY CERTIFICATE: EXCHANGEABLE FOR DEFINITIVE ENGRAVED CERTIFICATE WHEN READY FOR DELIVERY.
<S> <C> <C> <C>
Shares of Beneficial Interest [SHARES]
Par Value $0.01 Per Share
[NUMBER] CABOT INDUSTRIAL TRUST
THIS CERTIFICATE IS TRANSFERABLE IN ORGANIZED UNDER THE LAWS
BOSTON, MASSACHUSETTS OR NEW OF THE STATE OF MARYLAND
YORK, NEW YORK
CUSIP 127072 10 6
SEE REVERSE FOR IMPORTANT
NOTICE ON TRANSFER RESTRICTIONS
AND OTHER INFORMATION
THIS CERTIFIES THAT
[LOGO]
IS THE OWNER OF
fully paid and non-assessable Shares of Beneficial Interest, $0.01 par value per share, of Cabot Industrial Trust, a
real estate investment trust organized under the laws of the State of Maryland (the "Trust") transferable only on the
books of the Trust by the holder hereof in person or by its duly authorized Attorney upon the surrender of this
Certificate properly endorsed.
The Shares evidenced by this Certificate are subject to a Declaration of Trust dated as of October 8, 1997, as
amended from time to time. The transfers of Shares evidenced by this Certificate are subject to certain restrictions
as set forth on the reverse side of this Certificate and is hereby incorporated in and made a part of this
Certificate. The holder hereof has no interest, legal or equitable, in any specific property of the Trust. This
Certificate is not valid unless countersigned by the Transfer Agent and registered by the Registrar.
WITNESS the facsimile seal of the Trust and the facsimile signatures of its duly authorized officers.
Dated:
[REIT SEAL]
Countersigned and Registered:
BANKBOSTON, N.A.
PRESIDENT SECRETARY Transfer Agent and Registrar
By
Authorized Officer
</TABLE>
<PAGE>
CABOT INDUSTRIAL TRUST
THE TRUST WILL FURNISH TO ANY SHAREHOLDER, ON REQUEST AND WITHOUT CHARGE, A
FULL STATEMENT ON THE INFORMATION REQUIRED BY SECTION 8-203(d) OF THE
CORPORATIONS AND ASSOCIATIONS ARTICLE OF THE ANNOTATED CODE OF MARYLAND WITH
RESPECT TO THE DESIGNATIONS AND ANY PREFERENCES, CONVERSION AND OTHER RIGHTS,
VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS AND OTHER
DISTRIBUTIONS, QUALIFICATIONS, AND TERMS AND CONDITIONS OF REDEMPTION OF THE
SHARES OF EACH CLASS OF BENEFICIAL INTEREST WHICH THE TRUST HAS AUTHORITY TO
ISSUE AND, IF THE TRUST IS AUTHORIZED TO ISSUE ANY PREFERRED OR SPECIAL CLASS IN
SERIES, (i) THE DIFFERENCES IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE
SHARES OF EACH SERIES TO THE EXTENT SET, AND (ii) THE AUTHORITY OF THE BOARD OF
TRUSTEES TO SET SUCH RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES. THE FOREGOING
SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO AND QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE DECLARATION OF TRUST OF THE TRUST, AS AMENDED FROM
TIME TO TIME, A COPY OF WHICH WILL BE SENT WITHOUT CHARGE TO EACH SHAREHOLDER
WHO SO REQUESTS. SUCH REQUEST MUST BE MADE TO THE SECRETARY OF THE TRUST AT ITS
PRINCIPAL OFFICE OR TO THE TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ____________________________________________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with the
right of survivorship and under Uniform Gifts to Minors Act
not as tenants in common ____________________________________________
(State)
UNIF TRF MIN ACT -- ____________________________________________
(Cust) (Minor)
(until age _____) under Uniform Transfers to Minors
Act
____________________________________________
(State)
</TABLE>
Additional abbreviations may be used though not in the above list.
For Value Received, _____________________________________ hereby sell,
assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_________________________________________
________________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute
and appoint ____________________________________________________________________
______________________________________________________________________ Attorney
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.
Dated __________________________
____________________________________________
NOTICE: The signature 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.
The securities represented by this certificate are subject to restrictions
on transfer for the purpose of the Trust's maintenance of its status as a REIT
under the Internal Revenue Code of 1986, as amended. Except as otherwise
provided pursuant to the Declaration of Trust of the Trust, as amended from time
to time, no Person may Beneficially Own Shares, more than (i) 9.8% of the
Company's issued and outstanding Shares, or (ii) 9.8% of the total value of such
Shares. Any Person who attempts or proposes to Beneficially Own Shares in
excess of the above limitations must notify the Trust in writing at least 15
days prior to such proposed or attempted Transfer. All capitalized terms in
this legend have the meanings defined in the Declaration of Trust of the Trust,
a copy of which, including the restrictions on transfer, will be sent without
charge to each shareholder who so requests. If the restrictions on transfer are
violated, the securities represented hereby shall be designated and treated as
Excess Shares which shall be held in trust by the Excess Share Trustee for the
benefit of the Charitable Beneficiary.
<PAGE>
EXHIBIT 3.5
SECOND
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CABOT INDUSTRIAL PROPERTIES, L.P.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I -- DEFINED TERMS........................................................... 1
"Act".............................................................................. 1
"Additional Limited Partner"....................................................... 2
"Adjusted Capital Account"......................................................... 2
"Adjusted Capital Account Deficit"................................................. 2
"Adjusted Property"................................................................ 2
"Affiliate"........................................................................ 2
"Agreed Value"..................................................................... 2
"Agreement"........................................................................ 3
"Assignee"......................................................................... 3
"Available Cash"................................................................... 3
"Bankruptcy"....................................................................... 3
"Book-Tax Disparities"............................................................. 4
"Business Day"..................................................................... 4
"Cabot Advisors"................................................................... 4
"Capital Account".................................................................. 4
"Capital Contribution"............................................................. 4
"Carrying Value"................................................................... 4
"Certificate"...................................................................... 5
"Code"............................................................................. 5
"Common Share Rights".............................................................. 5
"Common Shares".................................................................... 5
"Consent".......................................................................... 5
"Contributed Property"............................................................. 5
"Conversion Right"................................................................. 5
"Converting Partner"............................................................... 5
"Debt"............................................................................. 5
"Declaration of Trust"............................................................. 6
"Depreciation"..................................................................... 6
"Dispose of"....................................................................... 6
"Effective Date"................................................................... 6
"Events of Dissolution"............................................................ 6
"Exchange Act"..................................................................... 6
"General Partner".................................................................. 6
"General Partnership Interest"..................................................... 6
"IRS".............................................................................. 6
"Immediate Family"................................................................. 6
"Incapacity"....................................................................... 7
"Indemnitee"....................................................................... 7
"Initial Limited Partner".......................................................... 7
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
"Limited Partner".................................................................. 7
"Limited Partnership Interest"..................................................... 7
"Liquidating Transaction".......................................................... 7
"Liquidator"....................................................................... 7
"Lock-up".......................................................................... 7
"Lock-up Period"................................................................... 7
"Net Income"....................................................................... 7
"Net Loss"......................................................................... 8
"New Securities"................................................................... 8
"Nonrecourse Built-in Gain"........................................................ 8
"Nonrecourse Deductions"........................................................... 8
"Nonrecourse Liability"............................................................ 8
"Notice of Conversion"............................................................. 8
"Option Plans"..................................................................... 8
"Original Partnership Agreement"................................................... 8
"Partner".......................................................................... 8
"Partner Minimum Gain"............................................................. 8
"Partner Nonrecourse Debt"......................................................... 9
"Partner Nonrecourse Deductions"................................................... 9
"Partnership"...................................................................... 9
"Partnership Interest"............................................................. 9
"Partnership Minimum Gain"......................................................... 9
"Partnership Record Date".......................................................... 9
"Partnership Unit" or "Unit"....................................................... 9
"Partnership Year"................................................................. 9
"Percentage Interest".............................................................. 10
"Person"........................................................................... 10
"Recapture Income"................................................................. 10
"Redemption Amount"................................................................ 10
"Registration Rights and Lock-up Agreement"........................................ 10
"Regulations"...................................................................... 10
"REIT"............................................................................. 10
"Residual Gain" or "Residual Loss"................................................. 10
"704(c) Value"..................................................................... 10
"Shares"........................................................................... 11
"Specified Conversion Date"........................................................ 11
"Subsidiary"....................................................................... 11
"Substituted Limited Partner"...................................................... 11
"Transaction"...................................................................... 11
"Unit Adjustment Factor"........................................................... 11
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
"Unrealized Gain".................................................................. 11
"Unrealized Loss".................................................................. 12
"Valuation Date"................................................................... 12
"Value"............................................................................ 12
ARTICLE II -- ORGANIZATIONAL MATTERS................................................. 12
Section 2.1 Organization and Continuation; Application of Act...................... 12
(a) Organization and Continuation of Partnership.................... 12
(b) Application of Act.............................................. 13
Section 2.2 Name................................................................... 13
Section 2.3 Registered Office and Agent; Principal Office.......................... 13
Section 2.4 Withdrawal............................................................. 13
Section 2.5 Term................................................................... 13
ARTICLE III -- PURPOSE............................................................... 13
Section 3.1 Purpose and Business................................................... 13
Section 3.2 Powers................................................................. 14
ARTICLE IV -- CAPITAL CONTRIBUTIONS; ISSUANCE OF UNITS;
CAPITAL ACCOUNTS................................................................... 14
Section 4.1 Capital Contributions of the Partners.................................. 14
(a) Initial Capital Contributions................................... 14
(b) Additional Capital Contributions................................ 14
(c) Return of Capital Contributions................................. 15
(d) Liability of Limited Partners................................... 15
Section 4.2 Issuances of Additional Partnership Interests.......................... 15
(a) Issuance to Other Than the General Partner...................... 16
(b) Issuance to the General Partner................................. 16
(c) Issuance of Additional Common Shares............................ 17
(d) Issuance Pursuant to Option Plans............................... 17
(e) Conversion of Units............................................. 18
Section 4.3 No Preemptive Rights................................................... 19
Section 4.4 Capital Accounts of the Partners....................................... 19
(a) General......................................................... 19
(b) Income, Gains, Deductions and Losses............................ 20
(c) Transfers of Partnership Units.................................. 20
(d) Unrealized Gains and Losses..................................... 20
(e) Modification by General Partner................................. 21
ARTICLE V -- DISTRIBUTIONS........................................................... 22
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Section 5.1 Requirement and Characterization of Distributions...................... 22
Section 5.2 Amounts Withheld....................................................... 22
Section 5.3 Distributions Upon Liquidation......................................... 22
ARTICLE VI -- ALLOCATIONS............................................................ 22
Section 6.1 Allocations For Capital Account Purposes Other than
the Taxable Year of Liquidation........................................ 22
(a) Net Income...................................................... 23
(b) Net Losses...................................................... 23
(c) Nonrecourse Liabilities......................................... 23
(d) Gains........................................................... 23
Section 6.4 Special Allocation Rules............................................... 25
(a) Minimum Gain Chargeback......................................... 25
(b) Partner Minimum Gain Chargeback................................. 25
(c) Qualified Income Offset......................................... 26
(d) Nonrecourse Deductions.......................................... 26
(e) Partner Nonrecourse Deductions.................................. 26
(f) Code Section 754 Adjustments.................................... 26
Section 6.5 Allocations for Tax Purposes........................................... 26
(a) General......................................................... 26
(b) To Eliminate Book-Tax Disparities............................... 27
(c) Power of General Partner to Elect Method........................ 27
ARTICLE VII -- MANAGEMENT AND OPERATIONS OF BUSINESS................................. 27
Section 7.1 Management............................................................. 27
(a) Powers of General Partner....................................... 27
(b) No Approval Required for Above Powers........................... 30
(c) Insurance....................................................... 31
(d) Working Capital Reserves........................................ 31
(e) No Obligation to Consider Tax Consequences to
Limited Partners................................................ 31
(f) Loss of REOC Status............................................. 31
Section 7.2 Certificate of Limited Partnership..................................... 31
Section 7.3 Restrictions on General Partner's Authority............................ 31
Section 7.4 Responsibility for Expenses............................................ 32
(a) No Compensation................................................. 32
(b) Responsibility for Ownership and Operation Expenses............. 32
(c) Responsibility for Organization Expenses........................ 32
Section 7.5 Outside Activities of the General Partner.............................. 32
(a) General......................................................... 32
(b) Purchase of Common Shares....................................... 33
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
Section 7.6 Contracts with Affiliates.............................................. 33
(a) Loans........................................................... 33
(b) Transfers of Assets............................................. 33
(c) Contracts With General Partner.................................. 33
(d) Employee Benefit Plans.......................................... 34
(e) Conflict Avoidance Arrangements................................. 34
Section 7.7 Indemnification........................................................ 34
(a) General......................................................... 34
(b) In Advance of Final Disposition................................. 34
(c) Non-Exclusive Section........................................... 35
(d) Insurance....................................................... 35
(e) Employee Benefit Plans.......................................... 35
(f) No Personal Liability for Limited Partners...................... 35
(g) Interested Transactions......................................... 35
(h) Binding Effect.................................................. 35
Section 7.8 Liability of the General Partner....................................... 36
(a) General......................................................... 36
(b) No Obligation to Consider Interests of Limited Partners......... 36
(c) Acts of Agents.................................................. 36
(d) Effect of Amendment............................................. 36
(e) Limitation of Liability of Shareholders and Officers
of the General Partner.......................................... 36
Section 7.9 Other Matters Concerning the General Partner........................... 37
(a) Reliance on Documents........................................... 37
(b) Reliance on Consultants and Advisers............................ 37
(c) Action Through Officers and Attorneys........................... 37
(d) Actions to Maintain REIT Status or Avoid Taxation
of General Partner............................................. 37
Section 7.10 Title to Partnership Assets............................................ 37
Section 7.11 Reliance by Third Parties.............................................. 38
Section 7.12 UBTI................................................................... 38
ARTICLE VIII -- RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS........................... 38
Section 8.1 Limitation of Liability................................................ 38
Section 8.2 Management of Business................................................. 38
Section 8.3 Outside Activities of Limited Partners................................. 39
Section 8.4 Priority Among Limited Partners........................................ 39
Section 8.5 Rights of Limited Partners Relating to the Partnership................. 40
(a) Copies of Business Records...................................... 40
(b) Notification of Changes in Unit Adjustment Factor............... 40
(c) Confidential Information........................................ 40
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
(d) Debt Allocation................................................. 40
Section 8.6 Redemption Right....................................................... 41
(a) General......................................................... 41
(b) Where Delivery of Common Shares Prohibited...................... 41
Section 8.7 Notice for Certain Transactions........................................ 41
ARTICLE IX -- BOOKS, RECORDS, ACCOUNTING AND REPORTS................................. 41
Section 9.1 Records and Accounting................................................. 41
Section 9.2 Fiscal Year............................................................ 42
Section 9.3 Reports................................................................ 42
(a) Annual Reports.................................................. 42
(b) Quarterly Reports............................................... 42
ARTICLE X -- TAX MATTERS............................................................. 42
Section 10.1 Preparation of Tax Returns............................................. 42
Section 10.2 Tax Elections.......................................................... 43
Section 10.3 Tax Matters Partner.................................................... 43
(a) General......................................................... 43
(b) Powers.......................................................... 43
(c) Reimbursement................................................... 44
Section 10.4 Organizational Expenses................................................ 44
Section 10.5 Withholding............................................................ 44
ARTICLE XI -- TRANSFERS, WITHDRAWALS................................................. 45
Section 11.1 Transfer............................................................... 45
(a) Definition...................................................... 45
(b) Requirements.................................................... 45
Section 11.2 Transfer of General Partner's Partnership Interest..................... 46
(a) General......................................................... 46
(b) Transfer to Partnership or Holder of Common Shares.............. 46
(c) Transfer in Connection With Reclassification,
Recapitalization, or Business Combination Involving
General Partner................................................. 46
(d) Merger Involving General Partner Where Surviving
Entity's Assets Contributed to Partnership...................... 46
Section 11.3 Limited Partners' Rights to Transfer................................... 47
(a) General......................................................... 47
(b) Incapacitated Limited Partners.................................. 47
(c) Transfers Contrary to Securities Laws........................... 47
(d) Transfers Resulting in Corporation Status; Transfers
Through Established Securities or Secondary Markets............. 47
(e) Transfers to Holders of Nonrecourse Liabilities................. 49
</TABLE>
vi
<PAGE>
<TABLE>
<S> <C>
Section 11.4 Substituted Limited Partners........................................... 49
(a) Consent of General Partner Required............................. 49
(b) Rights and Duties of Substituted Limited Partners............... 49
(c) Amendment of Exhibit A.......................................... 50
Section 11.5 Assignees.............................................................. 50
Section 11.6 General Provisions..................................................... 50
(a) Withdrawal of Limited Partner................................... 50
(b) Transfer of All Partnership Units by Limited Partner............ 50
(c) Timing of Transfers............................................. 50
(d) Allocation When Transfer Occurs................................. 50
Section 11.7 Lock-up Agreement...................................................... 51
(a) Lock-up Period.................................................. 51
(b) Exceptions...................................................... 51
ARTICLE XII -- ADMISSION OF PARTNERS................................................. 52
Section 12.1 Admission of Successor General Partner................................. 52
Section 12.2 Admission of Additional Limited Partners............................... 53
(a) General......................................................... 53
(b) Consent of General Partner Required............................. 53
Section 12.3 Amendment of Agreement and Certificate................................. 53
ARTICLE XIII -- DISSOLUTION AND LIQUIDATION.......................................... 53
Section 13.1 Dissolution............................................................ 53
(a) Expiration of Term.............................................. 53
(b) Withdrawal of General Partner................................... 53
(c) Dissolution Prior to 2097....................................... 53
(d) Judicial Dissolution Decree..................................... 54
(e) Sale of Partnership's Assets.................................... 54
(f) Merger.......................................................... 54
(g) Bankruptcy or Insolvency of General Partner..................... 54
(h) Readjustment, etc............................................... 54
Section 13.2 Winding Up............................................................. 55
(a) General......................................................... 55
(b) Where Immediate Sale of Partnership's Assets Impractical........ 55
Section 13.3 Compliance with Timing Requirements of Regulations;
Allowance for Contingent or Unforeseen Liabilities
or Obligations......................................................... 56
(a) Liquidation..................................................... 56
(b) Deficit Balance of General Partner.............................. 56
Section 13.4 Deemed Distribution and Recontribution................................. 57
Section 13.5 Rights of Limited Partners............................................. 57
Section 13.6 Notice of Dissolution.................................................. 57
</TABLE>
vii
<PAGE>
<TABLE>
<S> <C>
Section 13.7 Cancellation of Certificate of Limited Partnership..................... 57
Section 13.8 Reasonable Time for Winding-Up......................................... 57
ARTICLE XIV -- AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS.......................... 58
Section 14.1 Amendments............................................................. 58
(a) General......................................................... 58
(b) General Partner's Power to Amend................................ 58
(c) Consent of Adversely Affected Partner Required.................. 59
(d) When Consent of Majority of Limited Partnership
Interests Required.............................................. 59
Section 14.2 Meetings of the Partners............................................... 59
(a) General......................................................... 59
(b) Informal Action................................................. 59
(c) Proxies......................................................... 60
(d) Conduct of Meeting.............................................. 60
ARTICLE XV -- GENERAL PROVISIONS..................................................... 60
Section 15.1 Addresses and Notice................................................... 60
Section 15.2 Titles and Captions.................................................... 60
Section 15.3 Pronouns and Plurals................................................... 61
Section 15.4 Further Action......................................................... 61
Section 15.5 Binding Effect......................................................... 61
Section 15.6 Waiver of Partition.................................................... 61
Section 15.7 Entire Agreement....................................................... 61
Section 15.8 Securities Law Provisions.............................................. 61
Section 15.9 Remedies Not Exclusive................................................. 61
Section 15.10 Time................................................................... 61
Section 15.11 Creditors.............................................................. 61
Section 15.12 Waiver................................................................. 61
Section 15.13 Execution Counterparts................................................. 62
Section 15.14 Applicable Law......................................................... 62
Section 15.15 Invalidity of Provisions............................................... 62
ARTICLE XVI -- POWER OF ATTORNEY..................................................... 62
Section 16.1 Power of Attorney...................................................... 62
(a) Scope........................................................... 62
(b) Irrevocability.................................................. 63
EXHIBIT A -- PARTNERS, CONTRIBUTIONS AND PARTNERSHIP INTERESTS........................ 1
</TABLE>
viii
<PAGE>
<TABLE>
<S> <C>
EXHIBIT B -- VALUE OF CONTRIBUTED PROPERTY........................................... 2
EXHIBIT C -- NOTICE OF CONVERSION.................................................... 1
EXHIBIT D -- FORM OF UNIT CERTIFICATE................................................ 1
</TABLE>
ix
<PAGE>
SECOND
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CABOT INDUSTRIAL PROPERTIES, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as of
February __, 1998, of Cabot Industrial Properties, L.P. (the "Partnership") is
-----------
entered into by and among Cabot Industrial Trust, a Maryland real estate
investment trust, as General Partner (the "General Partner") and the Persons (as
---------------
defined herein) identified as "Limited Partners" on Exhibit A, as the Limited
----------------
Partners (as defined herein), together with any other Persons who become
Partners (as defined herein) in the Partnership as provided herein;
WHEREAS, the Partnership was formed by the filing of a certificate of
limited partnership with the Secretary of State of the State of Delaware on
October 10, 1997 by the General Partner;
WHEREAS, the General Partner and the Initial Limited Partner (as defined
herein) entered into an Agreement of Limited Partnership on October 10, 1997, as
then amended by the Amended and Restated Agreement of Limited Partnership dated
as of October 10, 1997 (collectively, the "Original Partnership Agreement") for
the formation of the Partnership under the Revised Uniform Limited Partnership
Act of the State of Delaware; and
WHEREAS, the Partners desire (i) to ratify the formation of, and provide
for the continuation of, the Partnership, (ii) to effectuate the introduction of
the Limited Partners into the Partnership (and the withdrawal of the Initial
Limited Partner) and (iii) to set forth their respective rights and duties
relating to the Partnership on the amended and restated terms as provided
herein,
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein made and intending to be legally bound, the parties hereby agree as
follows (such agreement to supersede, amend and restate the Original Partnership
Agreement it its entirety, effective as of the Effective Date (as defined
herein)):
ARTICLE I
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.
1
<PAGE>
"Additional Limited Partner" means a Person admitted to the
--------------------------
Partnership as a Limited Partner pursuant to Section 4.2 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 Year (a) 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 (b)
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 Year.
"Adjusted Property" means any property the Carrying Value of which
-----------------
has been adjusted pursuant to Section 4.4.
-----------
"Affiliate" means, with respect to any Person, (a) any Person directly
---------
or indirectly controlling, controlled by or under common control with such
Person, (b) any Person directly or indirectly owning or controlling 10 percent
or more of the outstanding voting interests of such Person, (c) any Person as to
which such Person directly or indirectly owns or controls 10 percent or more of
the voting interests, or (d) any officer, director, general partner or trustee
of such Person or any Person referred to in clauses (a), (b) and (c) above. As
used herein "control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agreed Value" means (a) in the case of any Contributed Property set
------------
forth on Exhibit B and as of the time of its contribution to the Partnership,
the Agreed Value of such property as set forth on Exhibit B; (b) in the case of
any Contributed Property not set forth on Exhibit B and as of the time of its
contribution to the Partnership, the 704(c) Value of such property or other
consideration, reduced by any liabilities either assumed by the Partnership upon
such contribution or to which such property is subject when contributed, and (c)
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.
2
<PAGE>
"Agreement" means this Amended and Restated Agreement of Limited
---------
Partnership and all Exhibits attached hereto, as the same may be amended,
supplemented or restated from time to time.
"Assignee" means a Person to whom one or more Partnership Units have
--------
been transferred but who has not been admitted as 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, (a) all cash revenues and funds received by the
Partnership from whatever source (excluding the proceeds of any Capital
Contribution to the Partnership pursuant to Section 4.1) plus the amount of any
-----------
reduction (including, without limitation, a reduction resulting because the
General Partner determines such amounts are no longer necessary) in reserves of
the Partnership, which reserves are referred to in clause (b)(iv) below;
(b) less the sum of the following (except to the extent made with the
proceeds of any Capital Contribution):
(i) all interest, principal and other debt payments made during
such period by the Partnership,
(ii) all cash expenditures (including capital expenditures) made
by the Partnership during such period,
(iii) investments in any entity (including loans made thereto)
to the extent that such investments are not otherwise described in clauses
(b)(i) or (ii), and
(iv) the amount of any increase in reserves established during
such period which the General Partner determines are 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.
"Bankruptcy" as to any Person, shall be deemed to have occurred when
----------
(i) such Person commences a voluntary proceeding seeking liquidation,
reorganization or other relief under any bankruptcy, insolvency or other similar
law now or hereafter in effect, (ii) such Person 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
such Person, (iii) such Person executes and delivers a general assignment for
the benefit of such Person's creditors, (iv) such Person files an answer or
other pleading admitting or failing to contest the
3
<PAGE>
material allegations of a petition filed against such Person in any proceeding
of the nature described in clause (ii) above, (v) such Person seeks, consents to
or acquiesces in the appointment of a trustee, receiver or liquidator for such
Person or for all or any substantial part of such Person's properties, (vi) any
proceeding seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law now or hereafter in effect has not
been dismissed within 120 days after the commencement thereof, (vii) the
appointment without such Person's consent or acquiescence of a trustee, receiver
or liquidator has not been vacated or stayed within 90 days of such appointment,
or (viii) an appointment referred to in clause (vii) is not vacated within 90
days after the expiration of any such stay.
"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 Section 4.4 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 City are authorized or required by law to
close.
"Cabot Advisors" means Cabot Advisors, Inc., a Delaware corporation,
--------------
of which the Partnership owns all of the outstanding preferred stock.
"Capital Account" means the capital account maintained by the
---------------
Partnership for each Partner pursuant to Section 4.4.
-----------
"Capital Contribution" means, with respect to each Partner, the total
--------------------
amount of cash, cash equivalents and the Agreed Value of Contributed Property
which such Partner contributes or is deemed to contribute to the Partnership
pursuant to Section 4.1 or 4.2.
----------- ---
"Carrying Value" means (a) 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 Property charged to the Partners'
Capital Accounts and (b) 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 Section 4.4(d), 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.
4
<PAGE>
"Certificate" means the Certificate of Limited Partnership relating to
-----------
the Partnership filed in the office of the Secretary of State of the State of
Delaware, 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. 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.
"Common Share Rights" has the meaning set forth in Section 4.2(e).
------------------- --------------
"Common Shares" means the common shares of beneficial interest, $.01
-------------
par value per share, of the General Partner.
"Consent" means the consent or approval of a proposed action by a
-------
Partner given in accordance with Section 14.1.
------------
"Contributed Property" means each property or other asset (but
--------------------
excluding cash and cash equivalents), in such form as may be permitted by the
Act contributed or deemed contributed to the Partnership. Once the Carrying
Value of a Contributed Property is adjusted pursuant to Section 4.4, such
-----------
property shall no longer constitute a Contributed Property, but shall be deemed
an Adjusted Property for purposes of Section 4.4.
-----------
"Conversion Right" has the meaning set forth in Section 4.2(e)(1).
---------------- -----------------
"Converting Partner" has the meaning set forth in Section 4.2(e)(1).
------------------ -----------------
"Debt" means, as to any Person, as of any date of determination, (a)
----
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, which purchase price is due more than six months
after the date of placing such property in service or taking delivery and title
thereto or the completion of such services, (b) all amounts owed by such Person
to banks or other Persons in respect of reimbursement obligations under letters
of credit, surety bonds and other similar instruments guaranteeing payment or
other performance of obligations by such Person, (c) all indebtedness for
borrowed money or for the deferred purchase price of property or services
secured by any lien on any property owned by such Person, to the extent
attributable to such Person's interest in such property, even though such Person
has not assumed or become liable for the payment thereof, (d) lease obligations
of such Person which, in accordance with generally accepted accounting
principles, should be capitalized and (e) all guarantees and other contingent
obligations of such Person with respect to Debt of others.
5
<PAGE>
"Declaration of Trust" means the Declaration of Trust of the General
--------------------
Partner filed with the Office of Assessments and Taxation of the State of
Maryland on October 10, 1997, as the same may be amended, supplemented or
restated from time to time.
"Depreciation" means for each fiscal year or other period, an amount
------------
equal to the Federal income tax depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
period, 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 or other period 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.
"Dispose of" has the meaning set forth in Section 11.7(a).
---------- ---------------
"Effective Date" means the date of closing of the sale of Common
--------------
Shares pursuant to that certain Underwriting Agreement among the General Partner
and J.P. Morgan, Inc., as representative of the other underwriters participating
in the initial public offering of the General Partner's Common Shares.
"Events of Dissolution" has the meaning set forth in Section 13.1.
--------------------- ------------
"Exchange Act" has the meaning set forth in Section 4.2(e).
------------ --------------
"General Partner" means Cabot Industrial Trust, a Maryland real estate
---------------
investment trust, and its successors as a general partner of the Partnership in
accordance with the terms of this Agreement.
"General Partnership Interest" means a Partnership Interest held by
----------------------------
the General Partner that is a general partnership interest and includes any and
all benefits to which the General Partner may be entitled and all obligations of
the General Partner hereunder. A General Partnership Interest may be expressed
as a number of Partnership Units.
"IRS" means the Internal Revenue Service, which is charged with
---
administering the internal revenue laws of the United States.
"Immediate Family" means, with respect to any natural Person, such
----------------
natural Person's spouse, parents, descendants, nephews, nieces, brothers, and
sisters.
6
<PAGE>
"Incapacity" or "Incapacitated" means, (a) as to any individual
---------- -------------
Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating him incompetent to manage his Person or his estate,
(b) 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, (c) as to any partnership which is a Partner, the dissolution and
commencement of winding up of the partnership's affairs, (d) as to any estate
which is a Partner, the distribution by the fiduciary of the estate's entire
interest in the Partnership, (e) as to any trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee), or (f) as
to any Partner, the Bankruptcy of such Partner.
"Indemnitee" means (a) any Person made a party to a proceeding by
----------
reason of his status as (i) the General Partner (including as a guarantor of any
Partnership Debt) or (ii) an officer of the Partnership or a trustee or officer
of the General Partner, and (b) such other Persons (including Affiliates of the
General Partner or the Partnership) as the General Partner may designate from
time to time, in its sole and absolute discretion.
"Initial Limited Partner" means Ferdinand Colloredo-Mansfeld.
-----------------------
"Limited Partner" means any Person named as a Limited Partner on
---------------
Exhibit A, as such Exhibit may be amended from time to time, including any
Substituted Limited Partner or Additional Limited Partner, in such Person's
capacity as a Limited Partner in the Partnership.
"Limited Partnership Interest" means a Partnership Interest held by a
----------------------------
Limited Partner representing a fractional part of the Partnership Interests of
all Limited Partners and includes any and all benefits to which such Limited
Partner may be entitled and all obligations of such Limited Partner hereunder.
A Limited Partnership Interest may be expressed as a number of Partnership
Units.
"Liquidating 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, results in the sale or other disposition of
all or substantially all of the assets of the Partnership.
"Liquidator" has the meaning set forth in Section 13.2.
---------- ------------
"Lock-up" has the meaning set forth in Section 11.7(a).
------- ---------------
"Lock-up Period" has the meaning set forth in Section 11.7(a).
-------------- ---------------
"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
7
<PAGE>
in accordance with Section 4.4. Once an item of income, gain, loss or deduction
-----------
that has been included in the initial computation of Net Income is subjected to
the special allocation rules in Sections 6.4 and 6.5, Net Income or the
------------ ---
resulting Net Loss, whichever the case may be, shall be recomputed without
regard to such item.
"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
Section 4.4. Once an item of income, gain, loss or deduction that has been
- -----------
included in the initial computation of Net Loss is subjected to the special
allocation rules in Sections 6.4 and 6.5, Net Loss or the resulting Net Income,
------------ ---
whichever the case may be, shall be recomputed without regard to such item.
"New Securities" has the meaning set forth in Section 4.2(c).
-------------- --------------
"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 6.5(b) 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 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 Conversion" means a Notice of Conversion substantially in
--------------------
the form of Exhibit C.
"Option Plans" means the option plans for Common Shares or Units, as
------------
the case may be, restricted share plans or employee benefit plans established
by, or for the benefit of the employees of, the General Partner, the Partnership
or Cabot Advisors or any other Subsidiary.
"Original Partnership Agreement" has the meaning set forth in the
------------------------------
recitals hereto.
"Partner" means individually, the General Partner or a Limited
-------
Partner, and "Partners" means collectively, the General Partner and the Limited
--------
Partners.
8
<PAGE>
"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).
"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 Year
shall be determined in accordance with the rules of Regulations Section 1.704-
2(i)(2).
"Partnership" means Cabot Industrial Properties, L.P., the limited
-----------
partnership formed under the Act and pursuant to this Agreement, 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 Partnership Minimum Gain, for a Partnership 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 General Partner for a distribution to its shareholders of some or all of its
portion of such distribution, and also means any record date established by the
General Partner in connection with any vote or consent of the Limited Partners
pursuant to this Agreement.
"Partnership Unit" or "Unit" means a fractional, undivided share of
---------------- ----
the Partnership Interests of all Partners issued pursuant to Sections 4.1 and
------------
4.2, in such number as set forth on Exhibit A, as such Exhibit may be amended
- ---
from time to time. The ownership of Partnership Units may be evidenced by the
form of non-transferable, non-negotiable certificate for units substantially in
the form of Exhibit D.
9
<PAGE>
"Partnership Year" means the fiscal year of the Partnership, which
----------------
shall be the calendar year.
"Percentage Interest" means, as to any 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 on Exhibit A, 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.
"Qualified Organization" means any "qualified organization" within the
----------------------
meaning of Section 514(c)(9)(C) of the Code.
"Recapture Income" means any gain recognized by the Partnership
----------------
(computed without regard to any adjustment required by Section 734 or Section
743 of the Code) 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.
"Redemption Amount" means an amount of cash per Partnership Unit equal
-----------------
to the Value on the Valuation Date of the Common Shares that the Partner being
redeemed would have been entitled to receive under Section 4.2(e).
--------------
"Registration Rights and Lock-up Agreement" means that certain
-----------------------------------------
Registration Rights and Lock-up Agreement dated as of the date hereof among the
General Partner and the Persons identified as "Holders" on the signature pages
thereto.
"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 as defined under Section
----
856 of the Code.
"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 6.5(b)(1)(i) or 6.5(b)(2)(i) to eliminate Book-Tax
-------------------- ------------
Disparities.
10
<PAGE>
"704(c) Value" of any Contributed Property means the value of such
------------
property as set forth on Exhibit B, or if no value is set forth on Exhibit B,
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. Subject to Section 4.4, the General Partner shall
-----------
use such method as it deems reasonable and appropriate to allocate the aggregate
of the 704(c) Value of Contributed Properties among each separate property on a
basis proportional to its fair market value.
"Shares" means any Common Shares issued to a Limited Partner upon
------
conversion of its Units pursuant to Section 4.2(e).
--------------
"Specified Conversion Date" means the tenth Business Day after receipt
-------------------------
by the General Partner of a Notice of Conversion; provided, however, that no
-------- -------
Specified Conversion Date shall occur before one year from the date of this
Agreement without the consent of the General Partner except as provided in
Section 4.2(e).
- --------------
"Subsidiary" means, with respect to any Person, any corporation or
----------
other entity of which a majority of (a) the voting power of the voting equity
securities or (b) the outstanding equity interests is owned, directly or
indirectly, by such Person. With respect to the General Partner and the
Partnership, "Subsidiary" shall include (without limitation) Cabot Advisors.
"Substituted Limited Partner" means a Person who is admitted as a
---------------------------
Limited Partner to the Partnership pursuant to Section 11.4.
------------
"Transaction" has the meaning set forth in Section 11.2(c).
----------- ---------------
"Unit Adjustment Factor" means the factor applied for converting
----------------------
Partnership Units to Common Shares, which shall initially be 1.0; provided,
--------
however, that in the event that the General Partner (a) declares or pays a
- -------
dividend on its outstanding Common Shares in Common Shares or makes a
distribution to all holders of its outstanding Common Shares in Common Shares,
(b) subdivides its outstanding Common Shares, or (c) combines its outstanding
Common Shares into a smaller number of Common Shares, the Unit Adjustment Factor
shall be adjusted by multiplying the Unit Adjustment Factor by a fraction, the
numerator of which shall be the number of Common Shares issued and outstanding
on the record date (assuming for such purposes that such dividend, distribution,
subdivision or combination has occurred as of such time), and the denominator of
which shall be the actual number of Common Shares (determined without the above
assumption) issued and outstanding on the record date for such dividend,
distribution, subdivision or combination. Any adjustment to the Unit Adjustment
Factor shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
11
<PAGE>
"Unrealized Gain" attributable to any item of Partnership property
---------------
means, as of any date of determination, the excess, if any, of (a) the fair
market value of such property (as determined under Section 4.4) as of such date,
-----------
over (b) the Carrying Value of such property (prior to any adjustment to be made
pursuant to Section 4.4) 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 (a) the Carrying
Value of such property (prior to any adjustment to be made pursuant to Section
-------
4.4) as of such date, over (b) the fair market value of such property (as
- ---
determined under Section 4.4) as of such date.
-----------
"Valuation Date" means the date of receipt by the General Partner of a
--------------
Notice of Conversion or, if such date is not a Business Day, the first Business
Day thereafter.
"Value" means, with respect to a Common 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: (a) if the Common Shares are listed or admitted to trading on any securities
exchange or the NASDAQ-National Market System, the closing price, regular way,
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; (b) if the Common 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
(c) if the Common 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 10 days prior to the date in
question) for which prices have been so reported; provided, however, that if
-------- -------
there are no bid and asked prices reported during the 10 days prior to the date
in question, the Value of the Common 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 a holder of Common Shares would be entitled to receive Common Share
Rights, then the Value of such Common Share 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.
12
<PAGE>
ARTICLE II
ORGANIZATIONAL MATTERS
Section 2.1 Organization and Continuation; Application of Act.
-------------------------------------------------
(a) Organization and Continuation of Partnership. The General
--------------------------------------------
Partner and the Limited Partners do hereby continue, and ratify the
formation of, the Partnership as a limited partnership according to all of
the terms and provisions of this Agreement and otherwise in accordance with
the Act. The General Partner is the sole general partner of the
Partnership.
(b) Application of Act. The Partnership is a limited partnership
------------------
subject to the provisions of the Act and 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. No Partner has
any interest in any Partnership property, and the Partnership Interest of
each Partner shall be personal property for all purposes.
Section 2.2 Name. The name of the Partnership is Cabot Industrial
----
Properties, L.P. 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 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; provided, however, that the name
-------- -------
of the Partnership may not be changed to include the name of any Limited Partner
without the written consent of that Limited Partner.
Section 2.3 Registered Office and Agent; Principal Office. The address of
---------------------------------------------
the registered office of the Partnership in the State of Delaware is located c/o
Corporation Service Company, 1013 Centre Road, Wilmington, Delaware 19805-1297,
and the registered agent for service of process on the Partnership in the State
of Delaware at such registered office is the Corporation Service Company. The
principal office of the Partnership is located at Two Center Plaza, Suite 200,
Boston, Massachusetts 02108, 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 Withdrawal. The Initial Limited Partner hereby withdraws
----------
from the Partnership.
13
<PAGE>
Section 2.5 Term. The term of the Partnership commenced, and shall
----
continue until December 31, 2097 unless it is dissolved sooner pursuant to the
provisions of Article XIII or as otherwise provided by law.
ARTICLE III
PURPOSE
Section 3.1 Purpose and Business. The purpose and nature of the business
--------------------
to be conducted by the Partnership is (a) to conduct any business that may be
lawfully conducted by a limited partnership organized pursuant to the Act, (b)
to enter into any partnership, joint venture or other similar arrangement to
engage in any of the foregoing or the ownership of interests in any entity
engaged in any of the foregoing and (c) to do anything necessary or incidental
to the foregoing; provided, however, that each of the foregoing clauses (a), (b)
-------- -------
and (c) shall be limited and conducted in such a manner as to permit the General
Partner at all times to be classified as a REIT, unless the General Partner
provides notice to the Partnership that it intends to cease or has ceased to
qualify as a REIT and provided further, however, that each of the foregoing
-------- ------- -------
clauses (a), (b) and (c) shall be limited and conducted in such a manner as to
permit the Partnership to qualify as a real estate operating company under U.S.
Department of Labor Regulation Section 29 C.F.R. 2510.3-101(e) unless the
General Partner has obtained an opinion of counsel that the Partnership is
otherwise deemed not to hold "plan assets" under U.S. Department of Labor
Regulation Section 29 C.F.R. 2510.3-101.
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;
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, (a) could adversely affect the ability of the General
Partner to continue to qualify as a REIT, (b) could subject the General Partner
to any additional taxes under Section 857 or Section 4981 of the Code, or (c)
could violate any law or regulation of any governmental body or agency having
jurisdiction over the General Partner or its securities, unless such action (or
inaction) shall have been specifically consented to by the General Partner in
writing.
ARTICLE IV
CAPITAL CONTRIBUTIONS; ISSUANCE OF UNITS;
CAPITAL ACCOUNTS
Section 4.1 Capital Contributions of the Partners.
-------------------------------------
(a) Initial Capital Contributions. At the time of the execution of
-----------------------------
this Agreement, the Partners shall make or shall have made the Capital
Contributions set forth in Exhibit A
14
<PAGE>
to this Agreement, provided that the Initial Limited Partner does hereby
--------
withdraw as the Initial Limited Partner upon the execution of this
Agreement. The Partners shall own Partnership Units in the amounts set
forth on Exhibit A and shall have a Percentage Interest in the Partnership
as set forth on Exhibit A, which Percentage Interest shall be adjusted on
Exhibit A from time to time by the General Partner to the extent necessary
to reflect accurately redemptions, conversions, Capital Contributions, the
issuance of additional Partnership Units, or similar events having an
effect on a Partner's Percentage Interest. The Partnership Units held by
the General Partner shall at all times be deemed to be General Partner
units and shall constitute the General Partnership Interest.
(b) Additional Capital Contributions.
--------------------------------
(1) No Partner shall be assessed or, except as provided for in
Sections 4.1(b)(2) and 13.3(b) below and except for any such amounts
-------- --------- -------
which a Limited Partner may be obligated to repay under Section 10.5,
------------
be required to contribute additional funds or other property to the
Partnership. Any additional funds or other property required by the
Partnership, as determined by the General Partner in its sole
discretion, may, at the option of the General Partner and without an
obligation to do so (except as provided for in Section 4.1(b)(2) and
-----------------
Section 13.3(b) below), be contributed by the General Partner as
---------------
additional Capital Contributions. If and as the General Partner or
any other Partner makes additional Capital Contributions to the
Partnership, each such Partner shall receive additional Partnership
Units as provided for in Section 4.2.
-----------
(2) Except to the extent provided in Section 7.5 below relating
-----------
to interests in Partnership properties held directly by the
Partnership or through Subsidiaries, the net proceeds of any and all
funds raised by or through the General Partner through the issuance of
additional shares of the General Partner (whether Common Shares or
preferred shares) shall be contributed to the Partnership as
additional Capital Contributions, and in such event the General
Partner shall be issued additional Partnership Units pursuant to
Section 4.2 below.
-----------
(c) Return of Capital Contributions. Except as otherwise expressly
-------------------------------
provided herein, the Capital Contribution of each Limited Partner will be
returned to that Partner only in the manner and to the extent provided in
Article V and Article XIII hereof, and no Partner may withdraw from the
Partnership or otherwise have any right to demand or receive the return of
its Capital Contribution to the Partnership (as such), except as
specifically provided herein. Under circumstances requiring a return of
any Capital Contribution, no Partner shall have the right to receive
property other than cash, except as specifically provided herein. No
Partner shall be entitled to interest on any Capital Contribution or
Capital Account notwithstanding any disproportion therein as between the
Partners. Except as specifically
15
<PAGE>
provided herein, the General Partner shall not be liable for the return of
any portion of the Capital Contribution of any Limited Partner, and the
return of such Capital Contributions shall be made solely from Partnership
assets.
(d) Liability of Limited Partners. No Limited Partner shall have any
-----------------------------
further personal liability to contribute money to, or in respect of, the
liabilities or the obligations of the Partnership, nor shall any Limited
Partner be personally liable for any obligations of the Partnership, except
as otherwise provided in this Article IV or in the Act. No Limited Partner
shall be required to make any contributions to the capital of the
Partnership other than its Capital Contribution.
Section 4.2 Issuances of Additional Partnership Interests.
---------------------------------------------
(a) Issuance to Other Than the General Partner. The General Partner
------------------------------------------
is hereby authorized to cause the Partnership to issue such additional
Partnership Interests in the form of Partnership Units for any Partnership
purpose at any time or from time to time, to the Partners (other than
issuances to the General Partner, which issuances are governed by Section
4.2(b)) or to other Persons for such consideration and on such terms and
conditions as shall be established by the General Partner in its sole and
absolute discretion, all without the approval of any Limited Partners
except to the extent provided herein; provided, however, that the
-------- -------
Partnership also may from time to time issue to third parties additional
Partnership Interests (other than any such issuance to the General Partner
which is governed by Sections 4.2(b) and 4.2(c)) 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 Limited
Partnership Interests, subject to Delaware law, including, without
limitation, with respect to (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 further however,
------------------------
that any issuance of any classes as provided in the foregoing proviso, made
or authorized to be made prior to the first anniversary of the Effective
Date shall be permitted only with the Consent of the Limited Partners
holding a majority of the Percentage Interests of the Limited Partners.
(b) Issuance to the General Partner. The Partnership also may from
-------------------------------
time to time issue to the General Partner 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 Limited Partnership
Interests, all as shall be determined by the General Partner, subject to
Delaware law, including, without limitation,
16
<PAGE>
with respect to (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, however, that (x) the additional
-------- -------
Partnership Interests are issued in connection with an issuance of shares
of the General Partner, which shares have designations, preferences and
other rights, all such that the economic 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(b), and (y) the General Partner shall make a Capital
--------------
Contribution to the Partnership (1) in an amount equal to the net proceeds
raised in connection with the issuance of such shares of the General
Partner in the event such shares are sold for cash or cash equivalents or
(2) in the form of the property received in consideration for such shares,
in the event such shares are issued in consideration for other property.
(c) Issuance of Additional Common Shares. The General Partner is
------------------------------------
explicitly authorized to issue additional Common Shares or preferred Shares
of Beneficial Interest of the General Partner, or rights, options, warrants
or convertible or exchangeable securities containing the right to subscribe
for or purchase Common Shares ("New Securities") and in connection
--------------
therewith, as further provided in Section 4.2(b), (i) the General Partner
--------------
shall cause the Partnership to issue to the General Partner Partnership
Interests or rights, options, warrants or convertible or exchangeable
securities of the 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 General Partner shall contribute
the net proceeds from, or the property received in consideration for, the
issuance of such New Securities and from the exercise of rights contained
in such New Securities to the Partnership. In connection with the issuance
of Partnership Interests which are substantially similar to New Securities,
the General Partner is authorized to modify or amend the distributions or
allocations hereunder solely to the extent necessary to give effect to the
designations, preferences and other rights pertaining to such Partnership
Interests.
(d) Issuance Pursuant to Option Plans.
---------------------------------
(1) Upon the exercise of an option granted by the General
Partner for Common Shares, the General Partner shall cause the
Partnership to issue to the General Partner one Partnership Unit for
each Common Share acquired upon such exercise pursuant to the Option
Plans, and the General Partner shall contribute to the Partnership the
net proceeds received upon such exercise (it being understood that the
General Partner may issue Common Shares in connection with the Option
Plans without receiving a specified amount of proceeds and that the
issuance of such
17
<PAGE>
Common Shares shall nonetheless entitle the General Partner to
additional Partnership Units).
(2) The General Partner shall cause the Partnership to issue
Partnership Units to employees of the Partnership upon the exercise by
any such employees of an option to acquire Partnership Units granted
by the Partnership pursuant to the Option Plans in accordance with the
terms of the Option Plans. Partnership Units so issued shall
represent Limited Partnership Interests.
(3) The General Partner shall cause the Partnership to issue
Partnership Units to any Subsidiary upon the exercise by an employee
of such Subsidiary of an option to acquire Partnership Units granted
by such Subsidiary pursuant to the Option Plans, and such Subsidiary
shall transfer to the Partnership the price per Partnership Unit
required by the Option Plans to be paid by Subsidiaries. Partnership
Units issued to any such Subsidiary shall represent Limited
Partnership Interests.
(e) Conversion of Units.
-------------------
(1) Subject to the further provisions of this Section 4.2(e) and
--------------
the provisions of Sections 8.6 and 11.7, beginning one year after the
------------ ----
Effective Date or earlier with the written consent of the General
Partner (except as otherwise contractually restricted), the General
Partner hereby grants to each Limited Partner the right (the
"Conversion Right") to exchange any or all of the Partnership Units
-----------------
held by that Partner for Common Shares, with one Partnership Unit
being exchangeable for one Common Share; provided, however, that in
-------- -------
the event the General Partner issues to all holders of Common Shares
rights, options, warrants or convertible or exchangeable securities
entitling the shareholders to subscribe for or purchase Common Shares,
or any other securities or property (collectively, the "Common Share
------------
Rights") then (except to the extent such rights have already been
------
reflected in an adjustment to the Unit Adjustment Factor as provided
in Section 4.2(e)(2) below) the Converting Partner shall also be
-----------------
entitled to receive such Common Share Rights that a holder of that
number of Common Shares would be entitled to receive. The Conversion
Right may be exercised by a Limited Partner (a "Converting Partner")
------------------
at any time beginning one year after the Effective Date (or earlier
upon the written consent of the General Partner) and from time to time
by delivering a Notice of Conversion to the General Partner not less
than ten (10) days prior to such exchange. The General Partner shall
at all times reserve and keep available out of its authorized but
unissued Common Shares, solely for the purpose of effecting the
exchange of Partnership Units for Common Shares, such number of Common
Shares as shall from time to time be sufficient to effect the
conversion of all outstanding Partnership Units not owned by the
General Partner. No Limited
18
<PAGE>
Partner shall, solely by virtue of being the holder of one or more
Partnership Units, be deemed to be a shareholder of or have any other
interest in the General Partner.
(2) In the event of any change in the Unit Adjustment Factor, the
number of Partnership Units held by each Partner shall be
proportionately adjusted by multiplying the number of Partnership
Units held by such Partner immediately prior to the change in the Unit
Adjustment Factor by the new Unit Adjustment Factor; the intent of
this provision is that one Partnership Unit remains exchangeable for
one Common Share without dilution. In the event the General Partner
issues any Common Shares in exchange for Partnership Units pursuant to
this Section 4.2(e), any such Partnership Units so acquired by the
--------------
General Partner shall immediately thereafter be canceled by the
Partnership and the Partnership shall issue to the General Partner new
Partnership Units pursuant to Section 4.2(c) hereof. Each Converting
--------------
Partner agrees to execute such documents as the General Partner may
reasonably require in connection with the issuance of Common Shares
upon exercise of the Conversion Right. Notwithstanding the foregoing
provisions of this Section 4.2(e), a Limited Partner shall not have
--------------
the right to exchange Partnership Units for Common Shares if (i) in
the opinion of counsel for the General Partner, the General Partner
would, as a result thereof, no longer qualify (or it would be more
likely than not that the General Partner no longer would qualify) as a
REIT; or (ii) such exchange would in the opinion of counsel for the
General Partner, constitute or be more likely than not to constitute a
violation of applicable securities laws.
Section 4.3 No Preemptive Rights. Except as specifically provided in
--------------------
this Agreement, no Person shall have any preemptive, preferential or other
similar right with respect to (a) additional Capital Contributions or loans to
the Partnership, or (b) issuance or sale of any Partnership Units.
Section 4.4 Capital Accounts of the Partners.
--------------------------------
(a) General. 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 (a)
the amount of all Capital Contributions made by such Partner to the
Partnership pursuant to this Agreement and (b) all items of Partnership
income and gain (including income and gain exempt from tax) computed in
accordance with Section 4.4(b) hereof and allocated to such Partner
--------------
pursuant to Sections 6.1 through Section 6.4 of the Agreement, and
------------ -----------
decreased by (i) 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 (ii) all items of Partnership deduction and loss
computed in accordance with Section 4.4(b) hereof and allocated to such
--------------
Partner pursuant to Sections 6.1 through Section 6.4 of the Agreement.
------------ -----------
19
<PAGE>
(b) Income, Gains, Deductions and Losses. For purposes of computing
------------------------------------
the amount of any item of income, gain, loss or deduction 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.
(2) The computation of all items of income, gain, loss 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 in gross income 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 cash
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 4.4(d) hereof, the amount of any such
--------------
adjustment shall be taken into account as gain or loss from the
disposition of such asset.
(6) Any items specially allocated under Section 6.5 hereof shall
-----------
not be taken into account.
(c) Transfers of Partnership Units. A transferee of a Partnership
------------------------------
Unit shall succeed to a pro rata portion of the Capital Account of the
transferor.
(d) Unrealized Gains and Losses.
---------------------------
20
<PAGE>
(1) Consistent with the provisions of Regulations Section 1.704-
1(b)(2)(iv)(f), and as provided in Section 4.4(d)(2), the Carrying
-----------------
Values 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 4.4(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:
(i) 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; (ii) 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; and (iii) immediately prior to the liquidation of the
Partnership or the General Partner's interest in the Partnership
within the meaning of Regulations Section 1.704-l(b)(2)(ii)(g);
provided, however, that adjustments pursuant to clauses (a) and (b)
-------- -------
above shall be made only if the General Partner reasonably 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 Values 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 such Unrealized Gain or Unrealized Loss 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 XIII of this Agreement, 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) Modification by General Partner. The provisions of 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 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
21
<PAGE>
distributed property or which are assumed by the Partnership, the General
Partner, or any Limited Partners) are computed in order to comply with such
Regulations, the General Partner may make such modification; provided,
--------
however, that it will not have a material effect on the amounts
-------
distributable to any Person pursuant to Article XIII of this Agreement upon
the liquidation of the Partnership. The General Partner also shall (a) 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
(b) make any appropriate modifications in the event unanticipated events
might otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b).
ARTICLE V
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions. The
-------------------------------------------------
General Partner shall distribute not less frequently than quarterly an amount
equal to 100% of Available Cash (other than amounts treated as net capital gains
as defined in Code Section 857(b)(3)) generated by the Partnership during such
quarter to the Partners who are Partners on the Partnership Record Date with
respect to such quarter (i) first, with respect to any class of Partnership
Interests issued pursuant to Sections 4.2(a) or 4.2(b) which are entitled to a
-------------------------
preference over Partnership Units on the distribution of Available Cash (and
within and among such classes, in order of the preferences designated therein
and pro rata among any such classes), and (ii) thereafter, in accordance with
their respective Percentage Interests on such Partnership Record Date; provided,
--------
however, that in no event may a Partner receive a distribution of Available Cash
- -------
with respect to a Unit if such Partner is entitled to receive a dividend from
the General Partner which is derived from a distribution of Available Cash to
the General Partner with respect to a Common Share for which such Unit has been
redeemed or exchanged.
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 General Partner, or
any Limited Partners or Assignees shall be treated as amounts distributed to the
General Partner or such Limited Partners, or Assignees pursuant to Section 5.1
-----------
for all purposes under this Agreement.
Section 5.3 Distributions Upon Liquidation. Proceeds from a Liquidating
------------------------------
Transaction shall be distributed to the Partners in accordance with Section
-------
13.2.
- ----
22
<PAGE>
ARTICLE VI
ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes Other than the
-------------------------------------------------------
Taxable Year of Liquidation. 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 (computed in accordance
with Section 4.4 hereof) shall be allocated among the Partners for each taxable
-----------
year (or portion thereof) as provided herein below.
(a) Net Income. After giving effect to the special allocations set
----------
forth in Section 6.2 through Section 6.4 below, Net Income shall be
----------- -----------
allocated (i) first, to the General Partner to the extent that, on a
cumulative basis, 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 (a) of
Section 6.1(a), and (ii) thereafter, Net Income shall be allocated to the
--------------
Partners in accordance with their respective Percentage Interests.
(b) Net Losses. After giving effect to the special allocations set
----------
forth in Section 6.2 through Section 6.4 below, Net Losses shall be
----------- -----------
allocated to the Partners in accordance with their respective Percentage
Interests; provided, however, that Net Losses shall not be allocated to any
-------- -------
Limited Partner pursuant to this Section 6.1(b) to the extent that such
--------------
allocation would cause such Limited Partner to have an Adjusted Capital
Account Deficit at the end of such taxable year (or increase any existing
Adjusted Capital Account Deficit). All Net Losses in excess of the
limitations set forth in the preceding sentence of this Section 6.1(b)
--------------
shall be allocated to the General Partner.
(c) Nonrecourse Liabilities. For purposes of Regulations Section
-----------------------
1.752-3(a), the Partners agree that Nonrecourse Liabilities of the
Partnership in excess of the sum of (i) the amount of Partnership Minimum
Gain and (ii) the total amount of Nonrecourse Built-in Gain shall be
allocated among the Partners in accordance with their respective Percentage
Interests.
(d) Gains. 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 allocations of gain pursuant to
Section 6.4 below, be characterized as Recapture 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, all in such a manor consistent with Regulation
Section 1.1245-1.
(e) Override. Notwithstanding Section 6.1(a) or Section 6.1(b), if
--------
any Qualified Organization or the General Partner would be allocated an
amount of aggregate Net Income
23
<PAGE>
for any taxable year of the Partnership that would cause its percentage
share of aggregate Net Income for such taxable year of the Partnership to
exceed its Percentage Interest for the taxable year of the Partnership, an
amount of Net Income that would otherwise be allocated to such Qualified
Organization or the General Partner shall instead be allocated to such
other Partners in the amount required to cause the Net Income allocable to
such Qualified Organization or the General Partner to not exceed each such
Partners' Percentage Interest for such taxable year of the Partnership, and
in subsequent fiscal years, an amount of Net Income otherwise allocable to
such other Partners shall instead be allocated to such Qualified
Organization and the General Partner to the maximum extent possible
consistent with this Section 6.1(e) until the amount of Net Income
previously allocated to such other Partners pursuant to this Section 6.1(e)
have been reallocated to such Qualified Organization and the General
Partner.
Section 6.2 Allocations for Capital Account Purposes in the Taxable
-------------------------------------------------------
Year of Liquidation.
-------------------
(a) In General. Subject to Sections 6.3 and 6.4, the Net Income and Net
----------
Loss of the Partnership for the taxable year of liquidation of the Partnership
shall be allocated prior to the final liquidating distributions of the
Partnership and shall be allocated first to eliminate all negative balances in
any Partner's Adjusted Capital Account Deficit and then, to the extent possible,
in a manner such that the Capital Accounts of the Partners immediately prior to
such final liquidating distributions are equal to the amount which would have
been distributable to the Partners under Section 5.1 if such distributions were
to be governed by Section 5.1. Notwithstanding the preceding sentence, actual
distributions made subsequent to the allocations under this Section 6.2 shall be
made pursuant to Section 5.3.
(b) Override. Notwithstanding Section 6.2(a), if any Qualified
--------
Organization or the General Partner would be allocated an amount of Net Income
for any taxable year of the Partnership ending on the liquidation date of the
Partnership that would cause its percentage share of Net Income for such taxable
year of the Partnership to exceed its Percentage Interest for such taxable year
of the Partnership, an amount of Net Income that would otherwise be allocated to
such Qualified Organization or the General Partner shall instead be allocated to
such other Partners in the amount required to cause the Net Income allocable to
such Qualified Organization or the General Partner to not exceed its Percentage
Interest for such taxable year of the Partnership.
Section 6.3 Additional Allocations.
----------------------
Notwithstanding anything to the contrary in this Agreement, all allocations
under this Agreement shall be adjusted insofar as may be required to enable the
Partnership to meet the requirements of Section 514(c)(9)(E) of the Code and the
Regulations thereunder so that all allocations hereunder have "substantial
economic effect" within the meaning of Section 704(b)(2)
24
<PAGE>
of the Code and so that, as to each Partner which is a Qualified Organization
and the General Partner,
(a) each such Partner's percentage share of the Partnership's "overall
partnership income" (within the meaning of Section 514(c)(9)(E)(i)(I) of the
Code and Regulation Section 1.514(c)-2) shall not, for any taxable year of the
Partnership, be greater than the percentage then applicable to such Partner
pursuant to Section 5.1 hereof, and
(b) each such Partner's percentage share of the Partnership's "overall
partnership loss" (within the meaning of Section 514(c)(9)(E)(i)(I) of the Code
and Regulation Section 1.514(c)-2) shall not, for any taxable year of the
Partnership, be less than the percentage then applicable to such Partner
pursuant to Section 5.1 hereof.
Section 6.4 Special Allocation Rules. Notwithstanding any other
------------------------
provision of this Agreement, the following special allocations shall be made
in the following order:
(a) Minimum Gain Chargeback. Notwithstanding any other provisions of
-----------------------
Article VI, if there is a net decrease in Partnership Minimum Gain during
any Partnership 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 6.4(a)
--------------
is intended to comply with the minimum gain chargeback requirements in
Regulations Section 1.704-2(f) and for purposes of this Section 6.4(a)
--------------
only, each Partner's Adjusted Capital Account Deficit shall be determined
prior to any other allocations pursuant to Section 6.1 of the Agreement
-----------
with respect to such fiscal year and without regard to any decrease in
Partner Minimum Gain during such fiscal year.
(b) Partner Minimum Gain Chargeback. Notwithstanding any other
-------------------------------
provision of Article VI (except Section 6.2(a) hereof), if there is a net
--------------
decrease in Partner Minimum Gain attributable to a Partner Nonrecourse Debt
during any Partnership fiscal year, each Partner who has a share of the
Partner Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(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
25
<PAGE>
Regulations Section 1.704-2(i)(4). This Section 6.4(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 this Section 6.4(b), each Partner's Adjusted Capital
--------------
Account Deficit shall be determined prior to any other allocations pursuant
to Article VI of this Agreement with respect to such fiscal year, other
than allocations pursuant to Section 6.4(a) hereof.
--------------
(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 6.4(a) and 6.4(b) hereof, such Partner has an
--------------- ------
Adjusted Capital Account Deficit, items of Partnership income and gain
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 taxable
----------------------
period 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 which does satisfy such
requirements.
(e) Partner Nonrecourse Deductions. Any Partner Nonrecourse
------------------------------
Deductions for any fiscal 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)(2).
(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.
Section 6.5 Allocations for Tax Purposes.
----------------------------
26
<PAGE>
(a) General. Except as otherwise provided in this Section 6.5, 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
Sections 6.1 and 6.4 of this Agreement.
------------ ---
(b) To Eliminate Book-Tax Disparities. 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) (i) 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 in a manner that
takes into account the variation between the 704(c) Value of such
property and its adjusted basis at the time of contribution, and (ii)
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 Sections 6.1 and 6.4 of this Agreement.
------------ ---
(2) (i) In the case of an Adjusted Property, such items shall
(A) first, be allocated among the Partners in a manner consistent with
the principles of Section 704(c) of the Code in a manner to take into
account the Unrealized Gain or Unrealized Loss attributable to such
property and the allocations thereof pursuant to Section 4.4 and (B)
-----------
second, in the event such property was originally a Contributed
Property, be allocated among the Partners in a manner consistent with
Section 6.5(b)(1)(i), and (ii) any item of Residual Gain or Residual
--------------------
Loss attributable to an Adjusted Property shall be allocated among the
Partners in the same manner as its correlative item of "book" gain or
loss is allocated pursuant to Sections 6.1 and 6.5 of this Agreement.
------------ ---
(3) All other items of income, gain, loss and deduction shall be
allocated among the Partners in the same manner as their correlative
item of "book" gain or loss is allocated pursuant to Sections 6.1 and
------------
6.4 of this Agreement.
---
(c) Power of General Partner to Elect Method. To the extent Treasury
----------------------------------------
Regulations promulgated pursuant to Section 704(c) of the Code permit a
partnership to utilize alternative methods to eliminate the disparities
between the agreed 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.
27
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ARTICLE VII
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management.
----------
(a) Powers of General Partner. Except as otherwise expressly
-------------------------
provided in this Agreement, all management powers over the business and
affairs of the Partnership are 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. Notwithstanding anything to the contrary in this Agreement,
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 General Partner (so long
as the General Partner 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 sufficient to permit the General Partner to maintain REIT
status), the assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of evidences of
indebtedness (including the securing of same by 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;
(2) using its best efforts to undertake the active management
and development of the real property held by the Partnership in a
manner so that the Partnership (unless it has been determined that the
Partnership otherwise does not hold "plan assets") continues to
qualify as a real estate operating company under U.S. Department of
Labor Regulation Section 29 C.F.R. 2510-3.101(e) including obtaining
an opinion of recognized counsel to such effect no more frequently
than annually, if so requested by any Limited Partner;
28
<PAGE>
(3) 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;
(4) the acquisition, disposition, sale, conveyance, mortgage,
pledge, encumbrance, hypothecation, contribution or exchange of any
assets of the Partnership or the merger or other combination of the
Partnership with or into another entity on such terms as the General
Partner deems proper;
(5) 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
General Partner, the Partnership or any of the Partnership's
Subsidiaries, the lending of funds to other Persons (including the
Partnership's Subsidiaries) 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, the holding of any real, personal and mixed property of
the Partnership in the name of the Partnership or in the name of a
nominee or trustee (subject to Section 7.10), the creation, by grant
------------
or otherwise, of easements or servitudes, and the performance of any
and all acts necessary or appropriate to the operation of the
Partnership assets including, but not limited to, applications for
rezoning, objections to rezoning, constructing, altering, improving,
repairing, renovating, rehabilitating, razing, demolishing or
condemning any improvements or property of the Partnership;
(6) the negotiation, execution, and performance of any
contracts, conveyances or other instruments (including with Affiliates
of the Partnership to the extent provided in Section 7.6) 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, without limitation,
the execution and delivery of leases on behalf of or in the name of
the Partnership (including the lease of Partnership property for any
purpose and without limit as to the term thereof, whether or not such
term (including renewal terms) shall extend beyond the date of
termination of the Partnership and whether or not the portion so
leased is to be occupied by the lessee or, in turn, subleased in whole
or in part to others);
(7) the opening and closing of bank accounts, the investment of
Partnership funds in securities, certificates of deposit and other
instruments, and the distribution of Partnership cash or other
Partnership assets in accordance with this Agreement;
29
<PAGE>
(8) the selection and dismissal of employees of the Partnership
or the General Partner (including, without limitation, employees
having titles such as "president", "vice president", "secretary" and
"treasurer"), and the engagement and dismissal of agents, outside
attorneys, accountants, engineers, appraisers, consultants,
contractors and other professionals on behalf of the General Partner
or the Partnership and the determination of their compensation and
other terms of employment or hiring;
(9) the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or appropriate;
(10) 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 contribution of property to, its Subsidiaries and any
other Person in which it has an equity investment from time to time);
(11) the control of any matters affecting the rights and
obligations of the Partnership, including the conduct of litigation
and the incurring of legal expense and the settlement of claims and
litigation, and the indemnification of any Person against liabilities
and contingencies to the extent permitted by law;
(12) 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);
(13) the determination of the fair market value of any
Partnership property distributed in kind using such reasonable
method of valuation as it may adopt;
(14) the execution, acknowledgment and delivery of any and all
documents and instruments to effectuate any or all of the foregoing;
and
(15) the issuance of Partnership Units to any Subsidiary which
may be necessary for such Subsidiary to satisfy such Subsidiary's
obligations under the Option Plans, in exchange for the transfer to
the Partnership by such Subsidiary of the price per Partnership Unit
required by the Option Plans to be paid by Subsidiaries.
(b) No Approval Required for Above Powers. Except as expressly
-------------------------------------
provided in this Agreement (including, without limitation, the last
sentence of this Section 7.1(b)), each of the Limited Partners agrees that
---------------
the General Partner is authorized to execute, deliver and
30
<PAGE>
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, the Act or any
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. Notwithstanding the foregoing, the
General Partner agrees that it will not take any of the following actions
at any time prior to the first anniversary of the Effective Date without
the Consent of Limited Partners holding a majority of the outstanding
Limited Partnership Interests: (i) a merger, consolidation or share
exchange of the General Partner and requiring the approval of the General
Partner's shareholders or any merger, consolidation or partnership interest
exchange of the Partnership; (ii) a sale, lease, transfer or other
disposition of all of substantially all of the General Partner's assets
requiring the approval of the General Partner's shareholders, a sale,
lease, transfer or other disposition of all or substantially all of the
Partnership's assets, or any election to dissolve the General Partner
requiring the approval of the General Partner's shareholders; or (iii) an
amendment to the Declaration of Trust requiring the approval of the General
Partner's shareholders.
(c) Insurance. At all times from and after the date hereof, the
---------
General Partner may cause the Partnership to obtain and maintain casualty,
liability and other insurance on the properties of the Partnership and
liability insurance for the Indemnitees hereunder. The right to procure
such insurance on behalf of the Indemnities shall in no way mitigate or
otherwise affect the right of any such Indemnitee to indemnification under
Section 7.7.
-----------
(d) Working Capital Reserves. At all times from and after the date
------------------------
hereof, the General Partner may cause the Partnership to establish and
maintain working capital reserves in such amounts as the General Partner,
in its sole and absolute discretion, deems appropriate and reasonable from
time to time.
(e) No Obligation to Consider Tax Consequences to Limited Partners.
--------------------------------------------------------------
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 pursuant to its authority under this Agreement.
(f) Loss of REOC Status. If the General Partner becomes aware that
-------------------
the Partnership may not qualify as a real estate operating company under
Department of Labor Regulation Section 29 C.F.R. 2510-3.101(e), it shall
notify the Limited Partners and, at the
31
<PAGE>
request of any affected Limited Partner, shall meet with any affected
Limited Partner upon not less than 10 days advance notice to consider
alternatives in a good faith effort to address the situation.
Section 7.2 Certificate of Limited Partnership. 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 and do all 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 jurisdiction
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,
as it may be amended or restated from time to time, to any Limited Partner. 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 jurisdiction in which the
Partnership may elect to do business or own property.
Section 7.3 Restrictions on General Partner's Authority. The General
-------------------------------------------
Partner may not, without the written Consent of all of the Limited Partners,
take any action in contravention of this Agreement including, without
limitation:
(a) take any action that would make it impossible to carry on the
ordinary business of the Partnership, except as otherwise provided in this
Agreement (provided that this restriction shall not be deemed to restrict
the sale, lease, transfer ir disposition of all or substantially all of the
Partnership's assets as may otherwise be provided herein);
(b) possess Partnership property, or assign any rights in specific
Partnership property, for other than a Partnership purpose except as
otherwise provided in this Agreement;
(c) admit a Person as a Partner, except as otherwise provided in this
Agreement; or
(d) perform any act that would subject a Limited Partner to liability
as a general partner in any jurisdiction or any other liability except as
provided herein or under the Act.
Section 7.4 Responsibility for Expenses.
---------------------------
(a) No Compensation. Except as provided in this Section 7.4 and
--------------- -----------
elsewhere in this Agreement (including the provisions of Articles V and VI
regarding distributions,
32
<PAGE>
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) Responsibility for Ownership and Operation Expenses. The
---------------------------------------------------
Partnership shall be responsible for and shall pay all expenses relating to
the Partnership's ownership of its assets, and the operation of, or for the
benefit of, the Partnership, and the General Partner shall be reimbursed on
a monthly basis, or such other basis as the General Partner may determine
in its sole and absolute discretion, for all expenses it incurs relating to
the Partnership's ownership of its assets and the operation of, or for the
benefit of, the Partnership; provided, however, that the amount of any such
-------- -------
reimbursement shall be reduced by any interest or other amounts earned by
the General Partner with respect to bank accounts or other instruments held
by it as permitted in Section 7.5(a). Such reimbursements shall be in
--------------
addition to any reimbursement to the General Partner as a result of
indemnification pursuant to Section 7.7 hereof.
-----------
(c) Responsibility for Organization Expenses. The Partnership shall
----------------------------------------
be responsible for and shall pay all expenses incurred relating to the
organization of the Partnership.
Section 7.5 Outside Activities of the General Partner.
-----------------------------------------
(a) General. 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 as a
General Partner or Limited Partner and the management of the business of
the Partnership, and such activities as are incidental thereto. The
General Partner shall not incur any Debt other than that for which it may
be liable in its capacity as General Partner of the Partnership (and other
than any guarantee of Partnership Debt) or other assets provided below.
The General Partner shall not own any assets other than Partnership
Interests (except for certain interests in Partnership properties held
directly by the General Partner or which have been caused by the General
Partner to be contributed to or purchased by Subsidiaries (including
qualified REIT subsidiaries, as defined in Section 856(i) of the Code, of
the General Partner), which interests shall not exceed 1% of the aggregate
economic interests of any property) and other than such bank accounts or
similar instruments as it deems necessary to carry out its responsibilities
contemplated under this Agreement and the Declaration of Trust. The
General Partner and Affiliates of the General Partner may acquire Limited
Partnership Interests and shall be entitled to exercise all rights of a
Limited Partner relating to such Limited Partnership Interests.
(b) Purchase of Common Shares. In the event the General Partner
-------------------------
exercises its rights under Article 3 of the Declaration of Trust to
purchase Common Shares, then the General Partner shall cause the
Partnership to purchase from it an equal number of
33
<PAGE>
Partnership Units (after application of the Unit Adjustment Factor) on the
same terms that the General Partner purchased such Common Shares.
Section 7.6 Contracts with Affiliates.
-------------------------
(a) Loans. The General Partner may cause the Partnership to lend or
-----
contribute 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) Transfers of Assets. Except as provided in Section 7.5(a), the
------------------- --------------
General Partner may cause the Partnership to 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.
(c) Contracts With General Partner. After the Effective Date and
------------------------------
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 on terms that are fair
and reasonable and no less favorable to the Partnership than would be
obtained from an unaffiliated third party in connection therewith.
(d) Employee Benefit Plans. 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
funded by the Partnership for the benefit of employees of the General
Partner, the Partnership, Subsidiaries of the Partnership or any Affiliate
of any of them in respect of services performed, directly or indirectly,
for the benefit of the Partnership, the General Partner, or any of the
Partnership's Subsidiaries, including any such plan which requires the
Partnership, the General Partner or any of the Partnership's Subsidiaries
to issue or transfer Partnership Units to employees.
Section 7.7 Indemnification.
---------------
(a) General. The Partnership shall indemnify an Indemnitee from and
-------
against any and all losses, claims, damages, liabilities, joint or several,
expenses (including 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 as set
forth in this Agreement in which any 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
34
<PAGE>
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. The termination of any proceeding by judgment, order or
settlement does not create a presumption that the Indemnitee did not meet
the requisite standard of conduct set forth in this Section 7.7(a). The
--------------
termination of any proceeding by conviction or upon a plea of nolo
contendere or its equivalent, or an entry of an order of probation prior to
judgment, creates a rebuttable presumption that the 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.
(b) In Advance of Final Disposition. Reasonable expenses incurred by
-------------------------------
an Indemnitee who is a party to a proceeding may be paid or reimbursed by
the Partnership in advance of the final disposition of the proceeding upon
receipt by the Partnership of (a) 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 this
Section 7.7 has been met, and (b) a written undertaking by or 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) Non-Exclusive Section. 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.
(d) Insurance. The Partnership may 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. The right to procure such insurance on behalf
of the Indemnitees shall in no way mitigate or otherwise affect the right
of any Indemnities to indemnification under this Section 7.7.
-----------
(e) Employee Benefit Plans. 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(a); and actions taken or omitted by the Indemnitee with
--------------
respect to an employee benefit plan in the
35
<PAGE>
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) No Personal Liability for Limited Partners. In no event may an
------------------------------------------
Indemnitee subject the Limited Partners to personal liability by reason of
the indemnification provisions set forth in this Agreement.
(g) Interested Transactions. 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) Binding Effect. 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.
Section 7.8 Liability of the General Partner.
--------------------------------
(a) General. Notwithstanding anything to the contrary set forth in
-------
this Agreement, the General Partner 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, unless (i) the General Partner actually received an
improper benefit in money, property or services (in which case, such
liability shall be for the amount of the benefit in money, property or
services actually received), or (ii) the General Partner's action or
failure to act was the result of active and deliberate dishonesty and was
material to the cause of action being adjudicated.
(b) No Obligation to Consider Interests of Limited Partners. The
-------------------------------------------------------
Limited Partners expressly acknowledge that the General Partner is acting
on behalf of the Partnership and the General Partner's shareholders
collectively, that the General Partner is under no obligation to consider
the separate interests of the Limited Partners (including, without
limitation, the tax consequences to Limited Partners or Assignees) in
deciding whether to cause the Partnership to take (or decline to take) any
actions which the General Partner has undertaken in good faith on behalf of
the Partnership, 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, unless
(i) the General Partner actually received an improper benefit in money,
property or services (in which case, such liability shall be for the amount
of the benefit in money, property or services actually received), or (ii)
the General Partner's action or failure to act was the result of active and
deliberate dishonesty and was material to the cause of action being
adjudicated.
(c) Acts of Agents. 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
36
<PAGE>
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 it in good faith.
(d) Effect of Amendment. 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
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.
(e) Limitation of Liability of Shareholders and Officers of the
-----------------------------------------------------------
General Partner. ANY OBLIGATION OR LIABILITY WHATSOEVER OF THE GENERAL
---------------
PARTNER WHICH MAY ARISE AT ANY TIME UNDER THIS AGREEMENT OR ANY OBLIGATION
OR LIABILITY WHICH MAY BE INCURRED BY IT PURSUANT TO ANY OTHER INSTRUMENT,
TRANSACTION OR UNDERTAKING CONTEMPLATED HEREBY SHALL BE SATISFIED, IF AT
ALL, OUT OF THE GENERAL PARTNER'S ASSETS ONLY. NO SUCH OBLIGATION OR
LIABILITY SHALL BE PERSONALLY BINDING UPON, NOR SHALL RESORT FOR THE
ENFORCEMENT THEREOF BE HAD TO, THE PROPERTY OF ANY OF ITS SHAREHOLDERS,
TRUSTEES, OFFICERS, EMPLOYEES OR AGENTS, REGARDLESS OF WHETHER SUCH
OBLIGATION OR LIABILITY IS IN THE NATURE OF CONTRACT, TORT OR OTHERWISE.
Section 7.9 Other Matters Concerning the General Partner.
--------------------------------------------
(a) Reliance on Documents. 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
to be genuine and to have been signed or presented by the proper party or
parties.
(b) Reliance on Consultants and Advisers. The General Partner may
------------------------------------
consult with legal counsel, accountants, appraisers, management
consultants, investment bankers 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 presumed to have been done or omitted in good faith and in
accordance with such opinion.
(c) Action Through Officers and Attorneys. 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 a duly appointed
attorney or attorneys-in-fact. Each such attorney
37
<PAGE>
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) Actions to Maintain REIT Status or Avoid Taxation of General
------------------------------------------------------------
Partner. 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 General Partner to continue to qualify as a REIT or (ii) to avoid the
General Partner 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. 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 covenants, declares and warrants that any Partnership
assets as to 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
or such nominee or Affiliate 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 and record title
to such assets to be vested in the Partnership as soon as reasonably
practicable. 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. 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 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
such Person shall be entitled to deal with the General Partner as if it 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 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 (a) at the time of the execution and
delivery of such certificate, document or instrument, this Agreement was in full
force and effect, (b) the Person executing and delivering such certificate,
document or instrument was duly authorized and empowered to do so for and on
behalf of the
38
<PAGE>
Partnership and (c) 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.
Section 7.12 UBTI. The General Partner shall use its reasonable best
----
efforts to prevent the Partnership from engaging in any activity or activities
that would cause any Partner that is a qualified organization within the meaning
of Section 514(c)(9)(C) of the Code to incur unrelated business taxable income
as defined in Section 512-514 of the Code.
ARTICLE VII
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, partner, 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 subject to any
--------------
other agreements entered into by a Limited Partner or its Affiliates with the
General Partner, the Partnership or a Subsidiary, the following rights shall
govern outside activities of Limited Partners: (a) any Limited Partner (other
than the General Partner) 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 the Partnership, including business interests and activities in
direct competition with the Partnership; (b) 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; (c) none of the Limited Partners
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, other than the General Partner, 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; (d) the
fact that a Limited Partner may encounter opportunities to purchase, otherwise
acquire, lease, sell or otherwise dispose of real or personal property and may
take advantage of such opportunities himself or introduce such opportunities to
entities in which it has or has not any interest, shall not subject such Partner
to liability to the Partnership or any of the other Partners on account of the
lost opportunity; and (e) except as otherwise specifically provided herein,
nothing contained in this Agreement shall be
39
<PAGE>
deemed to prohibit a Limited Partner or any Affiliate of a Limited Partner from
dealing, or otherwise engaging in business, with Persons transacting business
with the Partnership or from providing services relating to the purhcase, sale,
rental, management or operation of real or personal property (including real
estate brokerage services) and receiving compensation therefor, from any persons
who have transacted business with the Partnership or other third parties.
Section 8.4 Priority Among Limited Partners. No Partner (Limited or
-------------------------------
General) or Assignee shall have priority over any other Partner (Limited or
General) or Assignee either as to the return of Capital Contributions or
otherwise expressly provided in this Agreement, as to profits, losses or
distributions.
Section 8.5 Rights of Limited Partners Relating to the Partnership.
------------------------------------------------------
(a) Copies of Business Records. In addition to 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:
(1) to obtain a copy of the most recent annual and quarterly
reports filed with the Securities and Exchange Commission by the
General Partner pursuant to the Securities Exchange Act of 1934, as
amended;
(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 and
all amendments thereto, together with executed copies of all powers of
attorney pursuant to which this Agreement, the Certificate 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) Notification of Changes in Unit Adjustment Factor. The
-------------------------------------------------
Partnership shall notify each Limited Partner in writing of any change made
to the Unit Adjustment Factor within 10 Business Days of the date such
change becomes effective.
40
<PAGE>
(c) Confidential Information. 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 Partnership information that (i)
the General Partner 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 (ii) the Partnership is
required by law or by agreements with unaffiliated third parties to keep
confidential.
(d) Debt Allocation. C-M Holdings L.P. shall have the option, to the
---------------
extent of indebtedness available for such purpose, of guaranteeing on a "bottom
dollar basis," an amount of indebtedness of the Partnership or any successor
thereto, as is necessary from time to time to provide an allocation of debt to
C-M Holdings L.P. equal to the amount of debt then required to be allocated to
C-M Holdings L.P. to enable C-M Holdings L.P. to avoid recognizing gain pursuant
to Section 731(a)(1) of the Code as a result of a deemed distribution of money
to C-M Holdings L.P. pursuant to Section 752(b) of the Code. The General
Partner may, in its discretion, permit other Limited Partners to provide similar
guarantees from time to time.
Section 8.6 Redemption Right.
----------------
(a) General. Notwithstanding the provisions of Section 4.2(e), the
------- --------------
General Partner may satisfy the Conversion Right exercised by a Converting
Partner set forth in a Notice of Conversion by paying to such Converting
Partner the Redemption Amount on the Specified Conversion Date, whereupon
the General Partner shall acquire the Partnership Units to be exchanged by
such Converting Partner and shall be treated for all purposes of this
Agreement as the owner of such Partnership Units. The General Partner may
elect to pay the Redemption Amount for Partnership Units only upon a
receipt of a Notice of Conversion. In the event the General Partner shall
exercise its right to satisfy the Conversion Right in the manner described
in this Section 8.6(a), the Partnership shall have no obligation to pay any
--------------
amount to the Converting Partner with respect to such Converting Partner's
exercise of the Conversion Right, and each of the Converting Partner, the
Partnership, and the General Partner shall treat the transaction between
the General Partner and the Converting Partner as a sale of the Converting
Partner's Partnership Units to the General Partner for Federal income tax
purposes. Each Converting Partner which the General Partner has elected to
pay the Redemption Amount agrees to execute such documents as the General
Partner may reasonably require in connection with the payment of the
Redemption Amount.
(b) Where Delivery of Common Shares Prohibited. Notwithstanding the
------------------------------------------
provisions of Section 4.2(e) and Section 8.6(a), a Partner shall not be
-------------- --------------
entitled to exercise the Conversion Right pursuant to Section 4.2(e) if the
--------------
delivery of Common Shares to such Partner on the Specified Conversion Date
would be prohibited under the Declaration of Trust.
41
<PAGE>
Section 8.7 Notice for Certain Transactions. In the event of (a) a
-------------------------------
dissolution or liquidation of the Partnership or the General Partner, (b) a
merger, consolidation or combination of the Partnership or the General Partner
with or into another Person (including the events set forth in Sections 11.2(c)
and 11.2(d)), (c) the sale of all or substantially all of the assets of the
Partnership or the General Partner, or (d) the transfer by the General Partner
of all or any part of its interest in the Partnership, the General Partner shall
give written notice thereof to each Limited Partner at least twenty (20)
Business Days prior to the effective date or, to the extent applicable, record
date of such transaction, whichever comes first.
ARTICLE IX
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 appropriate books
and records 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, however, 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 purposes
on an accrual basis in accordance with generally accepted accounting principles
and for tax reporting purposes on the accrual basis.
Section 9.2 Fiscal Year. The fiscal year of the Partnership shall be the
-----------
calendar year.
Section 9.3 Reports.
-------
(a) Annual Reports. As soon as practicable, but in no event later
--------------
than 120 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 General Partner if such statements are prepared
solely on a consolidated basis with the General Partner, for such
Partnership Year, presented in accordance with generally accepted
accounting principles, such statements to be audited by a nationally
recognized firm of independent public accountants selected by the General
Partner.
(b) Quarterly Reports. As soon as practicable, but in no event
-----------------
later than 60 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 General Partner, if such statements are prepared solely on a
consolidated basis with the General Partner, and such other information as
may be required by applicable law or regulation, or as the General Partner
determines to be appropriate.
42
<PAGE>
ARTICLE X
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 90 days of the close of each taxable year, the tax
information reasonably required by the General Partner and the 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 including, without limitation,
the election under Section 754 of the Code in accordance with applicable
regulations thereunder. The General Partner shall have the right to seek to
revoke any such election (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.
Section 10.3 Tax Matters Partner.
-------------------
(a) General. The General Partner shall be the "tax matters partner"
-------
of the Partnership for Federal income tax purposes. Pursuant to Section
6223(c) 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 and profit
interest of each of the Limited Partners; provided, however, that such
-------- -------
information is provided to the Partnership by the Limited Partners. The
Limited Partners shall provide such information to the Partnership as the
General Partner shall reasonably request.
(b) Powers. 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 (a) 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
(b) who is a "notice partner" (as defined in Section 6231 of the Code) or a
member of a "notice group" (as defined in Section 6223(b)(2) of the Code);
43
<PAGE>
(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 or otherwise given 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 United States Claims Court,
or the filing of a complaint for refund with 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 at any time and, if any part of such request is not allowed by the
IRS, to file an appropriate pleading (petition, complaint or other
document) for judicial review with respect to such request;
(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 into account 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 of 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) Reimbursement. 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) shall be borne by the Partnership. Nothing
herein shall be construed to restrict the Partnership from engaging an
accounting firm and a law firm to assist the tax matters partner in
discharging his 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 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,
44
<PAGE>
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 Section 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 15 days after notice from the General Partner that such
payment must be made unless (a) the Partnership withholds such payment from a
distribution which would otherwise be made to the Limited Partner or (b) 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 (a) or (b) shall be treated as having
been distributed to such Limited Partner. Each Limited Partner hereby
unconditionally and irrevocably grants to the Partnership a 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 (including, without limitation, the
right to receive distributions). Any amounts payable by a Limited Partner
hereunder shall bear interest at 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 percentage points (but not higher than the
-------------------
maximum lawful rate) from the date such amount is due (i.e., 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 XI
TRANSFERS, WITHDRAWALS AND LOCK-UP
Section 11.1 Transfer.
--------
(a) Definition. The term "transfer," when used in this Article XI
----------
with respect to a Partnership Unit, shall be deemed to refer to a
transaction by which the General Partner purports to assign its General
Partnership Interest to another Person or by which a Limited Partner
purports to assign its Limited Partnership Interest to another Person, and
includes a sale, assignment, gift, pledge, encumbrance, hypothecation,
mortgage, exchange or any other disposition by law or otherwise. The term
"transfer" when used in this Article XI does not include any Conversion of
Partnership Units by a Limited Partner pursuant to Section 4.2(e) or
--------------
acquisition of Partnership Units from a Limited Partner by the General
Partner pursuant to Section 8.6(a).
--------------
(b) Requirements. No Partnership Interest shall be transferred,
------------
in whole or in part, except in accordance with the terms and conditions set
forth in this Article XI. Any
45
<PAGE>
transfer or purported transfer of a Partnership Interest not made in
accordance with this Article XI shall be null and void.
Section 11.2 Transfer of General Partner's Partnership Interest.
--------------------------------------------------
(a) General. The General Partner may not transfer any of its
-------
General Partnership Interest or withdraw as General Partner except as
provided in Section 11.2(b) or in connection with a transaction described
---------------
in Section 11.2(c).
---------------
(b) Transfer to Partnership or Holder of Common Shares. The
--------------------------------------------------
General Partner may transfer Partnership Interests held by it either to the
Partnership in accordance with Section 7.5(b) hereof or to a purported
--------------
holder of Common Shares in accordance with the provisions of Article 3 of
the Declaration of Trust relating to "Excess Shares" (as such term is
defined in the Declaration of Trust).
(c) Transfer in Connection With Reclassification,
----------------------------------------------
Recapitalization, or Business Combination Involving General Partner. Except
-------------------------------------------------------------------
as otherwise provided in Section 11.2(d), the General Partner shall not
---------------
engage in any merger, consolidation or other combination with or into
another Person or sale of all or substantially all of its assets, or any
reclassification, or recapitalization or change of outstanding Common
Shares (other than a change in par value, or from par value to no par
value, or as a result of a subdivision or combination as described in the
definition of "Unit Adjustment Factor") ("Transaction"), unless (i) under
-----------
the terms of the Transaction, Limited Partners will not engage in a sale or
exchange for Federal income tax purposes of their Partnership Units, or
(ii) as a result of such Transaction all Limited Partners either will
receive, or will have the right to receive, for each Partnership Unit
(after application of the Unit Adjustment Factor and without taking into
account any tax considerations) an amount of cash, securities, or other
property equal to, without taking into account any tax considerations, the
greatest amount of cash, securities or other property paid to a holder of
one Common Share in consideration of one Common Share at any time during
the period from and after the date on which the Transaction is consummated;
provided, however, if, in connection with the Transaction, a purchase,
-------- -------
tender or exchange offer shall have been made to and accepted by the
holders of more than 50 percent of the outstanding Common Shares, the
holders of Partnership Units shall receive the greatest amount of cash,
securities, or other property which a Limited Partner would have received
had it exercised the Conversion Right and received Common Shares in
exchange for its Partnership Units immediately prior to the expiration of
such purchase, tender or exchange offer.
(d) Merger Involving General Partner Where Surviving Entity's
---------------------------------------------------------
Assets Contributed to Partnership. Notwithstanding Section 11.2(c), the
--------------------------------- ---------------
General Partner may merge with another entity if, under the terms of the
transaction, Limited Partners will not engage in a sale or exchange for
Federal income tax purposes and immediately after such merger substantially
all of the assets of the surviving entity, other than Partnership Units
held by the General Partner, are contributed to the Partnership as a
Capital Contribution in
46
<PAGE>
exchange for Partnership Units with a fair market value equal to the 704(c)
Value of the assets so contributed.
Section 11.3 Limited Partners' Rights to Transfer.
------------------------------------
(a) General. Subject to the remaining provisions of this Section
------- -------
11.3 as well as Sections 11.4 and 11.7, a Limited Partner may transfer all
---- ----- ----
or any portion of his Partnership Interest, or any of such Limited
Partner's rights as a Limited Partner, without the prior written consent of
the General Partner. In order to effect such transfer, the Limited Partner
must deliver to the General Partner a duly executed copy of the instrument
making such transfer and such instrument must evidence the written
acceptance by the assignee of all of the terms and conditions of this
Agreement and represent that such assignment was made in accordance with
all applicable laws and regulations.
(b) Incapacitated Limited Partners. 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 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) Transfers Contrary to Securities Laws. The General Partner
-------------------------------------
may prohibit any transfer otherwise permitted under Section 11.3 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, as amended, or
would otherwise violate any Federal or state securities laws or regulations
applicable to the Partnership or the Partnership Units.
(d) Transfers Resulting in Corporation Status; Transfers Through
------------------------------------------------------------
Established Securities or Secondary Markets. No transfer by a Limited
-------------------------------------------
Partner of his Partnership Units (or any economic or other interest, right
or attribute therein) 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, or (ii) such transfer
is effectuated through an "established securities market" or a "secondary
market (or the substantial equivalent thereof)" within the meaning of
Section 7704 of the Code. Notwithstanding anything to the contrary in this
Agreement, (x) no interests in the Partnership shall be issued in a
transaction that is (or transactions that are) registered or required to be
registered under the Securities Act of 1933 (the "1933 Act"), and to the
extent such interests were not required to be registered under the 1933 Act
by reason of Regulation S (17 CFR 230.901 through 230.904) or any successor
thereto, such issuances would not have been required to be registered under
the 1933 Act if the interests so offered or sold had been offered and sold
within the United States, (y) any admission (or purported admission) of a
Partner and any transfer or assignment (or purported transfer or
assignment) of all or part of a Partner's interest (or any
47
<PAGE>
interest or right or attribute therein) in the Partnership, whether to
another Partner or to a third party, shall not be effective, and any such
transfer or assignment (or purported transfer or assignment) shall be void
ab initio, and no person shall otherwise become a Partner if (A) at the
-- ------
time of such transfer or assignment (or purported transfer or assignment)
any interest in the Partnership (or economic interest therein) is traded on
an established securities market or readily tradeable on a secondary market
or the substantial equivalent thereof or (B) after such transfer or
assignment (or purported transfer or assignment) the Partnership would have
more than 100 Partners. For purposes of clause (A) of the preceding
sentence and clause (ii) above, an established securities market is a
national securities exchange that is either registered under Section 6 of
the Securities Exchange Act of 1934 (the "1934 Act") or exempt from
registration because of the limited volume of transactions, a foreign
securities exchange that, under the law of the jurisdiction where it is
organized, satisfies regulatory requirements that are analogous to the
regulatory requirements of the 1934 Act, a regional or local exchange, or
an interdealer quotation system that regularly disseminates firm buy or
sell quotations by identified brokers or dealers by electronic means or
otherwise. For purposes of such clause (A) and clause (ii) above, interests
in the Partnership (or interests therein) are readily tradeable on a
secondary market or the substantial equivalent thereof if (i) interests in
the Partnership (or interests therein) are regularly quoted by any person,
such as a broker or dealer, making a market in the interests; (ii) any
person regularly makes available to the public (including customers or
subscribers) bid or offer quotes with respect to interests in the
Partnership (or interests therein) and stands ready to effect buy or sell
transactions at the quoted prices for itself or on behalf of others; (iii)
the holder of an interest in the Partnership has a readily available,
regular, and ongoing opportunity to sell or exchange such interest (or
interests therein) through a public means of obtaining or providing
information of offers to buy, sell, or exchange such interests; or (iv)
prospective buyers and sellers otherwise have the opportunity to buy, sell,
or exchange interests in the Partnership (or interests therein) in a time
frame and with the regularity and continuity that is comparable to that
described in clauses (i), (ii) and (iii) of this sentence. For purposes of
determining whether the Partnership will have more than 100 Partners, each
person indirectly owning an interest in the Partnership through a
partnership (including any entity treated as a partnership for federal
income tax purposes), a grantor trust or an S corporation (each such entity
a "flow-through entity") shall be treated as a Partner unless the General
Partner determines in its sole and absolute discretion that less than
substantially all of the value of the beneficial owner's interest in the
flow-through entity is attributable to the flow-through entity's interest
(direct or indirect) in the Partnership. Notwithstanding anything to the
contrary in this Section 11.3(d), the exercise of the Conversion Right by a
Limited Partner will not be subject to the restrictions set forth in this
Section 11.3(d).
(e) Transfers to Holders of Nonrecourse Liabilities. No transfer or
-----------------------------------------------
pledge 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
48
<PAGE>
General Partner to exchange or redeem for the Redemption 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) Consent of General Partner Required. A Limited Partner shall
-----------------------------------
have the right in its discretion to substitute a transferee as a Limited
Partner in his place, in which event such substitution shall occur if the
Limited Partner so provides; provided however, any transferee desiring to
become a Substituted Limited Partner must furnish 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 Article XVI 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 a Substituted
Limited Partner.
(b) Rights and Duties of Substituted Limited Partners. A
-------------------------------------------------
transferee who has been admitted as a Substituted Limited Partner in
accordance with this Article XI shall have all the rights and powers and be
subject to all the restrictions and liabilities of a Limited Partner under
this Agreement.
(c) Amendment of Exhibit A. 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 a Limited Partner, in its sole and absolute
---------
discretion, does not provide for the admission of any permitted transferee under
Section 11.4(a) 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 entitled to all the rights of an assignee of a limited
partnership interest under the Act, including the right to receive distributions
from the Partnership and the share of Net Income, Net Losses, gain, loss and
Recapture Income 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 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 shall be subject to all the provisions
of this Article XI to the same extent and in the same manner as any Limited
Partner desiring to make an assignment of Partnership Units.
49
<PAGE>
Section 11.6 General Provisions.
------------------
(a) Withdrawal of Limited Partner. 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 XI or pursuant to Conversion of all of its Partnership
Units under Section 4.2(e) or the redemption of its Partnership Units
-------------
under Section 8.6(a).
--------------
(b) Transfer of All Partnership Units by Limited Partner. Any
----------------------------------------------------
Limited Partner who shall transfer all of his Partnership Units in a
transfer permitted pursuant to this Article XI or pursuant to the
Conversion Rights of all of its Partnership Units under Section 4.2(e) or
--------------
pursuant to redemption of all of its Partnership Units under Section 8.6(a)
--------------
shall cease to be a Limited Partner.
(c) Timing of Transfers. Transfers pursuant to this Article XI
-------------------
may only be made on the first day of a fiscal quarter of the Partnership,
unless the General Partner otherwise agrees.
(d) Allocation When Transfer Occurs. If any Partnership Interest
-------------------------------
is transferred during any quarterly segment of the Partnership's fiscal
year in compliance with the provisions of this Article XI or converted
pursuant to Section 4.2(e) or redeemed pursuant to Section 8.6(a), Net
-------------- --------------
Income, Net Losses, each item thereof and all other items attributable to
such interest for such fiscal year shall be divided and allocated between
the transferor Partner and the transferee Partner by taking into account
their varying interests during the fiscal year in accordance with Section
706(d) of the Code, based on the portion of the year for which the
transferor Partner and the transferee Partner were Partners. Solely for
purposes of making such allocations, each of such items for the calendar
month in which the transfer or redemption occurs shall be allocated to the
Person who is a Partner as of midnight on the last day of said month. All
distributions of Available Cash with respect to which the Partnership
Record Date is before the date of such transfer or redemption shall be made
to the transferor Partner, and all distributions of Available Cash with
Partnership Record Dates thereafter shall be made to the transferee
Partner.
Section 11.7 Lock-up Agreement.
-----------------
(a) Lock-up Period. Each of the Limited Partners who is a Limited
--------------
Partner as of the closing of the initial public offering of the Common
Shares hereby agrees that, except as set forth in Section 11.7(b), from the
---------------
Effective Date until one year, except such period shall be two years in the
case of any Limited Partner which is a partner of either Cabot Partners
Limited Partnership (a Massachusetts limited partnership) or C-M Holdings
Limited Partnership (a Massachusetts limited partnership) (or any permitted
transferee thereof as provided herein), following the Effective Date (the
"Lock-up Period"), without the prior written consent of the General
----------------
Partner, it will not offer, pledge, sell, contract to sell, grant any
options for the sale of or otherwise dispose of, directly or indirectly
(collectively,
50
<PAGE>
"Dispose of"), any Shares or Partnership Units (the "Lock-up"). Each
------------ --------
Limited Partner agrees to be bound by the Registration Rights and Lock-up
Agreement and specifically authorizes the General Partner as its attorney-
in-fact to execute the Registration Rights and Lock-up Agreement on its
behalf.
(b) Exceptions. The following transfers of Shares or Partnership
----------
Units shall not be subject to the Lock-up set forth in Section 11.7(a):
---------------
(1) a Limited Partner who is a natural person may Dispose of
Shares or Partnership Units to his or her spouse, siblings, parents or
any natural or adopted children or other descendants or to any
personal trust in which such family members or such Limited Partner
retain the entire beneficial interest;
(2) a Limited Partner who is a natural person may Dispose of
Shares or Partnership Units on his or her death to such Limited
Partner's estate, executor, administrator or personal representative
or to such Limited Partner's beneficiaries pursuant to a devise or
bequest or by the laws of descent and distribution;
(3) a Limited Partner that is a corporation, partnership, trust
or other business entity may (A) Dispose of Shares or Partnership
Units to one or more other entities that are wholly owned and
controlled, legally and beneficially, by such Limited Partner or by a
Person or Persons that directly or indirectly wholly owns and controls
such Limited Partner or (B) Dispose of Shares or Partnership Units by
distributing such Shares or Partnership Units in a merger,
liquidation, dissolution, winding up or otherwise without
consideration to the equity owners of such corporation, partnership or
business entity or to any other corporation, partnership or business
entity that is wholly owned by such equity owners;
(4) a Limited Partner that is a master pension or profit sharing
trust or a group trust may Dispose of Shares or Partnership Units to
one or more of its participating trusts or to a successor trustee;
(5) a Limited Partner may Dispose of Shares or Partnership Units
as a bona fide gift; and
(6) a Limited Partner may Dispose of Shares or Partnership Units
pursuant to a pledge, grant of security interest or other encumbrance
effected in a bona fide transaction with an unrelated and unaffiliated
pledgee;
provided, however, that in the case of any transfer of Shares or Partnership
- -------- -------
Units pursuant to clauses (1), (3) and (4), the transfers shall each be effected
pursuant to a bona fide exemption under the 1933 Act, as amended.
51
<PAGE>
In the event any Limited Partner Disposes of Shares or Partnership Units
described in this Section 11.7(b) during the Lock-up Period, such Shares or
---------------
Partnership Units shall be subject to this Section 11.7 and the Registration
------------
Rights and Lock-up Agreement and, as a condition of the validity of such
disposition, the transferee (and any pledgee who acquires Shares or Partnership
Units upon foreclosure or any transferee thereof) shall be required to execute
and deliver a counterpart of this Agreement and the Registration Rights and
Lock-up Agreement. Thereafter, such transferee shall be deemed to be a "Holder"
for purposes of the Registration Rights and Lock-up Agreement.
ARTICLE XII
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner. A successor to all
--------------------------------------
of the General Partner's General Partnership 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.
Section 12.2 Admission of Additional Limited Partners.
----------------------------------------
(a) General. A Person who makes a Capital Contribution to the
-------
Partnership in accordance with this Agreement or who exercises an option to
receive Partnership Units 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 Article XVI 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) Consent of General Partner Required. 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.
Section 12.3 Amendment of Agreement and Certificate. 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 and may for this purpose
exercise the power of attorney granted pursuant to Article XVI hereof.
52
<PAGE>
ARTICLE XII
DISSOLUTION AND LIQUIDATION
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. The Partnership shall dissolve, and its affairs shall be wound
up, upon the first to occur of any of the following ("Events of Dissolution"):
---------------------
(a) Expiration of Term--the expiration of its term as provided in
------------------
Section 2.5 hereof;
-----------
(b) Withdrawal of General Partner--an event of withdrawal of the
-----------------------------
General Partner, as defined in the Act, unless, within 90 days after the
withdrawal all 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 substitute General Partner;
(c) Dissolution Prior to 2097--from and after the date of this
-------------------------
Agreement through December 31, 2097, with the Consent of a majority of the
Percentage Interests of the Limited Partners, an election to dissolve the
Partnership made by the General Partner, in its sole and absolute
discretion;
(d) Judicial Dissolution Decree--entry of a decree of judicial
---------------------------
dissolution of the Partnership pursuant to the provisions of the Act;
(e) Sale of Partnership's Assets--the sale or disposition of all or
----------------------------
substantially all of the assets and properties of the Partnership;
(f) Merger--the merger or other combination of the Partnership with
------
or into another entity;
(g) Bankruptcy or Insolvency of General Partner--the General Partner
-------------------------------------------
(1) makes an assignment for the benefit of creditors;
(2) files a voluntary petition in bankruptcy;
(3) is adjudged a bankrupt or insolvent, or has entered against
it an order for relief in any bankruptcy or insolvency
proceeding;
(4) files a petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation;
53
<PAGE>
(5) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against it in any
proceeding of this nature; or
(6) seeks, consents to or acquiesces in the appointment of a
trustee, receiver or liquidator of the General Partner or of all or
any substantial part of its properties; or
(h) Readjustment, etc. One hundred and twenty (120) days after the
-----------------
commencement of any proceeding against the General Partner seeking
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation, the
proceeding has not been dismissed, or if within 90 days after the
appointment without the General Partner's consent or acquiescence of a
trustee, receiver or liquidator of the General Partner or of all or any
substantial part of its properties, the appointment is not vacated or
stayed, or within 90 days after the expiration of any such stay, the
appointment is not vacated.
Section 13.2 Winding Up.
----------
(a) General. Upon the occurrence of an Event of Dissolution, 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 "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 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 Partners, pro rata in
accordance with amounts owed to each such Partner; and
(3) 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 XIII.
54
<PAGE>
(b) Where Immediate Sale of Partnership's Assets Impractical.
--------------------------------------------------------
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) or, with the Consent of the Partners holding a
majority of the Partnership Units, 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.
Section 13.3 Compliance with Timing Requirements of Regulations; Allowance
-------------------------------------------------------------
for Contingent or Unforeseen Liabilities or Obligations.
-------------------------------------------------------
(a) Liquidation. Notwithstanding anything to the contrary in this
-----------
Agreement, 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 XIII 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) (including any timing requirements therein). In the discretion
of the General Partner, a pro rata portion of the distributions that would
otherwise be made to the General Partner and Limited Partners pursuant to this
Article XIII may be: (i) distributed to a liquidating 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 of 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 General Partner, 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 (ii) withheld 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 amounts shall be
distributed to the General Partner and Limited Partners as soon as practicable.
(b) Deficit Balance of General Partner. Notwithstanding anything to
----------------------------------
the contrary in this Agreement, (i) if the General Partner has a deficit balance
in its Capital Account following the liquidation (within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g))
55
<PAGE>
of its interest in the Partnership, as determined after taking into account all
Capital Account adjustments for the Partnership taxable year during which such
liquidation occurs (other than any adjustment for a capital contribution of the
General Partner made pursuant to this sentence), the General Partner shall make
a capital contribution to the Partnership in an amount equal to such deficit
balance by the end of the Partnership taxable year during which such liquidation
occurs (or, if later, within 90 days after date of such liquidation); and (ii)
such capital contribution made pursuant to clause (i) of this Section 13.3(b)
shall be distributed or utilized as provided in Section 13.3 or 13.4.
Section 13.4 Deemed Distribution and Recontribution. Notwithstanding any
--------------------------------------
other provision of this Article XIII (but subject to Section 13.3(b)), in the
---------------
event the Partnership is liquidated within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g) but no Event of Dissolution 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, 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 specifically provided
--------------------------
in this Agreement, each Limited Partner shall look solely to the assets of the
Partnership for the return of his Capital Contribution and shall have no right
or power to demand or receive property other than cash from the Partnership.
Except as specifically provided in this Agreement, no Limited Partner shall have
priority over any other Limited Partner as to the return of his Capital
Contributions, distributions, or allocations.
Section 13.6 Notice of Dissolution. In the event an Event of Dissolution
---------------------
or an event occurs that would, but for provisions of Section 13.1, result in a
------------
dissolution of the Partnership, the General Partner shall, within 30 days
thereafter, provide written notice thereof to each of the Partners and to all
other parties with whom the Partnership regularly conducts business (as
determined in the discretion of the General Partner) and shall publish notice
thereof in a newspaper of general circulation in each place in which the
Partnership regularly conducts business (as determined in the discretion of the
General Partner).
Section 13.7 Cancellation of Certificate of Limited Partnership. Upon the
--------------------------------------------------
completion of the liquidation of the Partnership as provided in Section 13.2
------------
hereof, the Partnership shall be terminated and the Certificate 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.
56
<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.
ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14. Amendments.
----------
(a) General. Amendments to this Agreement may be proposed by the
-------
General Partner or by any Limited Partners holding 25 percent 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. Except as provided in Section
-------
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 Limited Partners holding a majority of the
Percentage Interests of the Limited Partners.
(b) General Partner's Power to Amend. 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 for the benefit of the Limited Partners any right or power
granted to the General Partner or any Affiliate of the General
Partner;
(2) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement;
(3) to set forth the rights, powers, duties, and preferences of
the holders of any additional Partnership Interests issued pursuant to
Section 4.2(b) 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
57
<PAGE>
(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 will provide notice to the Limited Partners when
any action under this Section 14.1(b) is taken.
---------------
(c) Consent of Adversely Affected Partner Required. Notwithstanding
----------------------------------------------
Section 14.1(a) and Section 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's interest, (ii) modify the limited liability of a
Limited Partner, (iii) alter rights of the Partner to receive distributions
pursuant to Article V, or the allocations specified in Article VI (except
as permitted pursuant to Section 4.2 and Section 14.1(b)(3) hereof), (iv)
----------- ------------------
alter or modify the Conversion Right or the Redemption Amount as set forth
in Sections 4.2(e), 8.6 and 11.2(b), and related definitions hereof, (v)
--------------- --- -------
cause the termination of the Partnership prior to the time set forth in
Sections 2.5 or 13.1, (vi) amend this Section 14.1(c) or (vii) amend
------------ ---- ---------------
Article VI or any definition used therein that would have the effect of
causing the allocations in Article VI to fail to comply with the
requirements of Section 514(c)(9)(E) of the Code. Further, no amendment may
alter the restrictions on the General Partner's authority set forth in
Section 7.3 without the Consent specified in that section.
-----------
(d) When Consent of Majority of Limited Partnership Interests
---------------------------------------------------------
Required. Notwithstanding Section 14.1(a) hereof, the General Partner
-------- ---------------
shall not amend Section 4.2(b), the second sentence of Section 7.1(a),
-------------- --------------
Sections 7.5, 7.6, 7.8, 11.2, and 13.1(c), this Section 14.1(d) or Section
------------ --- --- ---- ------- --------------- -------
14.2 without the Consent of two-thirds of the Percentage Interests of the
----
Limited Partners.
Section 14. Meetings of the Partners.
------------------------
(a) General. 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 holding 25 percent or more of the
Partnership Interests. The call 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 days nor more than 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 Partners is permitted or required under this
Agreement, such vote or Consent may be given at a meeting of Partners or
may be given in accordance with the procedure prescribed in Section 14.1
------------
hereof. Except as otherwise expressly provided in this Agreement, the
Consent of holders of a majority of the Percentage Interests shall control.
(b) Informal Action. 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
58
<PAGE>
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) Proxies. 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 11 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.
(d) Conduct of Meeting. Each meeting of 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.
ARTICLE XV
GENERAL PROVISIONS
Section 15.1 Addresses and Notice. All notices and demands under this
--------------------
Agreement shall be in writing, and may be either delivered personally (which
shall include deliveries by courier), by telefax, telex or other wire
transmission (with request for assurance of receipt in a manner appropriate with
respect to communications of that type, provided that a confirmation copy is
concurrently sent by a nationally recognized express courier for overnight
delivery) or mailed, postage prepaid, by certified or registered mail, return
receipt requested, directed to the parties at their respective addresses set
forth on Exhibit A, as it may be amended from time to time, and, if to the
Partnership, such notices and demands sent in the aforesaid manner must be
delivered at its principal place of business set forth above. Unless delivered
personally or by telefax, telex or other wire transmission as above (which shall
be effective on the date of such delivery or transmission), any notice shall be
deemed to have been made three (3) days following the date so mailed. Any party
hereto may designate a different address to which notices and demands shall
thereafter be directed by written notice given in the same manner and directed
to the Partnership at its office hereinabove set forth.
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.
59
<PAGE>
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 Waiver of Partition. The Partners hereby agree that the
-------------------
Partnership properties are not and will not be suitable for partition.
Accordingly, each of the Partners hereby irrevocably waives any and all rights
(if any) that it may have to maintain any action for partition of any of the
Partnership properties.
Section 15.7 Entire Agreement. This Agreement constitutes the entire
----------------
agreement among the parties with respect to the matters contained herein; it
supersedes any prior agreements or understandings among them and it may not be
modified or amended in any manner other than pursuant to Article XIV.
Section 15.8 Securities Law Provisions. The Partnership Units have not
-------------------------
been registered under the Federal or state securities laws of any state and,
therefore, may not be resold unless appropriate Federal and state securities
laws, as well as the provisions of Article XI hereof, have been complied with.
Section 15.9 Remedies Not Exclusive. Any remedies herein contained for
----------------------
breaches of obligations hereunder shall not be deemed to be exclusive and shall
not impair the right of any party to exercise any other right or remedy, whether
for damages, injunction or otherwise.
Section 15.10 Time. Time is of the essence of this Agreement.
----
Section 15.11 Creditors. None of the provisions of this Agreement shall be
---------
for the benefit of, or shall be enforceable by, any creditor of the Partnership.
Section 15.12 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 15.13 Execution Counterparts. This Agreement may be executed in
----------------------
counterparts, all of which together shall constitute one agreement binding on
all the parties hereto,
60
<PAGE>
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 15.14 Applicable Law. This Agreement shall be construed in
--------------
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.
Section 15.15 Invalidity of Provisions. If any provision of this Agreement
------------------------
is or becomes invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not be affected thereby.
ARTICLE XVI
POWER OF ATTORNEY
Section 16.1 Power of Attorney.
-----------------
(a) Scope. Each Limited Partner and each Assignee 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, publish, file and
record in the appropriate public offices (a) all certificates,
documents and other instruments (including, without limitation, this
Agreement and the Certificate 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 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 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 XI, XII or XIII hereof or
the Capital Contribution of any Partner; and (e) all certificates,
documents and other instruments relating to the determination of the
rights, preferences and privileges of Partnership Interests; and
(2) execute, swear to, 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, 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
61
<PAGE>
or necessary, in the sole discretion of the General Partner, to
effectuate the terms or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General
Partner to amend this Agreement except in accordance with Article XIV
hereof or as may be otherwise expressly provided for in this Agreement.
(b) Irrevocability. 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 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, 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, 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
15 days after receipt of the General Partner'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.
62
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Agreement of Limited Partnership of Cabot Industrial Properties,
L.P. as of the date first written above.
GENERAL PARTNER:
Cabot Industrial Trust
By: ___________________________
Name: Robert E. Patterson
Title: President
WITHDRAWING INITIAL LIMITED PARTNER:
________________________________
Name: Ferdinand Colloredo-Mansfeld
LIMITED PARTNERS:
Name of Limited Partner:
________________________________
By: ____________________________
Name:
Title:
63
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
PARTNERS, CONTRIBUTIONS AND
PARTNERSHIP INTERESTS
Name and Address Agreed Value of Partnership Percentage
of Partner Contributed Property Units Interest
- ------------------ -------------------- ----------- ----------
<S> <C> <C> <C>
General Partner
- ---------------
Cabot Industrial Trust
Limited Partners
- ----------------
Total
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT B
VALUE OF CONTRIBUTED PROPERTY
Underlying Property Basis Agreed Value
- ------------------- ----- ------------
<S> <C> <C>
</TABLE>
2
<PAGE>
EXHIBIT C
NOTICE OF CONVERSION
The undersigned hereby irrevocably (a) elects to exercise its Conversion
Right set forth in the Amended and Restated Agreement of Limited Partnership of
Cabot Industrial Properties, L.P. (the "Partnership Agreement"; capitalized
terms used and not otherwise defined herein shall have the meanings assigned to
such terms in the Partnership Agreement), with respect to an aggregate of
__________ Partnership Units, (b) surrenders such Partnership Units and all
right, title and interest therein, and (c) directs that the Common Shares (or
applicable Redemption Amount if so determined by the General Partner)
deliverable upon exercise of the Conversion Right be delivered to the address
specified below, and if Common Shares are to be delivered, such Common Shares
be registered or placed in the name(s) and at the address(es) specified below.
Dated: ____________
Name of Limited Partner:_________________________________________
_____________________________
(Signature of Limited Partner)
-_____________________________
(Street Address)
______________________________
(City) (State) (Zip Code)
Signature Guaranteed by:
______________________________
If Common Shares are to be issued, issue to:
Please insert social security or identifying number:
Name:
C-1
<PAGE>
EXHIBIT D
FORM OF UNIT CERTIFICATE
Attached
D-1
<PAGE>
NON-NEGOTIABLE, NON-TRANSFERABLE, NON-ASSIGNABLE
CABOT INDUSTRIAL PROPERTIES, L.P.
The undersigned hereby acknowledges that Units in Cabot Industrial
Properties, L.P. (the "Partnership"), organized under the Revised Uniform
Limited Partnership Act of the State of Delaware, are registered on the records
of said Partnership in the amount and in the name set forth below:
<TABLE>
<CAPTION>
CERTIFICATE SOCIAL SECURITY OR TAXPAYER
NUMBER NAME AND ADDRESS IDENTIFICATION NUMBER NUMBER OF UNITS
- -------------- ---------------- --------------------------- ---------------
<S> <C> <C> <C>
</TABLE>
This document has been issued solely to evidence that the above number of
Units stands in the name of such holder of Units, as of the date appearing
hereon, in the Partnership's Amended and Restated Agreement of Limited
Partnership, as amended (the "Partnership Agreement"), pursuant to Article IV of
the Partnership Agreement, and does not grant or carry with it any rights to the
income, profits or assets of the Partnership, such rights being derived solely
from the Partnership Agreement. This document is NON-NEGOTIABLE, NON-
TRANSFERABLE and NON-ASSIGNABLE. Assignment of Units can only be accomplished
in accordance with the procedure set forth in the Partnership Agreement, and
such assignment is subject to certain limitations contained in Articles IV and
XI of the Partnership Agreement, including a provision that the substitution of
any assignee of Units as a Limited Partner of the Partnership shall be subject
to the consent of the General Partner, which consent may be granted or withheld
in its sole discretion. Subject to Sections 8.6 and 11.7 of the Partnership
Agreement, beginning one year after the Effective Date or earlier with the
consent of the General Partner, a holder of Units has the right to exchange
Units for Common Shares of the General Partner as provided in Section 4.2 of the
Partnership Agreement. Subject to certain limited exemptions, Limited Partners
are prohibited from offering, selling, contracting to sell or otherwise
disposing of any Units or Common Shares obtained in exchange of Units for a
period of one year from the Effective Date without the prior written consent of
the General Partner. THIS DOCUMENT IS NOT A SECURITY UNDER THE APPLICABLE
PROVISIONS OF THE UNIFORM COMMERCIAL CODE, AND NEGOTIATION, TRANSFER OR
ASSIGNMENT OF INTERESTS CANNOT BE ACCOMPLISHED BY ANY ATTEMPT TO NEGOTIATE,
TRANSFER OR ASSIGN THIS DOCUMENT. Copies of the Partnership Agreement may be
obtained from the General Partner by contacting Cabot Industrial Trust, Two
Center Plaza, Suite 200, Boston, Massachusetts, 02108, Attention: Secretary.
Terms used herein have the meanings ascribed to such terms in the Partnership
Agreement.
THE UNITS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED ABSENT
REGISTRATION THEREUNDER OR EXEMPTION THEREFROM.
Date: ______________
____________________________________
Chief Executive Officer
Cabot Industrial Trust
General Partner
D-2
<PAGE>
CONTRIBUTION AGREEMENT
RELATING TO
THE CAPITALIZATION
OF
CABOT INDUSTRIAL TRUST
BY
AND
AMONG
CABOT INDUSTRIAL TRUST
CABOT INDUSTRIAL PROPERTIES, L.P.
CABOT PARTNERS LIMITED PARTNERSHIP
AND
VARIOUS CONTRIBUTORS AND TITLE HOLDING ENTITIES IDENTIFIED HEREIN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1: DEFINITIONS............................................................ 2
1.1 Definitions.......................................................... 2
ARTICLE 2: CONTRIBUTION PROVISIONS................................................ 10
2.1 Partnership Merger Contributors...................................... 10
2.2 Stock Contributors; Partnership Merger............................... 10
2.3 Property Contributors................................................ 11
2.4 Partnership Interest Contributors.................................... 11
2.5 Contribution of Assets of Cabot Partners............................. 11
2.6 Title Insurance...................................................... 12
2.7 Survey............................................................... 14
2.8 Access to Information; Environmental Audits.......................... 15
2.9 UCC Searches......................................................... 15
ARTICLE 3: COVENANTS AND OTHER AGREEMENTS......................................... 16
3.1 Implementing Agreement............................................... 16
3.2 Preservation of Business............................................. 16
3.3 Consents and Approvals............................................... 16
3.4 Maintenance of Insurance............................................. 17
3.5 Exclusivity.......................................................... 17
3.6 New Contracts and Liens.............................................. 17
3.7 Leasing Arrangements................................................. 17
3.8 Obligation to Supplement Information................................. 18
3.9 TI and Repair Contracts.............................................. 18
3.10 Damage............................................................... 18
3.11 Condemnation......................................................... 19
3.12 Material Agreements.................................................. 19
3.13 Clients of Cabot Partners............................................ 19
3.14 Completion of IPO.................................................... 20
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF CONTRIBUTORS AND TITLE
HOLDING ENTITIES....................................................... 20
4.1 Due Organization..................................................... 20
4.2 Due Authorization.................................................... 21
4.3 Conflicts............................................................ 21
4.4 Litigation........................................................... 22
4.5 Contractors and Suppliers; Service, TI and Repair Contracts.......... 22
4.6 Leases and Rent Roll................................................. 22
4.7 Operating Statements................................................. 23
4.8 Permits, Legal Compliance and Notice of Defects...................... 23
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
4.9 Environmental........................................................ 24
4.10 Utilities............................................................ 24
4.11 Ownership of the Title Holding Entities and Properties............... 25
4.12 Distributions and Payments........................................... 26
4.13 Securities........................................................... 26
4.14 No Brokers........................................................... 27
4.15 Solvency............................................................. 27
4.16 Certain Tax Matters.................................................. 27
ARTICLE 5: REPRESENTATIONS AND WARRANTIES OF CABOT PARTNERS....................... 28
5.1 Due Organization..................................................... 28
5.2 Due Authorization.................................................... 28
5.3 Conflicts............................................................ 29
5.4 Litigation........................................................... 29
5.5 Contractors and Suppliers............................................ 29
5.6 Solvency............................................................. 29
5.7 Names, Franchises, Permits, Etc...................................... 29
5.8 Title and Condition of Cabot Partner Assets.......................... 30
5.9 Intangible Personal Property......................................... 30
5.10 Investment Advisory and Property Management Contracts................ 30
5.11 Licenses and Permits; Compliance with Laws........................... 30
5.12 Securities........................................................... 31
5.13 No Brokers........................................................... 32
5.14 Financial Statements................................................. 32
5.15 Distributions and Payments........................................... 32
ARTICLE 6: REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PARTNERSHIP
6.1 Due Organization..................................................... 32
6.2 Due Authorization.................................................... 32
6.3 Conflicts............................................................ 33
6.4 Litigation........................................................... 33
6.5 Solvency............................................................. 33
6.6 Written Materials.................................................... 33
6.7 No Brokers........................................................... 33
6.8 Financial Statements................................................. 34
6.9 REIT, Partnership and REOC Status.................................... 34
ARTICLE 7: CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE
PARTNERSHIP............................................................ 34
7.1 Representations and Warranties....................................... 34
7.2 Compliance with Agreements and Covenants............................. 34
7.3 Tenant Estoppels..................................................... 35
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
7.4 Other Contracts...................................................... 35
7.5 Legal Proceedings.................................................... 35
7.6 IPO Closing.......................................................... 35
7.7 Title Holding Entity Consolidation................................... 36
7.8 Cabot Partners Contribution.......................................... 36
7.9 Consents and Approvals............................................... 36
7.10 Other Conditions..................................................... 36
ARTICLE 8: CONDITIONS PRECEDENT TO OBLIGATIONS OFCABOT PARTNERS................... 36
8.1 Representations and Warranties....................................... 36
8.2 Compliance with Agreements and Covenants............................. 36
8.3 Legal Proceedings.................................................... 37
8.4 IPO Closing.......................................................... 37
8.5 Consents and Approvals............................................... 37
8.6 Other Conditions..................................................... 37
ARTICLE 9: CONDITIONS PRECEDENT TO OBLIGATIONS OF CONTRIBUTORS
AND TITLE HOLDING ENTITIES............................................. 37
9.1 Representations and Warranties....................................... 37
9.2 Compliance with Agreements and Covenants............................. 38
9.3 Cabot Partner Contracts.............................................. 38
9.4 Legal Proceedings.................................................... 38
9.5 IPO Closing.......................................................... 38
9.6 Minimum Asset Size................................................... 38
9.7 Consents and Approvals............................................... 38
9.8 Other Conditions..................................................... 38
ARTICLE 10: CLOSING............................................................... 39
10.1 Closing.............................................................. 39
10.2 Deliveries by Contributors and Title Holding Entities................ 39
10.3 Deliveries by the Company and the Partnership........................ 41
10.4 Deliveries by Cabot Partners......................................... 42
ARTICLE 11: PRORATIONS AND ADJUSTMENTS............................................ 43
11.1 Prorations........................................................... 43
11.2 Tenant Reconciliations and Post-Closing Adjustments.................. 46
11.3 Leasing Commissions.................................................. 46
11.4 TI Contracts, Tenant Allowances and Capital Improvements............. 46
11.5 Repair Contracts..................................................... 48
11.6 Tenant Deposits...................................................... 48
11.7 Wages................................................................ 48
11.8 Utility Deposits..................................................... 48
11.9 Proration for Cabot Partners......................................... 49
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
11.10 Sales Commissions.................................................... 49
11.11 Certain Tax Matters.................................................. 49
ARTICLE 12: TERMINATION AND REMEDIES.............................................. 49
12.1 Termination.......................................................... 49
12.2 Effect of Termination................................................ 50
12.3 Termination as to Specific Properties................................ 50
ARTICLE 13: INDEMNIFICATION....................................................... 50
13.1 Contributors', Title Holding Entities' and Equity Holders'
Indemnity............................................................ 50
13.2 Cabot Partners' Indemnity............................................ 51
13.3 Partnership's Indemnity.............................................. 51
13.4 Company's Indemnity.................................................. 52
13.5 Environmental Excluded............................................... 52
13.6 Procedure............................................................ 52
13.7 Limitation on Liability.............................................. 52
13.8 Exclusivity.......................................................... 53
ARTICLE 14: MISCELLANEOUS......................................................... 53
14.1 Survival............................................................. 53
14.2 Expenses............................................................. 53
14.3 Additional Actions and Documents..................................... 53
14.4 Remedies Cumulative.................................................. 54
14.5 Entire Agreement; Amendment.......................................... 54
14.6 Notices.............................................................. 54
14.7 Waivers.............................................................. 54
14.8 Counterparts......................................................... 54
14.9 Governing Law........................................................ 54
14.10 Assignment........................................................... 55
14.11 No Third Party Beneficiaries......................................... 55
14.12 Confidentiality...................................................... 55
14.13 Severability......................................................... 57
14.14 Company Access to Information........................................ 57
14.15 Information and Audit Cooperation.................................... 57
14.16 Binding Effect....................................................... 57
14.17 Headings............................................................. 57
14.18 Representations and Warranties....................................... 57
14.19 Limitation of Liability.............................................. 57
14.20 Waiver of Jury Trial................................................. 58
</TABLE>
iv
<PAGE>
EXHIBITS
<TABLE>
<S> <C> <C>
A - Form of Partnership Agreement
B - Form of Registration Rights and Lock-Up Agreement
C - Form of Partnership Agreement and Plan of Merger
D - Form of Subsidiary Agreement and Plan of Merger
E - Form of Certificate of Dissolution
F - Form of Tenant Estoppel
G - Joint Escrow Instruction Letter
H - Form of Bill of Sale and Assignment
I - Form of Equity Holder Consent
J - Form of Bill of Sale, Assignment and Conveyance
K - Form of Audit Letter
</TABLE>
SCHEDULES
<TABLE>
<S> <C> <C>
A - Properties, Descriptions and Contribution Amounts per Title
Holding Entity
B - Cabot Partner Contracts and Contribution Amount with
Respect to Cabot Partner Assets
1.1 - Acquisition Properties
1.2 - Assumed Mortgage Debt
1.3 - Ownership Unit Calculation Example
1.4 - Current Title Policies
1.5 - Exempt Equity Holders
2.1 - Partnership Merger Title Holding Entities and Equity Holders
2.2 - Stock Contributors and Title Holding Corporations
2.3 - Property Contributors
2.4 - Partnership Interest Contributors and Title Holding Partnerships
4.1 - Persons Having Knowledge for Contributors and Title Holding
Entities
4.9 - Environmental Reports
X - Disclosure Letters
</TABLE>
v
<PAGE>
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT ("Agreement") is made and entered into as of
---------
the ____ day of October, 1997, among the parties set forth on the signature
pages hereto that are designated as a Contributor (together, the "Contributors"
------------
and, individually, a "Contributor"), the parties set forth on the signature
-----------
pages hereto that are designated as Title Holding Entities (as defined herein),
Cabot Partners Limited Partnership, a Massachusetts limited partnership ("Cabot
-----
Partners"), Cabot Industrial Trust, a Maryland real estate investment trust (the
- --------
"Company"), and Cabot Industrial Properties, L.P., a Delaware limited
-------
partnership (the "Partnership"), under the following circumstances:
-----------
RECITALS:
--------
1. Each Title Holding Entity owns, or is in the process of acquiring, the
properties (such properties, together with all other rights, privileges,
hereditaments and interests appurtenant thereto constituting Real Property, and
all Improvements, Leases, Personal Property and Intangible Property (each as
defined herein) relating thereto, the "Properties" and, individually, a
----------
"Property") listed opposite its name on Schedule A.
- --------- ----------
2. The Contributors, the Title Holding Entities, the Partnership and the
Company desire, subject to the terms and conditions hereinafter set forth, that
the Title Holding Entities will contribute the Properties, directly or
indirectly, either to (a) the Partnership in exchange for LP Units (as defined
herein), pursuant to a partnership agreement ("Partnership Agreement")
---------------------
substantially in the form of Exhibit A in which certain of the Contributors and
---------
certain of the Title Holding Entities or their respective Equity Holders (as
defined herein) shall be limited partners and the Company shall be the sole
general partner, or (b) the Company in exchange for Common Shares (as defined
herein) of the Company, in either case as determined according to the
Contribution Amount for, and net equity in, each Property, all as provided for
herein.
3. Subject to the terms and conditions hereinafter set forth, Cabot
Partners will contribute to the Partnership all of Cabot Partners' investment
advisory contracts and property management contracts listed on Schedule B (the
----------
"Cabot Partner Contracts") and the other Cabot Partner Assets (as defined
- ------------------------
herein) in exchange for LP Units, all as provided herein.
4. The Company, Cabot Partners, certain of the Contributors and certain
of the Title Holding Entities or their respective Equity Holders will,
contemporaneously with the IPO Closing Date (as defined herein), enter into a
registration rights and lock-up agreement substantially in the form of Exhibit B
---------
(the "Registration Rights Agreement").
-----------------------------
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby mutually acknowledged, the parties
hereto agree as follows:
1
<PAGE>
ARTICLE 1: DEFINITIONS
----------------------
1.1 Definitions. As used in this Agreement, the following terms shall have
-----------
the following meanings:
"Acquisition Properties" means the Properties set forth on Schedule
---------------------- --------
1.1 which are under contract for purchase by a Title Holding Entity as of
---
the date hereof. Any Acquisition Properties not acquired by such Title
Holding Entity prior to the Determination Date shall not be contributed to
the Partnership pursuant to this Agreement.
"Adjusted Contribution Amount" means, (a) with respect to each Title
----------------------------
Holding Entity, the aggregate Contribution Amount for all Properties
contributed, directly or indirectly, by such Title Holding Entity increased
or decreased as follows: first, by deducting the principal amount of all
-----
then-outstanding mortgage indebtedness encumbering the Properties owned by
such Title Holding Entity as of the Final Allocation Date; second, by
------
adding or deducting, as appropriate, the amount (determined by the Company
in good faith and reasonably acceptable to such Title Holding Entity) by
which the terms of such Title Holding Entity's mortgage indebtedness which
constitutes Assumed Mortgage Debt are above or below prevailing market
terms as of the Final Allocation Date; third, by deducting the amount
-----
(determined by the Company in good faith and agreed to by such Title
Holding Entity) of all liabilities, claims, demands, losses or damages
arising from any breaches by such Title Holding Entity of its
representations and warranties in Article 4 which are known prior to the
---------
Final Allocation Date; fourth, at the election of any Title Holding Entity
------
(which election must be made by written notice to the Company prior to the
Final Allocation Date), by deducting any Net Proration Amount which is due
to the Partnership from such Title Holding Entity (any Net Proration Amount
due to such Title Holding Entity from the Partnership shall be made in cash
in accordance with Article 11); fifth, to the extent provided in Section
---------- ----- -------
3.10, by deducting the amount of any damage (determined by the Company in
----
good faith and agreed to by such Title Holding Entity) to a Property owned
by such Title Holding Entity as determined prior to the Final Allocation
Date; sixth, by deducting the amount of any other known and determinable
-----
liabilities (determined by the Company in good faith and agreed to by such
Title Holding Entity) relating to a Property owned by such Title Holding
Entity as determined prior to the Final Allocation Date; and seventh, by
-------
deducting the Contribution Amount (and not making any adjustments pursuant
to clauses "first" through "sixth" above) for any Properties (i) which,
subsequent to the date hereof and prior to the Determination Time, have
been sold by such Title Holding Entity, or (ii) which, subsequent to the
date hereof and prior to the Determination Time, have been excluded from
the Consolidation pursuant to Section 12.3, or (iii) which, subsequent to
------------
the date hereof and prior to the Determination Time, are Acquisition
Properties which have not yet been acquired by such Title Holding Entity,
(b) with respect to each Contributor or Equity Holder, its percentage share
(as set forth on Schedule 2.1, 2.2 or 2.4) of the Adjusted Contribution
------------ --- ---
Amount of each Title Holding Entity in which it has an ownership interest
(as determined in clause (a) above), and (c) with respect to Cabot
Partners, its Contribution Amount decreased by deducting the amount
(determined by the Company in good faith and agreed
2
<PAGE>
to by Cabot Partners) of all liabilities, claims, demands, losses or
damages arising from any breaches by Cabot Partners of its representations
and warranties in Article 5 which are known prior to the Final Allocation
---------
Date. If any of the items discussed in clauses "third," "fourth," "fifth"
and "sixth" above have occurred, but there has not been agreement between
the Company and the applicable party on or before the required adjustment
date as set forth above, then, to the extent of such disagreement, such
item shall not result in an adjustment to the Contribution Amount of such
party, provided, that no party shall be deemed to have waived any of its
--------
other rights or remedies with respect to such item.
"Assignment" has the meaning set forth in Section 10.2(b).
---------- ---------------
"Assumed Mortgage Debt" means the existing mortgage indebtedness as
---------------------
set forth on Schedule 1.2 which encumbers certain of the Properties to be
------------
contributed, directly or indirectly, by Title Holding Entities to the
Partnership and which indebtedness will be assumed by the Partnership at
the Closing.
"Business Day" means any day of the year other than Saturday, Sunday
------------
or any other day on which banks located in New York, New York generally are
closed for business.
"Cabot Client" has the meaning set forth in Section 3.13.
------------ ------------
"Cabot Partners" means Cabot Partners Limited Partnership, a
--------------
Massachusetts limited partnership.
"Cabot Partner Assets" has the meaning set forth in Section 2.5.
-------------------- -----------
"Cabot Partner Contracts" has the meaning set forth in the Recitals.
-----------------------
"Closing" has the meaning set forth in Section 10.1.
------- ------------
"Closing Date" has the meaning set forth in Section 10.1.
------------ ------------
"C-M Holdings" means C-M Holdings Limited Partnership, a Massachusetts
------------
limited partnership.
"C-M Partnerships" means those partnerships which own, directly or
----------------
indirectly, one or more Properties and in which C-M Holdings is a general
partner, as set forth on Schedule A.
----------
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Common Shares" means common shares of beneficial interest, par value
-------------
$0.01 per share, of the Company.
3
<PAGE>
"Company" has the meaning set forth in the Preamble.
-------
"Consolidation" means the consolidation of the Properties and the
-------------
Cabot Partner Assets as contemplated by this Agreement.
"Consolidation Expenses" means all costs and expenses reasonably
----------------------
incurred by Cabot Partners, the Company and the Partnership in structuring
and consummating the Consolidation, including, but not limited to, legal
fees, advisory fees, accounting fees, environmental audit and engineering
fees, transfer taxes, title insurance and survey fees, lender fees and all
other costs and expenses in connection with (a) the formation and
organization of the Partnership and the Company, (b) the structuring of the
terms and conditions of the Consolidation, (c) the offering and issuance of
Common Shares and Units, (d) all steps taken to conduct the transaction in
compliance with applicable Federal and state corporate, partnership,
securities and other laws, (e) the receipt of all necessary consents and
approvals, including those required from regulatory bodies on or before
(and remaining in effect at the consummation of) the Consolidation, (f) the
solicitation of the Contributors, the Title Holding Entities and the Equity
Holders to participate in the Consolidation and (g) the acquisition by the
Partnership in the Consolidation of the assets and the assumption of the
Assumed Mortgage Debt. All environmental audit and engineering fees,
transfer taxes and title insurance and survey fees incurred specifically in
connection with the Consolidation shall be paid by the Company and the
Partnership and shall be considered "Consolidation Expenses".
----------------------
"Consolidation Expenses", however, do not include costs and expenses which
-----------------------
have been incurred by Cabot Partners or the Title Holding Entities in the
ordinary course of business which are not related to the Consolidation,
costs related to the Consolidation as to which the Contributors, the Title
Holding Entities, the Equity Holders and Cabot Partners have agreed
separately to bear directly, or costs related to the independent review of
the Consolidation by the Contributors, the Title Holding Entities, the
Equity Holders or their own individual investment advisors and legal
counsel.
"Contributed Capital" means, as of the Closing, the sum of (a) the
-------------------
aggregate Adjusted Contribution Amount of all Title Holding Entities and
Cabot Partners and (b) the product of the IPO Share Price and the number of
Common Shares issued to the public in the IPO.
"Contribution Amount" means, (a) with respect to each Title Holding
-------------------
Entity, the dollar amount assigned individually to each Property, and in
the aggregate to all Properties to be contributed, directly or indirectly,
by such Title Holding Entity, as set forth on Schedule A, (b) with respect
----------
to each Contributor or Equity Holder, its percentage share (as set forth on
Schedule 2.1, 2.2 or 2.4) of the Contribution Amount of each Title Holding
------------ --- ---
Entity in which it has an ownership interest as determined in clause (a)
above and (c) with respect to Cabot Partners, the dollar amount assigned to
the Cabot Partner Assets, as set forth on Schedule B.
----------
"Contributors" has the meaning set forth in the Preamble.
------------
4
<PAGE>
"Determination Time" means the time at which the Form S-11
------------------
registration statement of the Company for the IPO is declared effective by
the Securities and Exchange Commission.
"Environmental Laws" has the meaning set forth in Section 4.9.
------------------ -----------
"Equity Holders" means the equity holders of the Title Holding
--------------
Entities listed on Schedule 2.1.
------------
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Fair Market Value" means, with respect to any Common Shares or Units,
-----------------
the closing sales price if the Common Shares are listed on a national
securities exchange, or if not so listed, as reported on the NASDAQ
National Market System, or if there have been no sales on any such exchange
or the NASDAQ National Market System on any day, the average of the highest
bid and lowest asked prices at the end of such day, or if on any day the
Common Shares are not so listed, the average of the representative bid and
asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, on
such day, or if on any day the Common Shares are not so quoted, the average
of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case
averaged over a period of 21 days consisting of the day as of which "Fair
----
Market Value" is being determined and the 20 consecutive business days
------------
prior to such day; provided that, if the Common Shares are listed on any
--------
national securities exchange, the term "business days" as used in this
-------------
sentence means business days on which such exchange is open for trading. If
at any time the Common Shares are not listed on any national securities
exchange or the NASDAQ National Market System or quoted in the NASDAQ
System or the domestic over-the-counter market, the "Fair Market Value"
-----------------
shall be the fair value thereof determined in good faith by the Company's
Board of Trustees.
"Final Allocation Date" means the last day of the calendar month first
---------------------
preceding the month in which the final preliminary prospectus generally
distributed to prospective purchasers in connection with the IPO is dated.
"Financial Advisor" means Robert A. Stanger & Co., Inc., which has
-----------------
been engaged on behalf of certain Title Holding Entities and Equity Holders
and has delivered an opinion dated September 30, 1997 relating to the
fairness of the Consolidation to the Title Holding Entities and Equity
Holders (other than those affiliated with C-M Holdings), from a financial
point of view.
"GP Units" means partnership units issued to the Company as general
--------
partner evidencing ownership in the Partnership as provided in the
Partnership Agreement.
"Hazardous Materials" has the meaning set forth in Section 4.9.
------------------- -----------
5
<PAGE>
"Improvement" has the meaning set forth in the definition of Real
-----------
Property.
"Intangible Property" means, with respect to each Property, all
-------------------
intangible property now or on the Closing Date owned by the Title Holding
Entities (or in which the Title Holding Entities have any interest, but
only to the extent of such interest) and used in connection with the Real
Property or the Personal Property, to the extent assignable in accordance
with its terms or under applicable law, including, without limitation, all
right, title and interest in and to all: licenses, approvals, applications
and permits issued or approved by any governmental authority and relating
to the use, operation, ownership, occupancy and/or maintenance of the Real
Property or the Personal Property; TI Contracts, Repair Contracts and
Service Contracts; utility arrangements; indemnities; claims against third
parties; plans; drawings; specifications; surveys; maps; engineering
reports and other technical descriptions; books and records; insurance
proceeds and condemnation awards; and all other intangible rights used in
connection with or relating to the Real Property or the Personal Property,
including rights, if any, to current and past names of the Real Property.
"IPO" means the initial public offering of Common Shares of the
---
Company.
"IPO Closing Date" means the date on which the IPO is consummated.
----------------
"IPO Filing Date" means the date on which the Form S-11 registration
---------------
statement relating to the IPO is first filed with the Securities and
Exchange Commission.
"IPO Proceeds" means, with respect to each Contributor, Title Holding
------------
Entity or Equity Holder and Cabot Partners, an amount equal to the product
obtained by multiplying the Ownership Units issued to such Contributor,
Title Holding Entity or Equity Holder or Cabot Partners, as the case may
be, by the IPO Share Price.
"IPO Share Price" means the initial public offering price of the
---------------
Common Shares in the IPO.
"Landlord Default" has the meaning set forth in Section 7.3.
---------------- -----------
"Leases" means, with respect to each Property, all leases and other
------
agreements granting the right to occupy or use the Improvements, including
leases which may be made by the Title Holding Entities after the date
hereof and before the Closing as permitted by this Agreement.
"Lien" means any mortgage, lien (statutory or other), charge,
----
restriction, pledge, security interest, option, lease or sublease, claim,
right of any third party, easement, encroachment or other encumbrance.
"LP Units" means partnership units issued to a limited partner
--------
evidencing ownership in the Partnership as provided in the Partnership
Agreement.
6
<PAGE>
"Net Proration Amount" means, with respect to each Title Holding
--------------------
Entity in relation to the Company and the Partnership, an amount equal to
the sum of all the credits and debits between such parties with respect to
the items to be prorated under Article 11 of this Agreement.
----------
"Operating Expense Pass-Throughs" has the meaning set forth in Section
------------------------------- -------
11.1(c).
-------
"Ownership Units" means, with respect to each Contributor, Title
---------------
Holding Entity or Equity Holder or Cabot Partners, as the case may be, a
number of LP Units or Common Shares, as the case may be as provided in
Article 2, equal to the product of: (a) the quotient of (i) the Adjusted
---------
Contribution Amount for such Contributor, Title Holding Entity or Equity
Holder or Cabot Partners, as the case may be, divided by (ii) the sum of
the Adjusted Contribution Amounts for all Title Holding Entities and Cabot
Partners (without regard to the proceeds from the IPO) multiplied by (b)
the excess of (i) the quotient of (A) the number of Common Shares (without
regard to any over-allotment option) of the Company sold in the IPO divided
by (B) the fractional ownership interest (expressed in decimal form) in the
Partnership that the GP Units corresponding to the Common Shares sold in
the IPO (without regard to any over-allotment option) represent as a
fraction of all Units at such time minus (ii) the number of Common Shares
sold in the IPO (without regard to any over-allotment option). An example
of the calculation of Ownership Units is set forth on Schedule 1.3.
------------
"Partnership" has the meaning set forth in the Preamble.
-----------
"Partnership Agreement" has the meaning set forth in the Recitals.
---------------------
"Partnership Agreement and Plan of Merger" has the meaning set forth
----------------------------------------
in Section 2.1.
-----------
"Partnership Interest Contributor" means each Contributor which owns
--------------------------------
an interest in a Title Holding Partnership, as set forth on Schedule 2.4.
------------
"Permitted Exceptions" means (a) those exceptions contained on
--------------------
Schedule "B" of the title policy currently held by the applicable Title
Holding Entity, a list of which title policies is set forth on Schedule 1.4
------------
(excluding Liens securing or evidencing indebtedness other than Assumed
Mortgage Debt), (b) such additional encumbrances as do not adversely affect
the use, value or marketability of the Property affected thereby, (c) those
additional matters that may be specifically approved in writing by the
Company (which approval shall not be unreasonably withheld), (d) the
Leases, (e) Liens for taxes which are not yet due and payable and (f) Liens
evidencing or securing Assumed Mortgage Debt to the extent and in the
manner such Liens are in existence on the date hereof.
"Person" means any individual, corporation, partnership, limited
------
liability company, trust, unincorporated organization, association or other
entity.
7
<PAGE>
"Personal Property" means, with respect to each Property, all tangible
-----------------
property owned by the Title Holding Entities (or in which the Title Holding
Entities have any interest, but only to the extent of such interest) now or
on the Closing Date and used in conjunction with the operation,
maintenance, ownership and/or occupancy of the Real Property including,
without limitation: furniture; furnishings; art work; sculptures;
paintings; office equipment and supplies; landscaping; plants; lawn
equipment; and whether stored on or off the Real Property, tools and
supplies, maintenance equipment, materials and supplies used in connection
with the operation, maintenance, ownership or occupancy of the Real
Property, shelving and partitions and any construction and finish materials
and supplies not incorporated into the Improvements and held for repairs
and replacements thereto, wherever located. The Personal Property does not
include tools, supplies and equipment owned by the property manager.
"Private Offering Materials" means the private offering materials
--------------------------
distributed to the Contributors, the Title Holding Entities and the Equity
Holders by letter dated as of September 15, 1997 from the Company, together
with any amended or supplemental materials regarding the Consolidation
distributed prior to the date of this Agreement by the Company to all
Contributors, Title Holding Entities and Equity Holders.
"Property" has the meaning set forth in the Recitals and each Property
--------
is described on Schedule A.
----------
"QPAM" means U.S. Trust Company of California, N.A., which has been
----
engaged as a qualified professional asset manager by certain Equity Holders
as set forth on Schedule 1.5.
------------
"Real Property" means, with respect to each Property, the fee simple
-------------
absolute estate (or other estate set forth on Schedule A) in and to the
----------
real property described or referred to on Schedule A, together with all
----------
rights, privileges, hereditaments and interests appurtenant thereto
including, without limitation: any water and mineral rights, development
rights, air rights, easements and any and all rights of the Title Holding
Entities in and to any streets, alleys, passages and other rights of way;
and all buildings and other improvements located on or affixed to such real
property and all replacements and additions thereto (collectively,
"Improvements").
-------------
"Registration Rights Agreement" has the meaning set forth in the
-----------------------------
Recitals.
"Rent Roll" means the rent roll(s) specified in Section 4.6.
--------- -----------
"Repair Contracts" has the meaning set forth in Section 3.9.
---------------- -----------
"Revenue Ruling" means the ruling requested, on behalf of certain
--------------
corporations qualifying under Section 501(c)(25) of the Code, pursuant to a
letter ruling request dated August 13, 1997, regarding the effect of a
state law merger of such a corporation.
8
<PAGE>
"Securities Act" has the meaning set forth in Section 4.13.
-------------- ------------
"Service Contracts" means, with respect to each Property, all
-----------------
management, service, supply, equipment rental and other contracts related
to the operation of the Real Property or the Personal Property.
"Stock Contributors" means each Contributor which owns any of the
------------------
outstanding capital stock of a Title Holding Corporation, as set forth on
Schedule 2.2.
------------
"Subsidiary Agreement and Plan of Merger" has the meaning set forth in
---------------------------------------
Section 2.2.
-----------
"Tax" or "Taxes" means all taxes, however, denominated, imposed by any
--- -----
federal, state, local or foreign government or any agency or political
subdivision of any government, which taxes shall include, without limiting
the generality of the foregoing, all income or profits taxes (including any
interest, penalties or additions attributable to or imposed on or with
respect to any such taxes), real property gain taxes, payroll and employee
withholding taxes, unemployment insurance taxes, social security taxes,
sales and use taxes, ad valorem taxes, excise taxes, franchise taxes, gross
receipts taxes, business license taxes, workers' compensation, Pension
Benefit Guaranty Corporation premiums and other government charges, and
other obligations of the same or of a similar nature to any of the
foregoing.
"Tax Return" means any return, report, information return or schedule
----------
or other document (including, without limitation, any related or supporting
information or schedule, such as self-employment schedules and returns,
federal Tax Form 1099's for all applicable transactions, property tax
filings, sales and use tax returns, federal and state payroll reports and
federal Tax Form 5500's) filed or required to be filed with any federal,
state, local or foreign governmental entity or other authority in
connection with the determination, assessment or collection of an Tax or
the administration of any laws, regulations or administrative requirements
relating to any Tax.
"TI Contracts" has the meaning set forth in Section 3.9.
------------ -----------
"Title Company" means, at the Company's option, (a) with respect to
-------------
each Property, the title insurance company which issued the owner's policy
currently held by the applicable Title Holding Entity covering such
Property, or (b) a nationally recognized title insurance company acceptable
to the Company.
"Title Holding Corporation" means a Title Holding Entity which is
-------------------------
incorporated under state law.
"Title Holding Entity" means a Title Holding Corporation, Title
--------------------
Holding Partnership or any other entity holding title to a Property.
9
<PAGE>
"Title Holding Partnership" means a Title Holding Entity which is
-------------------------
organized under state law as a general or limited partnership, limited
liability company or trust and is treated as a partnership for U.S. federal
income tax purposes and not as an association taxable as a corporation.
"Underlying Shares" has the meaning set forth in Section 4.13.
----------------- ------------
"Units" means partnership units evidencing ownership in the
-----
Partnership as provided in the Partnership Agreement, whether LP Units or
GP Units.
ARTICLE 2: CONTRIBUTION PROVISIONS
----------------------------------
Upon the terms and subject to the conditions of this Agreement, the events
set forth in this Article 2 shall be effected as of the IPO Closing Date. The
---------
contribution of the Properties and the Cabot Partner Assets to the Partnership
pursuant to this Article 2 shall constitute "Capital Contributions" pursuant to
---------
Section 4.1 of the Partnership Agreement and are intended to be governed by
- -----------
Section 721 of the Code.
2.1 Partnership Merger Contributors. Each Title Holding Entity listed on
-------------------------------
Schedule 2.1 and the Partnership hereby agree to take all actions necessary to
- ------------
cause such Title Holding Entity to be merged with and into the Partnership on
the terms and conditions set forth in an agreement and plan of merger of such
Title Holding Entity with the Partnership substantially in the form of Exhibit C
---------
(the "Partnership Agreement and Plan of Merger"). The Partnership shall issue to
----------------------------------------
the Equity Holders of each such Title Holding Entity on the IPO Closing Date, as
part of such merger of such Title Holding Entity, a number of LP Units equal to
their respective Ownership Unit amounts relating to such Title Holding Entity
(determined as provided in clause (b) of the definition of "Adjusted
Contribution Amount" and in the definition of "Ownership Units").
Notwithstanding the foregoing provisions of this Section 2.1, in the event that
-----------
the Revenue Ruling has not been favorably issued substantially in the manner
requested prior to the Determination Time, the Title Holding Corporations listed
on Schedule 2.1 shall not be merged with and into the Partnership, and each such
------------
Title Holding Corporation represents and warrants that each of its Equity
Holders listed on Schedule 2.1 has agreed that, in such event, it will (i) be a
------------
Stock Contributor as provided in Section 2.2 and (ii) contribute the outstanding
-----------
capital stock of each such Title Holding Corporation as provided in Section 2.2.
-----------
2.2 Stock Contributors; Partnership Merger. Each Stock Contributor hereby
--------------------------------------
agrees to sell to the Company all of the outstanding capital stock of each Title
Holding Corporation listed on Schedule 2.2 opposite its name, free and clear of
------------
all Liens, and the Company hereby agrees to purchase such capital stock and to
issue to such Stock Contributor on the IPO Closing Date a number of Common
Shares equal to its Ownership Unit amount relating to such Title Holding
Corporation (determined as provided in clause (b) of the definition of "Adjusted
Contribution Amount" and in the definition of "Ownership Units"). The Company
and the Partnership shall immediately thereafter take all actions necessary to
cause each such Title Holding Corporation to be merged with and into the
Partnership on the terms and conditions set forth in an agreement and
10
<PAGE>
plan of merger of such Title Holding Corporation with the Partnership
substantially in the form of Exhibit D (the "Subsidiary Agreement and Plan of
--------------------------------
Merger"). The Partnership shall issue to the Company on the IPO Closing Date as
- ------
part of the merger a number of GP Units equal to the aggregate number of Common
Shares issued to the Stock Contributors.
2.3 Property Contributors. Each Title Holding Entity listed on Schedule
--------------------- --------
2.3 hereby agrees to sell, convey and transfer each of the Properties listed on
- ---
Schedule 2.3 opposite its name, subject to no Liens other than Permitted
- ------------
Exceptions, and the Company agrees to purchase such Properties and to issue to
such Title Holding Entity on the IPO Closing Date a number of Common Shares
equal to its Ownership Unit amount. The Company hereby directs that each of such
Properties be conveyed directly at Closing to the Partnership as a contribution
by the Company, and the Partnership shall issue to the Company a number of GP
Units equal to the aggregate number of Common Shares issued to such Title
Holding Entities.
2.4 Partnership Interest Contributors. Each Partnership Interest
---------------------------------
Contributor hereby agrees to sell, transfer and assign to the Partnership all
right, title and interest in and to the partnership interest it holds in the
Title Holding Partnership listed on Schedule 2.4 opposite its name, free and
------------
clear of all Liens, and the Partnership hereby agrees to purchase such
partnership interest and to issue to such Partnership Interest Contributor on
the IPO Closing Date a number of LP Units equal to its Ownership Unit amount
relating to such Title Holding Partnership (determined as provided in clause (b)
of the definition of "Adjusted Contribution Amount" and in the definition of
"Ownership Units"). Upon the contribution of 100% of the partnership interests
in a Title Holding Partnership to the Partnership, the Partnership and the
Partnership Interest Contributors shall execute and record as appropriate a
Certificate of Dissolution substantially in the form of Exhibit E.
---------
2.5 Contribution of Assets of Cabot Partners. Cabot Partners hereby agrees
----------------------------------------
to contribute, transfer and assign to the Partnership (or to a subsidiary of the
Partnership) all of the Cabot Partner Contracts, together with all right, title
and interest to the other assets set forth in clauses (a) through (c) below (the
Cabot Partner Contracts and such other assets, the "Cabot Partner Assets"), free
--------------------
and clear of all Liens, and the Partnership hereby agrees to purchase the Cabot
Partner Contracts and such other assets and to issue to Cabot Partners on the
IPO Closing Date a number of LP Units equal to its Ownership Unit amount. Each
Cabot Partner Contract so contributed which is listed on Schedule B as being
----------
terminated upon the Closing shall be terminated upon the Closing. The other
assets to be sold, transferred and assigned by Cabot Partners to the Partnership
are as follows:
(a) all equipment, furniture, furnishings, supplies, books, records,
software and other items of tangible personal property owned by Cabot
Partners (or in which Cabot Partners has any interest as lessee or
otherwise) and used in connection with the business conducted by Cabot
Partners;
(b) all intangible personal property owned by Cabot Partners (or in
which Cabot Partners has any interest as lessee or otherwise) and used in
connection with the business conducted by Cabot Partners including, without
limitation, all of Cabot Partners' right, title and interest, if any, in
and to all: trade names, trademarks, trademark applications, service
11
<PAGE>
marks, logos or other proprietary information; licenses, approvals,
applications and permits issued or approved by any governmental authority
and relating to the business conducted by Cabot Partners; contracts;
indemnities; claims against third parties; insurance proceeds and
condemnation awards; and all other intangible rights used in connection
with the business conducted by Cabot Partners; and
(c) all other assets, tangible or intangible, used in connection with
the business conducted by Cabot Partners including, without limitation, all
goodwill relating thereto (other than cash except to the extent required
pursuant to the proration provisions in Section 11.9).
------------
Except to the extent expressly provided in this Agreement, neither the
Partnership nor the Company shall assume, or shall be deemed to assume, any
debt, claim or other liability of Cabot Partners.
2.6 Title Insurance.
---------------
(a) Each of the Properties is currently covered by an owner's policy of
title insurance held by the applicable Title Holding Entity. With respect to
each of the Properties (together, the "Title Policy Retention Properties" and,
---------------------------------
individually, a "Title Policy Retention Property") acquired by the Partnership
-------------------------------
as provided in Sections 2.1, 2.2 and 2.4, the Company and the Partnership, to
------------ --- ---
the extent legally permissible, shall (i) maintain the applicable title policy
in full force and effect and (ii) obtain (or cause to be obtained), at the
Company's expense, from the Title Company at Closing the following endorsements
to the existing owner's title insurance policy with respect to such Property, in
each case dated the Closing Date:
(A) a date-down endorsement adding no exceptions to such existing
owner's title insurance policy other than (I) an update of the
real estate and personal property tax exception to except taxes
not yet due and payable and (II) Permitted Exceptions, to the
extent not already included in such existing owner's title
insurance policy;
(B) an assignment endorsement modifying the named insured to be the
Partnership, rather than the Title Holding Entity of such Title
Policy Retention Property;
(C) an endorsement increasing the insured amount to an amount equal
to the Contribution Amount applicable to such Title Policy
Retention Property;
(D) a non-imputation endorsement; and
(E) to the extent not included in such existing owner's title
insurance policy, and available at commercially reasonable rates,
the endorsements and coverages described in Section 2.6(b).
--------------
12
<PAGE>
Such endorsements shall be issued to the Partnership.
(b) With respect to any title insurance policy covering a Title Policy
Retention Property that is not permitted by law to be endorsed in the manner
contemplated by Section 2.6(a) and with respect to the remaining Properties
--------------
which are not Title Policy Retention Properties, the Company or the Partnership
shall obtain (or cause to be obtained), at the Company's expense, from the Title
Company at Closing an owner's title insurance policy issued by the Title Company
in favor of the Partnership, (i) dated the Closing Date, (ii) in the full amount
of the Contribution Amount with respect to the applicable Property, (iii) in the
form of an American Land Title Association Owner's Policy, Standard Form B (or
such other form as is acceptable to the Company, if such ALTA form is not
available in the state in which the applicable Property is located), (iv)
subject only to the standard exclusions from coverage contained in such policy
and the Permitted Exceptions, with full extended coverage over all standard and
general exceptions (where available), and (v) which policy shall contain the
following endorsements, if available in such state:
(A) an ALTA 3.1 zoning endorsement;
(B) a non-imputation endorsement;
(C) an owner's comprehensive endorsement;
(D) an access endorsement;
(E) a contiguity endorsement, if applicable;
(F) a survey endorsement; and
(G) such other endorsements as the Company shall reasonably require
after review of the survey, title insurance commitment and
Leases.
(c) The transactions contemplated by this Article 2 shall be closed by
---------
means of a New York style closing, with the concurrent delivery of the documents
of title and transfer of interests, delivery of the title policy and/or
endorsements, and delivery of the applicable Ownership Units. The Company and/or
the Partnership shall provide any undertaking to the Title Company reasonably
necessary to effectuate the New York style closing.
(d) At the Company's request, each Title Holding Entity shall promptly
deliver to the Company a copy of its existing title insurance policy. Each Title
Holding Entity shall, at or prior to Closing, deliver or cause to be delivered
such commercially reasonable affidavits, certificates, information and
instruments of indemnification as shall be reasonably required to induce the
Title Company to issue the title insurance policies contemplated by this Section
-------
2.6.
- ---
13
<PAGE>
2.7 Survey.
------
(a) Prior to the Closing, the Company shall obtain, at its expense, a
survey of each Property, prepared by a land surveyor licensed to perform surveys
in the state in which such Property is located, that either:
(i) meets the "Minimum Standard Detail Requirements for ALTA/ACSM Land
Title Surveys" as adopted by the American Land Title Association/American
Society and American Congress on Surveying and Mapping in 1992 (or
equivalent in the state in which such Property is located), and is
certified by such surveyor as of a date not earlier than six months prior
to the Closing Date in favor of the Company and the appropriate Title
Company and any lender(s) designated by the Company, and contains and
discloses, subject to reasonable exceptions that do not materially
adversely affect the use, value or marketability of such Property, the
following:
(A) The boundaries of the Real Properties conforming to the
legal description contained in Schedule A, which boundaries
----------
enclose a contiguous and uninterrupted area;
(B) The location of all Improvements thereon;
(C) That all Improvements are within lot lines and applicable
side-yard, rear-yard, and building line or set-back
requirements;
(D) The location of all streets and public ways;
(E) No encroachment of the Improvements on the Real Properties
onto adjacent premises or onto any public way and no
encroachment of any building or improvement on adjacent
premises onto the Real Properties;
(F) The area of the Real Property, expressed in square feet;
(G) The location of all easements and rights-of-way, recorded or
visible; and
(H) Whether the Properties are located in an area designated by
an agency of the United States as being subject to flood
hazards; or
(ii) is otherwise in such form (and accompanied by such certificates,
affidavits or undertakings) as shall be required by the Title Company to
issue the so-called comprehensive endorsement contemplated by Section 2.6
-----------
and to delete the so-called standard survey exceptions in the applicable
title insurance policy.
14
<PAGE>
(b) At the Company's request, each Title Holding Entity shall promptly
deliver to the Company a copy of the surveys of its Properties in its
possession.
2.8 Access to Information; Environmental Audits. At all times before the
-------------------------------------------
Closing Date, each Title Holding Entity shall provide the Company and its
affiliates, their respective agents, employees, consultants and representatives,
with continuing and reasonable access to all files, books, records and other
materials in the possession or control of such Title Holding Entity relating to
the Properties and to the operations, assets and liabilities of such Title
Holding Entity and the right to examine, inspect and make copies of such
materials as appropriate. During such period, each Title Holding Entity shall
also provide for such parties to have reasonable physical access to the
Properties for the purpose of conducting surveys, architectural, engineering,
geotechnical and environmental inspections and tests (including sampling and
invasive testing for the presence of Hazardous Materials performed in connection
with Phase I and Phase II environmental audits, provided that no Phase II or
--------
other invasive testing shall be conducted without the consent of such Title
Holding Entity, which consent shall not be unreasonably withheld or delayed),
feasibility studies and any other inspections, studies or tests reasonably
required by them. The Company may conduct a "walk-through" of tenant spaces upon
reasonable and appropriate notice to tenants and subject to the rights of
tenants. In the course of its investigations, the Company may make inquiries to
third parties including, without limitation, contractors, property managers,
parties to TI Contracts, Repair Contracts or Service Contracts, lenders, tenants
and municipal, local and other governmental officials and representatives. The
Company shall indemnify, defend and hold such Title Holding Entity harmless from
and against all claims, actions, damages, liabilities, losses, costs, attorneys'
fees and expenses related to or arising from the inspections and studies
performed by the Company or at the Company's request.
2.9 UCC Searches. Prior to or at the Closing, each Contributor and Title
------------
Holding Entity shall deliver or cause to be delivered to the Company, at the
Company's expense, current searches of all Uniform Commercial Code financing
statements filed at the state and local levels against such Contributor or Title
Holding Entity, its Equity Holders (but only with respect to their equity
interests), the other affiliates of such Contributor or Title Holding Entity
involved in the operations of such Contributor's or Title Holding Entity's
Properties and the managing agent for each of such Properties in each
jurisdiction in which Properties are located (and such other jurisdictions as
the Company may reasonably request). Such searches shall verify that no Liens
exist against such Contributor or Title Holding Entity or its Equity Holders
(but only with respect to their equity interests) pertaining to the Properties
or other assets to be contributed hereunder other than Permitted Exceptions.
Prior to or at the Closing, Cabot Partners shall cause to be delivered to the
Company, at the Company's expense, current searches of all Uniform Commercial
Code financing statements filed at the state and local levels against it in each
jurisdiction in which any Cabot Partner Assets are located (and such other
jurisdictions as the Company may reasonably request), which searches shall
verify that no Liens exist against Cabot Partners pertaining to the Cabot
Partner Assets.
15
<PAGE>
ARTICLE 3: COVENANTS AND OTHER AGREEMENTS
-----------------------------------------
3.1 Implementing Agreement. Subject to the terms and conditions hereof,
----------------------
each party hereto shall use its commercially reasonable efforts to take all
action required of it to fulfill its obligations under the terms of this
Agreement and to facilitate the consummation of the transactions contemplated
hereby. The covenants of the Contributors and the Title Holding Entities made in
this Article 3 are made by each Contributor and Title Holding Entity severally
---------
solely with respect to itself, and the covenants with respect to Title Holding
Entities and Properties are made by each Contributor and Title Holding Entity
solely with respect to each Property and, in the case of Contributors, each
Title Holding Entity in which such Contributor or Title Holding Entity has an
ownership interest.
3.2 Preservation of Business.
------------------------
(a) From the date of this Agreement until the Closing Date, the
Contributors and the Title Holding Entities shall use their commercially
reasonable efforts to cause the Properties to be operated only in the ordinary
and usual course of business and consistent with past practice and maintained in
good working condition and repair (ordinary wear and tear excepted), shall use
their commercially reasonable efforts to preserve the goodwill and advantageous
relationships of the Contributors and the Title Holding Entities with customers,
suppliers, independent contractors, employees and other Persons material to the
operation of the Properties, shall use their commercially reasonable efforts to
perform their material obligations under the Leases and other material
agreements affecting the Properties and shall not take or permit any action or
omission, to the extent such action or omission is within the reasonable control
of such Contributor or Title Holding Entity, which would cause any of the
representations or warranties of the Contributors and the Title Holding Entities
contained herein to become inaccurate or any of the covenants of the
Contributors and the Title Holding Entities herein to be breached.
(b) From the date of this Agreement until the Closing Date, Cabot Partners
shall use its commercially reasonable efforts to operate its business only in
the ordinary and usual course of business and consistent with past practice and
shall maintain its properties and assets in good working condition and repair
(ordinary wear and tear excepted), shall use its commercially reasonable efforts
to preserve the goodwill and advantageous relationships of Cabot Partners with
clients, suppliers, independent contractors, employees and other Persons
material to its business as now conducted, shall use its commercially reasonable
efforts to perform its material obligations under any material agreements
affecting its business and shall not take or permit any action or omission, to
the extent such action or omission is within the reasonable control of Cabot
Partners, which would cause any of its representations or warranties contained
herein to become inaccurate or any of its covenants herein to be breached.
3.3 Consents and Approvals. The Contributors, the Title Holding Entities
----------------------
and Cabot Partners shall use their commercially reasonable efforts to obtain all
consents, approvals, certificates and other documents required in connection
with the performance by them of this Agreement and the consummation of the
transactions contemplated hereby prior to the Final Allocation Date. The
16
<PAGE>
Contributors, the Title Holding Entities and Cabot Partners shall make all
filings, applications, statements and reports to all governmental authorities
and other Persons which are required to be made prior to the Closing Date by or
on behalf of the Contributors, the Title Holding Entities or Cabot Partners or
any of their respective affiliates pursuant to any applicable law or contract in
connection with this Agreement and the transactions contemplated hereby. The
Company and the Partnership shall make all filings, applications, statements and
reports to all governmental authorities and other Persons which are required to
be made prior to the Closing Date by or on behalf of the Company and the
Partnership or any of their affiliates pursuant to any applicable law or
contract in connection with this Agreement and the transactions contemplated
hereby.
3.4 Maintenance of Insurance. The Contributors, the Title Holding Entities
------------------------
and Cabot Partners shall continue to carry their existing or equivalent
insurance with respect to the Properties or the Cabot Partners Assets, as the
case may be, through the Closing Date and shall use their commercially
reasonable efforts not to allow any material breach, default, termination or
cancellation of such insurance policies or agreements to occur or exist.
3.5 Exclusivity. Without the Company's prior written consent and except as
-----------
required by law, during the pendency of this Agreement, the Contributors, the
Title Holding Entities and their respective Equity Holders shall not provide any
confidential information to, solicit offers for, or participate in any
discussions or negotiations with, any Person other than the Company and the
Partnership and the Contributors', the Title Holding Entities' and the Equity
Holders' consultants and advisors and holders of debt currently encumbering the
Properties concerning any sale, financing, merger or other similar transaction
involving the Properties.
3.6 New Contracts and Liens. Without the Company's prior written consent
-----------------------
in each instance, which consent shall not be unreasonably withheld or delayed,
the Contributors, the Title Holding Entities and Cabot Partners shall not,
except as permitted by Section 3.7, grant, enter into, or amend, terminate or
-----------
grant concessions regarding any Liens affecting title to any Property or the
Cabot Partner Assets, as the case may be, or any contract or agreement that will
be an obligation affecting the Properties or the Cabot Partner Assets, as the
case may be, or binding on the Company or the Partnership after the Closing
except contracts entered into in the ordinary course of business that are
terminable without cause on 30 days' notice (and the Contributors, the Title
Holding Entities and Cabot Partners, as the case may be, agree to terminate any
such contracts by the Closing Date if the Company or the Partnership gives any
such party notice at least 30 days before the Closing Date).
3.7 Leasing Arrangements. The Contributors and the Title Holding Entities
--------------------
shall not enter into, amend, terminate or grant concessions regarding any Lease
unless the Company has given its written consent, which consent shall not be
unreasonably withheld or delayed. The Contributors and the Title Holding
Entities shall provide the Company with all material information related to each
request for consent, including, without limitation, lease form, lease terms,
leasing commissions, tenant improvement obligations and other lease procurement
costs, description of tenant's business and tenant's financial statements or a
Dunn & Bradstreet credit report. Notwithstanding the foregoing, new Leases may
be entered into, or amendments to existing Leases may be made, without
17
<PAGE>
the Company's consent if (a) such Lease is on the form customarily used without
any material modifications; (b) such Lease is entered into in the ordinary
course of business; (c) such Lease is at a rental rate consistent with or
greater than rentals to other tenants at the applicable Real Property (or at
current market rental rates, if less); and (d) the term of such Lease is
consistent with leases to other tenants at the applicable Real Property.
3.8 Obligation to Supplement Information. From time to time prior to the
------------------------------------
Closing, the Contributors, the Title Holding Entities, Cabot Partners, the
Company and the Partnership, shall promptly disclose in writing to each other
party to this Agreement any matter hereafter arising or discovered which, to its
knowledge (as defined in Article 4), (a) would be reasonably likely to have a
---------
material adverse effect on the condition, value, use or marketability of a
Property or the Cabot Partner Assets, as the case may be, or (b) if existing,
occurring or known at the date of this Agreement would have been required to be
disclosed to the other parties or which would render inaccurate in a material
way any representation or warranty by the disclosing party. No information
provided pursuant to this Section 3.8 shall be deemed to cure any inaccuracy in
-----------
or breach of any representation, warranty or covenant made in this Agreement.
3.9 TI and Repair Contracts. At least 10 days before the Closing Date,
-----------------------
the Contributors and the Title Holding Entities shall notify the Company in a
written progress report as to those contracts for tenant improvements under
Leases ("TI Contracts") and for repairs or restoration being performed on the
------------
Properties ("Repair Contracts") that will not be completed by the Closing Date.
----------------
Adjustments for TI Contracts and Repair Contracts shall be made according to
Article 11. At the Closing, the Title Holding Entities shall assign to the
- ----------
Partnership all of their rights under, and the Partnership shall assume all of
the Title Holding Entities' obligations under, all TI Contracts, Repair
Contracts and Service Contracts relating to the Properties.
3.10 Damage. The Contributors and the Title Holding Entities shall
------
promptly after learning of the same give the Company and the Partnership written
notice of any material damage to one or more of their respective Properties,
describing such damage, whether such damage is covered by insurance and the
estimated cost of repairing such damage. In the event of any damage to one or
more of the Properties, (a) the Title Holding Entity owning such damaged
Property shall, to the extent practicable, begin repairs prior to the Closing
out of any insurance proceeds received by such Title Holding Entity for the
damage, (b) at the Closing, the Partnership shall receive all insurance proceeds
not applied to the repair of any such Properties prior to the Closing (including
rent loss insurance applicable to any period from and after the Closing Date)
paid or due to such Title Holding Entity for the damage, (c) any uninsured
damage or deductible and any post-closing rent abatement not covered by rent
loss insurance proceeds delivered to such Title Holding Entity, as reasonably
estimated by the Company and reasonably approved by such Title Holding Entity,
shall be credited to the Partnership at Closing and (d) the Partnership shall
assume the responsibility for the repair after the Closing. The appropriate
Title Holding Entity shall be entitled to any excess of the insurance proceeds
received for the damage over and above the actual cost of repair and
restoration.
18
<PAGE>
3.11 Condemnation. The Contributors and the Title Holding Entities shall
------------
promptly after learning of the same give the Company and the Partnership written
notice of any eminent domain proceedings that are contemplated, threatened or
instituted by any body having the power of eminent domain with respect to one or
more of their respective Properties. By notice to the applicable Title Holding
Entity after the Company and the Partnership receive notice of such
contemplated, threatened or instituted proceedings, the Company and such Title
Holding Entity shall have the joint right during the pendency of this Agreement
to negotiate and otherwise deal with the condemning authority in respect of such
matter and shall cooperate in good faith in doing so. At the Closing, the Title
Holding Entity shall assign to the Partnership its entire right, title and
interest in and to any condemnation award.
3.12 Material Agreements. Neither the Title Holding Entities nor the
-------------------
Contributors nor Cabot Partners shall materially amend, modify or terminate any
material agreement except such agreements that may terminate pursuant to their
own terms prior to the Closing, except with the consent of the Company and the
Partnership, which consent shall not be unreasonably withheld or delayed.
3.13 Clients of Cabot Partners. Each Contributor or Title Holding Entity
-------------------------
(on its own behalf or on behalf of any of its Equity Holders) which is a party
to a Cabot Partner Contract (each such Contributor, Title Holding Entity or
Equity Holder, a "Cabot Client") acknowledges that the actions of Cabot Partners
------------
on behalf of such Cabot Client in arranging the Consolidation and preparing this
Agreement have been taken by Cabot Partners pursuant to its responsibilities
under such Cabot Partner Contract, provided that nothing herein shall be deemed
--------
to be a waiver of any rights or remedies of such Cabot Client under its
respective Cabot Partner Contract. In accordance with the scope of its
responsibilities under each Cabot Partner Contract, Cabot Partners hereby
confirms to each Cabot Client, respectively, that it has reviewed each of the
representations and warranties in Article 4 of this Agreement, has conducted all
---------
reasonable investigations and inquiries with respect to such representations and
warranties in accordance with Article 4, has reviewed the disclosure letter (if
---------
any) delivered to the Company on behalf of such Cabot Client and, after
reasonable investigation, is unaware of any facts, events or circumstances that
would cause it to believe that any of the representations and warranties in
Article 4 of this Agreement are untrue. The confirmation by Cabot Partners as
- ---------
set forth in the immediately preceding sentence shall be deemed to satisfy the
"reasonable inquiry" of such Cabot Client required under Article 4. Also, in
---------
accordance with the scope of its responsibilities under each Cabot Partner
Contract, Cabot Partners hereby confirms to each Cabot Client, respectively,
that (a) the representations and warranties contained in Article 4, other than
---------
with respect to (i) Section 4.13, (ii) the execution and delivery of consents by
------------
the Equity Holders as provided in Section 10.2(q) and (iii) the ownership of
---------------
equity interests in the Title Holding Entities by the Equity Holders, are true,
correct and complete, and (b) that it has prepared or will prepare the Leases,
Rent Rolls, financial operating statements and updates thereof, tax returns as
required by Section 11.11, affidavits, certificates, information and instruments
-------------
of indemnification and representation letter and related information required in
connection with Property audits required by such representations and warranties
or by other provisions hereof and will make the deliveries required by Sections
--------
2.1 through 2.9 and Section 10.2 (other than the delivery of documents requiring
- --- --- ------------
the signature of any such Cabot Client) and such items are or will be true,
19
<PAGE>
correct and complete in all material respects. In addition, in accordance with
its responsibilities under each Cabot Partner Contract, Cabot Partners confirms
to each of the Cabot Clients that, as long as such Cabot Partner Contract has
not been terminated, Cabot Partners is responsible for performing the covenants
required of such Cabot Client under this Article 3 and will be liable for any
---------
loss against such Cabot Client resulting from a failure to perform such
obligations. Each Cabot Client hereby consents to the transfer and assignment of
each Cabot Partner Contract to which it is a party by Cabot Partners to the
Partnership as contemplated in Section 2.5 and authorizes Cabot Partners to take
-----------
all necessary and appropriate actions (including the execution and delivery of
any certificates, assignments or other instruments) on its behalf under the
terms of this Agreement and the other documents to be executed pursuant to this
Agreement.
3.14 Completion of IPO. The Company shall use its commercially reasonable
-----------------
efforts to complete the IPO (subject to the terms and conditions of this
Agreement) and to cause the proceeds of the IPO to be contributed to the
Partnership in accordance with the terms of the Partnership Agreement.
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF CONTRIBUTORS AND TITLE HOLDING
----------------------------------------------------------------------------
ENTITIES
--------
Each Contributor and Title Holding Entity hereby represents and warrants
severally to the Company and the Partnership as follows, except as set forth in
a disclosure letter delivered to each other party to this Agreement on or prior
to the date of this Agreement and attached as Schedule X. Representations and
----------
warranties with respect to Title Holding Entities and Properties are made by
each Contributor and Title Holding Entity solely with respect to each Property
and, in the case of Contributors, each Title Holding Entity in which such
Contributor or Title Holding Entity has an ownership interest. All
representations that are made to the "Contributor's or Title Holding Entity's
knowledge" shall mean to the actual knowledge of the individuals listed next to
the name of such Contributor or Title Holding Entity on Schedule 4.1 after
------------
reasonable inquiry. Representations and warranties with respect to Properties
shall be effective with respect to any Acquisition Properties only from and
after the date upon which such Acquisition Property is acquired by the Title
Holding Entity listed opposite such Acquisition Property on Schedule 1.1,
------------
provided, that such representations and warranties shall then be fully effective
- --------
as written even if they relate to periods prior to such date.
4.1 Due Organization. Such Contributor or Title Holding Entity has been
----------------
duly organized and is validly existing and in good standing under the laws of
its jurisdiction of organization, and (a) in the case of a Contributor, is
qualified to do business and in good standing in all other jurisdictions where
such qualification is necessary to carry on its business as now conducted except
where the failure to so qualify would not have a material adverse effect on the
ability of such Contributor to perform its obligations under this Agreement, and
(b) in the case of a Title Holding Entity, is qualified to do business and in
good standing in all jurisdictions where the Properties owned by it are located
or where such qualification is necessary to carry on its business as now
conducted, except where the failure to so qualify would not have an adverse
effect on the ability of such Title Holding Entity to perform its obligations
under this Agreement.
20
<PAGE>
4.2 Due Authorization. Such Contributor or Title Holding Entity has full
-----------------
power and authority to own, lease, operate and sell the Properties owned by it,
and to enter into this Agreement and the other documents to be executed by it
pursuant to this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance by such Contributor or Title
Holding Entity of this Agreement have been, and the documents to be executed by
it pursuant to this Agreement shall be, duly and validly approved by all
necessary partnership, corporate or other applicable action and no other actions
or proceedings on the part of such Contributor or Title Holding Entity are
necessary to authorize this Agreement and the transactions contemplated hereby
and thereby. Such Contributor or Title Holding Entity has complied with
applicable law and valid agreements binding upon it in connection with its
solicitation of any necessary approvals or consents related to this transaction
and obtaining appropriate authorization. No consent, waiver, approval or
authorization of, or filing, registration or qualification with, or notice to,
any governmental instrumentality or any other Person is required to be made,
obtained or given by such Contributor or Title Holding Entity in connection with
the execution, delivery and performance of this Agreement and the documents
executed by such Contributor or Title Holding Entity pursuant to this Agreement.
The joinder of no entity or Person other than such Contributor or Title Holding
Entity will be necessary to perform its obligations hereunder. Such Contributor
or Title Holding Entity has duly and validly executed and delivered this
Agreement. This Agreement constitutes, and the documents executed by such
Contributor or Title Holding Entity pursuant to this Agreement when executed
will constitute, legal, valid and binding obligations of such Contributor or
Title Holding Entity enforceable against it in accordance with their respective
terms, subject to (a) applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and transfer and other similar laws of general
application, heretofore or hereafter enacted or in effect, affecting the rights
and remedies of creditors generally, and (b) the exercise of judicial or
administrative discretion in accordance with general equitable principles,
particularly as to the availability of the remedy of specific performance or
other injunctive relief. Such Contributor or Title Holding Entity represents and
warrants that either (a) the assets to be contributed by it to the Company or
the Partnership pursuant to the terms of this Agreement do not constitute "plan
assets" (within the meaning of 29 C.F.R. (S)2510.3-101) of any "employee benefit
plan" subject to Title I of ERISA or a "governmental plan" as defined in Section
3(32) of ERISA or (b)(i) the decision to enter into this Agreement has been made
pursuant to the exemption set forth opposite the name of such Title Holding
Entity or Equity Holder on Schedule 1.5 and the conditions of that exemption
------------
have been fully satisfied or (ii) in the case of a governmental plan, the
execution and delivery of this Agreement by such Contributor or Title Holding
Entity and the transactions contemplated hereunder do not violate applicable
state law.
4.3 Conflicts. The execution and delivery of this Agreement and the other
---------
documents to be executed by such Contributor or Title Holding Entity, as the
case may be, pursuant to this Agreement do not and will not conflict with or
result in a breach of (with or without the passage of time or notice or both)
the terms of any of the constituent documents of such Contributor or Title
Holding Entity, any judgment, order or decree of any court, governmental
authority or arbitrator binding on such Contributor or Title Holding Entity,
and, to such Contributor's or Title Holding Entity's knowledge, do not and will
not breach or violate any applicable law, rule or regulation of any governmental
authority. The execution and delivery of, and performance by such Contributor
21
<PAGE>
or Title Holding Entity under, this Agreement and the documents executed by
such Contributor or Title Holding Entity pursuant to this Agreement will not
result in a breach or violation of (with or without the passage of time or
notice or both) the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which such Contributor or Title Holding Entity is a party or by
which such Contributor or Title Holding Entity is bound or to which any of the
Properties owned by it are subject. Neither such Title Holding Entity, nor, to
such Contributor's or Title Holding Entity's knowledge, any predecessor in title
to such Title Holding Entity, has granted (a) to any tenant under any Lease the
right, option, right of first refusal or any other agreement of any kind, which
is currently in effect, to purchase or to otherwise acquire any Property owned
by such Title Holding Entity or any part thereof or any interest therein or to
renew its term thereunder at fixed rents or (b) to any other Person any rights,
options, rights of first refusal or any other agreements of any kind, which are
currently in effect, to purchase or to otherwise acquire the Properties it owns
or any part thereof or any interest therein, except the rights of the Company
and the Partnership under this Agreement.
4.4 Litigation. There is no action, suit or proceeding pending or, to such
----------
Contributor's or Title Holding Entity's knowledge, threatened against such
Contributor or Title Holding Entity or the Properties owned by it which, if
adversely determined, would have a material adverse effect on the financial
condition or results of operations of such Contributor or Title Holding Entity
or the Properties owned by it or which challenges or impairs the ability of such
Contributor or Title Holding Entity to execute or deliver, or perform its
obligations under, this Agreement and the documents executed by it pursuant to
this Agreement or to consummate the transactions contemplated herein.
4.5 Contractors and Suppliers; Service, TI and Repair Contracts. Except as
-----------------------------------------------------------
otherwise provided in this Agreement with respect to Service Contracts, TI
Contracts and Repair Contracts to be assumed by the Partnership, all
contractors, subcontractors, suppliers, architects, engineers and others who
have performed services or labor or supplied material in connection with such
Contributor's or Title Holding Entity's acquisition, development, ownership or
management of the Properties owned by it, other than those incurred in the
ordinary course of business for the accounts payable period immediately prior to
the Closing and those engaged directly by tenants, shall, at the Closing Date,
have been paid in full and all Liens arising therefrom (or claims which with the
passage of time or notice or both, could mature into Liens) shall, at the
Closing Date, have been satisfied and released. Such Contributor or Title
Holding Entity has performed its obligations under the Service Contracts, TI
Contracts and Repair Contracts and, to such Contributor's or Title Holding
Entity's knowledge, no other party is in material default under the Service
Contracts, TI Contracts or Repair Contracts affecting the Properties owned by
it.
4.6 Leases and Rent Roll. The documents constituting the Leases that are
--------------------
delivered to the Company pursuant to this Agreement are true, correct and
complete copies of all of the Leases affecting the Properties owned by such
Contributor or Title Holding Entity including all amendments and guarantees.
Except as set forth in the Rent Roll (delivered to the Company and the
Partnership as of the date hereof), and updates thereof delivered to the Company
and the Partnership pursuant to this Agreement, there are no material leasing or
other fees or commissions due, nor will
22
<PAGE>
any become due, pursuant to the terms of any Lease or any renewal or extension
or expansion of any Lease, and no understanding or agreement with any party
exists as to payment of any leasing commissions or fees regarding future leases
or as to the procuring of tenants which are due and payable prior to the Closing
Date other than commissions set forth in the commission schedule contemplated in
Section 11.3 which may become due by reason of renewals of existing Leases. To
- ------------
such Contributor's or Title Holding Entity's knowledge, except as disclosed in
the Rent Roll and updates thereof delivered to the Company and the Partnership
pursuant to this Agreement, no tenants have asserted in writing that there are
any defenses or offsets to rent accruing after the Closing Date and no material
default or breach exists on the part of any tenant. Such Contributor or Title
Holding Entity has not received any notice of any default or breach on the part
of the landlord under any Lease, nor, to such Contributor's or Title Holding
Entity's knowledge, does there exist any such default or breach on the part of
the landlord. Except as set forth in the Rent Roll, and updates thereof
delivered to the Company and the Partnership pursuant to this Agreement, all of
the landlord's obligations to construct tenant improvements or reimburse the
tenants for tenant improvements under the Leases through the date of this
Agreement have been paid and performed in full and all concessions (other than
any unexpired rent abatement set forth in the Leases) from the landlord under
the Leases have been paid and performed in full.
4.7 Operating Statements. The unaudited financial operating statements
--------------------
delivered to each other party to this Agreement and any updates thereof
requested by the Company prior to the Closing show or will show all material
items of income and expense (operating and capital) incurred by such Contributor
or Title Holding Entity in connection with the ownership, operation, and
management of the Properties owned by it for the last two full fiscal years and
any subsequent fiscal quarters (or such other period to which the Company may
have agreed) and are or will be true, correct and complete in all material
respects.
4.8 Permits, Legal Compliance and Notice of Defects. Such Contributor or
-----------------------------------------------
Title Holding Entity has not applied to or entered into any agreement with any
governmental official, agency or body or with any other Person or entity with
respect to any modification, variance or exception regarding zoning, building
codes and similar laws and regulations that materially and adversely affects the
operation, value or utility of any of the Properties owned by it. Such
Contributor or Title Holding Entity has all licenses, permits and certificates
necessary for the use and operation of the Properties owned by it (as presently
used and operated), including, without limitation, all certificates of occupancy
necessary for the occupancy of such Properties, except where the failure to have
such licenses, permits and certificates would not materially and adversely
affect the value, use or operation of the Property affected thereby. To such
Contributor's or Title Holding Entity's knowledge, neither the Properties owned
by it nor the current use thereof violates any governmental law or regulation
(exclusive of the American with Disabilities Act of 1990 or any rules or
regulations promulgated thereunder and exclusive of any Environmental Laws,
which are addressed in Section 4.9) or any covenants or restrictions encumbering
-----------
such Properties, except such violations which would not materially and adversely
affect the value, use or operation of the Property affected thereby. Either such
Contributor or Title Holding Entity, or, if required by the terms of their
respective Leases and to such Contributor's or Title Holding Entity's knowledge,
the tenants of the Properties owned by it, now have in force insurance policies
relating to such Properties covering
23
<PAGE>
such risks and with policy limits and deductibles in such amounts as would be
maintained by prudent operators of properties similar in use and configuration
to such Properties and located in the locality in which such Properties are
located. Such Contributor or Title Holding Entity has not received any written
notice from any insurance company or underwriter of any defect that would
materially adversely affect the insurability of the Properties owned by it or
cause an increase in insurance premiums over current levels. Such Contributor or
Title Holding Entity has not received from any government agency or insurer any
written notice of violations or alleged violations of any laws, rules,
regulations or codes with respect to the Properties owned by it which have not
been corrected to the satisfaction of the issuer of the notice or which, if
uncorrected, would have a material adverse effect on the value, use or operation
of the Property affected thereby. To such Contributor's or Title Holding
Entity's knowledge, there is no pending or contemplated condemnation or other
eminent domain proceeding affecting all or any part of the Properties owned by
it.
4.9 Environmental. Such Contributor or Title Holding Entity has no
-------------
knowledge of any violation of Environmental Laws related to the Properties owned
by it or the presence or release of Hazardous Materials on or from such
Properties, except as reflected in the environmental reports listed on Schedule
--------
4.9. Schedule 4.9 is a list of written environmental reports and results of
- --- ------------
environmental inspections and tests in the possession of such Contributor or
Title Holding Entity, which list is complete in all material respects. To such
Contributor's or Title Holding Entity's knowledge, such Contributor or Title
Holding Entity has not used the Properties owned by it for the generation,
treatment, storage, handling or disposal of any Hazardous Materials in violation
of any Environmental Laws. The term "Environmental Laws" includes, without
------------------
limitation, the Resource Conservation and Recovery Act and the Comprehensive
Environmental Response Compensation and Liability Act and other federal laws
governing the environment as in effect on the date of this Agreement together
with their implementing regulations and guidelines as of the date of this
Agreement, and all state, regional, county, municipal and other local laws,
regulations and ordinances that are equivalent or similar to the federal laws
recited above or that purport to regulate Hazardous Materials. The term
"Hazardous Materials" includes petroleum, including crude oil or any fraction
- --------------------
thereof, natural gas, natural gas liquids, liquefied natural gas or synthetic
gas usable for fuel (or mixtures of natural gas or such synthetic gas), and any
substance, material waste, pollutant or contaminant listed or defined as
hazardous or toxic under any Environmental Law.
4.10 Utilities. To such Contributor's or Title Holding Entity's knowledge,
---------
all water, sewer, gas, electric, telephone and drainage facilities, and other
utilities required for the normal and proper operation of the Properties owned
by it, are installed and connected to the Improvements with valid permits, and
are adequate to serve the Improvements for their current use and to permit full
compliance with all requirements of law and the Leases. To such Contributor's or
Title Holding Entity's knowledge, all permits and connection fees are fully
paid. To such Contributor's or Title Holding Entity's knowledge, all utilities
serving the Improvements enter it through currently effective public or private
easements. To such Contributor's or Title Holding Entity's knowledge, no fact or
condition exists which would result in the termination of such utilities
services to the Improvements.
24
<PAGE>
4.11 Ownership of the Title Holding Entities and Properties.
------------------------------------------------------
(a) The outstanding capital stock of each Title Holding Corporation listed
on Schedule 2.1, or the partnership interests in each Title Holding Partnership
------------
listed on Schedule 2.1, as the case may be, are owned by the Equity Holders
------------
thereof as shown on Schedule 2.1, free and clear of all Liens. Each Stock
------------
Contributor owns the outstanding capital stock of the Title Holding Corporation
shown as owned by it on Schedule 2.2, free and clear of all Liens. Each
-------------
Partnership Interest Contributor owns the partnership interest in the Title
Holding Partnership shown as owned by it on Schedule 2.4, free and clear of all
------------
Liens. Each Title Holding Entity has good and marketable or indefeasible title
to each Real Property shown as owned by it on Exhibit A, free and clear of all
---------
Liens other than Permitted Exceptions.
(b) The shares in each Title Holding Corporation shown as owned by the
Equity Holders thereof on Schedule 2.1, and the shares owned by each Stock
------------
Contributor in each Title Holding Corporation shown as owned by it on Schedule
--------
2.2, have been, in each case, validly issued and fully paid and are non-
- ---
assessable, constitute all of the issued and outstanding capital stock of such
Title Holding Corporation and were not issued in violation of any preemptive
rights. The shares owned by each Equity Holder or Stock Contributor in such
Title Holding Corporation were issued in compliance with applicable law and the
relevant organizational documents (as then in effect). There are no enforceable
rights, subscriptions, warrants, options, conversion rights, preemptive rights
or agreements of any kind outstanding to purchase or to otherwise acquire any of
the interests in any Title Holding Corporation or any securities or obligations
of any kind convertible into any interests in any Title Holding Corporation or
other equity interests or profit participations of any kind.
(c) The partnership interest owned by each Partnership Interest Contributor
in each Title Holding Partnership shown as owned by it on Schedule 2.4, and the
------------
partnership interest in each Title Holding Partnership shown as owned by each
Equity Holder thereof on Schedule 2.1, were validly issued, fully paid and non-
------------
assessable, and, together with the partnership interest of any other Partnership
Interest Contributor shown on Schedule 2.4 or any other Equity Holder thereof
------------
shown on Schedule 2.1, as the case may be, as owning a partnership interest in
------------
such Title Holding Partnership, constitutes all of the issued and outstanding
partnership interests of such Title Holding Partnership; all such partnership
interests were not issued in violation of any preemptive rights. The partnership
interests owned by each Partnership Interest Contributor or Equity Holder, as
the case may be, in such Title Holding Partnership were issued in compliance
with applicable law and the relevant organizational documents (as then in
effect). There are no enforceable rights, subscriptions, warrants, options,
conversion rights, preemptive rights or agreements of any kind outstanding to
purchase or to otherwise acquire any of the interests in any Title Holding
Partnership or any securities or obligations of any kind convertible into any
interests in any Title Holding Partnership or other equity interests or profit
participations of any kind.
(d) Each Title Holding Entity listed on Schedule 2.1, 2.2 or 2.4 is, and as
------------ --- ---
of the Closing Date will be, subject to no liabilities, whether matured or
contingent, whether disclosed or undisclosed, except for (i) such liabilities
which are subject to proration under Article 11 or have been taken into account
----------
in determining the Adjusted Contribution Amount of such Title Holding
25
<PAGE>
Entity, (ii) any Assumed Mortgage Debt or other mortgage debt to be repaid as of
the Closing Date and (iii) any other liabilities which have arisen in the
ordinary course of business (which are the responsibility of such Contributor or
Title Holding Entity or its Equity Holders under Section 13.1).
------------
4.12 Distributions and Payments. All obligations, disclosures and
--------------------------
distributions in connection with the contribution of the Properties owned by
such Contributor or Title Holding Entity that under applicable law or any
applicable, valid and binding agreements are required to be performed, given or
made with respect to any Person that directly or indirectly holds an interest in
such Contributor or Title Holding Entity shall, at the Closing Date, have been
performed, given and made.
4.13 Securities.
----------
(a) Such Contributor or Title Holding Entity or its Equity Holders will
acquire the LP Units and the Common Shares exchangeable therefor (the
"Underlying Shares"), or the Common Shares directly, as the case may be, for its
- ------------------
own account and not with a view to or for sale in connection with any public
distribution thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), except that any such securities may be sold
--------------
pursuant to registration or any exemption therefrom (which may include a
distribution to the equity holders of such Contributor or Title Holding Entity
or its Equity Holders provided such distribution is made pursuant to an
exemption from registration under the Securities Act).
(b) Such Contributor or Title Holding Entity and each of its Equity Holders
has sufficient knowledge and experience in financial and business matters to
enable it to evaluate the merits and risks of an investment in the LP Units
(together with the Underlying Shares) and the Common Shares. Such Contributor or
Title Holding Entity and each of its Equity Holders has the ability to bear the
economic risk of acquiring the LP Units and the Common Shares.
(c) Such Contributor or Title Holding Entity and each of its Equity Holders
has been furnished with a copy of the Private Offering Materials and has had a
full opportunity to ask questions of and receive answers from the Company or any
person or persons acting on behalf of the Company concerning the Company, the
Partnership, the Consolidation and the terms and conditions of the acquisition
of the LP Units (together with the Underlying Shares) and the Common Shares.
(d) Such Contributor or Title Holding Entity (on its own behalf and on
behalf of each of its Equity Holders) hereby acknowledges that the LP Units, the
Underlying Shares and the Common Shares are not registered under the Securities
Act or any state securities laws and cannot be resold without registration
thereunder or an exemption therefrom. Such Contributor or Title Holding Entity
and each of its Equity Holders agrees that it will not transfer all or any
portion of the LP Units (together with the Underlying Shares) or the Common
Shares unless such transfer has been registered or is exempt from registration
under the Securities Act and any applicable state securities laws (which may
include a distribution to the equity holders of such
26
<PAGE>
Contributor or Title Holding Entity or its Equity Holders provided such
distribution is made pursuant to an exemption from registration under the
Securities Act). The LP Units (together with the Underlying Shares) and the
Common Shares shall, unless registered, contain a prominent legend with respect
to the restrictions on transfer under the Securities Act and other applicable
state securities laws.
(e) Such Contributor (and each equity holder of such Contributor) or such
Title Holding Entity (and each of its Equity Holders) is an "accredited
----------
investor" as such term is defined in Regulation D promulgated under the
- --------
Securities Act.
4.14 No Brokers. Neither such Contributor or Title Holding Entity nor any
----------
of its officers, partners, directors or employees has employed or made any
agreement with any broker, finder or similar agent or any Person or firm which
will result in the obligation of the Company or the Partnership or any of their
affiliates to pay any finder's fee, brokerage fees or commissions or similar
payment in connection with the transactions contemplated by this Agreement.
4.15 Solvency. Such Contributor or Title Holding Entity has been solvent
--------
at all times prior to and will be solvent immediately following the
Consolidation.
4.16 Certain Tax Matters.
-------------------
(a) Each Partnership Interest Contributor, Stock Contributor and Title
Holding Entity listed on Schedule 2.1 represents and warrants that:
------------
(i) Such Title Holding Entity or the Title Holding Entity whose
interest is being contributed by such Partnership Interest Contributor or
Stock Contributor has timely filed (or has had timely filed on its behalf)
or will timely file or cause to be timely filed, all Tax Returns required
by applicable law to be filed by it prior to or as of the Closing Date. All
such Tax Returns and amendments thereto are or will be true, complete and
correct in all respects;
(ii) There has been no audit by a Tax authority with respect to any
Tax Returns filed by, or Taxes due from, such Title Holding Entity. No
issue has been raised by any Tax authority in any audit of such Title
Holding Entity that if raised with respect to any other period not so
audited could be expected to result in a material proposed deficiency for
any period not so audited. To the knowledge of such Title Holding Entity,
Partnership Interest Contributor or Stock Contributor, no deficiency or
adjustment for any Taxes has been threatened, proposed or asserted against
such Title Holding Entity. There are no liens for Taxes upon the assets of
such Title Holding Entity, except liens for current Taxes not yet due;
(iii) Such Title Holding Entity has not given or been requested to
give any waiver of statutes of limitation relating to the payment of Taxes
or has executed powers of attorney with respect to Tax matters, which will
be outstanding as of the Closing Date; and
27
<PAGE>
(iv) There are no changes in the tax accounting methods subject to
Section 481(a) of the Code which have an ongoing effect to such Title
Holding Entity.
(b) Each Partnership Interest Contributor represents and warrants that:
(i) Such Partnership Interest Contributor is not a foreign person,
foreign corporation, foreign partnership, foreign trust or foreign estate
within the meaning of Section 1445 of the Code; and
(ii) The Title Holding Entity whose interest is being contributed by
such Partnership Interest Contributor is, and has been since its formation,
classified as a partnership and not as an association taxable as a
corporation for Federal income tax purposes for any period up to and
including the Closing. The Internal Revenue Service has not challenged or,
to the knowledge of such Partnership Interest Contributor, threatened to
challenge the status of such Title Holding Entity as a partnership and not
as an association taxable as a corporation for Federal income tax purposes.
All Tax Returns and other filings have been filed on a basis consistent
with such position for Federal income tax purposes.
ARTICLE 5: REPRESENTATIONS AND WARRANTIES OF
---------------------------------------------
CABOT PARTNERS
--------------
Cabot Partners hereby represents and warrants to the Company and the
Partnership as follows, except as set forth in a disclosure letter delivered to
each other party to this Agreement on or prior to the date of this Agreement and
attached as Schedule X.
----------
5.1 Due Organization. Cabot Partners has been duly organized and is
----------------
validly existing and in good standing under the laws of its jurisdiction of
organization, and is qualified to do business and in good standing in all other
jurisdictions where such qualification is necessary to carry on its business as
now conducted except where the failure to so qualify would not have an adverse
effect on the ability of Cabot Partners to perform its obligations under this
Agreement.
5.2 Due Authorization. Cabot Partners has full power and authority to own,
-----------------
lease and operate its properties and assets and to carry on its business as
presently conducted, and to enter into this Agreement and the other documents to
be executed by it pursuant to this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Cabot Partners
of this Agreement have been, and the other documents to be executed by it
pursuant to this Agreement shall be, duly and validly approved by all necessary
action and no other consent or approval on the part of Cabot Partners is
necessary to authorize this Agreement and the other documents to be executed by
it pursuant to this Agreement and the transactions contemplated hereby. No
consent, waiver, approval or authorization of, or filing, registration or
qualification with, or notice to, any governmental instrumentality or any other
entity or Person (including without limitation, its partners) is required to be
made, obtained or given by Cabot Partners in connection with the execution,
delivery and performance of this Agreement. Cabot Partners has duly and validly
executed and delivered this Agreement. This Agreement constitutes, and the
documents executed
28
<PAGE>
by Cabot Partners pursuant to this Agreement when executed will constitute,
legal, valid and binding obligations of Cabot Partners, enforceable against such
party in accordance with their respective terms, subject to (a) applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
transfer and other similar laws of general application, heretofore or hereafter
enacted or in effect, affecting the rights and remedies of creditors generally,
and (b) the exercise of judicial or administrative discretion in accordance with
general equitable principles, particularly as to the availability of the remedy
of specific performance or other injunctive relief.
5.3 Conflicts. The execution and delivery of this Agreement and the other
---------
documents to be executed by it pursuant to this Agreement, and the performance
by Cabot Partners under this Agreement and such other documents, do not and will
not conflict with or result in a breach of (with or without the passage of time
or notice or both) the terms of any of the constituent documents of Cabot
Partners, any judgment, order or decree of any court, governmental authority or
arbitrator binding on Cabot Partners and, to Cabot Partners' knowledge, do not
breach or violate any applicable law, rule or regulation of any governmental
authority. The execution and delivery of, and performance by Cabot Partners
under, this Agreement will not result in a breach or violation of (with or
without the passage of time or notice or both) the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which Cabot Partners is a party or
by which Cabot Partners is bound or to which its assets or properties are
subject.
5.4 Litigation. There is no action, suit or proceeding pending or, to
----------
Cabot Partners' knowledge, threatened against Cabot Partners which, if adversely
determined, would have a material adverse effect on the financial condition or
results of operations of Cabot Partners or which challenges or impairs the
ability of Cabot Partners to execute or deliver, or perform its obligations
under, this Agreement and the other documents executed by Cabot Partners
pursuant to this Agreement or to consummate the transactions contemplated
herein.
5.5 Contractors and Suppliers. Except as otherwise provided in this
-------------------------
Agreement, all contractors, subcontractors, suppliers, engineers, architects and
others who have performed services or labor or supplied material in connection
with the Cabot Partner Assets, other than those incurred in the ordinary course
of business for the accounts payable period immediately prior to the Closing,
shall, at the Closing Date, have been paid in full.
5.6 Solvency. Cabot Partners has been solvent at all times prior to and
--------
will be solvent immediately following the Consolidation.
5.7 Names, Franchises, Permits, Etc. Cabot Partners has the legal right to
-------------------------------
use its name in every state in which it now does business. Cabot Partners owns
or has valid and enforceable rights to all franchises, permits, licenses,
trademarks, trade names, patents, patent applications, copyrights, trade
secrets, computer software, formulas, designs or inventions necessary for the
ownership, use, operation and conduct of its business as it is now conducted
without infringing on the rights of any other Person. Cabot Partners has not
infringed or violated any trademark, trade name, copyright,
29
<PAGE>
trade secret right or contractual relationship of others, and has not received
any notice, claim or protest respecting any such violations or infringement in
connection with the conduct of its business.
5.8 Title and Condition of Cabot Partner Assets. Cabot Partners has good
-------------------------------------------
and marketable title to the Cabot Partner Assets free and clear of any Liens.
The tangible personal property included in the Cabot Partner Assets is in good
operating condition, except for ordinary wear and tear, and has been regularly
maintained and repaired in accordance with good business practice.
5.9 Intangible Personal Property. Cabot Partners owns or possesses valid
----------------------------
and binding licenses or other rights to use the intangible personal property
included in the Cabot Partner Assets. All actions necessary to maintain the
registration, application or use of such intangible personal property have been
taken by Cabot Partners and Cabot Partners has not engaged in any conduct or
omitted to perform any necessary act, the result of which could invalidate,
abandon or otherwise render the Company's rights to any such intangible personal
property unenforceable. Except for license royalties payable to software
vendors, Cabot Partners is not required to pay any royalty, license, fee or
similar compensation with respect to the intangible personal property in
connection with the current or prior conduct of the business of Cabot Partners.
The use by Cabot Partners of such intangible personal property does not infringe
or violate the proprietary rights of any third party and no claims have been
asserted by any person with respect to the use of such intangible personal
property.
5.10 Investment Advisory and Property Management Contracts. Schedule B is
----------------------------------------------------- ----------
true, complete and accurate as of the date thereof and sets forth all of the
investment advisory contracts and property management contracts to which Cabot
Partners is a party as of the date of this Agreement. Each of the Cabot Partner
Contracts is a legal, valid and binding obligation of the parties thereto
enforceable in accordance with its terms, subject to (a) applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and transfer and
other similar laws of general application, heretofore or hereafter enacted or in
effect, affecting the rights and remedies of creditors generally, and (b) the
exercise of judicial or administrative discretion in accordance with general
equitable principles, particularly as to the availability of the remedy of
specific performance or other injunctive relief. Cabot Partners is not in
breach, violation or default under any Cabot Partner Contract and, as of the
date of this Agreement and to Cabot Partners' knowledge, no other party is in
breach, violation or default under any Cabot Partner Contract and, as of the
date of this Agreement, Cabot Partners has not received any notice of
termination of any Cabot Partner Contract and does not have any knowledge of any
prospective termination of a Cabot Partner Contract.
5.11 Licenses and Permits; Compliance with Laws. Cabot Partners has all
------------------------------------------
governmental licenses, permits and authorizations currently required by law or
by the terms of any Cabot Partner Contract for the operation of its business as
presently conducted and all such permits and licenses are in full force and
effect as of the date hereof and will be on the Closing Date, except where the
ineffectiveness of any such permits, licenses or authorizations would not have a
material adverse effect on the business of Cabot Partners. Cabot Partners has
complied with all conditions or requirements imposed by the permits, licenses
and authorizations described herein, except where the failure to so comply would
not be materially adverse to its business, and Cabot Partners has not
30
<PAGE>
received any notice, and has no reason to believe, that any appropriate
authority intends to cancel or terminate any of such permits, licenses or
authorizations or that valid grounds for such cancellation or termination
currently exist, except where any such cancellation or termination would not
have a material adverse effect on the business of Cabot Partners. Cabot Partners
is not in conflict with or in default or violation of any law, rule, regulation,
order, judgment or decree applicable to it or by which any of the Cabot Partner
Assets are bound or affected, except for a conflict, default or violation, if
any, which would not result in a material adverse effect upon the business,
financial condition or results of operations of Cabot Partners or upon the
ability of Cabot Partners to execute or deliver, or perform its obligations
under, this Agreement and the other documents executed by it pursuant hereto or
to consummate the transactions contemplated herein.
5.12 Securities.
----------
(a) Cabot Partners will acquire the LP Units and Underlying Shares
exchangeable therefor for its own account and not with a view to or for sale in
connection with any public distribution thereof within the meaning of the
Securities Act, except that, upon exchange of LP Units for Underlying Shares,
such Underlying Shares may be sold pursuant to registration or any exemption
therefrom (which may include a distribution to the equity holders of Cabot
Partners provided such distribution is made pursuant to an exemption from
registration under the Securities Act).
(b) Cabot Partners has sufficient knowledge and experience in financial and
business matters to enable it to evaluate the merits and risks of an investment
in the LP Units and the Underlying Shares. Cabot Partners has the ability to
bear the economic risk of acquiring the LP Units and the Underlying Shares.
(c) Cabot Partners has been furnished with a copy of the Private Offering
Materials and has had a full opportunity to ask questions of and receive answers
from the Company or any person or persons acting on behalf of the Company
concerning the Company, the Partnership, the Consolidation and the terms and
conditions of the acquisition of the LP Units and the Underlying Shares.
(d) Cabot Partners hereby acknowledges that the LP Units and the Underlying
Shares are not registered under the Securities Act or any state securities laws
and cannot be resold without registration thereunder or an exemption therefrom.
Cabot Partners agrees that it will not transfer all or any portion of the LP
Units or the Underlying Shares unless such transfer has been registered or is
exempt from registration under the Securities Act and any applicable state
securities laws (which may include a distribution to the equity holders of Cabot
Partners provided such distribution is made pursuant to an exemption from
registration under the Securities Act). The LP Units and the Underlying Shares
shall, unless registered, contain a prominent legend with respect to the
restrictions on transfer under the Securities Act and other applicable state
securities laws.
(e) Cabot Partners and each of its equity holders is an "accredited
----------
investor" as such term is defined in Regulation D promulgated under the
- --------
Securities Act.
31
<PAGE>
5.13 No Brokers. Other than J. P. Morgan Securities Inc., neither Cabot
----------
Partners nor any of its partners, officers, directors or employees has used any
investment banker, broker, trader or similar agent or any Person or firm which
will result in the obligation of the Company or the Partnership to pay any
finder's fee, brokerage fees or commissions or similar payment in connection
with the transactions contemplated by this Agreement.
5.14 Financial Statements. The financial statements and updates thereof
--------------------
delivered to each other party to this Agreement show or will show all items of
income and expense (operating and capital) incurred in connection with the
ownership, operation and management of the business of Cabot Partners for the
last two full fiscal years and any subsequent fiscal quarters (or such other
period to which the Company may have agreed) and are or will be true, correct
and complete in all material respects.
5.15 Distributions and Payments. All obligations, disclosures and
--------------------------
distributions in connection with the contribution of the Cabot Partner Assets
that under applicable law or any applicable, valid and binding agreements are
required to be performed, given or made with respect to any Person that directly
or indirectly holds an interest in Cabot Partners shall, at the Closing Date,
have been performed, given and made.
ARTICLE 6: REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PARTNERSHIP
----------------------------------------------------------------------------
The Company and the Partnership hereby represent and warrant to the
Contributors, the Title Holding Entities and Cabot Partners as follows.
6.1 Due Organization. Each of the Company and the Partnership has been
----------------
duly organized and is validly existing and in good standing under the laws of
its jurisdiction of organization, and is qualified to do business in all other
jurisdictions where such qualification is necessary to carry on its business as
now conducted and as proposed to be conducted except where the failure to so
qualify would not have an adverse effect on the ability of such party to perform
its obligations under this Agreement.
6.2 Due Authorization. Each of the Company and the Partnership has full
-----------------
power and authority to enter into this Agreement and the other documents to be
executed by it pursuant to this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by each of the
Company and the Partnership of this Agreement have been, and the other documents
to be executed by it pursuant to this Agreement shall be, duly and validly
approved by all necessary corporate or other applicable action and no other
consent or approval on the part of the Company or the Partnership is necessary
to authorize this Agreement and the other documents to be executed by it
pursuant to this Agreement and the transactions contemplated hereby. No consent,
waiver, approval or authorization of, or filing, registration or qualification
with, or notice to, any governmental instrumentality (including, without
limitation, any filing required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended), or any other entity or Person (including
without limitation, its shareholders or partners) is required to be made,
obtained or given
32
<PAGE>
by the Company or the Partnership in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, except for such consents as have been obtained or will be
obtained by the Closing. Each of the Company and the Partnership has duly and
validly executed and delivered this Agreement. This Agreement constitutes, and
the documents executed by the Company and the Partnership, as the case may be,
pursuant to this Agreement when executed will constitute, legal, valid and
binding obligations of the Company and the Partnership, as the case may be,
enforceable against such party in accordance with their respective terms.
6.3 Conflicts. The execution and delivery of this Agreement and the other
---------
documents to be executed by it pursuant to this Agreement, and the performance
by each of the Company and the Partnership under this Agreement and such other
documents, do not and will not conflict with or result in a breach of (with or
without the passage of time or notice or both) the terms of any of the
constituent documents of the Company or the Partnership or any judgment, order
or decree of any court, governmental authority or arbitrator binding on the
Company or the Partnership and, to the Company's knowledge, do not breach or
violate any applicable law, rule or regulation of any governmental authority.
The execution and delivery of, and performance by the Company and the
Partnership under, this Agreement will not result in a breach or violation of
(with or without the passage of time or notice or both) the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which either the Company or the
Partnership is a party or by which either the Company or the Partnership is
bound.
6.4 Litigation. There is no action, suit or proceeding pending or, to the
----------
Company's knowledge, threatened against the Company or the Partnership which, if
adversely determined, would have a material adverse effect on the financial
condition or results of operations of the Company or the Partnership or which
challenges or impairs the ability of the Company or the Partnership to execute
or deliver, or perform its obligations under, this Agreement and the documents
executed by it pursuant to this Agreement or to consummate the transactions
contemplated herein.
6.5 Solvency. Each of the Company and the Partnership has been solvent at
--------
all times prior to and will be solvent immediately following the Consolidation.
6.6 Written Materials. As of the date of this Agreement and the IPO Filing
-----------------
Date, the Private Offering Materials do not contain an untrue statement of a
material fact or omit to state a material fact in order to make the statements
made therein, in light of the circumstances under which they are made, not
misleading.
6.7 No Brokers. Other than J. P. Morgan Securities Inc., neither the
----------
Company nor any of its officers, directors or employees has used any investment
banker, broker, trader or similar agent or any Person or firm which will result
in the obligation of the Company or the Partnership to pay any finder's fee,
brokerage fees or commissions or similar payment in connection with the
transactions contemplated by this Agreement.
33
<PAGE>
6.8 Financial Statements. The financial statements of the Company, and the
--------------------
notes related thereto, included in the Private Offering Materials present fairly
the consolidated financial position of the Company as of the dates indicated and
the results of the operations and changes in consolidated cash flows for the
periods specified; such financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis.
6.9 REIT, Partnership and REOC Status. 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 is expected to
enable it to continue to satisfy the requirements for taxation as a "real estate
investment trust" under the Code. The Partnership will be treated for Federal
income tax purposes as a partnership, and not as an association taxable as a
corporation. The Partnership will not hold any assets prior to the Closing and,
upon the Closing, will qualify as a "real estate operating company" under
Department of Labor Regulation Section 29 C.F.R. 2510-3.101(e).
ARTICLE 7: CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE
----------------------------------------------------------------------
PARTNERSHIP
-----------
The obligation of the Company and the Partnership to consummate the Closing
is subject to the fulfillment, at or prior to the Closing, of each of the
following conditions, and failure to satisfy any such condition shall excuse and
discharge all obligations of the Company and the Partnership to carry out the
provisions of this Agreement unless such failure is waived in writing by the
Company and the Partnership. Promptly after becoming aware that any of the
following conditions has not been or cannot be satisfied at or prior to the
Closing, the Company and the Partnership shall so notify all other parties to
this Agreement.
7.1 Representations and Warranties. The representations and warranties
------------------------------
made by the Contributors and the Title Holding Entities in Article 4 of this
---------
Agreement and made by Cabot Partners in Article 5 of this Agreement and the
---------
statements contained in any document furnished by the Contributors or the Title
Holding Entities or by Cabot Partners in connection with the Closing pursuant to
this Agreement shall be true, correct and complete when made and on and as of
the Closing Date as though such representations and warranties were made on and
as of such date (except to the extent any such representation and warranty is
limited to a specific date by its express terms), except for inaccuracies which,
individually or in the aggregate for all parties, would not have a material
adverse effect on the financial condition or results of operations of the
Company and the Partnership taken as a whole.
7.2 Compliance with Agreements and Covenants. All parties other than the
----------------------------------------
Company and the Partnership shall have performed and complied with all of their
covenants, obligations and agreements contained in this Agreement to be
performed and complied with by them on or prior to the Closing Date, except for
failures to perform or comply which, individually or in the aggregate for all
parties, would not have a material adverse effect on the financial condition or
results of operations of the Company and the Partnership taken as a whole.
34
<PAGE>
7.3 Tenant Estoppels. With respect to each Property, the appropriate
----------------
Contributor or Title Holding Entity shall (a) obtain a tenant estoppel,
substantially in the form of Exhibit F, from all tenants, or, (b) with the prior
---------
consent of the Company, which consent shall not be unreasonably withheld,
provide a certificate from an officer of such Contributor or Title Holding
Entity (or from Cabot Partners or a duly authorized agent or representative of
such Contributor or Title Holding Entity) setting forth substantially the same
factual information as is contained in Exhibit F with respect to such leased
---------
premises (except that the statements contained in Sections 7, 8 and 10 of
Exhibit F may be made to such Contributor's or Title Holding Entity's
- ---------
knowledge). In the event that any tenant estoppel or any certificate reflects
any claims, offsets or defenses against enforcement of the Lease against the
tenant thereunder, or any other obligations owing to the tenant by such
Contributor or Title Holding Entity (any of the foregoing, a "Landlord
--------
Default"), such Contributor or Title Holding Entity shall pay to the Company, at
- -------
the Closing, the amount, as determined by the Company in good faith and agreed
to by such Contributor or Title Holding Entity, necessary to correct or cure
such Landlord Default; provided, however, that if such Contributor or Title
-------- -------
Holding Entity contests the existence of a Landlord Default, then such
Contributor or Title Holding Entity shall escrow with the applicable Title
Company (or other financial institution mutually agreed to by such Contributor
or Title Holding Entity and the Company) at the Closing either (i) cash in an
amount determined by the Company in good faith and agreed to by such Contributor
or Title Holding Entity which is required to correct the Landlord Default if it
is ultimately determined to exist or (ii) a number of Ownership Units issued to
such Contributor or Title Holding Entity or its Equity Holders having a value
(based on the IPO Share Price) equal to the amount determined by the Company in
good faith and agreed to by such Contributor or Title Holding Entity as
contemplated in clause (i) of this sentence. If such Contributor or Title
Holding Entity contests the existence of a Landlord Default, the cash or
Ownership Units shall be held in escrow until such matter is resolved to the
reasonable satisfaction of such Contributor or Title Holding Entity or its
Equity Holders and the Company, or otherwise resolved by a final judgment from a
court of competent jurisdiction. The amount placed in escrow with respect to
each Landlord Default shall, if in cash, be deposited in an interest bearing
account and all interest earned thereon or, if in Ownership Units, all dividends
and other distributions paid thereon shall be paid to such Contributor or Title
Holding Entity or its Equity Holders to the extent that it exceeds the amount
paid to the tenant with respect to such Landlord Default.
7.4 Other Contracts. As of the Closing Date, there shall exist no material
---------------
default under any material agreement to be assumed by the Partnership.
7.5 Legal Proceedings. As of the Closing Date, no action or proceeding by
-----------------
or before any governmental authority shall have been instituted or threatened
(and not subsequently dismissed, settled or otherwise terminated) which is
reasonably expected to restrain, prohibit or invalidate the transactions
contemplated by this Agreement, other than an action or proceeding instituted or
threatened by the Company or the Partnership.
7.6 IPO Closing. The closing of the IPO of the Company shall occur
-----------
simultaneously with the Closing.
35
<PAGE>
7.7 Title Holding Entity Consolidation. The Title Holding Entities
----------------------------------
shall hold directly the title to all Properties.
7.8 Cabot Partners Contribution. The contribution of the Cabot
---------------------------
Partner Assets to the Partnership shall be made in accordance with the terms of
this Agreement.
7.9 Consents and Approvals. All parties to this Agreement shall have
----------------------
obtained all necessary consents and approvals required in connection with the
performance by them of this Agreement and the consummation of the transactions
contemplated hereby, except for such consents and approvals the failure of which
to obtain, individually or in the aggregate for all parties, would not have a
material adverse effect on the financial condition or results of operations of
the Company and the Partnership taken as a whole. If Cabot Partners or any
Contributor or Title Holding Entity has not obtained a necessary consent or
approval with respect to any Cabot Partner Contract or any Property at or prior
to the Closing, such Cabot Partner Contract or such Property shall not be
contributed, directly or indirectly, to the Company or the Partnership unless
the Company shall agree.
7.10 Other Conditions. All other conditions to the obligations of the
----------------
Company and the Partnership set forth in this Agreement shall have been
satisfied as of the dates required.
ARTICLE 8: CONDITIONS PRECEDENT TO OBLIGATIONS OF
--------------------------------------------------
CABOT PARTNERS
--------------
The obligation of Cabot Partners to consummate the Closing is subject to
the fulfillment, at or prior to the Closing, of each of the following
conditions, and failure to satisfy any such condition shall excuse and discharge
all obligations of Cabot Partners to carry out the provisions of this Agreement
unless such failure is waived in writing by Cabot Partners. Promptly after
becoming aware that any of the following conditions has not been or cannot be
satisfied at or prior to the Closing, Cabot Partners shall so notify all other
parties to this Agreement.
8.1 Representations and Warranties. The representations and warranties
------------------------------
made by the Contributors and the Title Holding Entities in Article 4 of this
---------
Agreement and by the Company and the Partnership in Article 6 of this Agreement
---------
and the statements contained in any document furnished by the Contributors or
the Title Holding Entities, the Company or the Partnership in connection with
the Closing pursuant to this Agreement shall be true, correct and complete when
made and on and as of the Closing Date as though such representations and
warranties were made on and as of such date (except to the extent any such
representation and warranty is limited to a specific date by its express terms),
except for inaccuracies which, individually or in the aggregate for all parties,
would not have a material adverse effect on the financial condition or results
of operations of the Company and the Partnership taken as a whole.
8.2 Compliance with Agreements and Covenants. All parties hereto other
----------------------------------------
than Cabot Partners shall have performed and complied with all of their
covenants, obligations and agreements contained in this Agreement to be
performed and complied with by them on or prior to the Closing
36
<PAGE>
Date, except for failures to perform or comply which, individually or in the
aggregate for all parties, would not have a material adverse effect on the
financial condition or results of operations of the Company and the Partnership
taken as a whole.
8.3 Legal Proceedings. As of the Closing Date, no action or proceeding by
-----------------
or before any governmental authority shall have been instituted or threatened
(and not subsequently dismissed, settled or otherwise terminated) which is
reasonably expected to restrain, prohibit or invalidate the transactions
contemplated by this Agreement, other than an action or proceeding instituted or
threatened by Cabot Partners.
8.4 IPO Closing. The closing of the IPO of the Company shall occur
-----------
simultaneously with the Closing.
8.5 Consents and Approvals. All parties to this Agreement shall have
----------------------
obtained all necessary consents and approvals required in connection with the
performance by them of this Agreement and the consummation of the transactions
contemplated hereby, except for such consents and approvals the failure of which
to obtain, individually or in the aggregate for all parties, would not have a
material adverse effect on the financial condition or results of operations of
the Company and the Partnership taken as a whole. If Cabot Partners has not
obtained a necessary consent or approval listed on its disclosure letter with
respect to any Cabot Partner Contract at or prior to the Closing, such Cabot
Partner Contract shall not be contributed to the Partnership unless Cabot
Partners and the Company shall mutually agree.
8.6 Other Conditions. All other conditions to the obligations of Cabot
----------------
Partners set forth in this Agreement shall have been satisfied as of the dates
required.
ARTICLE 9: CONDITIONS PRECEDENT TO OBLIGATIONS OF CONTRIBUTORS AND TITLE HOLDING
- --------------------------------------------------------------------------------
ENTITIES
--------
The obligation of each Contributor and Title Holding Entity to consummate
the Closing is subject to the fulfillment, at or prior to the Closing, of each
of the following conditions, and failure to satisfy any such condition shall
excuse and discharge all obligations of such Contributor or Title Holding Entity
to carry out the provisions of this Agreement unless such failure is waived in
writing by such Contributor or Title Holding Entity. Promptly after becoming
aware that any of the following conditions has not been or cannot be satisfied
at or prior to the Closing, such Contributor or Title Holding Entity shall so
notify all other parties to such Agreement.
9.1 Representations and Warranties. The representations and warranties
------------------------------
made by the Company and the Partnership in Article 6 of this Agreement, by Cabot
---------
Partners in Article 5 and Section 3.13 of this Agreement and by the other
--------- ------------
Contributors and Title Holding Entities in Article 4 of this Agreement and the
---------
statements contained in any document furnished by the Company or the
Partnership, Cabot Partners or any other Contributor or Title Holding Entity in
connection with the Closing pursuant to this Agreement shall be true, correct
and complete when made and on and as of the Closing Date as though such
representations and warranties were made on and as of such date
37
<PAGE>
(except to the extent any such representation and warranty is limited to a
specific date by its express terms), except for inaccuracies which, individually
or in the aggregate for all parties, would not have a material adverse effect on
the financial condition or results of operations of the Company and the
Partnership taken as a whole.
9.2 Compliance with Agreements and Covenants. All parties hereto other
----------------------------------------
than such Contributor or Title Holding Entity shall have performed and complied
with all of their covenants, obligations and agreements contained in this
Agreement to be performed and complied with by them on or prior to the Closing
Date, except for failures to perform or comply which, individually or in the
aggregate for all parties, would not have a material adverse effect on the
financial condition or results of operations of the Company and the Partnership
taken as a whole.
9.3 Cabot Partner Contracts. As of the Closing Date, there shall exist no
-----------------------
default under the Cabot Partner Contracts which, individually or in the
aggregate, would have a material adverse effect on the financial condition or
results of operations of the Company and the Partnership taken as a whole.
9.4 Legal Proceedings. No action or proceeding by or before any
-----------------
governmental authority shall have been instituted or threatened (and not
subsequently dismissed, settled or otherwise terminated) which is reasonably
expected to restrain, prohibit or invalidate the transactions contemplated by
this Agreement, other than an action or proceeding instituted or threatened by
such Contributor or Title Holding Entity.
9.5 IPO Closing. The closing of the IPO of the Company shall occur
-----------
simultaneously with the Closing.
9.6 Minimum Asset Size. As of the Closing Date (after giving effect to the
------------------
IPO and the transactions contemplated hereby), the Company shall have
Contributed Capital of not less than $550 million.
9.7 Consents and Approvals. All parties to this Agreement shall have
----------------------
obtained all necessary consents and approvals required in connection with the
performance by them of this Agreement and the consummation of the transactions
contemplated hereby except for such consents and approvals the failure of which
to obtain, individually or in the aggregate for all parties, would not have a
material adverse effect on the financial condition or results of operations of
the Company and the Partnership taken as a whole. If any Contributor or Title
Holding Entity has not obtained a necessary consent or approval listed on its
disclosure letter with respect to any Property at or prior to the Closing, such
Property shall not be contributed, directly or indirectly, to the Company or the
Partnership unless such Contributor or Title Holding Entity and the Company
shall mutually agree.
9.8 Other Conditions. All other conditions to the Contributors' and the
----------------
Title Holding Entities' obligations set forth in this Agreement shall have been
satisfied as of the dates required.
38
<PAGE>
ARTICLE 10: CLOSING
-------------------
10.1 Closing. The consummation of the transactions contemplated hereby
-------
(the "Closing") shall take place at the offices of Cabot Partners, Two Center
-------
Plaza, Suite 200, Boston, Massachusetts 02108-1906, which shall occur on the
same date as the IPO Closing Date (the "Closing Date"). A pre-closing
------------
conference shall commence at least three days before the Closing Date, during
which all deliveries (other than any delivery of cash) shall be made into an
escrow with the Title Company, or, at the option of the parties, such deliveries
may be made in such other manner as the parties may determine. All deliveries
made during the pre-closing period shall be deemed deliveries made at the
Closing, and the transfers described herein and all closing deliveries, and the
consummation of the IPO, shall be deemed concurrent for all purposes. The
deliveries set forth in this Article 10 shall be conditions precedent to the
----------
Closing. Upon completion of the deliveries set forth in this Article 10 and
----------
satisfaction of the other conditions to the Closing herein set forth, the
parties shall direct the Title Company to make such deliveries and disbursements
according to the terms of this Agreement and under an escrow instruction letter
substantially in the form of Exhibit G.
---------
10.2 Deliveries by Contributors and Title Holding Entities. At the Closing,
-----------------------------------------------------
in addition to any other documents or agreements required under any other
provision of this Agreement, each Contributor and Title Holding Entity shall
make the following deliveries and performance solely with respect to each
Property and, in the case of Contributors, each Title Holding Entity in which
such Contributor or Title Holding Entity has an ownership interest:
(a) Deed. For each Property contributed by a Title Holding Entity
----
listed on Schedule 2.3, a deed containing a special warranty of title, in
------------
statutory form or if the applicable jurisdiction does not promulgate such a
form, in such form as is customary in the applicable jurisdiction which the
Title Company shall require in order to issue the title policies which are
consistent with the requirements of Section 2.6, executed and acknowledged
-----------
by the Title Holding Entity, conveying to the Partnership indefeasible fee
simple title to such Property subject only to Permitted Exceptions. The
deeds shall be delivered, in escrow, to agents of the Title Company located
in the appropriate counties for recording the deeds, so that the deeds can
be recorded on the Closing Date;
(b) Assignment of Leases, etc. For each Property, a Bill of Sale and
-------------------------
Assignment of Leases, Contracts and Intangible Property substantially in
the form of Exhibit H (the "Assignment"), executed and acknowledged by the
--------- ----------
applicable Title Holding Entity, vesting in the Partnership good title to
the assets and property described therein free of any Liens, except for, to
the extent applicable, Permitted Exceptions;
(c) UCC Searches and Tenant Estoppels. The requirements in Section 2.9
--------------------------------- -----------
(UCC Searches) and Section 7.3 (Tenant Estoppels) shall have been complied
-----------
with;
(d) Releases. Such information, releases, termination statements and
--------
other items as the Title Company may require to pay off and release all
existing Liens evidencing or securing all mortgage indebtedness other than
Assumed Mortgage Debt;
39
<PAGE>
(e) Partnership Agreement. The Partnership Agreement, executed by such
---------------------
Contributor or Title Holding Entity or its Equity Holders;
(f) Registration Rights Agreements. The Registration Rights
------------------------------
Agreements, executed by such Contributor or Title Holding Entity or its
Equity Holders;
(g) Assumed Mortgage Documents. The documents evidencing the
--------------------------
assumption of the Assumed Mortgage Debt executed by such Contributor or
Title Holding Entity and all deliveries of such Contributor or Title
Holding Entity required thereunder;
(h) Notice to Tenants. A notice to each tenant in form reasonably
-----------------
satisfactory to the parties hereto, notifying tenants of transfers of
ownership and directing payment of all rents occurring after the Closing
Date to be made to the Partnership or at its direction;
(i) State Law Disclosures. Such disclosures and reports as are
---------------------
required by applicable state and local law in connection with the
conveyance of real property;
(j) FIRPTA. A Foreign Investment in Real Property Tax Act affidavit
------
executed by such Contributor or Title Holding Entity. If such Contributor
or Title Holding Entity fails to provide the necessary affidavit and/or
documentation of exemption on the Closing Date, the Company may proceed in
accordance with the withholding provisions as provided in such Act;
(k) Affidavits. A gap undertaking and ALTA certificate reasonably
----------
satisfactory to the Title Company to enable it to issue the Title Policy
and to close this transaction in accordance with the terms hereof, and any
documents required by the Title Company to provide the coverage and
endorsements described in Section 2.6;
-----------
(l) Partnership Merger. An executed Partnership Agreement and Plan of
------------------
Merger by each Title Holding Entity listed on Schedule 2.1, as contemplated
------------
by Section 2.1;
-----------
(m) Delivery of Stock Certificates, etc. Delivery to the Company or
------------------------------------
the Partnership, as appropriate, of the stock certificates or other indicia
of ownership in each Title Holding Entity (or interests therein) held by
the Stock Contributors, Partnership Interest Contributors or other Equity
Holders, as the case may be, assigned or endorsed in blank;
(n) Authority. Evidence of the existence, organization and authority
---------
of such Contributor or Title Holding Entity and of the authority of the
persons executing documents on behalf of such Contributor or Title Holding
Entity reasonably satisfactory to the Title Company and the Company;
(o) Possession. Possession of the Properties, subject only to the
----------
applicable Permitted Exceptions;
40
<PAGE>
(p) Delivery of Books and Records. Delivery to the offices of the
-----------------------------
Partnership: the original Leases; copies or originals of all books and
records of account; contracts; copies of correspondence with tenants and
suppliers; receipts for deposits; unpaid bills and other papers or
documents which pertain to the Properties; all advertising materials,
booklets, keys and other items, if any, used in the operation of the
Properties; and, if in the possession or control of such Contributor or
Title Holding Entity, the original "as-built" plans and specifications and
all other available plans and specifications; each Contributor and Title
Holding Entity shall cooperate with the Partnership after the Closing to
provide to the Partnership any such information stored electronically;
(q) Consents. Copies of consents executed by the requisite Equity
--------
Holders of each Title Holding Entity substantially in the form of Exhibit I
---------
approving the entering into of this Agreement and the other documents
contemplated herein by such Title Holding Entity and agreeing, among other
things, to be bound by the indemnification obligations set forth in Article
-------
13; and
--
(r) Other. Such other documents and instruments as may reasonably be
-----
required by the Company, its (or its underwriters') counsel or the Title
Company that may be necessary to consummate the transaction and to
otherwise effect the agreements of the parties under this Agreement.
10.3 Deliveries by the Company and the Partnership. At the Closing, the
---------------------------------------------
Company and the Partnership shall make the following deliveries and performance:
(a) Partnership Agreement. The Partnership Agreement, executed by the
---------------------
Company, together with any filings with any governmental authority or
agency required to be made by or on behalf of the Partnership;
(b) Partnership Ratification. The Partnership's written ratification
------------------------
of this Agreement and agreement to perform the obligations of the
Partnership that are to be performed after the Closing;
(c) Merger Documents. An executed Subsidiary Agreement and Plan of
----------------
Merger, in the case of Properties contributed pursuant to Section 2.2, or
-----------
an executed Partnership Agreement and Plan of Merger, in the case of
Properties contributed pursuant to Section 2.1;
-----------
(d) LP Units or Common Shares. Issuance by the Partnership to the
-------------------------
Equity Holders of each Title Holding Entity listed on Schedule 2.1, each
------------
Partnership Interest Contributor and Cabot Partners of that number of LP
Units equal to the Ownership Units applicable to such party and reasonably
satisfactory evidence of such issuance; issuance by the Company to each
Stock Contributor and each Title Holding Entity listed on Schedule 2.3 of
------------
that number of Common Shares equal to the Ownership Units applicable to
such party;
41
<PAGE>
(e) Payment of Consolidation Expenses; Reimbursement of Costs. At or
---------------------------------------------------------
promptly after the Closing, the Partnership shall pay all Consolidation
Expenses as well as the fees and expenses paid or to be paid to the
Financial Advisor and the QPAM, as provided in their respective engagement
letters. At or promptly after the Closing, the Partnership shall reimburse
Cabot Partners for its actual, out-of-pocket costs which constitute
Consolidation Expenses incurred in connection with the Consolidation
including, without limitation, all reasonable fees and reimbursements
payable to its consultants and attorneys. Cabot Partners shall not be
reimbursed for any employee time, as opposed to reimbursement for costs
incurred by employees;
(f) Registration Rights Agreement. The Registration Rights Agreement,
-----------------------------
executed by the Company;
(g) Authority. Evidence of existence, organization and authority of
---------
the Company and the Partnership and the authority of the person executing
documents on behalf of each of the Company and the Partnership;
(h) Assignment of Leases. The Assignment, executed by the Partnership;
--------------------
(i) State Law Disclosures. Such disclosures and reports as are
---------------------
required by applicable state and local law in connection with the
conveyance of real property;
(j) Assumed Mortgage Debt. The documents evidencing the assumption of
---------------------
the Assumed Mortgage Debt and any other liabilities to be assumed by the
Partnership (all of which such other liabilities are subject to proration
under Article 11), executed by the Partnership, and all deliveries of the
----------
Partnership required thereunder;
(k) Legal Opinions. Usual and customary legal opinions from counsel to
--------------
the Company and the Partnership, which opinions may be relied on by the
Equity Holders, which shall be substantially the same in scope as the
opinions delivered to the underwriters at the Closing of the IPO, including
with respect to the matters addressed in Section 6.9;
-----------
(l) Title Insurance and Survey. The requirements of Section 2.6 (Title
-------------------------- -----------
Insurance) and Section 2.7 (Survey) shall have been complied with; and
-----------
.
(m) Other. Such other documents and instruments as may reasonably be
-----
required by the Contributors, the Title Holding Entities or the Title
Company or their respective counsel that may be necessary to consummate the
transaction and to otherwise effect the agreement of the parties under this
Agreement.
10.4 Deliveries by Cabot Partners. At the Closing, Cabot Partners shall
----------------------------
make the following deliveries and performance:
42
<PAGE>
(a) Partnership Agreement. The Partnership Agreement, executed by
---------------------
Cabot Partners, together with any filings with any governmental authority
or agency required to be made by or on behalf of Cabot Partners;
(b) Bill of Sale and Other Transfer Documents. A Bill of Sale
-----------------------------------------
substantially in the form of Exhibit J and such other good and sufficient
---------
instruments of transfer and conveyance as shall be necessary or appropriate
to vest the Partnership with title to all of the Cabot Partners Assets;
(c) Registration Rights Agreement. The Registration Rights Agreement,
-----------------------------
executed by Cabot Partners;
(d) Authority. Evidence of the existence, organization and authority
---------
of Cabot Partners and of the authority of the persons executing documents
on behalf of Cabot Partners reasonably satisfactory to the Company;
(e) Notice to Clients. A notice to each client of Cabot Partners in
-----------------
form reasonably satisfactory to the parties hereto, notifying the clients
of Cabot Partners of the transfer of the Cabot Partners Contracts and the
succeeding parties to the investment advisory and property management
services;
(f) Books and Records. All original Cabot Partner Contracts, copies or
-----------------
originals of all books and records of accounts, contracts, copies of
correspondence with clients and suppliers, receipts, unpaid bills, other
papers or documents which pertain to the investment advisory and property
management business of Cabot Partners and all other assets used in the
operation of such business;
(g) Disclosures. Such disclosures and reports as are required by
-----------
applicable federal, state and local law in connection with the conveyance
of the Cabot Partner Assets; and
(h) Other. Such other documents and instruments as may reasonably be
-----
required by the Company, its (or its underwriters') counsel that may be
necessary to consummate the transaction and to otherwise effect the
agreements of the parties hereto under this Agreement.
ARTICLE 11: PRORATIONS AND ADJUSTMENTS
--------------------------------------
11.1 Prorations. Before the Closing, the Contributors and the Title
----------
Holding Entities shall provide to the Company such information and verification
reasonably necessary to support the prorations and adjustments under this
Article 11. Subject to paragraph (a) below, the items in paragraphs (a) through
- ----------
(f) of this Section 11.1, as well as any amount of damage to be credited to the
------------
Partnership to the extent provided in Section 3.10, shall be prorated as between
------------
the Partnership and each Title Holding Entity as of the close of the day
immediately preceding the Closing Date,
43
<PAGE>
the Closing Date being a day of income and expense to the Partnership. Except as
provided in clauses "third" through "sixth" of clause (a) of the definition of
"Adjusted Contribution Amount," all prorations shall be in cash and shall not
affect the number of Ownership Units to be delivered to the Contributors or the
Title Holding Entities or their respective Equity Holders; provided, however
--------
that any Title Holding Entity or Equity Holder may elect to make its proration
payments to the Company in cash or in Ownership Units valued at their Fair
Market Value at the time of payment.
(a) Taxes and Assessments. Except as provided in the last sentence of
---------------------
this Section 11.1(a) or as covered by Section 11.1(c), the Partnership
--------------- ---------------
shall receive a credit for any unpaid real estate taxes (and any
assessments imposed by private covenant), whether or not then due or
payable, imposed in respect of the Properties and applicable for the
portion of the current year or other applicable tax period which has
elapsed before the Closing Date (and to the extent unpaid, for prior years
or tax periods) and the Title Holding Entities shall receive a credit for
any real estate taxes (and any assessments imposed by private covenant)
previously paid by them in respect of the Properties and relating to
periods after the Closing Date. If the amount of any such taxes have not
been determined as of the Closing, such credit shall be based on the most
recent ascertainable taxes which proration shall be final and shall not be
reprorated upon issuance of the final tax bill. The Partnership shall
receive a credit for the total amount of any special assessments or similar
charges which are levied or charged against the Properties before the
Closing, whether or not then due and payable, except to the extent such
assessments were deducted in determining the Contribution Amount.
Notwithstanding the foregoing provisions of this Section 11.1(a), no credit
---------------
shall be given to the Partnership for any accrued and unpaid real estate
taxes, private covenant assessments, special assessments or similar
charges, to the extent that (i) any tenant is responsible for the direct
payment of such amounts or (ii) such amounts are, or will be, collectible
from Operating Expense Pass-Throughs.
(b) Collected Rent. The Partnership shall receive a credit for any
--------------
rent and other income (and any applicable state or local tax on rent) under
Leases, collected by the Contributors and the Title Holding Entities before
the Closing and applicable to any period of time after the Closing. After
the Closing, the Partnership shall apply all rent and income collected by
the Partnership from a tenant, unless the tenant properly identifies the
payment as being for a specific item, first to such tenant's monthly rental
for the month in which the Closing occurred and then to arrearages in the
reverse order in which they were due, remitting to the Contributors or the
Title Holding Entities or their respective Equity Holders, after deducting
collection costs, any rent properly allocable to the Title Holding
Entities' period of ownership. The Partnership shall bill and attempt to
collect such rent arrearages in the ordinary course of business, but shall
not be obligated to engage a collection agency or take legal action to
collect any rent arrearages. The Contributors and the Title Holding
Entities and their respective Equity Holders shall not have the right to
seek collection of any rents or other income applicable to any period
before the Closing until such time as the applicable tenant vacates its
property. Any rent or other income received by the Contributors or the
Title Holding Entities or their respective Equity Holders after Closing
which are owed to the Partnership shall be held in trust and remitted to
the Partnership promptly after receipt.
44
<PAGE>
(c) Operating Expense Pass-Throughs. The Title Holding Entities, as
-------------------------------
landlords under the Leases, are currently collecting from tenants under the
Leases additional rent to cover all or portions of taxes, insurance,
utilities, maintenance and other operating costs and expenses
(collectively, "Operating Expense Pass-Throughs") incurred by the Title
-------------------------------
Holding Entities in connection with the ownership, operation, maintenance
and management of the Properties. If the Title Holding Entities collected
estimated prepayments of Operating Expense Pass-Throughs in excess of any
tenant's share of such expenses and had not previously repaid those amounts
to the appropriate tenants, then if the excess can be determined by the
Closing, the Partnership shall receive a credit for the excess or, if the
excess cannot be determined at Closing, the Partnership shall receive a
credit based upon an estimate, and the parties shall make an adjustment
payment between them when the correct amount can be determined. In either
event, the Partnership shall be responsible for crediting or repaying those
amounts to the appropriate tenants. If the Title Holding Entities collected
estimated prepayments of Operating Expense Pass-Throughs attributable to
any period after the Closing, the Title Holding Entities shall pay or
credit any such amounts to the Partnership at the Closing. At the Closing,
the Partnership shall receive a credit equal to the amount, if any, by
which payments made by tenants in respect of Operating Expense Pass-
Throughs for the period prior to the Closing exceed the amount paid or
accrued during this same period of time for Operating Expense Pass-
Throughs. To the extent that any tenant is obligated to pay taxes or
assessments at year end, then no proration of such amounts shall be made
and the Partnership shall have the sole right to collect such amounts from
the applicable tenant. To the extent that the Title Holding Entities have
paid any taxes, insurance, utilities, maintenance or other operating costs
and expenses prior to the receipt from a tenant of Operating Expense Pass-
Throughs due or to be due from the tenant, the Title Holding Entities shall
receive a credit for any amount so paid.
(d) Service Contracts. The Title Holding Entities or the Partnership,
-----------------
as the case may be, shall receive a credit for regular charges under
Service Contracts assumed by the Partnership pursuant to this Agreement
paid and applicable to the Partnership's period of ownership or payable and
applicable to the Title Holding Entities' period of ownership.
Notwithstanding the foregoing, no payment or credit shall be due from the
Contributors or the Title Holding Entities to the extent that such amounts
are, or will be, due from tenants as Operating Expense Pass-Throughs but
have not yet been collected from tenants.
(e) Utilities. The Contributors or the Title Holding Entities shall
---------
cause the meters, if any, for utilities to be read on the Closing Date and
shall pay the bills rendered on the basis of such readings, except for
utilities paid directly by tenants. If any such meter reading for any
utility is not available, then adjustment therefor shall be made on the
basis of the most recently issued bills therefor which are based on meter
readings no earlier than 30 days before the Closing Date. Notwithstanding
the foregoing, no payment or credit shall be due from the Contributors or
the Title Holding Entities to the extent that such amounts are, or will be,
due from tenants as Operating Expense Pass-Throughs but have not yet been
collected from tenants.
45
<PAGE>
(f) Accrued Interest on Assumed Mortgage Debt. The Partnership shall
-----------------------------------------
receive a credit for any interest accrued on Assumed Mortgage Debt, whether
or not then due and payable, for the portion of the applicable interest
period which has elapsed before the Closing Date (and to the extent unpaid,
for prior periods).
11.2 Tenant Reconciliations and Post-Closing Adjustments. After year-end
---------------------------------------------------
(or other applicable period) adjustments with tenants under Leases for Operating
Expense Pass-Throughs and receipt of final tax and other bills, the Partnership
shall prepare and present to the Contributors or the Title Holding Entities or
their respective Equity Holders a calculation of the reproration of such
Operating Expense Pass-Throughs, taxes (to the extent provided herein) and other
items, based upon the actual amount of such items charged to or received by the
parties for the year or other applicable fiscal period. The parties shall make
the appropriate adjusting payment between them within 30 days after presentment
to the Contributors or the Title Holding Entities or their respective Equity
Holders of the Partnership's calculation. The Contributors or the Title Holding
Entities or their respective Equity Holders may inspect the Partnership's books
and records related to the Properties to confirm the calculation. Appropriate
post-Closing reconciliations and adjustments shall be made for any incorrect
proration or adjustment. All post-Closing reconciliations and adjustments
between the parties shall be paid in cash.
11.3 Leasing Commissions. At the Closing, the Partnership shall credit the
-------------------
Title Holding Entities an amount equal to any leasing commissions paid by the
Title Holding Entities after August 31, 1997 and prior to the Closing to the
extent that such commissions were deducted in determining the Contribution
Amount. Except to the extent that such commissions were deducted in determining
the Contribution Amount, the Partnership shall receive a credit at the Closing
equal to all leasing commissions due to leasing or other agents for the current
remaining term of each Lease (determined without regard to any unexercised
termination or cancellation right), discounted to present value using a discount
rate of 11 percent per year. The Partnership shall assume in writing the
obligation to pay any such leasing commissions due thereunder after the Closing
Date up to the amount of the leasing commissions related to such credit, but
only to the extent such leasing commissions are identified in the Rent Roll or
approved by the Partnership after the date of this Agreement. At the Closing,
the Partnership shall assume leasing commissions expressly identified in the
commission schedule delivered to the Company and the Partnership on or prior to
the date hereof which may become due as a result of the renewal, extension or
expansion of any Lease which renewal or extension term or expansion commences
after the date of this Agreement.
11.4 TI Contracts, Tenant Allowances and Capital Improvements. Tenant
--------------------------------------------------------
improvement expenses (including all hard and soft construction costs, whether
payable to the contractor or the tenant), tenant allowances, rent abatement,
moving expenses and, other out-of-pocket costs which are the obligation of the
landlord under Leases shall be allocated between the parties according to
whether such obligations arise in connection with (a) Leases in place (the rent
commencement date falls before the date of execution of this Agreement)
("Existing TI Obligations") other than with respect to renewal or expansion
- -------------------------
rights under Leases executed before the date of execution of this Agreement and
properly exercised after the date of this Agreement, or (b) Leases for which the
rent commencement date falls after the date of this Agreement or (c) Leases or
amendments entered into
46
<PAGE>
during the pendency of this Agreement and approved by the Partnership or
otherwise permitted pursuant to Section 3.7 or renewals or expansion rights
-----------
existing under Leases executed before the date of execution of this Agreement
and properly exercised after the date of this Agreement ("New TI Obligations"):
------------------
(i) Existing TI Obligations. At the Closing, the Partnership shall
-----------------------
credit the Title Holding Entities an amount equal to any Existing TI
Obligations completed and paid in full by the Title Holding Entities after
August 31, 1997 and prior to the Closing to the extent that such Existing
TI Obligations were deducted in determining the Contribution Amount. Except
to the extent that the Contribution Amount has been determined by deducting
the amount of any Existing TI Obligations as of the date of determination
of such amount, if, by the Closing, the Contributors or the Title Holding
Entities have not completed and paid in full Existing TI Obligations, then
such costs as are reasonably agreed by the Partnership and the Contributors
or the Title Holding Entities shall be charged against the Contributors or
the Title Holding Entities and credited to the Partnership, and the
Partnership shall be responsible for completing such Existing TI
Obligations. If the amount charged against the Contributors or the Title
Holding Entities and credited to the Partnership exceeds the Partnership's
reasonable cost to complete such Existing TI Obligations, such excess shall
be paid in cash to the Contributors or the Title Holding Entities or their
respective Equity Holders; but if the credit is insufficient for such
purpose, the Contributors or the Title Holding Entities or their respective
Equity Holders shall reimburse the Partnership in cash for such deficiency
within 10 days after the Partnership's presentment of a final written
reconciliation supported by evidence reasonably satisfactory to the
Contributors or the Title Holding Entities or their respective Equity
Holders.
(ii) New TI Obligations. At the Closing, the Partnership shall credit
------------------
the Contributors or the Title Holding Entities for the cost of New TI
Obligations properly performed and paid for by the Contributors or the
Title Holding Entities to the extent such obligations were expressly
approved in writing by the Partnership or otherwise permitted under Section
-------
3.7, or if not performed and paid and relating to Leases which are
---
permitted under the terms of this Agreement, the Partnership shall assume
the obligation to perform and pay for such New TI Obligations. If the rent
commencement date under any Lease amendment, renewal, extension or
expansion of a Lease subject to New TI Obligations falls before the Closing
Date, then the cost of the New TI Obligation under such Lease, amendment,
renewal or expansion shall be apportioned between the parties in the
proportion that the length of the portion of the noncancellable primary
term after such rent commencement date to the Closing Date bears to the
length of the portion of the noncancellable primary term falling after the
Closing Date.
(iii) Capital Improvements. At the Closing, the Partnership shall
--------------------
credit the Title Holding Entities for the cost of capital improvements to
the Properties identified in the appraisals (which capital improvements
shall exclude any TI Obligations provided for in paragraphs (i) and (ii)
above) and properly performed and paid for by the Title Holding Entities.
47
<PAGE>
(iv) Change Orders. The Contributors and the Title Holding Entities
-------------
shall not agree to any change orders or additions to tenant improvements or
changes in the scope of work or specifications with respect to Existing TI
Obligations or New TI Obligations which exceed 10% of the approved costs
without the Company's prior written approval, which shall not be
unreasonably withheld or delayed.
(v) Evidence of Payment. At the Closing, the Contributors and the
-------------------
Title Holding Entities shall provide lien waivers, payment affidavits,
certificates of completion, Tenant Estoppels and other evidence reasonably
necessary to confirm the Contributors' and the Title Holding Entities'
compliance with their obligations pursuant to this Section 11.4, and, to
------------
the extent such coverage is available, shall provide such indemnity or
other assurance to enable the Title Company to insure against any claims
against the Properties arising from work performed before the Closing.
11.5 Repair Contracts. At the Closing, the Contributors and the Title
----------------
Holding Entities shall pay or provide for payment in a manner reasonably
satisfactory to the Company for all work under Repair Contracts that has been
performed through the Closing Date, and, subject to the Partnership's reasonable
requirements with respect to the selection of contractor, mechanic's lien
protection and insurance, the Contributors and the Title Holding Entities shall
at their sole cost and expense complete the remaining work to be performed under
such Repair Contracts after the Closing Date. Any insurance proceeds covering
work under the Repair Contracts shall be paid to the Contributors and the Title
Holding Entities for the cost of the work covered by such insurance. Warranties
related to work under TI Contracts and Repair Contracts shall be included in the
warranties described as Intangible Property related to the applicable
Properties. The Contributors and the Title Holding Entities shall provide
assurance to the Title Company to enable it, to the extent permitted by
applicable title insurance regulations, to issue the Title Policy without
exception for mechanics' and materialmens' liens related to work performed by
the Contributors and the Title Holding Entities under Repair Contracts.
Notwithstanding the foregoing, the Contributors and the Title Holding Entities
shall not be responsible for costs payable pursuant to Repair Contracts to the
extent such costs are, or will be, due from tenants as Operating Expense Pass-
Throughs.
11.6 Tenant Deposits. All unapplied tenant security deposits (and interest
---------------
thereon if required by law or contract to be earned thereon) shall be
transferred or credited to the Partnership at the Closing.
11.7 Wages. The Partnership shall not be liable for any wages, fringe
-----
benefits, payroll taxes, unemployment insurance contributions, accrued vacation
pay, accrued pay for unused sick leave, accrued severance pay and other
compensation accruing prior to the Closing for employees of the Properties.
11.8 Utility Deposits. The Title Holding Entities shall receive a credit
----------------
for the amount of deposits, if any, with utility companies that are transferable
and that are properly assigned to the Partnership at the Closing.
48
<PAGE>
11.9 Proration for Cabot Partners. The parties hereto agree that (a)
----------------------------
Cabot Partners is entitled to all of the revenues derived from the Cabot Partner
Assets and is responsible for all of the expenses, obligations, losses, damages,
costs and liabilities incurred in connection with the Cabot Partner Assets,
attributable to the period ending with the day immediately preceding the Closing
Date, whether such revenues are received or such expenses are paid before or
after the Closing Date, and (b) the Partnership is entitled to all of the
revenues from the Cabot Partner Assets, and is responsible for all of the
expenses, obligations, losses, damages, costs and liabilities incurred in
connection with the Cabot Partner Assets, attributable to the period beginning
on the Closing Date. Accordingly, revenues, expenses, obligations, losses,
damages, costs and liabilities relating to the Cabot Partner Assets shall be
apportioned between the Partnership and Cabot Partners as of the Closing Date.
Cabot Partners shall prepare a proration schedule setting forth its good faith
estimate of all proratable items prior to the Closing Date and shall deliver a
copy thereof to the Company and the Partnership. Cabot Partners shall promptly
provide to the Company and the Partnership any information reasonably requested
by the Partnership in order to confirm the aforementioned proration schedule and
the parties shall cooperate reasonably and in good faith to agree mutually to a
final proration schedule as promptly as practicable. Adjustments required as a
result of a final proration schedule as to which the parties have agreed shall
be made by prompt payment from Cabot Partners to the Partnership or from the
Partnership to Cabot Partners.
11.10 Sales Commissions. In the event of any claim for broker's or
-----------------
finder's fees or commissions in connection with the negotiation, execution or
consummation of this Agreement or the transactions contemplated hereby, each
party hereto shall indemnify and hold harmless each other party hereto from and
against any such claim based upon any statement, representation or agreement of
such party.
11.11 Certain Tax Matters. Each Stock Contributor and Title Holding
-------------------
Corporation listed on Schedule 2.1 and the Company agree to furnish or cause to
------------
be furnished to the other, upon request, as promptly as practicable, such
information (including access to books and records) and assistance relating to
such Title Holding Corporation or the Title Holding Corporation whose interest
is being contributed by such Stock Contributor as is reasonably necessary for
the filing of any Tax Return, the preparation for any Tax audit, the prosecution
or defense of any claim, suit or proceeding relating to any proposed Tax
adjustment for which the Stock Contributor or the Company retains liability
under this Section 11.11.
ARTICLE 12: TERMINATION AND REMEDIES
------------------------------------
12.1 Termination. This Agreement may be terminated:
-----------
(a) At any time prior to the Closing Date, between the Company and a
Contributor or Title Holding Entity, with the joint written consent of the
Company and such Contributor or Title Holding Entity; provided, however,
-------- -------
that any such terminated Contributor or Title Holding Entity shall remain
liable for its pro rata share of the Consolidation Expenses pursuant to
Section 14.2 in the event this Agreement terminates without a Closing; or
------------
49
<PAGE>
(b) By the Company or any Contributor or Title Holding Entity or
Equity Holder, if the IPO has not occurred by June 30, 1998 or if the Form
S-11 registration statement of the Company for the IPO has not been filed
with the Securities and Exchange Commission by May 15, 1998.
12.2 Effect of Termination. If this Agreement is terminated pursuant to
---------------------
Section 12.1, all obligations of the parties hereunder (or of the terminated
- ------------
Contributor or Title Holding Entity, in the case of terminations pursuant to
Section 12.1(a)) shall terminate, except for the obligations that expressly
- ----------------
survive the termination of this Agreement. If this Agreement is terminated
pursuant to Section 12.1, no party (or no terminated Contributor or Title
------------
Holding Entity, in the case of terminations pursuant to Section 12.1(a)) shall
----------------
have any continuing liability for any inaccuracy in or breach of any
representation or warranty or covenant under this Agreement, and if any Property
is excluded from the Consolidation in accordance with the election of the
Company pursuant to Section 12.3, any Contributor or Title Holding Entity having
------------
an ownership interest in such Property shall not have any continuing liability
for any inaccuracy in or breach of any representation or warranty or covenant
with respect to such Property under this Agreement; provided, however, that no
-------- -------
such termination pursuant to Section 12.1 or exclusion pursuant to Section 12.3
------------ ------------
shall relieve any party from its responsibility to pay for a pro rata share of
expenses under Section 14.2 or from liability for any prior intentional breach
------------
of this Agreement.
12.3 Termination as to Specific Properties. At any time prior to the
-------------------------------------
Closing Date, if there shall have been a material breach of any covenant,
representation or warranty of any Contributor or Title Holding Entity hereunder
with respect to any Property or Properties, or failure of any condition to the
Company's obligation to close with respect to one or more Properties which is
not or cannot be cured within two Business Days or there shall have occurred a
material adverse change or development affecting the condition, value or utility
of any Property, the Company may elect by written notice to such Contributor or
Title Holding Entity to exclude such Property or Properties from the
Consolidation, which notice shall be given by the Company within 30 days after
becoming aware of such material breach, failure or material adverse change or
development or such longer period to which such Contributor or Title Holding
Entity may agree, in which event the Contribution Amount of such Contributor or
Title Holding Entity or its Equity Holders shall be adjusted accordingly. The
Company and Cabot Partners agree to cooperate with such Contributor or Title
Holding Entity in transferring such Property or Properties to another title
holding entity owned by such Contributor or by the Equity Holders of such Title
Holding Entity so that it or they may be excluded from the Consolidation without
any adverse tax consequences to such Contributor or Title Holding Entity or its
Equity Holders.
ARTICLE 13: INDEMNIFICATION
----------------------------
13.1 Contributors', Title Holding Entities' and Equity Holders' Indemnity.
--------------------------------------------------------------------
Each Contributor and Title Holding Entity agrees, and represents and warrants
that each of its Equity Holders has agreed, severally but not jointly, to
indemnify, defend and hold the Company and the Partnership harmless from any
liability, claim, demand, loss or damage (for the survival period provided in
Section 14.1) (a) asserted by any person or entity against any such indemnitee
- ------------
arising
50
<PAGE>
from any act or omission of such Contributor or Title Holding Entity,
its agents, employees or contractors occurring on or before the Closing except
for matters covered by the representations and warranties in Article 4 or
---------
relating to the Properties owned by it, which shall be governed, if at all, by
clause (b) or (e) below; (b) arising from any breach by such Contributor or
Title Holding Entity of any contractual obligation related to the Properties
owned by it other than those obligations which by this Agreement, or any closing
delivery, specifically become the obligations of the Partnership; (c) for
proration payments under Article 11; (d) liabilities arising prior to the
----------
Closing with respect to the Properties, whether or not asserted or due, except
for (i) liabilities subject to proration under Article 11, (ii) Assumed Mortgage
----------
Debt or (iii) matters covered by the representations and warranties in Article 4
---------
or relating to the Properties owned by it, which shall be governed, if at all,
by clause (b) above or clause (e) below; or (e) arising from any breach by such
Contributor or Title Holding Entity of its representations and warranties in
Article 4, except to the extent previously adjusted in calculating the Adjusted
- ---------
Contribution Amount for such Contributor or Title Holding Entity or its Equity
Holders. In the event the Company or the Partnership is entitled to receive any
amount from a Contributor or Title Holding Entity or its Equity Holders pursuant
to this Section 13.1 as an indemnification payment, in lieu of receiving a cash
------------
payment from such Contributor or Title Holding Entity or its Equity Holders,
such Contributor or Title Holding Entity or its Equity Holders may elect to
satisfy such indemnification amount by delivery to the Company or the
Partnership, as the case may be, of Ownership Units that it holds, free and
clear of all liens, with each such Ownership Unit having a value equal to the
Fair Market Value of the Common Shares as of the first date that payment of such
indemnification amount is due to the Company or the Partnership, as the case may
be.
13.2 Cabot Partners' Indemnity. Cabot Partners agrees to indemnify, defend
-------------------------
and hold the Company and the Partnership harmless from any liability, claim,
demand, loss or damage (for the survival period provided in Section 14.1) (a)
------------
asserted by any person or entity against any such indemnitee arising from any
act or omission of Cabot Partners, its agents, employees or contractors
occurring on or before the Closing, except for any such items which are subject
to proration under Article 11; (b) arising from any breach by Cabot Partners of
----------
any obligation related to its business other than those obligations which by
this Agreement, or any closing delivery, specifically become the obligations of
the Partnership; or (c) arising from any breach by Cabot Partners of its
representations and warranties in Article 5.
----------
13.3 Partnership's Indemnity. The Partnership agrees to indemnify, defend
-----------------------
and hold the Contributors, the Title Holding Entities and their respective
Equity Holders and Cabot Partners harmless from and against any liability,
claim, demand, loss or damage (for the survival period provided in Section 14.1,
------------
except with respect to clauses (a) and (d) below, which shall not be so limited)
(a) asserted by any person or entity against any of them with respect to the
Properties or otherwise arising from any act or omission of the Partnership, its
agents, employees or contractors occurring on or after the Closing; (b) arising
from any breach by the Partnership of any obligation of the Partnership under
this Agreement; (c) for proration payments under Article 11; (d) arising from
----------
events occurring after the Closing with respect to the Properties, except for
liabilities subject to proration under Article 11; or (e) arising from any
----------
breach by the Partnership of its representations and warranties in Article 6.
---------
51
<PAGE>
13.4 Company's Indemnity. The Company agrees to indemnify, defend and hold
-------------------
the Contributors, the Title Holding Entities and their respective Equity Holders
and Cabot Partners harmless from any liability, claim, demand, loss or damage
suffered by any of them (for the survival period provided in Section 14.1) (a)
------------
asserted by any person or entity against any such indemnitee arising from any
act or omission of the Company, its agents, employees or contractors occurring
on or before the Closing, except for any such items which are subject to
proration under Article 11; or (b) arising from any breach by the Company of its
----------
representations and warranties in Article 6.
---------
13.5 Environmental Excluded. The indemnities set forth in this Article 13
---------------------- ----------
do not cover indemnification relating to environmental conditions or claims
including, without limitation, asbestosis, with the exception of a breach by the
Contributors or the Title Holding Entities of their representation and warranty
in Section 4.9. Each party explicitly reserves all rights with respect to such
-----------
claims under any other provision of this Agreement and under applicable law.
13.6 Procedure. The following provisions govern all actions for indemnity
---------
under this Article 13 and any other provision of this Agreement. Promptly after
----------
receipt by an indemnitee of notice of any claim, such indemnitee shall, if a
claim in respect thereof is to be made against the indemnitor, deliver to the
indemnitor written notice thereof and the indemnitor shall have the right to
participate in and, if the indemnitor agrees in writing that it shall be
responsible for any costs, expenses, judgments, damages and losses incurred by
the indemnitee with respect to such claim, to assume the defense thereof, with
counsel mutually satisfactory to the parties; provided, however, that an
-------- -------
indemnitee shall have the right to retain its own counsel, with the fees and
expenses to be paid by the indemnitor, if the indemnitee reasonably believes
that representation of such indemnitee by the counsel retained by the indemnitor
would be inappropriate due to actual or potential differing interests between
such indemnitee and any other party represented by such counsel in such
proceeding. The failure of an indemnitee to deliver written notice to the
indemnitor within a reasonable time after the indemnitee receives notice of any
such claim shall relieve such indemnitor of any liability to the indemnitee
under this indemnity only if and to the extent that such failure is prejudicial
to the indemnitor's ability to defend such action. If an indemnitee settles a
claim without the prior written consent of the indemnitor, then the indemnitor
shall be released from liability with respect to such claim unless the
indemnitor has unreasonably withheld such consent.
13.7 Limitation on Liability. Notwithstanding any other provision in this
-----------------------
Article 13, (a) the aggregate liability of each Contributor, Title Holding
- ----------
Entity or Equity Holder, respectively, with respect to any and all liabilities,
claims, demands, losses or damages effected under Section 13.1 shall not exceed
------------
its IPO Proceeds and (b) the liability of any Contributor, Title Holding
Entity or Equity Holder, respectively, with respect to any and all liabilities,
claims, demands, losses or damages effected under Section 13.1 with respect to
------------
any particular Property (including any breach of Section 4.7 with respect to any
-----------
particular Property) shall not exceed its Contribution Amount with respect to
such Property, as adjusted for any adjustments provided in the definition of
"Adjusted Contribution Amount" which specifically relate to such Property with a
pro rata adjustment for any such other adjustments in the definition of
"Adjusted Contribution Amount" which relate to such Contributor, Title Holding
Entity or Equity Holder, in general, based on its Contribution Amount with
respect to each of its Properties; provided, however, that if any such
-------- -------
Contributor, Title Holding
52
<PAGE>
Entity or Equity Holder has elected pursuant to Section 13.1 to deliver
------------
Ownership Units to satisfy its indemnification amount and has previously
delivered all Ownership Units received by it in the Consolidation to the Company
or the Partnership pursuant to Section 13.1, then such Contributor, Title
------------
Holding Entity or Equity Holder shall have no further liability under this
Article 13. Notwithstanding any other provision in this Article 13, the
- ---------- ----------
aggregate liability of Cabot Partners with respect to any and all liabilities,
claims, demands, losses or damages effected under Section 13.2 shall not exceed
------------
its IPO Proceeds.
13.8 Exclusivity. The parties hereto agree that, from and after the
-----------
Closing Date, with respect to any breach or violation of any representation or
warranty or any covenant, obligation or other term set forth in this Agreement
or the other documents delivered in connection herewith, the only relief and
remedy available to a party in respect of such breach shall be (a) damages, but
only to the extent properly claimable hereunder pursuant to this Article 13 as
----------
may be limited pursuant to Section 13.7, (b) specific performance, if a court of
------------
competent jurisdiction in its discretion grants the same, or (c) injunctive or
declaratory relief, if a court of competent jurisdiction in its discretion
grants the same.
ARTICLE 14: MISCELLANEOUS
-------------------------
14.1 Survival. The representations and warranties contained in this
--------
Agreement and the indemnification obligations and other provisions of this
Agreement that contemplate performance after the Closing shall survive the
Closing for a period of one year from the Closing Date and shall not be deemed
to be merged into or waived by the instruments of the Closing. Notice of a good
faith claim for indemnification under Article 13 must be given by an indemnitee
----------
pursuant to Section 13.6 within one year after the date of this Agreement if a
------------
claim in respect thereof is to be made against the indemnitor.
14.2 Expenses. In the event this Agreement terminates without a Closing,
--------
each of the Contributors and the Title Holding Entities and Cabot Partners
agrees to pay a pro rata share of the Consolidation Expenses determined by
dividing the sum of the Contribution Amounts attributable to such party by the
sum of the Contribution Amounts of all Contributors, Title Holding Entities and
Cabot Partners. Any Contributor or Title Holding Entity or Cabot Partners shall,
upon request, receive reasonable documentation from the Company and the
Partnership for any or all Consolidation Expenses. Except as provided in this
Section 14.2 or as otherwise expressly provided herein, each party hereto shall
- ------------
pay its own expenses incident to this Agreement and the transactions
contemplated hereby, including all legal and accounting fees and disbursements.
14.3 Additional Actions and Documents. Each of the parties hereto hereby
--------------------------------
agrees to use its commercially reasonable efforts to take or cause to be taken
such further actions, to execute, deliver and file or cause to be executed,
delivered and filed such further documents, and to obtain such consents, as may
be necessary or as may be reasonably requested in order to fully effectuate the
purposes, terms and conditions of this Agreement. The obligations of the parties
set forth in this Section 14.3 shall survive the Closing and shall not be deemed
------------
to be merged into or waived by any instrument of conveyance delivered at
Closing.
53
<PAGE>
14.4 Remedies Cumulative. The remedies provided in this Agreement shall be
-------------------
cumulative and, except as otherwise expressly provided, shall not preclude the
assertion or exercise of any other rights or remedies available by law, in
equity or otherwise.
14.5 Entire Agreement; Amendment. This Agreement, including the exhibits,
---------------------------
schedules and other documents referred to herein or therein or furnished
pursuant hereto or thereto, constitutes the entire agreement among the parties
hereto with respect to the transactions contemplated herein, and supersedes all
prior oral or written agreements, commitments or understandings with respect to
the matters provided for herein. No amendment, modification or discharge of this
Agreement shall be valid or binding unless set forth in writing and duly
executed and delivered by the party against whom enforcement of the amendment,
modification or discharge is sought.
14.6 Notices. All notices, demands, requests or other communications which
-------
may be or are required to be given, served or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be hand
delivered, sent by overnight courier or mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, or transmitted by
facsimile, telegram, telecopy or telex, addressed as set forth on the signature
pages hereto. Each party may designate by notice in writing a new address or
additional addresses to which any notice, demand, request or communication may
thereafter be so given, served or sent. Each notice, demand, request or
communication which shall be hand delivered, sent, mailed, faxed, telecopied or
telexed in the manner described above, or which shall be delivered to a
telegraph company, shall be deemed sufficiently given, served, sent, received or
delivered for all purposes at such time as it is delivered to the addressee
(with the return receipt, the delivery receipt, the confirmation receipt (with
respect to a facsimile) or the answer-back (with respect to a telecopy or telex)
being deemed conclusive, but not exclusive, evidence of such delivery) or at
such time as delivery is refused by the addressee upon presentation.
14.7 Waivers. No delay or failure on the part of any party hereto in
-------
exercising any right, power or privilege under this Agreement or under any other
documents furnished in connection with or pursuant to this Agreement shall
impair any such right, power or privilege or be construed as a waiver of any
default or any acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of such right,
power or privilege, or the exercise of any other right, power or privilege. No
waiver shall be valid against any party hereto unless made in writing and signed
by the party against whom enforcement of such waiver is sought and then only to
the extent expressly specified therein.
14.8 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
14.9 Governing Law. This Agreement, the rights and obligations of the
-------------
parties hereto, and any claim or disputes relating thereto, shall be governed by
and construed in accordance with the laws of the State of Delaware (excluding
the choice of law rules thereof) except for actions affecting title to real
property, in which case the laws of the state in which the real property is
located shall apply.
54
<PAGE>
14.10 Assignment. No party hereto shall assign its rights and/or
----------
obligations under this Agreement, in whole or in part, whether by operation of
law or otherwise, without the prior written consent of the other parties hereto;
provided, that the Company may assign its rights and/or obligations under this
- --------
Agreement to any Affiliate; provided further, that, subject to the prior written
-------- -------
consent of the Company (which may only be granted upon the receipt by the
Company of an opinion of counsel from its counsel that such assignment does not
violate Federal or state securities laws or ERISA), a Contributor or Title
Holding Entity may assign its rights and/or obligations under this Agreement to
any party if and solely to the extent such party has acquired one or more
Properties from such Contributor or Title Holding Entity. For the purposes of
this paragraph, the term "Affiliate" means (a) an entity that directly or
---------
indirectly controls, is controlled by or is under common control with the
Company or (b) an entity at least a majority of whose economic interest is owned
by the Company; and the term "control" means the power to direct the management
of such entity through voting rights, ownership or contractual obligations.
14.11 No Third Party Beneficiaries. This Agreement is solely for the
----------------------------
benefit of the parties hereto (including their respective Equity Holders), and
no provision of this Agreement shall be deemed to confer any benefit on any
third party. The Equity Holders shall have no liability or obligations under
this Agreement, except as provided in their consents delivered pursuant to
Section 10.2(q).
- ---------------
14.12 Confidentiality.
---------------
(a) Before the Closing Date, no Contributor or Title Holding Entity shall
make any public announcement or disclosure of this Agreement or any information
related to this Agreement to third parties, other than their respective
investment advisors, asset and property managers, auditors and accountants and
legal counsel, without the prior written consent of the Company. The Company and
the Partnership shall not make any public disclosure of the name of any
Contributor, Title Holding Entity or Equity Holder, except as required by law or
as provided in paragraph (d) below.
(b) As used herein, "Confidential Material" means, with respect to each
party hereto (the "Providing Party"), all information, whether oral, written or
otherwise, furnished to any other party hereto (the "Receiving Party") or such
Receiving Party's directors, officers, partners, affiliates, employees, agents
or representatives (collectively, "Representatives"), by the Providing Party and
all reports, analyses, compilations, studies and other material prepared by the
Receiving Party or its Representatives (in whatever form maintained, whether
documentary,. computer storage or otherwise) containing, reflecting or based
upon, in whole or in part, any such information. The term "Confidential
Material" does not include information which (i) is or becomes generally
available to the public other than as a result of a disclosure by the Receiving
Party, its Representatives or anyone to whom the Receiving Party or any of its
Representatives transmit any Confidential Material in violation of this
Agreement, (ii) is or becomes known or available to the Receiving Party on a
non-confidential basis from a source (other than the Providing Party or another
Receiving Party or one of their Representatives) who is not, to the knowledge of
the Receiving Party after reasonable inquiry, prohibited from transmitting the
information to the Receiving Party or its Representatives
55
<PAGE>
by a contractual, legal, fiduciary or other obligation or (iii) is subsequently
disclosed in the Form S-11 registration statement relating to the IPO or other
public disclosure permitted under this Section 14.12.
-------------
(c) Subject to paragraph (d) below or except as required by law, the
Confidential Material will be kept confidential and will not, without the prior
written consent of the Providing Party, be disclosed by the Receiving Party or
its Representatives, in whole or in part, and will not be used by the Receiving
Party or its Representatives, directly or indirectly, for any purpose other than
in connection with this Agreement, the Consolidation or the conducting,
negotiating or advising with respect to a transaction contemplated herein.
Moreover, each Receiving Party agrees to transmit Confidential Material to its
Representatives only if and to the extent that such Representatives need to know
the Confidential Material for purposes of such transaction and are informed by
such Receiving Party of the confidential nature of the Confidential Material and
of the terms of this Section 14.12. In any event, each Receiving Party will be
-------------
responsible for any actions by its Representatives which are not in accordance
with the provisions hereof.
(d) In the event that any Receiving Party, its Representatives or anyone to
whom such Receiving Party or its Representatives supply the Confidential
Material, are requested (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand, any informal or
formal investigation by any government or governmental agency or authority or
otherwise in connection with legal process) to disclose any Confidential
Material, such Receiving Party agrees (i) to immediately notify the Providing
Party of the existence, terms and circumstances surrounding such a request, (ii)
to consult with the Providing Party on the advisability of taking available
legal steps to resist or narrow such request and (iii) if disclosure of such
information is required, to furnish only that portion of the Confidential
Material which, in the opinion of such Receiving Party's counsel, such Receiving
Party is legally compelled to disclose and to cooperate with any action by the
Providing Party to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the Confidential Material
(it being agreed that the Providing Party shall reimburse the Receiving Party
for all reasonable out-of-pocket expenses incurred by the Receiving Party in
connection with such cooperation). Notwithstanding anything to the contrary
contained herein, the Company and the Partnership may disclose Confidential
Material received from any Providing Party in the Form S-11 registration
statement and otherwise in connection with the IPO as they believe necessary or
appropriate to comply with federal and state securities laws, requests by the
Securities and Exchange Commission or state securities commissions for
additional information or as otherwise deemed necessary by them, the
underwriters and their respective counsel in connection with the IPO.
(e) The provisions of this Section 14.12 shall terminate upon the Closing.
-------------
In the event of the termination of this Agreement in accordance with its terms,
promptly upon request from a Providing Party, each Receiving Party shall, except
to the extent prevented by law, redeliver to such Providing Party or destroy all
tangible Confidential Material and will not retain any copies, extracts or other
reproductions thereof in whole or in part. Any such destruction shall be
certified in writing to such Providing Party by an authorized officer of the
Receiving Party supervising the same. Notwithstanding the foregoing, each
Receiving Party and one Representative designated by each
56
<PAGE>
Receiving Party shall be permitted to retain one permanent file copy of each
document constituting Confidential Material.
14.13 Severability. If any provision of this Agreement shall be held
------------
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions hereof shall not be affected thereby, and there shall be
deemed substituted for the provision at issue a valid, legal and enforceable
provision as similar as possible to the provision at issue.
14.14 Company Access to Information. Upon the Company's reasonable
-----------------------------
request, at any time before or after the Closing Date, each Contributor and
Title Holding Entity shall provide the Company and the Partnership reasonable
access to the books and records of the Properties and all related information in
order for the Company and the Partnership to verify any payments or receipts
from tenants, suppliers, service providers and any other party.
14.15 Information and Audit Cooperation. At the Company's request, at any
---------------------------------
time before or after the Closing Date, the Contributors and the Title Holding
Entities shall provide to the Company's designated independent auditor access to
the books and records of the Properties and all related information regarding
the period for which the Company or its affiliates is required to have the
Properties audited under the regulations of the Securities and Exchange
Commission, and a representation letter regarding the books and records of the
Properties substantially in the form of Exhibit K in connection with the normal
---------
course of auditing the Properties in accordance with generally accepted auditing
standards.
14.16 Binding Effect. This Agreement shall insure to the benefit of and be
--------------
binding upon the parties hereto and their respective successors and assigns.
14.17 Headings. The headings contained in this Agreement are for reference
--------
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
14.18 Representations and Warranties. The Company and the Partnership
------------------------------
acknowledge that there are certain representations and warranties in Article 4
---------
as to which the Contributors and the Title Holding Entities have no actual
knowledge. The parties hereto agree that such representations and warranties,
together with the closing conditions in Article 7 and the indemnification
---------
provisions in Article 13, are intended to allocate risk and economic cost as
----------
between the Contributors and the Title Holding Entities, on the one hand, and
the Company and the Partnership, on the other hand, in the event such
representations and warranties are breached. In no event, however, has any of
the Contributors or Title Holding Entities given any representation and warranty
which he or it actually knows to be inaccurate.
14.19 Limitation of Liability. Any obligation or liability whatsoever of
-----------------------
the Company which may arise at any time under this Agreement or any obligation
or liability which may be incurred by it pursuant to any other instrument,
transaction or undertaking contemplated hereby shall be satisfied, if at all,
out of the Company's assets only. No such obligation or liability shall be
personally binding upon, nor shall resort for the enforcement thereof be had to,
the property of any
57
<PAGE>
of its shareholders, trustees, officers, employees or agents, regardless of
whether such obligation or liability is in the nature of contract, tort or
otherwise.
14.20 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
--------------------
PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE CONTRIBUTION
AGREEMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE PROVISIONS
OF THIS SECTION 14.20 SHALL SURVIVE ANY TERMINATION OF THIS AGREEMENT.
-------------
58
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Contribution
Agreement to be duly executed on their behalf as of the date first above
written.
CABOT INDUSTRIAL TRUST
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Robert E. Patterson
Facsimile No.: (617) 722-8237
By: /s/ Robert E. Patterson
---------------------------------
Robert E. Patterson
President
CABOT INDUSTRIAL PROPERTIES, L.P.
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Robert E. Patterson
Facsimile No.: (617) 722-8237
By: Cabot Industrial Trust
By: /s/ Robert E. Patterson
---------------------------------
Robert E. Patterson
President
CABOT PARTNERS LIMITED PARTNERSHIP
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Ferdinand Colloredo-Mansfeld
Facsimile No. (617) 722-8237
By: Cabot Realty Advisors Corp.
By: /s/ Ferdinand Colloredo-Mansfeld
---------------------------------
Ferdinand Colloredo-Mansfeld
Chairman
<PAGE>
CONTRIBUTORS:
C-M HOLDINGS LIMITED PARTNERSHIP
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Ferdinand Colloredo-Mansfeld
Facsimile No. (617) 722-8237
By: Alces Corporation
By: /s/ Ferdinand Colloredo-Mansfeld
--------------------------------
Ferdinand Colloredo-Mansfeld
President
C-M MICHIGAN ASSOCIATES LIMITED PARTNERSHIP
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Ferdinand Colloredo-Mansfeld
Facsimile No. (617) 722-8237
By: Alces Corporation
By: /s/ Ferdinand Colloredo-Mansfeld
--------------------------------
Ferdinand Colloredo-Mansfeld
President
C-M MONROE ASSOCIATES LIMITED PARTNERSHIP
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Ferdinand Colloredo-Mansfeld
Facsimile No. (617) 722-8237
By: Alces Corporation
By: /s/ Ferdinand Colloredo-Mansfeld
--------------------------------
Ferdinand Colloredo-Mansfeld
President
<PAGE>
CONTRIBUTORS:
C-M MADISON ASSOCIATES LIMITED PARTNERSHIP
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Ferdinand Colloredo-Mansfeld
Facsimile No. (617) 722-8237
By: Alces Corporation
By: /s/ Ferdinand Colloredo-Mansfeld
--------------------------------
Ferdinand Colloredo-Mansfeld
President
C-M HARRISBURG ASSOCIATES LIMITED
PARTNERSHIP
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Ferdinand Colloredo-Mansfeld
Facsimile No. (617) 722-8237
By: Alces Corporation
By: /s/ Ferdinand Colloredo-Mansfeld
--------------------------------
Ferdinand Colloredo-Mansfeld
President
<PAGE>
CONTRIBUTORS:
C-M TAUNTON ASSOCIATES LIMITED PARTNERSHIP
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Ferdinand Colloredo-Mansfeld
Facsimile No. (617) 722-8237
By: Alces Corporation
By: /s/ Ferdinand Colloredo-Mansfeld
--------------------------------
Ferdinand Colloredo-Mansfeld
President
C-M HOWE INVESTMENT COMPANY
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Ferdinand Colloredo-Mansfeld
Facsimile No. (617) 722-8237
By: Alces Corporation
By: /s/ Ferdinand Colloredo-Mansfeld
--------------------------------
Ferdinand Colloredo-Mansfeld
President
<PAGE>
TITLE HOLDING ENTITIES:
C-M MADISON INVESTMENT COMPANY
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Ferdinand Colloredo-Mansfeld
Facsimile No. (617) 722-8237
By: C-M Holdings Limited Partnership
By: Alces Corporation
By: /s/ Ferdinand Colloredo-Mansfeld
----------------------------------
Ferdinand Colloredo-Mansfeld
President
C-M HARRISBURG INVESTMENT COMPANY
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Ferdinand Colloredo-Mansfeld
Facsimile No. (617) 722-8237
By: C-M Holdings Limited Partnership
By: Alces Corporation
By: /s/ Ferdinand Colloredo-Mansfeld
----------------------------------
Ferdinand Colloredo-Mansfeld
President
<PAGE>
TITLE HOLDING ENTITIES:
C-M MICHIGAN INVESTMENT COMPANY
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Ferdinand Colloredo-Mansfeld
Facsimile No. (617) 722-8237
By: C-M Holdings Limited Partnership
By: Alces Corporation
By: /s/ Ferdinand Colloredo-Mansfeld
--------------------------------
Ferdinand Colloredo-Mansfeld
President
C-M MONROE INVESTMENT COMPANY
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Ferdinand Colloredo-Mansfeld
Facsimile No. (617) 722-8237
By: C-M Holdings Limited Partnership
By: Alces Corporation
By: /s/ Ferdinand Colloredo-Mansfeld
--------------------------------
Ferdinand Colloredo-Mansfeld
President
<PAGE>
TITLE HOLDING ENTITIES:
C-M TAUNTON INVESTMENT COMPANY
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Ferdinand Colloredo-Mansfeld
Facsimile No. (617) 722-8237
By: C-M Holdings Limited Partnership
By: Alces Corporation
By: /s/ Ferdinand Colloredo-Mansfeld
----------------------------------
Ferdinand Colloredo-Mansfeld
President
C-M HOWE PROPERTIES, L.P.
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Ferdinand Colloredo-Mansfeld
Facsimile No. (617) 722-8237
By: C-M Howe Investment Company
By: C-M Holdings Limited Partnership
By: Alces Corporation
By: /s/ Ferdinand Colloredo-Mansfeld
----------------------------------
Ferdinand Colloredo-Mansfeld
President
<PAGE>
TITLE HOLDING ENTITIES:
CP INVESTMENT PROPERTIES, INC.
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Robert E. Patterson
Facsimile No. (617) 722-8237
By: /s/ Robert E. Patterson
----------------------------------
Robert E. Patterson
Vice President
CP REPROP CORP.
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Robert E. Patterson
Facsimile No. (617) 722-8237
By: /s/ Robert E. Patterson
----------------------------------
Robert E. Patterson
Vice President
<PAGE>
TITLE HOLDING ENTITIES:
KEYSTONE-ILLINOIS PROPERTY HOLDING CORP.
875 North Michigan Avenue, Suite 4114
Chicago, Illinois 60611
Attention: Paula M. Ferkull
Facsimile No.: (312) 266-4270
By: /s/ Patrick Callan
---------------------------------
Patrick Callan
President
KEYSTONE-NEW JERSEY PROPERTY HOLDING CORP.
875 North Michigan Avenue, Suite 4114
Chicago, Illinois 60611
Attention: Paula M. Ferkull
Facsimile No.: (312) 266-4270
By: /s/ Patrick Callan
---------------------------------
Patrick Callan
President
KEYSTONE-OHIO PROPERTY HOLDING CORP.
875 North Michigan Avenue, Suite 4114
Chicago, Illinois 60611
Attention: Paula M. Ferkull
Facsimile No.: (312) 266-4270
By: /s/ Patrick Callan
---------------------------------
Patrick Callan
President
<PAGE>
TITLE HOLDING ENTITIES:
STATE OF WISCONSIN INVESTMENT BOARD
121 East Wilson Street, 2nd Floor
Madison, Wisconsin 53702
Attention: Steven S. Spiekerman
Facsimile No.: (608) 261-6671
By: /s/ Robert H. Severance
-------------------------------
Robert H. Severance
Investment Director
Real Estate & Mortgages
<PAGE>
TITLE HOLDING ENTITIES:
WEST COAST INDUSTRIAL, L.L.C.
c/o The O'Connor Group
399 Park Avenue
New York, New York 10022
Attention: John A. Rivard
Facsimile No.: (212) 308-7880
By: ARGO Partnership II, L.P.
its Managing Member,
by: ARGO II MANAGEMENT
COMPANY L.P., its General Partner,
by: O'CONNOR CAPITAL PARTNERS
II, L.P., its General Partner,
by: O'CONNOR CAPITAL II
INCORPORATED, its General Partner,
by: /s/ John A. Rivard
------------------------------
John A. Rivard
Senior Vice President
<PAGE>
TITLE HOLDING ENTITIES:
THE FOUR B'S
c/o NFI Industries
71 West Park Avenue
Vineland, New Jersey 08360
Attention: Sydney R. Brown
Facsimile No.:_____________________
By: /s/ Sid Brown
-------------------------------
By: /s/ Sid Brown
-------------------------------
Name: Sid Brown
Title: Managing General Partner
<PAGE>
TITLE HOLDING ENTITIES:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
Eight Campus Drive
Parsippany, New York 07054
Attention: Kevin R. Smith
Facsimile No.: (201) 734-1300
By: /s/ Kevin R. Smith
-------------------------------
Name: Kevin R. Smith
Title: Vice President
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
("PRUDENTIAL") SHALL NOT BE A PARTY TO THIS AGREEMENT
AND THE PROPERTIES LISTED ON SCHEDULES A AND 2.3 AS
BEING CONTRIBUTED TO THE COMPANY BY PRUDENTIAL SHALL
NOT BE CONTRIBUTED TO THE COMPANY OR THE PARTNERSHIP
UNLESS THE CONTRIBUTION OF SUCH PROPERTIES IS APPROVED
BY PRUDENTIAL'S INVESTMENT COMMITTEE ON OR BEFORE
OCTOBER 21, 1997 OR SUCH LATER DATE TO WHICH THE
COMPANY MAY AGREE.
<PAGE>
TITLE HOLDING ENTITIES:
KNICKERBOCKER PROPERTIES, INC. II
By: /s/ Mark Alexander
--------------------------------
Name: Mark Alexander
Title: Vice President
KNICKERBOCKER PROPERTIES, INC. XXX
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Robert E. Patterson
Facsimile No. (617) 722-8237
By: /s/ Robert E. Patterson
--------------------------------
Robert E. Patterson
Vice President
KNICKERBOCKER PROPERTIES, INC. XXXI
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Robert E. Patterson
Facsimile No. (617) 722-8237
By: /s/ Robert E. Patterson
--------------------------------
Robert E. Patterson
Vice President
<PAGE>
TITLE HOLDING ENTITIES:
KNICKERBOCKER PROPERTIES, INC. XI
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Robert E. Patterson
Facsimile No. (617) 722-8237
By: /s/ Robert E. Patterson
----------------------------------
Robert E. Patterson
Vice President
KNICKERBOCKER PROPERTIES, INC. XV
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Robert E. Patterson
Facsimile No. (617) 722-8237
By: /s/ Robert E. Patterson
----------------------------------
Robert E. Patterson
Vice President
KNICKERBOCKER INDUSTRIAL PROPERTIES EAST, LP
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Robert E. Patterson
Facsimile No. (617) 722-8237
By: Knickerbocker Properties, Inc. XIII
By: /s/ Robert E. Patterson
----------------------------------
Robert E. Patterson
Vice President
<PAGE>
TITLE HOLDING ENTITIES:
KNICKERBOCKER PROPERTIES, INC. XXXII
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Robert E. Patterson
Facsimile No. (617) 722-8237
By: /s/ Robert E. Patterson
---------------------------------
Robert E. Patterson
Vice President
KNICKERBOCKER NJ INDUSTRIAL PROPERTIES, LP
c/o Cabot Partners Limited Partnership
Two Center Plaza, Suite 200
Boston, Massachusetts 02108-1906
Attention: Robert E. Patterson
Facsimile No. (617) 722-8237
By: Knickerbocker Properties, Inc. XIII
By: /s/ Robert E. Patterson
---------------------------------
Robert E. Patterson
Vice President
<PAGE>
EXHIBIT A
---------
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CABOT INDUSTRIAL PROPERTIES, L.P.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I -- DEFINED TERMS................................................................ 1
"Act"................................................................................ 1
"Additional Limited Partner"......................................................... 2
"Adjusted Capital Account"........................................................... 2
"Adjusted Capital Account Deficit"................................................... 2
"Adjusted Property".................................................................. 2
"Affiliate".......................................................................... 2
"Agreed Value"....................................................................... 2
"Agreement".......................................................................... 3
"Assignee"........................................................................... 3
"Available Cash"..................................................................... 3
"Bankruptcy"......................................................................... 3
"Book-Tax Disparities"............................................................... 4
"Business Day"....................................................................... 4
"Cabot Advisors"..................................................................... 4
"Capital Account".................................................................... 4
"Capital Contribution"............................................................... 4
"Carrying Value"..................................................................... 4
"Certificate"........................................................................ 5
"Code"............................................................................... 5
"Common Share Rights"................................................................ 5
"Common Shares"...................................................................... 5
"Consent"............................................................................ 5
"Contributed Property"............................................................... 5
"Conversion Right"................................................................... 5
"Converting Partner"................................................................. 5
"Debt"............................................................................... 5
"Declaration of Trust"............................................................... 6
"Depreciation"....................................................................... 6
"Dispose of"......................................................................... 6
"Effective Date"..................................................................... 6
"Events of Dissolution".............................................................. 6
"Exchange Act"....................................................................... 6
"General Partner".................................................................... 6
"General Partnership Interest"....................................................... 6
"IRS"................................................................................ 6
"Immediate Family"................................................................... 6
"Incapacity"......................................................................... 7
"Indemnitee"......................................................................... 7
"Initial Limited Partner"............................................................ 7
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
"Limited Partner".................................................................... 7
"Limited Partnership Interest"....................................................... 7
"Liquidating Transaction"............................................................ 7
"Liquidator"......................................................................... 7
"Lock-up"............................................................................ 7
"Lock-up Period"..................................................................... 7
"Net Income"......................................................................... 7
"Net Loss"........................................................................... 8
"New Securities"..................................................................... 8
"Nonrecourse Built-in Gain".......................................................... 8
"Nonrecourse Deductions"............................................................. 8
"Nonrecourse Liability".............................................................. 8
"Notice of Conversion"............................................................... 8
"Option Plans"....................................................................... 8
"Original Partnership Agreement"..................................................... 8
"Partner"............................................................................ 8
"Partner Minimum Gain"............................................................... 8
"Partner Nonrecourse Debt"........................................................... 9
"Partner Nonrecourse Deductions"..................................................... 9
"Partnership"........................................................................ 9
"Partnership Interest"............................................................... 9
"Partnership Minimum Gain"........................................................... 9
"Partnership Record Date"............................................................ 9
"Partnership Unit" or "Unit"......................................................... 9
"Partnership Year"................................................................... 9
"Percentage Interest"................................................................ 10
"Person"............................................................................. 10
"Recapture Income"................................................................... 10
"Redemption Amount".................................................................. 10
"Registration Rights and Lock-up Agreement".......................................... 10
"Regulations"........................................................................ 10
"REIT"............................................................................... 10
"Residual Gain" or "Residual Loss"................................................... 10
"704(c) Value"....................................................................... 10
"Shares"............................................................................. 11
"Specified Conversion Date".......................................................... 11
"Subsidiary"......................................................................... 11
"Substituted Limited Partner"........................................................ 11
"Transaction"........................................................................ 11
"Unit Adjustment Factor"............................................................. 11
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
"Unrealized Gain".................................................................... 11
"Unrealized Loss".................................................................... 12
"Valuation Date"..................................................................... 12
"Value".............................................................................. 12
ARTICLE II -- ORGANIZATIONAL MATTERS...................................................... 12
Section 2.1 Organization and Continuation; Application of Act........................... 12
(a) Organization and Continuation of Partnership..................... 12
(b) Application of Act............................................... 13
Section 2.2 Name........................................................................ 13
Section 2.3 Registered Office and Agent; Principal Office............................... 13
Section 2.4 Withdrawal.................................................................. 13
Section 2.5 Term........................................................................ 13
ARTICLE III -- PURPOSE.................................................................... 13
Section 3.1 Purpose and Business........................................................ 13
Section 3.2 Powers...................................................................... 14
ARTICLE IV -- CAPITAL CONTRIBUTIONS; ISSUANCE OF UNITS;CAPITAL ACCOUNTS................... 14
Section 4.1 Capital Contributions of the Partners....................................... 14
(a) Initial Capital Contributions.................................... 14
(b) Additional Capital Contributions................................. 14
(c) Return of Capital Contributions.................................. 15
(d) Liability of Limited Partners.................................... 15
Section 4.2 Issuances of Additional Partnership Interests............................... 15
(a) Issuance to Other Than the General Partner....................... 16
(b) Issuance to the General Partner.................................. 16
(c) Issuance of Additional Common Shares............................. 17
(d) Issuance Pursuant to Option Plans................................ 17
(e) Conversion of Units.............................................. 18
Section 4.3 No Preemptive Rights........................................................ 19
Section 4.4 Capital Accounts of the Partners............................................ 19
(a) General.......................................................... 19
(b) Income, Gains, Deductions and Losses............................. 20
(c) Transfers of Partnership Units................................... 20
(d) Unrealized Gains and Losses...................................... 20
(e) Modification by General Partner.................................. 21
ARTICLE V -- DISTRIBUTIONS................................................................ 22
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Section 5.1 Requirement and Characterization of Distributions........................... 22
Section 5.2 Amounts Withheld............................................................ 22
Section 5.3 Distributions Upon Liquidation.............................................. 22
ARTICLE VI -- ALLOCATIONS................................................................. 22
Section 6.1 Allocations For Capital Account Purposes
the Taxable Year of Liquidation............................................. 22
(a) Net Income....................................................... 23
(b) Net Losses....................................................... 23
(c) Nonrecourse Liabilities.......................................... 23
(d) Gains............................................................ 23
Section 6.4 Special Allocation Rules.................................................... 25
(a) Minimum Gain Chargeback.......................................... 25
(b) Partner Minimum Gain Chargeback.................................. 25
(c) Qualified Income Offset.......................................... 26
(d) Nonrecourse Deductions........................................... 26
(e) Partner Nonrecourse Deductions................................... 26
(f) Code Section 754 Adjustments..................................... 26
Section 6.5 Allocations for Tax Purposes................................................ 26
(a) General.......................................................... 26
(b) To Eliminate Book-Tax Disparities................................. 27
(c) Power of General Partner to Elect Method.......................... 27
ARTICLE VII -- MANAGEMENT AND OPERATIONS OF BUSINESS...................................... 27
Section 7.1 Management................................................................. 27
(a) Powers of General Partner........................................ 27
(b) No Approval Required for Above Powers............................ 30
(c) Insurance........................................................ 31
(d) Working Capital Reserves......................................... 31
(e) No Obligation to Consider Tax Consequences to Limited Partners... 31
(f) Loss of REOC Status.............................................. 31
Section 7.2 Certificate of Limited Partnership......................................... 31
Section 7.3 Restrictions on General Partner's Authority................................ 31
Section 7.4 Responsibility for Expenses................................................ 32
(a) No Compensation.................................................. 32
(b) Responsibility for Ownership and Operation Expenses.............. 32
(c) Responsibility for Organization Expenses......................... 32
Section 7.5 Outside Activities of the General Partner.................................. 32
(a) General.......................................................... 32
(b) Purchase of Common Shares........................................ 33
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
Section 7.6 Contracts with Affiliates................................................... 33
(a) Loans............................................................. 33
(b) Transfers of Assets............................................... 33
(c) Contracts With General Partner.................................... 33
(d) Employee Benefit Plans............................................ 34
(e) Conflict Avoidance Arrangements................................... 34
Section 7.7 Indemnification............................................................. 34
(a) General........................................................... 34
(b) In Advance of Final Disposition................................... 34
(c) Non-Exclusive Section............................................. 35
(d) Insurance......................................................... 35
(e) Employee Benefit Plans............................................ 35
(f) No Personal Liability for Limited Partners........................ 35
(g) Interested Transactions........................................... 35
(h) Binding Effect.................................................... 35
Section 7.8 Liability of the General Partner............................................ 36
(a) General........................................................... 36
(b) No Obligation to Consider Interests of Limited Partners........... 36
(c) Acts of Agents.................................................... 36
(d) Effect of Amendment............................................... 36
(e) Limitation of Liability of Shareholders and Officers of the
General Partner................................................. 36
Section 7.9 Other Matters Concerning the General Partner................................ 37
(a) Reliance on Documents............................................. 37
(b) Reliance on Consultants and Advisers.............................. 37
(c) Action Through Officers and Attorneys............................. 37
(d) Actions to Maintain REIT Status or Avoid Taxation of
General Partner................................................. 37
Section 7.10 Title to Partnership Assets................................................. 37
Section 7.11 Reliance by Third Parties................................................... 38
ARTICLE VIII -- RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS................................. 38
Section 8.1 Limitation of Liability.................................................... 38
Section 8.2 Management of Business..................................................... 38
Section 8.3 Outside Activities of Limited Partners..................................... 39
Section 8.4 Priority Among Limited Partners............................................ 39
Section 8.5 Rights of Limited Partners Relating to the Partnership..................... 40
(a) Copies of Business Records........................................ 40
(b) Notification of Changes in Unit Adjustment Factor................. 40
(c) Confidential Information.......................................... 40
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
(d) Debt Allocation................................................... 40
Section 8.6 Redemption Right............................................................. 41
(a) General........................................................... 41
(b) Where Delivery of Common Shares Prohibited........................ 41
Section 8.7 Notice for Certain Transactions.............................................. 41
ARTICLE IX -- BOOKS, RECORDS, ACCOUNTING AND REPORTS....................................... 41
Section 9.1 Records and Accounting....................................................... 41
Section 9.2 Fiscal Year.................................................................. 42
Section 9.3 Reports...................................................................... 42
(a) Annual Reports.................................................... 42
(b) Quarterly Reports................................................. 42
ARTICLE X -- TAX MATTERS................................................................... 42
Section 10.1 Preparation of Tax Returns................................................... 42
Section 10.2 Tax Elections................................................................ 43
Section 10.3 Tax Matters Partner.......................................................... 43
(a) General........................................................... 43
(b) Powers............................................................ 43
(c) Reimbursement..................................................... 44
Section 10.4 Organizational Expenses...................................................... 44
Section 10.5 Withholding.................................................................. 44
ARTICLE XI -- TRANSFERS, WITHDRAWALS....................................................... 45
Section 11.1 Transfer..................................................................... 45
(a) Definition........................................................ 45
(b) Requirements...................................................... 45
Section 11.2 Transfer of General Partner's Partnership Interest........................... 46
(a) General........................................................... 46
(b) Transfer to Partnership or Holder of Common Shares................ 46
(c) Transfer in Connection With Reclassification, Recapitalization, or
Business Combination Involving General Partner.................... 46
(d) Merger Involving General Partner Where Surviving Entity's Assets
Contributed to Partnership........................................ 46
Section 11.3 Limited Partners' Rights to Transfer......................................... 47
(a) General........................................................... 47
(b) Incapacitated Limited Partners.................................... 47
(c) Transfers Contrary to Securities Laws............................. 47
(d) Transfers Resulting in Corporation Status; Transfers Through
Established Securities or Secondary Markets....................... 47
</TABLE>
vi
<PAGE>
<TABLE>
<S> <C>
(e) Transfers to Holders of Nonrecourse Liabilities.................. 49
Section 11.4 Substituted Limited Partners................................................ 49
(a) Consent of General Partner Required.............................. 49
(b) Rights and Duties of Substituted Limited Partners................ 49
(c) Amendment of Exhibit A........................................... 50
Section 11.5 Assignees................................................................... 50
Section 11.6 General Provisions.......................................................... 50
(a) Withdrawal of Limited Partner.................................... 50
(b) Transfer of All Partnership Units by Limited Partner............. 50
(c) Timing of Transfers.............................................. 50
(d) Allocation When Transfer Occurs.................................. 50
Section 11.7 Lock-up Agreement........................................................... 51
(a) Lock-up Period................................................... 51
(b) Exceptions....................................................... 51
ARTICLE XII -- ADMISSION OF PARTNERS...................................................... 52
Section 12.1 Admission of Successor General Partner...................................... 52
Section 12.2 Admission of Additional Limited Partners.................................... 53
(a) General.......................................................... 53
(b) Consent of General Partner Required.............................. 53
Section 12.3 Amendment of Agreement and Certificate...................................... 53
ARTICLE XIII -- DISSOLUTION AND LIQUIDATION............................................... 53
Section 13.1 Dissolution................................................................. 53
(a) Expiration of Term............................................... 53
(b) Withdrawal of General Partner.................................... 53
(c) Dissolution Prior to 2097........................................ 53
(d) Judicial Dissolution Decree...................................... 54
(e) Sale of Partnership's Assets..................................... 54
(f) Merger........................................................... 54
(g) Bankruptcy or Insolvency of General Partner...................... 54
(h) Readjustment, etc................................................ 54
Section 13.2 Winding Up.................................................................. 55
(a) General.......................................................... 55
(b) Where Immediate Sale of Partnership's Assets Impractical......... 55
Section 13.3 Compliance with Timing Requirements of Regulations; Allowance for Contingent
or Unforeseen Liabilities or Obligations.................................... 56
(a) Liquidation...................................................... 56
(b) Deficit Balance of General Partner............................... 56
Section 13.4 Deemed Distribution and Recontribution...................................... 57
</TABLE>
vii
<PAGE>
<TABLE>
<S> <C>
Section 13.5 Rights of Limited Partners.................................................. 57
Section 13.6 Notice of Dissolution....................................................... 57
Section 13.7 Cancellation of Certificate of Limited Partnership.......................... 57
Section 13.8 Reasonable Time for Winding-Up.............................................. 57
ARTICLE XIV -- AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS............................... 58
Section 14.1 Amendments.................................................................. 58
(a) General.......................................................... 58
(b) General Partner's Power to Amend................................. 58
(c) Consent of Adversely Affected Partner Required................... 59
(d) When Consent of Majority of Limited Partnership Interests
Required......................................................... 59
Section 14.2 Meetings of the Partners.................................................... 59
(a) General.......................................................... 59
(b) Informal Action.................................................. 59
(c) Proxies.......................................................... 60
(d) Conduct of Meeting............................................... 60
ARTICLE XV -- GENERAL PROVISIONS.......................................................... 60
Section 15.1 Addresses and Notice........................................................ 60
Section 15.2 Titles and Captions......................................................... 60
Section 15.3 Pronouns and Plurals........................................................ 61
Section 15.4 Further Action.............................................................. 61
Section 15.5 Binding Effect.............................................................. 61
Section 15.6 Waiver of Partition......................................................... 61
Section 15.7 Entire Agreement............................................................ 61
Section 15.8 Securities Law Provisions................................................... 61
Section 15.9 Remedies Not Exclusive...................................................... 61
Section 15.10 Time........................................................................ 61
Section 15.11 Creditors................................................................... 61
Section 15.12 Waiver...................................................................... 61
Section 15.13 Execution Counterparts...................................................... 62
Section 15.14 Applicable Law.............................................................. 62
Section 15.15 Invalidity of Provisions.................................................... 62
ARTICLE XVI -- POWER OF ATTORNEY.......................................................... 62
Section 16.1 Power of Attorney........................................................... 62
(a) Scope............................................................ 62
(b) Irrevocability................................................... 63
</TABLE>
viii
<PAGE>
<TABLE>
<S> <C>
EXHIBIT A -- PARTNERS, CONTRIBUTIONS AND
PARTNERSHIP INTERESTS......................... 1
EXHIBIT B -- VALUE OF CONTRIBUTED PROPERTY......... 2
EXHIBIT C -- NOTICE OF CONVERSION.................. 1
EXHIBIT D -- FORM OF UNIT CERTIFICATE.............. 1
</TABLE>
ix
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CABOT INDUSTRIAL PROPERTIES, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as of
[ ], of Cabot Industrial Properties, L.P. (the "Partnership") is entered
-----------
into by and among Cabot Industrial Trust, a Maryland real estate investment
trust, as General Partner (the "General Partner") and the Persons (as defined
---------------
herein) identified as "Limited Partners" on Exhibit A, as the Limited Partners
----------------
(as defined herein), together with any other Persons who become Partners (as
defined herein) in the Partnership as provided herein;
WHEREAS, the Partnership was formed by the filing of a certificate of
limited partnership with the Secretary of State of the State of Delaware on
[ ] by the General Partner;
WHEREAS, the General Partner and the Initial Limited Partner (as defined
herein) entered into an Agreement of Limited Partnership on __________, 1997 the
"Original Partnership Agreement" for the formation of the Partnership under the
Revised Uniform Limited Partnership Act of the State of Delaware; and
WHEREAS, the Partners desire (i) to ratify the formation of, and provide
for the continuation of, the Partnership, (ii) to effectuate the introduction of
the Limited Partners into the Partnership (and the withdrawal of the Initial
Limited Partner) and (iii) to set forth their respective rights and duties
relating to the Partnership on the amended and restated terms as provided
herein,
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein made and intending to be legally bound, the parties hereby agree as
follows (such agreement to supersede, amend and restate the Original Partnership
Agreement it its entirety, effective as of the Effective Date (as defined
herein)):
ARTICLE I
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.
1
<PAGE>
"Additional Limited Partner" means a Person admitted to the
--------------------------
Partnership as a Limited Partner pursuant to Section 4.2 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 Year (a) 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 (b)
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 Year.
"Adjusted Property" means any property the Carrying Value of which
-----------------
has been adjusted pursuant to Section 4.4.
-----------
"Affiliate" means, with respect to any Person, (a) any Person directly
---------
or indirectly controlling, controlled by or under common control with such
Person, (b) any Person directly or indirectly owning or controlling 10 percent
or more of the outstanding voting interests of such Person, (c) any Person as to
which such Person directly or indirectly owns or controls 10 percent or more of
the voting interests, or (d) any officer, director, general partner or trustee
of such Person or any Person referred to in clauses (a), (b) and (c) above. As
used herein "control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agreed Value" means (a) in the case of any Contributed Property set
------------
forth on Exhibit B and as of the time of its contribution to the Partnership,
the Agreed Value of such property as set forth on Exhibit B; (b) in the case of
any Contributed Property not set forth on Exhibit B and as of the time of its
contribution to the Partnership, the 704(c) Value of such property or other
consideration, reduced by any liabilities either assumed by the Partnership upon
such contribution or to which such property is subject when contributed, and (c)
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.
2
<PAGE>
"Agreement" means this Amended and Restated Agreement of Limited
---------
Partnership and all Exhibits attached hereto, as the same may be amended,
supplemented or restated from time to time.
"Assignee" means a Person to whom one or more Partnership Units have
--------
been transferred but who has not been admitted as 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, (a) all cash revenues and funds received by the
Partnership from whatever source (excluding the proceeds of any Capital
Contribution to the Partnership pursuant to Section 4.1) plus the amount of any
-----------
reduction (including, without limitation, a reduction resulting because the
General Partner determines such amounts are no longer necessary) in reserves of
the Partnership, which reserves are referred to in clause (b)(iv) below;
(b) less the sum of the following (except to the extent made with the
proceeds of any Capital Contribution):
(i) all interest, principal and other debt payments made during
such period by the Partnership,
(ii) all cash expenditures (including capital expenditures) made
by the Partnership during such period,
(iii) investments in any entity (including loans made thereto) to
the extent that such investments are not otherwise described in clauses (b)(i)
or (ii), and
(iv) the amount of any increase in reserves established during
such period which the General Partner determines are 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.
"Bankruptcy" as to any Person, shall be deemed to have occurred when
----------
(i) such Person commences a voluntary proceeding seeking liquidation,
reorganization or other relief under any bankruptcy, insolvency or other similar
law now or hereafter in effect, (ii) such Person 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
such Person, (iii) such Person executes and delivers a general assignment for
the benefit of such Person's creditors, (iv) such Person files an answer or
other pleading admitting or failing to contest the
3
<PAGE>
material allegations of a petition filed against such Person in any proceeding
of the nature described in clause (ii) above, (v) such Person seeks, consents to
or acquiesces in the appointment of a trustee, receiver or liquidator for such
Person or for all or any substantial part of such Person's properties, (vi) any
proceeding seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law now or hereafter in effect has not
been dismissed within 120 days after the commencement thereof, (vii) the
appointment without such Person's consent or acquiescence of a trustee, receiver
or liquidator has not been vacated or stayed within 90 days of such appointment,
or (viii) an appointment referred to in clause (vii) is not vacated within 90
days after the expiration of any such stay.
"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 Section 4.4 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 City are authorized or required by law to
close.
"Cabot Advisors" means [Cabot Partners, Inc.], a Delaware corporation,
--------------
of which the Partnership owns all of the outstanding preferred stock.
"Capital Account" means the capital account maintained by the
---------------
Partnership for each Partner pursuant to Section 4.4.
-----------
"Capital Contribution" means, with respect to each Partner, the total
--------------------
amount of cash, cash equivalents and the Agreed Value of Contributed Property
which such Partner contributes or is deemed to contribute to the Partnership
pursuant to Section 4.1 or 4.2.
----------- ---
"Carrying Value" means (a) 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 Property charged to the Partners'
Capital Accounts and (b) 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 Section 4.4(d), 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.
4
<PAGE>
"Certificate" means the Certificate of Limited Partnership relating to
-----------
the Partnership filed in the office of the Secretary of State of the State of
Delaware, 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. 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.
"Common Share Rights" has the meaning set forth in Section 4.2(e).
------------------- --------------
"Common Shares" means the common shares of beneficial interest, $.01
-------------
par value per share, of the General Partner.
"Consent" means the consent or approval of a proposed action by a
-------
Partner given in accordance with Section 14.1.
------------
"Contributed Property" means each property or other asset (but
--------------------
excluding cash and cash equivalents), in such form as may be permitted by the
Act contributed or deemed contributed to the Partnership. Once the Carrying
Value of a Contributed Property is adjusted pursuant to Section 4.4, such
-----------
property shall no longer constitute a Contributed Property, but shall be deemed
an Adjusted Property for purposes of Section 4.4.
-----------
"Conversion Right" has the meaning set forth in Section 4.2(e)(1).
---------------- -----------------
"Converting Partner" has the meaning set forth in Section 4.2(e)(1).
------------------ -----------------
"Debt" means, as to any Person, as of any date of determination, (a)
----
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, which purchase price is due more than six months
after the date of placing such property in service or taking delivery and title
thereto or the completion of such services, (b) all amounts owed by such Person
to banks or other Persons in respect of reimbursement obligations under letters
of credit, surety bonds and other similar instruments guaranteeing payment or
other performance of obligations by such Person, (c) all indebtedness for
borrowed money or for the deferred purchase price of property or services
secured by any lien on any property owned by such Person, to the extent
attributable to such Person's interest in such property, even though such Person
has not assumed or become liable for the payment thereof, (d) lease obligations
of such Person which, in accordance with generally accepted accounting
principles, should be capitalized and (e) all guarantees and other contingent
obligations of such Person with respect to Debt of others.
5
<PAGE>
"Declaration of Trust" means the Declaration of Trust of the General
--------------------
Partner filed with the Office of Assessments and Taxation of the State of
Maryland on [ ], as the same may be amended, supplemented or restated
from time to time.
"Depreciation" means for each fiscal year or other period, an amount
------------
equal to the Federal income tax depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
period, 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 or other period 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.
"Dispose of" has the meaning set forth in Section 11.7(a).
---------- ---------------
"Effective Date" means the date of closing of the sale of Common
--------------
Shares pursuant to that certain Underwriting Agreement among the General Partner
and J.P. Morgan, Inc., as representative of the other underwriters participating
in the initial public offering of the General Partner's Common Shares.
"Events of Dissolution" has the meaning set forth in Section 13.1.
--------------------- ------------
"Exchange Act" has the meaning set forth in Section 4.2(e).
------------ --------------
"General Partner" means Cabot Industrial Trust, a Maryland real estate
---------------
investment trust, and its successors as a general partner of the Partnership in
accordance with the terms of this Agreement.
"General Partnership Interest" means a Partnership Interest held by
----------------------------
the General Partner that is a general partnership interest and includes any and
all benefits to which the General Partner may be entitled and all obligations of
the General Partner hereunder. A General Partnership Interest may be expressed
as a number of Partnership Units.
"IRS" means the Internal Revenue Service, which is charged with
---
administering the internal revenue laws of the United States.
"Immediate Family" means, with respect to any natural Person, such
----------------
natural Person's spouse, parents, descendants, nephews, nieces, brothers, and
sisters.
6
<PAGE>
"Incapacity" or "Incapacitated" means, (a) as to any individual
---------- -------------
Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating him incompetent to manage his Person or his estate,
(b) 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, (c) as to any partnership which is a Partner, the dissolution and
commencement of winding up of the partnership's affairs, (d) as to any estate
which is a Partner, the distribution by the fiduciary of the estate's entire
interest in the Partnership, (e) as to any trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee), or (f) as
to any Partner, the Bankruptcy of such Partner.
"Indemnitee" means (a) any Person made a party to a proceeding by
----------
reason of his status as (i) the General Partner (including as a guarantor of any
Partnership Debt) or (ii) an officer of the Partnership or a trustee or officer
of the General Partner, and (b) such other Persons (including Affiliates of the
General Partner or the Partnership) as the General Partner may designate from
time to time, in its sole and absolute discretion.
"Initial Limited Partner" means [ ].
-----------------------
"Limited Partner" means any Person named as a Limited Partner on
---------------
Exhibit A, as such Exhibit may be amended from time to time, including any
Substituted Limited Partner or Additional Limited Partner, in such Person's
capacity as a Limited Partner in the Partnership.
"Limited Partnership Interest" means a Partnership Interest held by a
----------------------------
Limited Partner representing a fractional part of the Partnership Interests of
all Limited Partners and includes any and all benefits to which such Limited
Partner may be entitled and all obligations of such Limited Partner hereunder.
A Limited Partnership Interest may be expressed as a number of Partnership
Units.
"Liquidating 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, results in the sale or other disposition of
all or substantially all of the assets of the Partnership.
"Liquidator" has the meaning set forth in Section 13.2.
---------- ------------
"Lock-up" has the meaning set forth in Section 11.7(a).
------- ---------------
"Lock-up Period" has the meaning set forth in Section 11.7(a).
-------------- ---------------
"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
7
<PAGE>
in accordance with Section 4.4. Once an item of income, gain, loss or deduction
-----------
that has been included in the initial computation of Net Income is subjected to
the special allocation rules in Sections 6.4 and 6.5, Net Income or the
------------ ---
resulting Net Loss, whichever the case may be, shall be recomputed without
regard to such item.
"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
Section 4.4. Once an item of income, gain, loss or deduction that has been
- -----------
included in the initial computation of Net Loss is subjected to the special
allocation rules in Sections 6.4 and 6.5, Net Loss or the resulting Net Income,
------------ ---
whichever the case may be, shall be recomputed without regard to such item.
"New Securities" has the meaning set forth in Section 4.2(c).
-------------- --------------
"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 6.5(b) 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 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 Conversion" means a Notice of Conversion substantially in
--------------------
the form of Exhibit C.
"Option Plans" means the option plans for Common Shares or Units, as
------------
the case may be, restricted share plans or employee benefit plans established
by, or for the benefit of the employees of, the General Partner, the Partnership
or Cabot Advisors or any other Subsidiary.
"Original Partnership Agreement" has the meaning set forth in the
------------------------------
recitals hereto.
"Partner" means individually, the General Partner or a Limited
-------
Partner, and "Partners" means collectively, the General Partner and the Limited
--------
Partners.
8
<PAGE>
"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).
"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 Year
shall be determined in accordance with the rules of Regulations Section 1.704-
2(i)(2).
"Partnership" means Cabot Industrial Properties, L.P., the limited
-----------
partnership formed under the Act and pursuant to this Agreement, 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 Partnership Minimum Gain, for a Partnership 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 General Partner for a distribution to its shareholders of some or all of its
portion of such distribution, and also means any record date established by the
General Partner in connection with any vote or consent of the Limited Partners
pursuant to this Agreement.
"Partnership Unit" or "Unit" means a fractional, undivided share of
---------------- ----
the Partnership Interests of all Partners issued pursuant to Sections 4.1 and
------------
4.2, in such number as set forth on Exhibit A, as such Exhibit may be amended
- ---
from time to time. The ownership of Partnership Units may be evidenced by the
form of non-transferable, non-negotiable certificate for units substantially in
the form of Exhibit D.
9
<PAGE>
"Partnership Year" means the fiscal year of the Partnership, which
----------------
shall be the calendar year.
"Percentage Interest" means, as to any 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 on Exhibit A, 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.
"Qualified Organization" means any "qualified organization" within the
----------------------
meaning of Section 514(c)(9)(C) of the Code.
"Recapture Income" means any gain recognized by the Partnership
----------------
(computed without regard to any adjustment required by Section 734 or Section
743 of the Code) 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.
"Redemption Amount" means an amount of cash per Partnership Unit equal
-----------------
to the Value on the Valuation Date of the Common Shares that the Partner being
redeemed would have been entitled to receive under Section 4.2(e).
--------------
"Registration Rights and Lock-up Agreement" means that certain
-----------------------------------------
Registration Rights and Lock-up Agreement dated as of the date hereof among the
General Partner and the Persons identified as "Holders" on the signature pages
thereto.
"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 as defined under Section
----
856 of the Code.
"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 6.5(b)(1)(i) or 6.5(b)(2)(i) to eliminate Book-Tax
-------------------- ------------
Disparities.
10
<PAGE>
"704(c) Value" of any Contributed Property means the value of such
------------
property as set forth on Exhibit B, or if no value is set forth on Exhibit B,
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. Subject to Section 4.4, the General Partner shall
-----------
use such method as it deems reasonable and appropriate to allocate the aggregate
of the 704(c) Value of Contributed Properties among each separate property on a
basis proportional to its fair market value.
"Shares" means any Common Shares issued to a Limited Partner upon
------
conversion of its Units pursuant to Section 4.2(e).
--------------
"Specified Conversion Date" means the tenth Business Day after receipt
-------------------------
by the General Partner of a Notice of Conversion; provided, however, that no
-------- -------
Specified Conversion Date shall occur before one year from the date of this
Agreement without the consent of the General Partner except as provided in
Section 4.2(e).
- --------------
"Subsidiary" means, with respect to any Person, any corporation or
----------
other entity of which a majority of (a) the voting power of the voting equity
securities or (b) the outstanding equity interests is owned, directly or
indirectly, by such Person. With respect to the General Partner and the
Partnership, "Subsidiary" shall include (without limitation) Cabot Advisors.
"Substituted Limited Partner" means a Person who is admitted as a
---------------------------
Limited Partner to the Partnership pursuant to Section 11.4.
------------
"Transaction" has the meaning set forth in Section 11.2(c).
----------- ---------------
"Unit Adjustment Factor" means the factor applied for converting
----------------------
Partnership Units to Common Shares, which shall initially be 1.0; provided,
--------
however, that in the event that the General Partner (a) declares or pays a
- -------
dividend on its outstanding Common Shares in Common Shares or makes a
distribution to all holders of its outstanding Common Shares in Common Shares,
(b) subdivides its outstanding Common Shares, or (c) combines its outstanding
Common Shares into a smaller number of Common Shares, the Unit Adjustment Factor
shall be adjusted by multiplying the Unit Adjustment Factor by a fraction, the
numerator of which shall be the number of Common Shares issued and outstanding
on the record date (assuming for such purposes that such dividend, distribution,
subdivision or combination has occurred as of such time), and the denominator of
which shall be the actual number of Common Shares (determined without the above
assumption) issued and outstanding on the record date for such dividend,
distribution, subdivision or combination. Any adjustment to the Unit Adjustment
Factor shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
11
<PAGE>
"Unrealized Gain" attributable to any item of Partnership property
---------------
means, as of any date of determination, the excess, if any, of (a) the fair
market value of such property (as determined under Section 4.4) as of such date,
-----------
over (b) the Carrying Value of such property (prior to any adjustment to be made
pursuant to Section 4.4) 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 (a) the Carrying
Value of such property (prior to any adjustment to be made pursuant to Section
-------
4.4) as of such date, over (b) the fair market value of such property (as
- ---
determined under Section 4.4) as of such date.
-----------
"Valuation Date" means the date of receipt by the General Partner of a
--------------
Notice of Conversion or, if such date is not a Business Day, the first Business
Day thereafter.
"Value" means, with respect to a Common 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: (a) if the Common Shares are listed or admitted to trading on any securities
exchange or the NASDAQ-National Market System, the closing price, regular way,
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; (b) if the Common 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
(c) if the Common 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 10 days prior to the date in
question) for which prices have been so reported; provided, however, that if
-------- -------
there are no bid and asked prices reported during the 10 days prior to the date
in question, the Value of the Common 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 a holder of Common Shares would be entitled to receive Common Share
Rights, then the Value of such Common Share 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.
12
<PAGE>
ARTICLE II
ORGANIZATIONAL MATTERS
Section 2.1 Organization and Continuation; Application of Act.
-------------------------------------------------
(a) Organization and Continuation of Partnership. The General
--------------------------------------------
Partner and the Limited Partners do hereby continue, and ratify the
formation of, the Partnership as a limited partnership according to all of
the terms and provisions of this Agreement and otherwise in accordance with
the Act. The General Partner is the sole general partner of the
Partnership.
(b) Application of Act. The Partnership is a limited partnership
------------------
subject to the provisions of the Act and 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. No Partner
has any interest in any Partnership property, and the Partnership Interest
of each Partner shall be personal property for all purposes.
Section 2.2 Name. The name of the Partnership is Cabot Industrial
----
Properties, L.P. 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 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; provided, however, that the name
-------- -------
of the Partnership may not be changed to include the name of any Limited Partner
without the written consent of that Limited Partner.
Section 2.3 Registered Office and Agent; Principal Office. The address
---------------------------------------------
of the registered office of the Partnership in the State of Delaware is located
c/o Corporation Service Company, 1013 Centre Road, Wilmington, Delaware 19805-
1297, and the registered agent for service of process on the Partnership in the
State of Delaware at such registered office is the Corporation Service Company.
The principal office of the Partnership is located at Two Center Plaza, Suite
200, Boston, Massachusetts 02108, 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 Withdrawal. The Initial Limited Partner hereby withdraws
----------
from the Partnership.
13
<PAGE>
Section 2.5 Term. The term of the Partnership commenced, and shall
----
continue until December 31, 2097 unless it is dissolved sooner pursuant to the
provisions of Article XIII or as otherwise provided by law.
ARTICLE III
PURPOSE
Section 3.1 Purpose and Business. The purpose and nature of the business
--------------------
to be conducted by the Partnership is (a) to conduct any business that may be
lawfully conducted by a limited partnership organized pursuant to the Act, (b)
to enter into any partnership, joint venture or other similar arrangement to
engage in any of the foregoing or the ownership of interests in any entity
engaged in any of the foregoing and (c) to do anything necessary or incidental
to the foregoing; provided, however, that each of the foregoing clauses (a), (b)
-------- -------
and (c) shall be limited and conducted in such a manner as to permit the General
Partner at all times to be classified as a REIT, unless the General Partner
provides notice to the Partnership that it intends to cease or has ceased to
qualify as a REIT and provided further, however, that each of the foregoing
-------- ------- -------
clauses (a), (b) and (c) shall be limited and conducted in such a manner as to
permit the Partnership to qualify as a real estate operating company under U.S.
Department of Labor Regulation Section 29 C.F.R. 2510.3-101(e) unless the
General Partner has obtained an opinion of counsel that the Partnership is
otherwise deemed not to hold "plan assets" under U.S. Department of Labor
Regulation Section 29 C.F.R. 2510.3-101.
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;
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, (a) could adversely affect the ability of the General
Partner to continue to qualify as a REIT, (b) could subject the General Partner
to any additional taxes under Section 857 or Section 4981 of the Code, or (c)
could violate any law or regulation of any governmental body or agency having
jurisdiction over the General Partner or its securities, unless such action (or
inaction) shall have been specifically consented to by the General Partner in
writing.
ARTICLE IV
CAPITAL CONTRIBUTIONS; ISSUANCE OF UNITS;
CAPITAL ACCOUNTS
Section 4.1 Capital Contributions of the Partners.
-------------------------------------
(a) Initial Capital Contributions. At the time of the execution of
-----------------------------
this Agreement, the Partners shall make or shall have made the Capital
Contributions set forth in Exhibit A
14
<PAGE>
to this Agreement, provided that the Initial Limited Partner does hereby
--------
withdraw as the Initial Limited Partner upon the execution of this
Agreement. The Partners shall own Partnership Units in the amounts set
forth on Exhibit A and shall have a Percentage Interest in the Partnership
as set forth on Exhibit A, which Percentage Interest shall be adjusted on
Exhibit A from time to time by the General Partner to the extent necessary
to reflect accurately redemptions, conversions, Capital Contributions, the
issuance of additional Partnership Units, or similar events having an
effect on a Partner's Percentage Interest. The Partnership Units held by
the General Partner shall at all times be deemed to be General Partner
units and shall constitute the General Partnership Interest.
(b) Additional Capital Contributions.
--------------------------------
(1) No Partner shall be assessed or, except as provided for in
Sections 4.1(b)(2) and 13.3(b) below and except for any such amounts
-------- --------- -------
which a Limited Partner may be obligated to repay under Section 10.5,
------------
be required to contribute additional funds or other property to the
Partnership. Any additional funds or other property required by the
Partnership, as determined by the General Partner in its sole
discretion, may, at the option of the General Partner and without an
obligation to do so (except as provided for in Section 4.1(b)(2) and
-----------------
Section 13.3(b) below), be contributed by the General Partner as
---------------
additional Capital Contributions. If and as the General Partner or
any other Partner makes additional Capital Contributions to the
Partnership, each such Partner shall receive additional Partnership
Units as provided for in Section 4.2.
-----------
(2) Except to the extent provided in Section 7.5 below relating
-----------
to interests in Partnership properties held directly by the
Partnership or through Subsidiaries, the net proceeds of any and all
funds raised by or through the General Partner through the issuance of
additional shares of the General Partner (whether Common Shares or
preferred shares) shall be contributed to the Partnership as
additional Capital Contributions, and in such event the General
Partner shall be issued additional Partnership Units pursuant to
Section 4.2 below.
-----------
(c) Return of Capital Contributions. Except as otherwise expressly
-------------------------------
provided herein, the Capital Contribution of each Limited Partner will be
returned to that Partner only in the manner and to the extent provided in
Article V and Article XIII hereof, and no Partner may withdraw from the
Partnership or otherwise have any right to demand or receive the return of
its Capital Contribution to the Partnership (as such), except as
specifically provided herein. Under circumstances requiring a return of
any Capital Contribution, no Partner shall have the right to receive
property other than cash, except as specifically provided herein. No
Partner shall be entitled to interest on any Capital Contribution or
Capital Account notwithstanding any disproportion therein as between the
Partners. Except as specifically
15
<PAGE>
provided herein, the General Partner shall not be liable for the return of
any portion of the Capital Contribution of any Limited Partner, and the
return of such Capital Contributions shall be made solely from Partnership
assets.
(d) Liability of Limited Partners. No Limited Partner shall have any
-----------------------------
further personal liability to contribute money to, or in respect of, the
liabilities or the obligations of the Partnership, nor shall any Limited
Partner be personally liable for any obligations of the Partnership, except
as otherwise provided in this Article IV or in the Act. No Limited Partner
shall be required to make any contributions to the capital of the
Partnership other than its Capital Contribution.
Section 4.2 Issuances of Additional Partnership Interests.
---------------------------------------------
(a) Issuance to Other Than the General Partner. The General Partner
------------------------------------------
is hereby authorized to cause the Partnership to issue such additional
Partnership Interests in the form of Partnership Units for any Partnership
purpose at any time or from time to time, to the Partners (other than
issuances to the General Partner, which issuances are governed by Section
4.2(b)) or to other Persons for such consideration and on such terms and
conditions as shall be established by the General Partner in its sole and
absolute discretion, all without the approval of any Limited Partners
except to the extent provided herein; provided, however, that the
-------- -------
Partnership also may from time to time issue to third parties additional
Partnership Interests (other than any such issuance to the General Partner
which is governed by Sections 4.2(b) and 4.2(c)) 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 Limited
Partnership Interests, subject to Delaware law, including, without
limitation, with respect to (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 further however,
------------------------
that any issuance of any classes as provided in the foregoing proviso, made
or authorized to be made prior to the first anniversary of the Effective
Date shall be permitted only with the Consent of the Limited Partners
holding a majority of the Percentage Interests of the Limited Partners.
(b) Issuance to the General Partner. The Partnership also may from
-------------------------------
time to time issue to the General Partner 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 Limited Partnership
Interests, all as shall be determined by the General Partner, subject to
Delaware law, including, without limitation,
16
<PAGE>
with respect to (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, however, that (x) the additional
-------- -------
Partnership Interests are issued in connection with an issuance of shares
of the General Partner, which shares have designations, preferences and
other rights, all such that the economic 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(b), and (y) the General Partner shall make a Capital
--------------
Contribution to the Partnership (1) in an amount equal to the net proceeds
raised in connection with the issuance of such shares of the General
Partner in the event such shares are sold for cash or cash equivalents or
(2) in the form of the property received in consideration for such shares,
in the event such shares are issued in consideration for other property.
(c) Issuance of Additional Common Shares. The General Partner is
------------------------------------
explicitly authorized to issue additional Common Shares or preferred Shares
of Beneficial Interest of the General Partner, or rights, options, warrants
or convertible or exchangeable securities containing the right to subscribe
for or purchase Common Shares ("New Securities") and in connection
--------------
therewith (i) the General Partner shall cause the Partnership to issue to
the General Partner Partnership Interests or rights, options, warrants or
convertible or exchangeable securities of the 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 General Partner shall contribute the net proceeds from, or the
property received in consideration for, the issuance of such New Securities
and from the exercise of rights contained in such New Securities to the
Partnership. In connection with the issuance of Partnership Interests
which are substantially similar to New Securities, the General Partner is
authorized to modify or amend the distributions or allocations hereunder
solely to the extent necessary to give effect to the designations,
preferences and other rights pertaining to such Partnership Interests.
(d) Issuance Pursuant to Option Plans.
---------------------------------
(1) Upon the exercise of an option granted by the General
Partner for Common Shares, the General Partner shall cause the
Partnership to issue to the General Partner one Partnership Unit for
each Common Share acquired upon such exercise pursuant to the Option
Plans, and the General Partner shall contribute to the Partnership
the net proceeds received upon such exercise (it being understood
that the General Partner may issue Common Shares in connection with
the Option Plans without receiving a specified amount of proceeds and
that the issuance of such
17
<PAGE>
Common Shares shall nonetheless entitle the General Partner to
additional Partnership Units).
(2) The General Partner shall cause the Partnership to issue
Partnership Units to employees of the Partnership upon the exercise by
any such employees of an option to acquire Partnership Units granted
by the Partnership pursuant to the Option Plans in accordance with the
terms of the Option Plans. Partnership Units so issued shall
represent Limited Partnership Interests.
(3) The General Partner shall cause the Partnership to issue
Partnership Units to any Subsidiary upon the exercise by an employee
of such Subsidiary of an option to acquire Partnership Units granted
by such Subsidiary pursuant to the Option Plans, and such Subsidiary
shall transfer to the Partnership the price per Partnership Unit
required by the Option Plans to be paid by Subsidiaries. Partnership
Units issued to any such Subsidiary shall represent Limited
Partnership Interests.
(e) Conversion of Units.
-------------------
(1) Subject to the further provisions of this Section 4.2(e) and
--------------
the provisions of Sections 8.6 and 11.7, beginning one year after the
------------ ----
Effective Date or earlier with the written consent of the General
Partner (except as otherwise contractually restricted), the General
Partner hereby grants to each Limited Partner the right (the
"Conversion Right") to exchange any or all of the Partnership Units
-----------------
held by that Partner for Common Shares, with one Partnership Unit
being exchangeable for one Common Share; provided, however, that in
-------- -------
the event the General Partner issues to all holders of Common Shares
rights, options, warrants or convertible or exchangeable securities
entitling the shareholders to subscribe for or purchase Common Shares,
or any other securities or property (collectively, the "Common Share
------------
Rights") then (except to the extent such rights have already been
------
reflected in an adjustment to the Unit Adjustment Factor as provided
in Section 4.2(e)(2) below) the Converting Partner shall also be
-----------------
entitled to receive such Common Share Rights that a holder of that
number of Common Shares would be entitled to receive. The Conversion
Right may be exercised by a Limited Partner (a "Converting Partner")
------------------
at any time beginning one year after the Effective Date (or earlier
upon the written consent of the General Partner) and from time to time
by delivering a Notice of Conversion to the General Partner not less
than ten (10) days prior to such exchange. The General Partner shall
at all times reserve and keep available out of its authorized but
unissued Common Shares, solely for the purpose of effecting the
exchange of Partnership Units for Common Shares, such number of Common
Shares as shall from time to time be sufficient to effect the
conversion of all outstanding Partnership Units not owned by the
General Partner. No Limited
18
<PAGE>
Partner shall, solely by virtue of being the holder of one or more
Partnership Units, be deemed to be a shareholder of or have any other
interest in the General Partner.
(2) In the event of any change in the Unit Adjustment Factor, the
number of Partnership Units held by each Partner shall be
proportionately adjusted by multiplying the number of Partnership
Units held by such Partner immediately prior to the change in the Unit
Adjustment Factor by the new Unit Adjustment Factor; the intent of
this provision is that one Partnership Unit remains exchangeable for
one Common Share without dilution. In the event the General Partner
issues any Common Shares in exchange for Partnership Units pursuant to
this Section 4.2(e), any such Partnership Units so acquired by the
--------------
General Partner shall immediately thereafter be canceled by the
Partnership and the Partnership shall issue to the General Partner new
Partnership Units pursuant to Section 4.2(c) hereof. Each Converting
--------------
Partner agrees to execute such documents as the General Partner may
reasonably require in connection with the issuance of Common Shares
upon exercise of the Conversion Right. Notwithstanding the foregoing
provisions of this Section 4.2(e), a Limited Partner shall not have
--------------
the right to exchange Partnership Units for Common Shares if (i) in
the opinion of counsel for the General Partner, the General Partner
would, as a result thereof, no longer qualify (or it would be more
likely than not that the General Partner no longer would qualify) as a
REIT; or (ii) such exchange would in the opinion of counsel for the
General Partner, constitute or be more likely than not to constitute a
violation of applicable securities laws.
Section 4.3 No Preemptive Rights. Except as specifically provided in
--------------------
this Agreement, no Person shall have any preemptive, preferential or other
similar right with respect to (a) additional Capital Contributions or loans to
the Partnership, or (b) issuance or sale of any Partnership Units.
Section 4.4 Capital Accounts of the Partners.
--------------------------------
(a) General. 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 (a)
the amount of all Capital Contributions made by such Partner to the
Partnership pursuant to this Agreement and (b) all items of Partnership
income and gain (including income and gain exempt from tax) computed in
accordance with Section 4.4(b) hereof and allocated to such Partner
--------------
pursuant to Sections 6.1 through Section 6.4 of the Agreement, and
------------ -----------
decreased by (i) 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 (ii) all items of Partnership deduction and loss
computed in accordance with Section 4.4(b) hereof and allocated to such
--------------
Partner pursuant to Sections 6.1 through Section 6.4 of the Agreement.
------------ -----------
19
<PAGE>
(b) Income, Gains, Deductions and Losses. For purposes of computing
------------------------------------
the amount of any item of income, gain, loss or deduction 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.
(2) The computation of all items of income, gain, loss 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 in gross income 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 cash
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 4.4(d) hereof, the amount of any such
--------------
adjustment shall be taken into account as gain or loss from the
disposition of such asset.
(6) Any items specially allocated under Section 6.5 hereof shall
-----------
not be taken into account.
(c) Transfers of Partnership Units. A transferee of a Partnership
------------------------------
Unit shall succeed to a pro rata portion of the Capital Account of the
transferor.
(d) Unrealized Gains and Losses.
---------------------------
20
<PAGE>
(1) Consistent with the provisions of Regulations Section 1.704-
1(b)(2)(iv)(f), and as provided in Section 4.4(d)(2), the Carrying
-----------------
Values 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 4.4(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:
(i) 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; (ii) 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; and (iii) immediately prior to the liquidation of the
Partnership or the General Partner's interest in the Partnership
within the meaning of Regulations Section 1.704-l(b)(2)(ii)(g);
provided, however, that adjustments pursuant to clauses (a) and (b)
-------- -------
above shall be made only if the General Partner reasonably 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 Values 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 such Unrealized Gain or Unrealized Loss 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 XIII of this Agreement, 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) Modification by General Partner. The provisions of 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 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
21
<PAGE>
distributed property or which are assumed by the Partnership, the General
Partner, or any Limited Partners) are computed in order to comply with such
Regulations, the General Partner may make such modification; provided,
--------
however, that it will not have a material effect on the amounts
-------
distributable to any Person pursuant to Article XIII of this Agreement upon
the liquidation of the Partnership. The General Partner also shall (a) 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
(b) make any appropriate modifications in the event unanticipated events
might otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b).
ARTICLE V
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions. The
-------------------------------------------------
General Partner shall distribute not less frequently than quarterly an amount
equal to 100% of Available Cash generated by the Partnership during such quarter
to the Partners who are Partners on the Partnership Record Date with respect to
such quarter (i) first, with respect to any class of Partnership Interests
issued pursuant to Section 4.2(b) which are entitled to a preference over
--------------
Partnership Units on the distribution of Available Cash (and within and among
such classes, in order of the preferences designated therein and pro rata among
any such classes), and (ii) thereafter, in accordance with their respective
Percentage Interests on such Partnership Record Date; provided, however, that in
-------- -------
no event may a Partner receive a distribution of Available Cash with respect to
a Unit if such Partner is entitled to receive a dividend from the General
Partner which is derived from a distribution of Available Cash to the General
Partner with respect to a Common Share for which such Unit has been redeemed or
exchanged.
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 General Partner, or
any Limited Partners or Assignees shall be treated as amounts distributed to the
General Partner or such Limited Partners, or Assignees pursuant to Section 5.1
-----------
for all purposes under this Agreement.
Section 5.3 Distributions Upon Liquidation. Proceeds from a Liquidating
------------------------------
Transaction shall be distributed to the Partners in accordance with Section
-------
13.2.
- ----
22
<PAGE>
ARTICLE VI
ALLOCATIONS
Section 6.1 Allocations for Capital Account Purposes Other than the
-------------------------------------------------------
Taxable Year of Liquidation. 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 (computed in accordance
with Section 4.4 hereof) shall be allocated among the Partners for each taxable
-----------
year (or portion thereof) as provided herein below.
(a) Net Income. After giving effect to the special allocations set
----------
forth in Section 6.2 through Section 6.4 below, Net Income shall be
----------- -----------
allocated (i) first, to the General Partner to the extent that, on a
cumulative basis, 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 (a) of
Section 6.1(a), and (ii) thereafter, Net Income shall be allocated to the
--------------
Partners in accordance with their respective Percentage Interests.
(b) Net Losses. After giving effect to the special allocations set
----------
forth in Section 6.2 through Section 6.4 below, Net Losses shall be
----------- -----------
allocated to the Partners in accordance with their respective Percentage
Interests; provided, however, that Net Losses shall not be allocated to any
-------- -------
Limited Partner pursuant to this Section 6.1(b) to the extent that such
--------------
allocation would cause such Limited Partner to have an Adjusted Capital
Account Deficit at the end of such taxable year (or increase any existing
Adjusted Capital Account Deficit). All Net Losses in excess of the
limitations set forth in the preceding sentence of this Section 6.1(b)
--------------
shall be allocated to the General Partner.
(c) Nonrecourse Liabilities. For purposes of Regulations Section
-----------------------
1.752-3(a), the Partners agree that Nonrecourse Liabilities of the
Partnership in excess of the sum of (i) the amount of Partnership Minimum
Gain and (ii) the total amount of Nonrecourse Built-in Gain shall be
allocated among the Partners in accordance with their respective Percentage
Interests.
(d) Gains. 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 allocations of gain pursuant to
Section 6.4 below, be characterized as Recapture 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, all in such a manor consistent with Regulation
Section 1.1245-1.
(e) Override. Notwithstanding Section 6.1(a) or Section 6.1(b), if
--------
any Qualified Organization or the General Partner would be allocated an
amount of aggregate Net Income
23
<PAGE>
for any taxable year of the Partnership that would cause its percentage
share of aggregate Net Income for such taxable year of the Partnership to
exceed its Percentage Interest for the taxable year of the Partnership, an
amount of Net Income that would otherwise be allocated to such Qualified
Organization or the General Partner shall instead be allocated to such
other Partners in the amount required to cause the Net Income allocable to
such Qualified Organization or the General Partner to not exceed each such
Partners' Percentage Interest for such taxable year of the Partnership, and
in subsequent fiscal years, an amount of Net Income otherwise allocable to
such other Partners shall instead be allocated to such Qualified
Organization and the General Partner to the maximum extent possible
consistent with this Section 6.1(e) until the amount of Net Income
previously allocated to such other Partners pursuant to this Section 6.1(e)
have been reallocated to such Qualified Organization and the General
Partner.
Section 6.2 Allocations for Capital Account Purposes in the Taxable
-------------------------------------------------------
Year of Liquidation.
-------------------
(a) In General. Subject to Sections 6.3 and 6.4, the Net Income and Net
----------
Loss of the Partnership for the taxable year of liquidation of the Partnership
shall be allocated prior to the final liquidating distributions of the
Partnership and shall be allocated first to eliminate all negative balances in
any Partner's Adjusted Capital Account Deficit and then, to the extent possible,
in a manner such that the Capital Accounts of the Partners immediately prior to
such final liquidating distributions are equal to the amount which would have
been distributable to the Partners under Section 5.1 if such distributions were
to be governed by Section 5.1. Notwithstanding the preceding sentence, actual
distributions made subsequent to the allocations under this Section 6.2 shall be
made pursuant to Section 5.3.
(b) Override. Notwithstanding Section 6.2(a), if any Qualified
--------
Organization or the General Partner would be allocated an amount of Net Income
for any taxable year of the Partnership ending on the liquidation date of the
Partnership that would cause its percentage share of Net Income for such taxable
year of the Partnership to exceed its Percentage Interest for such taxable year
of the Partnership, an amount of Net Income that would otherwise be allocated to
such Qualified Organization or the General Partner shall instead be allocated to
such other Partners in the amount required to cause the Net Income allocable to
such Qualified Organization or the General Partner to not exceed its Percentage
Interest for such taxable year of the Partnership.
Section 6.3 Additional Allocations.
----------------------
Notwithstanding anything to the contrary in this Agreement, all allocations
under this Agreement shall be adjusted insofar as may be required to enable the
Partnership to meet the requirements of Section 514(c)(9)(E) of the Code and the
Regulations thereunder so that all allocations hereunder have "substantial
economic effect" within the meaning of Section 704(b)(2)
24
<PAGE>
of the Code and so that, as to each Partner which is a Qualified Organization
and the General Partner,
(a) each such Partner's percentage share of the Partnership's "overall
partnership income" (within the meaning of Section 514(c)(9)(E)(i)(I) of the
Code and Regulation Section 1.514(c)-2) shall not, for any taxable year of the
Partnership, be greater than the percentage then applicable to such Partner
pursuant to Section 5.1 hereof, and
(b) each such Partner's percentage share of the Partnership's "overall
partnership loss" (within the meaning of Section 514(c)(9)(E)(i)(I) of the Code
and Regulation Section 1.514(c)-2) shall not, for any taxable year of the
Partnership, be less than the percentage then applicable to such Partner
pursuant to Section 5.1 hereof.
Section 6.4 Special Allocation Rules. Notwithstanding any other
------------------------
provision of this Agreement, the following special allocations shall be made
in the following order:
(a) Minimum Gain Chargeback. Notwithstanding any other provisions of
-----------------------
Article VI, if there is a net decrease in Partnership Minimum Gain during
any Partnership 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 6.4(a)
--------------
is intended to comply with the minimum gain chargeback requirements in
Regulations Section 1.704-2(f) and for purposes of this Section 6.4(a)
--------------
only, each Partner's Adjusted Capital Account Deficit shall be determined
prior to any other allocations pursuant to Section 6.1 of the Agreement
-----------
with respect to such fiscal year and without regard to any decrease in
Partner Minimum Gain during such fiscal year.
(b) Partner Minimum Gain Chargeback. Notwithstanding any other
-------------------------------
provision of Article VI (except Section 6.2(a) hereof), if there is a net
--------------
decrease in Partner Minimum Gain attributable to a Partner Nonrecourse Debt
during any Partnership fiscal year, each Partner who has a share of the
Partner Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(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
25
<PAGE>
Regulations Section 1.704-2(i)(4). This Section 6.4(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 this Section 6.4(b), each Partner's Adjusted Capital Account
--------------
Deficit shall be determined prior to any other allocations pursuant to
Article VI of this Agreement with repsect to such fiscal year, other than
allocations pursuant to Section 6.4(a) hereof.
--------------
(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 6.4(a) and 6.4(b) hereof, such Partner has an
--------------- ------
Adjusted Capital Account Deficit, items of Partnership income and gain
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 taxable
----------------------
period 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 which does satisfy such
requirements.
(e) Partner Nonrecourse Deductions. Any Partner Nonrecourse
------------------------------
Deductions for any fiscal 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)(2).
(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.
Section 6.5 Allocations for Tax Purposes.
----------------------------
26
<PAGE>
(a) General. Except as otherwise provided in this Section 6.5, 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
Sections 6.1 and 6.4 of this Agreement.
------------ ---
(b) To Eliminate Book-Tax Disparities. 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) (i) 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 in a manner that
takes into account the variation between the 704(c) Value of such
property and its adjusted basis at the time of contribution, and (ii)
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 Sections 6.1 and 6.4 of this Agreement.
------------ ---
(2) (i) In the case of an Adjusted Property, such items shall
(A) first, be allocated among the Partners in a manner consistent with
the principles of Section 704(c) of the Code in a manner to take into
account the Unrealized Gain or Unrealized Loss attributable to such
property and the allocations thereof pursuant to Section 4.4 and (B)
-----------
second, in the event such property was originally a Contributed
Property, be allocated among the Partners in a manner consistent with
Section 6.5(b)(1)(i), and (ii) any item of Residual Gain or Residual
--------------------
Loss attributable to an Adjusted Property shall be allocated among the
Partners in the same manner as its correlative item of "book" gain or
loss is allocated pursuant to Sections 6.1 and 6.5 of this Agreement.
------------ ---
(3) All other items of income, gain, loss and deduction shall be
allocated among the Partners in the same manner as their correlative
item of "book" gain or loss is allocated pursuant to Sections 6.1 and
------------
6.4 of this Agreement.
---
(c) Power of General Partner to Elect Method. To the extent Treasury
----------------------------------------
Regulations promulgated pursuant to Section 704(c) of the Code permit a
partnership to utilize alternative methods to eliminate the disparities
between the agreed 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.
27
<PAGE>
ARTICLE VII
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management.
----------
(a) Powers of General Partner. Except as otherwise expressly
-------------------------
provided in this Agreement, all management powers over the business and
affairs of the Partnership are 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. Notwithstanding anything to the contrary in this Agreement,
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 General Partner (so long
as the General Partner 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 sufficient to permit the General Partner to maintain REIT
status), the assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of evidences of
indebtedness (including the securing of same by 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;
(2) using its best efforts to undertake the active management
and development of the real property held by the Partnership in a
manner so that the Partnership (unless it has been determined that the
Partnership otherwise does not hold "plan assets") continues to
qualify as a real estate operating company under U.S. Department of
Labor Regulation Section 29 C.F.R. 2510-3.101(e) including obtaining
an opinion of recognized counsel to such effect no more frequently
than annually, if so requested by any Limited Partner;
28
<PAGE>
(3) 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;
(4) the acquisition, disposition, sale, conveyance, mortgage,
pledge, encumbrance, hypothecation, contribution or exchange of any
assets of the Partnership or the merger or other combination of the
Partnership with or into another entity on such terms as the General
Partner deems proper;
(5) 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
General Partner, the Partnership or any of the Partnership's
Subsidiaries, the lending of funds to other Persons (including the
Partnership's Subsidiaries) 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, the holding of any real, personal and mixed property of
the Partnership in the name of the Partnership or in the name of a
nominee or trustee (subject to Section 7.10), the creation, by grant
------------
or otherwise, of easements or servitudes, and the performance of any
and all acts necessary or appropriate to the operation of the
Partnership assets including, but not limited to, applications for
rezoning, objections to rezoning, constructing, altering, improving,
repairing, renovating, rehabilitating, razing, demolishing or
condemning any improvements or property of the Partnership;
(6) the negotiation, execution, and performance of any
contracts, conveyances or other instruments (including with Affiliates
of the Partnership to the extent provided in Section 7.6) 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, without limitation,
the execution and delivery of leases on behalf of or in the name of
the Partnership (including the lease of Partnership property for any
purpose and without limit as to the term thereof, whether or not such
term (including renewal terms) shall extend beyond the date of
termination of the Partnership and whether or not the portion so
leased is to be occupied by the lessee or, in turn, subleased in whole
or in part to others);
(7) the opening and closing of bank accounts, the investment of
Partnership funds in securities, certificates of deposit and other
instruments, and the distribution of Partnership cash or other
Partnership assets in accordance with this Agreement;
29
<PAGE>
(8) the selection and dismissal of employees of the Partnership
or the General Partner (including, without limitation, employees
having titles such as "president", "vice president", "secretary" and
"treasurer"), and the engagement and dismissal of agents, outside
attorneys, accountants, engineers, appraisers, consultants,
contractors and other professionals on behalf of the General Partner
or the Partnership and the determination of their compensation and
other terms of employment or hiring;
(9) the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or appropriate;
(10) 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 contribution of property to, its Subsidiaries and any
other Person in which it has an equity investment from time to time);
(11) the control of any matters affecting the rights and
obligations of the Partnership, including the conduct of litigation
and the incurring of legal expense and the settlement of claims and
litigation, and the indemnification of any Person against liabilities
and contingencies to the extent permitted by law;
(12) 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);
(13) the determination of the fair market value of any
Partnership property distributed in kind using such reasonable method
of valuation as it may adopt;
(14) the execution, acknowledgment and delivery of any and all
documents and instruments to effectuate any or all of the foregoing;
and
(15) the issuance of Partnership Units to any Subsidiary which
may be necessary for such Subsidiary to satisfy such Subsidiary's
obligations under the Option Plans, in exchange for the transfer to
the Partnership by such Subsidiary of the price per Partnership Unit
required by the Option Plans to be paid by Subsidiaries.
(b) No Approval Required for Above Powers. Except as expressly
-------------------------------------
provided in this Agreement (including, without limitation, the last
sentence of this Section 7.1(b)), each of the Limited Partners agrees that
---------------
the General Partner is authorized to execute, deliver and
30
<PAGE>
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, the Act or any
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. Notwithstanding the foregoing, the
General Partner agrees that it will not take any of the following actions
at any time prior to the first anniversary of the Effective Date without
the Consent of Limited Partners holding a majority of the outstanding
Limited Partnership Interests: (i) a merger, consolidation or share
exchange of the General Partner and requiring the approval of the General
Partner's shareholders or any merger, consolidation or partnership interest
exchange of the Partnership; (ii) a sale, lease, transfer or other
disposition of all of substantially all of the General Partner's assets
requiring the approval of the General Partner's shareholders, a sale,
lease, transfer or other disposition of all or substantially all of the
Partnership's assets, or any election to dissolve the General Partner
requiring the approval of the General Partner's shareholders; or (iii) an
amendment to the Declaration of Trust requiring the approval of the General
Partner's shareholders.
(c) Insurance. At all times from and after the date hereof, the
---------
General Partner may cause the Partnership to obtain and maintain casualty,
liability and other insurance on the properties of the Partnership and
liability insurance for the Indemnitees hereunder. The right to procure
such insurance on behalf of the Indemnities shall in no way mitigate or
otherwise affect the right of any such Indemnitee to indemnification under
Section 7.7.
-----------
(d) Working Capital Reserves. At all times from and after the date
------------------------
hereof, the General Partner may cause the Partnership to establish and
maintain working capital reserves in such amounts as the General Partner,
in its sole and absolute discretion, deems appropriate and reasonable from
time to time.
(e) No Obligation to Consider Tax Consequences to Limited Partners.
--------------------------------------------------------------
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 pursuant to its authority under this Agreement.
(f) Loss of REOC Status. If the General Partner becomes aware that
-------------------
the Partnership may not qualify as a real estate operating company under
Department of Labor Regulation Section 29 C.F.R. 2510-3.101(e), it shall
notify the Limited Partners and, at the
31
<PAGE>
request of any affected Limited Partner, shall meet with any affected
Limited Partner upon not less than 10 days advance notice to consider
alternatives in a good faith effort to address the situation.
Section 7.2 Certificate of Limited Partnership. 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 and do all 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 jurisdiction
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,
as it may be amended or restated from time to time, to any Limited Partner. 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 jurisdiction in which the
Partnership may elect to do business or own property.
Section 7.3 Restrictions on General Partner's Authority. The General
-------------------------------------------
Partner may not, without the written Consent of all of the Limited Partners,
take any action in contravention of this Agreement including, without
limitation:
(a) take any action that would make it impossible to carry on the
ordinary business of the Partnership, except as otherwise provided in this
Agreement (provided that this restriction shall not be deemed to restrict
the sale, lease, transfer or disposition of all or substantially all of the
Partnership's assets as may otherwise be provided herein);
(b) possess Partnership property, or assign any rights in specific
Partnership property, for other than a Partnership purpose except as
otherwise provided in this Agreement;
(c) admit a Person as a Partner, except as otherwise provided in this
Agreement; or
(d) perform any act that would subject a Limited Partner to liability
as a general partner in any jurisdiction or any other liability except as
provided herein or under the Act.
Section 7.4 Responsibility for Expenses.
---------------------------
(a) No Compensation. Except as provided in this Section 7.4 and
--------------- -----------
elsewhere in this Agreement (including the provisions of Articles V and VI
regarding distributions,
32
<PAGE>
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) Responsibility for Ownership and Operation Expenses. The
---------------------------------------------------
Partnership shall be responsible for and shall pay all expenses relating to
the Partnership's ownership of its assets, and the operation of, or for the
benefit of, the Partnership, and the General Partner shall be reimbursed on
a monthly basis, or such other basis as the General Partner may determine
in its sole and absolute discretion, for all expenses it incurs relating to
the Partnership's ownership of its assets and the operation of, or for the
benefit of, the Partnership; provided, however, that the amount of any such
-------- -------
reimbursement shall be reduced by any interest or other amounts earned by
the General Partner with respect to bank accounts or other instruments held
by it as permitted in Section 7.5(a). Such reimbursements shall be in
--------------
addition to any reimbursement to the General Partner as a result of
indemnification pursuant to Section 7.7 hereof.
-----------
(c) Responsibility for Organization Expenses. The Partnership
----------------------------------------
shall be responsible for and shall pay all expenses incurred relating to
the organization of the Partnership.
Section 7.5 Outside Activities of the General Partner.
-----------------------------------------
(a) General. 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 as a
General Partner or Limited Partner and the management of the business of
the Partnership, and such activities as are incidental thereto. The General
Partner shall not incur any Debt other than that for which it may be liable
in its capacity as General Partner of the Partnership (and other than any
guarantee of Partnership Debt) or other assets provided below. The General
Partner shall not own any assets other than Partnership Interests (except
for certain interests in Partnership properties held directly by the
General Partner or which have been caused by the General Partner to be
contributed to or purchased by Subsidiaries (including qualified REIT
subsidiaries, as defined in Section 856(i) of the Code, of the General
Partner), which interests shall not exceed 1% of the aggregate economic
interests of any property) and other than such bank accounts or similar
instruments as it deems necessary to carry out its responsibilities
contemplated under this Agreement and the Declaration of Trust. The General
Partner and Affiliates of the General Partner may acquire Limited
Partnership Interests and shall be entitled to exercise all rights of a
Limited Partner relating to such Limited Partnership Interests.
(b) Purchase of Common Shares. In the event the General Partner
-------------------------
exercises its rights under Article 3 of the Declaration of Trust to
purchase Common Shares, then the General Partner shall cause the
Partnership to purchase from it an equal number of
33
<PAGE>
Partnership Units (after application of the Unit Adjustment Factor) on the
same terms that the General Partner purchased such Common Shares.
Section 7.6 Contracts with Affiliates.
-------------------------
(a) Loans. The General Partner may cause the Partnership to lend
-----
or contribute 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) Transfers of Assets. Except as provided in Section 7.5(a),
------------------- --------------
the General Partner may cause the Partnership to 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.
(c) Contracts With General Partner. After the Effective Date and
------------------------------
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 on terms that are fair
and reasonable and no less favorable to the Partnership than would be
obtained from an unaffiliated third party in connection therewith.
(d) Employee Benefit Plans. 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
funded by the Partnership for the benefit of employees of the General
Partner, the Partnership, Subsidiaries of the Partnership or any Affiliate
of any of them in respect of services performed, directly or indirectly,
for the benefit of the Partnership, the General Partner, or any of the
Partnership's Subsidiaries, including any such plan which requires the
Partnership, the General Partner or any of the Partnership's Subsidiaries
to issue or transfer Partnership Units to employees.
Section 7.7 Indemnification.
---------------
(a) General. The Partnership shall indemnify an Indemnitee from
-------
and against any and all losses, claims, damages, liabilities, joint or
several, expenses (including 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 as set
forth in this Agreement in which any 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
34
<PAGE>
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. The termination of any proceeding by judgment, order or
settlement does not create a presumption that the Indemnitee did not meet
the requisite standard of conduct set forth in this Section 7.7(a). The
--------------
termination of any proceeding by conviction or upon a plea of nolo
contendere or its equivalent, or an entry of an order of probation prior to
judgment, creates a rebuttable presumption that the 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.
(b) In Advance of Final Disposition. Reasonable expenses incurred by
-------------------------------
an Indemnitee who is a party to a proceeding may be paid or reimbursed by
the Partnership in advance of the final disposition of the proceeding upon
receipt by the Partnership of (a) 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 this
Section 7.7 has been met, and (b) a written undertaking by or 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) Non-Exclusive Section. 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.
(d) Insurance. The Partnership may 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. The right to procure such insurance on
behalf of the Indemnitees shall in no way mitigate or otherwise affect the
right of any Indemnities to indemnification under this Section 7.7.
-----------
(e) Employee Benefit Plans. 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(a); and actions taken or omitted by the Indemnitee with
--------------
respect to an employee benefit plan in the
35
<PAGE>
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) No Personal Liability for Limited Partners. In no event may
------------------------------------------
an Indemnitee subject the Limited Partners to personal liability by reason
of the indemnification provisions set forth in this Agreement.
(g) Interested Transactions. 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) Binding Effect. 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.
Section 7.8 Liability of the General Partner.
--------------------------------
(a) General. Notwithstanding anything to the contrary set forth
-------
in this Agreement, the General Partner 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, unless (i) the General Partner actually received an
improper benefit in money, property or services (in which case, such
liability shall be for the amount of the benefit in money, property or
services actually received), or (ii) the General Partner's action or
failure to act was the result of active and deliberate dishonesty and was
material to the cause of action being adjudicated.
(b) No Obligation to Consider Interests of Limited Partners. The
-------------------------------------------------------
Limited Partners expressly acknowledge that the General Partner is acting
on behalf of the Partnership and the General Partner's shareholders
collectively, that the General Partner is under no obligation to consider
the separate interests of the Limited Partners (including, without
limitation, the tax consequences to Limited Partners or Assignees) in
deciding whether to cause the Partnership to take (or decline to take) any
actions which the General Partner has undertaken in good faith on behalf of
the Partnership, 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, unless
(i) the General Partner actually received an improper benefit in money,
property or services (in which case, such liability shall be for the amount
of the benefit in money, property or services actually received), or (ii)
the General Partner's action or failure to act was the result of active and
deliberate dishonesty and was material to the cause of action being
adjudicated.
(c) Acts of Agents. 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
36
<PAGE>
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 it in good faith.
(d) Effect of Amendment. 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
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.
(e) Limitation of Liability of Shareholders and Officers of the
-----------------------------------------------------------
General Partner. ANY OBLIGATION OR LIABILITY WHATSOEVER OF THE GENERAL
---------------
PARTNER WHICH MAY ARISE AT ANY TIME UNDER THIS AGREEMENT OR ANY OBLIGATION
OR LIABILITY WHICH MAY BE INCURRED BY IT PURSUANT TO ANY OTHER INSTRUMENT,
TRANSACTION OR UNDERTAKING CONTEMPLATED HEREBY SHALL BE SATISFIED, IF AT
ALL, OUT OF THE GENERAL PARTNER'S ASSETS ONLY. NO SUCH OBLIGATION OR
LIABILITY SHALL BE PERSONALLY BINDING UPON, NOR SHALL RESORT FOR THE
ENFORCEMENT THEREOF BE HAD TO, THE PROPERTY OF ANY OF ITS SHAREHOLDERS,
TRUSTEES, OFFICERS, EMPLOYEES OR AGENTS, REGARDLESS OF WHETHER SUCH
OBLIGATION OR LIABILITY IS IN THE NATURE OF CONTRACT, TORT OR OTHERWISE.
Section 7.9 Other Matters Concerning the General Partner.
--------------------------------------------
(a) Reliance on Documents. 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
to be genuine and to have been signed or presented by the proper party or
parties.
(b) Reliance on Consultants and Advisers. The General Partner may
------------------------------------
consult with legal counsel, accountants, appraisers, management
consultants, investment bankers 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 presumed to have been done or omitted in good faith and in
accordance with such opinion.
(c) Action Through Officers and Attorneys. 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 a duly
appointed attorney or attorneys-in-fact. Each such attorney
37
<PAGE>
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) Actions to Maintain REIT Status or Avoid Taxation of General
------------------------------------------------------------
Partner. 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 General Partner to continue to qualify as a REIT or (ii) to avoid the
General Partner 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. 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 covenants, declares and warrants that any Partnership
assets as to 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 or such nominee or Affiliate 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 and record title
to such assets to be vested in the Partnership as soon as reasonably
practicable. 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. 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 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
such Person shall be entitled to deal with the General Partner as if it 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 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 (a) at the time of the execution and
delivery of such certificate, document or instrument, this Agreement was in full
force and effect, (b) the Person executing and delivering such certificate,
document or instrument was duly authorized and empowered to do so for and on
behalf of the
38
<PAGE>
Partnership and (c) 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 VII
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, partner, 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 subject to any
--------------
other agreements entered into by a Limited Partner or its Affiliates with the
General Partner, the Partnership or a Subsidiary, the following rights shall
govern outside activities of Limited Partners: (a) any Limited Partner (other
than the General Partner) 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 the Partnership, including business interests and activities in
direct competition with the Partnership; (b) 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; (c) none of the Limited Partners
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, other than the General Partner, 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; (d) the
fact that a Limited Partner may encounter opportunities to purchase, otherwise
acquire, lease, sell or otherwise dispose of real or personal property and may
take advantage of such opportunities himself or introduce such opportunities to
entities in which it has or has not any interest, shall not subject such Partner
to liability to the Partnership or any of the other Partners on account of the
lost opportunity; and (e) except as otherwise specifically provided herein,
nothing contained in this Agreement shall be deemed to prohibit a Limited
Partner or any Affiliate of a Limited Partner from dealing, or otherwise
39
<PAGE>
engaging in business, with Persons transacting business with the Partnership or
from providing services relating to the purchase, sale, rental, management or
operation of real or personal property (including real estate brokerage
services) and receiving compensation therefor, from any Persons who have
transacted business with the Partnership or other third parties.
Section 8.4 Priority Among Limited Partners. No Partner (Limited or
-------------------------------
General) or Assignee shall have priority over any other Partner (Limited or
General) or Assignee either as to the return of Capital Contributions or
otherwise expressly provided in this Agreement, as to profits, losses or
distributions.
Section 8.5 Rights of Limited Partners Relating to the Partnership.
------------------------------------------------------
(a) Copies of Business Records. In addition to 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:
(1) to obtain a copy of the most recent annual and quarterly
reports filed with the Securities and Exchange Commission by the
General Partner pursuant to the Securities Exchange Act of 1934, as
amended;
(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
and all amendments thereto, together with executed copies of all
powers of attorney pursuant to which this Agreement, the Certificate
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) Notification of Changes in Unit Adjustment Factor. The
-------------------------------------------------
Partnership shall notify each Limited Partner in writing of any change made
to the Unit Adjustment Factor within 10 Business Days of the date such
change becomes effective.
40
<PAGE>
(c) Confidential Information. 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 Partnership
information that (i) the General Partner 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 (ii) the Partnership is required by law or by agreements
with unaffiliated third parties to keep confidential.
(d) Debt Allocation. C-M Holdings L.P. shall have the option, to
---------------
the extent of indebtedness available for such purpose, of guaranteeing on a
"bottom dollar basis," an amount of indebtedness of the Partnership or any
successor thereto, as is necessary from time to time to provide an
allocation of debt to C-M Holdings L.P. equal to the amount of debt then
required to be allocated to C-M Holdings L.P. to enable C-M Holdings L.P.
to avoid recognizing gain pursuant to Section 731(a)(1) of the Code as a
result of a deemed distribution of money to C-M Holdings L.P. pursuant to
Section 752(b) of the Code.
Section 8.6 Redemption Right.
----------------
(a) General. Notwithstanding the provisions of Section 4.2(e),
------- --------------
the General Partner may satisfy the Conversion Right exercised by a
Converting Partner set forth in a Notice of Conversion by paying to such
Converting Partner the Redemption Amount on the Specified Conversion Date,
whereupon the General Partner shall acquire the Partnership Units to be
exchanged by such Converting Partner and shall be treated for all purposes
of this Agreement as the owner of such Partnership Units. The General
Partner may elect to pay the Redemption Amount for Partnership Units only
upon a receipt of a Notice of Conversion. In the event the General Partner
shall exercise its right to satisfy the Conversion Right in the manner
described in this Section 8.6(a), the Partnership shall have no obligation
--------------
to pay any amount to the Converting Partner with respect to such Converting
Partner's exercise of the Conversion Right, and each of the Converting
Partner, the Partnership, and the General Partner shall treat the
transaction between the General Partner and the Converting Partner as a
sale of the Converting Partner's Partnership Units to the General Partner
for Federal income tax purposes. Each Converting Partner which the General
Partner has elected to pay the Redemption Amount agrees to execute such
documents as the General Partner may reasonably require in connection with
the payment of the Redemption Amount.
(b) Where Delivery of Common Shares Prohibited. Notwithstanding
------------------------------------------
the provisions of Section 4.2(e) and Section 8.6(a), a Partner shall not be
-------------- --------------
entitled to exercise the Conversion Right pursuant to Section 4.2(e) if the
--------------
delivery of Common Shares to such Partner on the Specified Conversion Date
would be prohibited under the Declaration of Trust.
41
<PAGE>
Section 8.7 Notice for Certain Transactions. In the event of (a) a
-------------------------------
dissolution or liquidation of the Partnership or the General Partner, (b) a
merger, consolidation or combination of the Partnership or the General Partner
with or into another Person (including the events set forth in Sections 11.2(c)
and 11.2(d)), (c) the sale of all or substantially all of the assets of the
Partnership or the General Partner, or (d) the transfer by the General Partner
of all or any part of its interest in the Partnership, the General Partner shall
give written notice thereof to each Limited Partner at least twenty (20)
Business Days prior to the effective date or, to the extent applicable, record
date of such transaction, whichever comes first.
ARTICLE IX
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 appropriate books
and records 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, however, 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 purposes
on an accrual basis in accordance with generally accepted accounting principles
and for tax reporting purposes on the accrual basis.
Section 9.2 Fiscal Year. The fiscal year of the Partnership shall be the
-----------
calendar year.
Section 9.3 Reports.
-------
(a) Annual Reports. As soon as practicable, but in no event later
--------------
than 120 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 General Partner if such statements are prepared
solely on a consolidated basis with the General Partner, for such
Partnership Year, presented in accordance with generally accepted
accounting principles, such statements to be audited by a nationally
recognized firm of independent public accountants selected by the General
Partner.
(b) Quarterly Reports. As soon as practicable, but in no event
-----------------
later than 60 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 General Partner, if such statements are prepared solely on a
consolidated basis with the
42
<PAGE>
General Partner, and such other information as may be required by
applicable law or regulation, or as the General Partner determines to be
appropriate.
ARTICLE X
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 90 days of the close of each taxable year, the tax
information reasonably required by the General Partner and the 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 including, without limitation,
the election under Section 754 of the Code in accordance with applicable
regulations thereunder. The General Partner shall have the right to seek to
revoke any such election (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.
Section 10.3 Tax Matters Partner.
-------------------
(a) General. The General Partner shall be the "tax matters
-------
partner" of the Partnership for Federal income tax purposes. Pursuant to
Section 6223(c) 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 and
profit interest of each of the Limited Partners; provided, however, that
-------- -------
such information is provided to the Partnership by the Limited Partners.
The Limited Partners shall provide such information to the Partnership as
the General Partner shall reasonably request.
(b) Powers. 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 (a) who
43
<PAGE>
(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 (b) who is a "notice partner" (as defined
in Section 6231 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 or otherwise given 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 United States Claims Court,
or the filing of a complaint for refund with 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 at any time and, if any part of such request is not allowed by the
IRS, to file an appropriate pleading (petition, complaint or other
document) for judicial review with respect to such request;
(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 into account 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 of 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) Reimbursement. 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) shall be borne by the Partnership. Nothing
herein shall be construed to restrict the Partnership from engaging an
accounting firm and a law firm to assist the tax matters partner in
discharging his duties
44
<PAGE>
hereunder, so long as the compensation paid by the Partnership for such
services is reasonable.
Section 10. Organizational Expenses. The Partnership shall elect to
-----------------------
deduct expenses, if any, incurred by it in organizing the Partnership ratably
over a 60-month period as provided in Section 709 of the Code.
Section 10. 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 Section 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 15 days after notice
from the General Partner that such payment must be made unless (a) the
Partnership withholds such payment from a distribution which would otherwise be
made to the Limited Partner or (b) 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 (a)
or (b) shall be treated as having been distributed to such Limited Partner.
Each Limited Partner hereby unconditionally and irrevocably grants to the
Partnership a 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
(including, without limitation, the right to receive distributions). Any
amounts payable by a Limited Partner hereunder shall bear interest at 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 percentage
-------------------
points (but not higher than the maximum lawful rate) from the date such amount
is due (i.e., 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.
45
<PAGE>
ARTICLE XI
TRANSFERS, WITHDRAWALS AND LOCK-UP
Section 11.1 Transfer.
--------
(a) Definition. The term "transfer," when used in this Article XI
----------
with respect to a Partnership Unit, shall be deemed to refer to a
transaction by which the General Partner purports to assign its General
Partnership Interest to another Person or by which a Limited Partner
purports to assign its Limited Partnership Interest to another Person, and
includes a sale, assignment, gift, pledge, encumbrance, hypothecation,
mortgage, exchange or any other disposition by law or otherwise. The term
"transfer" when used in this Article XI does not include any Conversion of
Partnership Units by a Limited Partner pursuant to Section 4.2(e) or
--------------
acquisition of Partnership Units from a Limited Partner by the General
Partner pursuant to Section 8.6(a).
--------------
(b) Requirements. No Partnership Interest shall be transferred,
------------
in whole or in part, except in accordance with the terms and conditions set
forth in this Article XI. Any transfer or purported transfer of a
Partnership Interest not made in accordance with this Article XI shall be
null and void.
Section 11.2 Transfer of General Partner's Partnership Interest.
--------------------------------------------------
(a) General. The General Partner may not transfer any of its
-------
General Partnership Interest or withdraw as General Partner except as
provided in Section 11.2(b) or in connection with a transaction described
---------------
in Section 11.2(c).
---------------
(b) Transfer to Partnership or Holder of Common Shares. The
--------------------------------------------------
General Partner may transfer Partnership Interests held by it either to the
Partnership in accordance with Section 7.5(b) hereof or to a purported
--------------
holder of Common Shares in accordance with the provisions of Article 3 of
the Declaration of Trust relating to "Excess Shares" (as such term is
defined in the Declaration of Trust).
(c) Transfer in Connection With Reclassification,
---------------------------------------------
Recapitalization, or Business Combination Involving General Partner. Except
-------------------------------------------------------------------
as otherwise provided in Section 11.2(d), the General Partner shall not
---------------
engage in any merger, consolidation or other combination with or into
another Person or sale of all or substantially all of its assets, or any
reclassification, or recapitalization or change of outstanding Common
Shares (other than a change in par value, or from par value to no par
value, or as a result of a subdivision or combination as described in the
definition of "Unit Adjustment Factor") ("Transaction"), unless (i) under
-----------
the terms of the Transaction, Limited Partners will not engage in a sale or
exchange for Federal income tax purposes of their Partnership Units, or
(ii) as a result of such Transaction
46
<PAGE>
all Limited Partners either will receive, or will have the right to
receive, for each Partnership Unit (after application of the Unit
Adjustment Factor and without taking into account any tax considerations)
an amount of cash, securities, or other property equal to, without taking
into account any tax considerations, the greatest amount of cash,
securities or other property paid to a holder of one Common Share in
consideration of one Common Share at any time during the period from and
after the date on which the Transaction is consummated; provided, however,
-------- -------
that if, in connection with the Transaction, a purchase, tender or exchange
offer shall have been made to and accepted by the holders of more than 50
percent of the outstanding Common Shares, the holders of Partnership Units
shall receive the greatest amount of cash, securities, or other property
which a Limited Partner would have received had it exercised the Conversion
Right and received Common Shares in exchange for its Partnership Units
immediately prior to the expiration of such purchase, tender or exchange
offer.
(d) Merger Involving General Partner Where Surviving Entity's
---------------------------------------------------------
Assets Contributed to Partnership. Notwithstanding Section 11.2(c), the
---------------------------------
General Partner may merge with another entity if, under the terms of the
transaction, Limited Partners will not engage in a sale or exchange for
Federal income tax purposes and immediately after such merger substantially
all of the assets of the surviving entity, other than Partnership Units
held by the General Partner, are contributed to the Partnership as a
Capital Contribution in exchange for Partnership Units with a fair market
value equal to the 704(c) Value of the assets so contributed.
Section 11.3 Limited Partners' Rights to Transfer.
------------------------------------
(a) General. Subject to the remaining provisions of this Section
------- -------
11.3 as well as Sections 11.4 and 11.7, a Limited Partner may transfer all
---- ----- ----
or any portion of his Partnership Interest, or any of such Limited
Partner's rights as a Limited Partner, without the prior written consent of
the General Partner. In order to effect such transfer, the Limited Partner
must deliver to the General Partner a duly executed copy of the instrument
making such transfer and such instrument must evidence the written
acceptance by the assignee of all of the terms and conditions of this
Agreement and represent that such assignment was made in accordance with
all applicable laws and regulations.
(b) Incapacitated Limited Partners. 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 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.
47
<PAGE>
(c) Transfers Contrary to Securities Laws. The General Partner may
-------------------------------------
prohibit any transfer otherwise permitted under Section 11.3 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, as amended, or would otherwise violate
any Federal or state securities laws or regulations applicable to the
Partnership or the Partnership Units.
(d) Transfers Resulting in Corporation Status; Transfers Through
------------------------------------------------------------
Established Securities or Secondary Markets. No transfer by a Limited
-------------------------------------------
Partner of his Partnership Units (or any economic or other interest, right
or attribute therein) 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, or (ii) such transfer
is effectuated through an "established securities market" or a "secondary
market (or the substantial equivalent thereof)" within the meaning of
Section 7704 of the Code. Notwithstanding anything to the contrary in this
Agreement, (x) no interests in the Partnership shall be issued in a
transaction that is (or transactions that are) registered or required to be
registered under the Securities Act of 1933 (the "1933 Act"), and to the
extent such interests were not required to be registered under the 1933 Act
by reason of Regulation S (17 CFR 230.901 through 230.904) or any successor
thereto, such issuances would not have been required to be registered under
the 1933 Act if the interests so offered or sold had been offered and sold
within the United States, (y) any admission (or purported admission) of a
Partner and any transfer or assignment (or purported transfer or
assignment) of all or part of a Partner's interest (or any interest or
right or attribute therein) in the Partnership, whether to another Partner
or to a third party, shall not be effective, and any such transfer or
assignment (or purported transfer or assignment) shall be void ab initio,
-- ------
and no person shall otherwise become a Partner if (A) at the time of such
transfer or assignment (or purported transfer or assignment) any interest
in the Partnership (or economic interest therein) is traded on an
established securities market or readily tradeable on a secondary market or
the substantial equivalent thereof or (B) after such transfer or assignment
(or purported transfer or assignment) the Partnership would have more than
100 Partners. For purposes of clause (A) of the preceding sentence and
clause (ii) above, an established securities market is a national
securities exchange that is either registered under Section 6 of the
Securities Exchange Act of 1934 (the "1934 Act") or exempt from
registration because of the limited volume of transactions, a foreign
securities exchange that, under the law of the jurisdiction where it is
organized, satisfies regulatory requirements that are analogous to the
regulatory requirements of the 1934 Act, a regional or local exchange, or
an interdealer quotation system that regularly disseminates firm buy or
sell quotations by identified brokers or dealers by electronic means or
otherwise. For purposes of such clause (A) and clause (ii) above,
interests in the Partnership (or interests therein) are readily tradeable
on a secondary market or the substantial equivalent thereof if (i)
interests in the Partnership (or interests therein) are regularly quoted by
any person, such as a broker or dealer, making a market in the interests;
(ii) any person regularly makes
48
<PAGE>
available to the public (including customers or subscribers) bid or offer
quotes with respect to interests in the Partnership (or interests therein)
and stands ready to effect buy or sell transactions at the quoted prices
for itself or on behalf of others; (iii) the holder of an interest in the
Partnership has a readily available, regular, and ongoing opportunity to
sell or exchange such interest (or interests therein) through a public
means of obtaining or providing information of offers to buy, sell, or
exchange such interests; or (iv) prospective buyers and sellers otherwise
have the opportunity to buy, sell, or exchange interests in the Partnership
(or interests therein) in a time frame and with the regularity and
continuity that is comparable to that described in clauses (i), (ii) and
(iii) of this sentence. For purposes of determining whether the Partnership
will have more than 100 Partners, each person indirectly owning an interest
in the Partnership through a partnership (including any entity treated as a
partnership for federal income tax purposes), a grantor trust or an S
corporation (each such entity a "flow-through entity") shall be treated as
a Partner unless the General Partner determines in its sole and absolute
discretion that less than substantially all of the value of the beneficial
owner's interest in the flow-through entity is attributable to the flow-
through entity's interest (direct or indirect) in the Partnership.
(e) Transfers to Holders of Nonrecourse Liabilities. No transfer
-----------------------------------------------
or pledge 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 exchange or redeem for the
Redemption 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) Consent of General Partner Required. A Limited Partner shall
-----------------------------------
have the right in its discretion to substitute a transferee as a Limited
Partner in his place, in which event such substitution shall occur if the
Limited Partner so provides; provided however, any transferee desiring to
become a Substituted Limited Partner must furnish 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 Article XVI 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 a Substituted
Limited Partner.
49
<PAGE>
(b) Rights and Duties of Substituted Limited Partners. A
-------------------------------------------------
transferee who has been admitted as a Substituted Limited Partner in
accordance with this Article XI shall have all the rights and powers and be
subject to all the restrictions and liabilities of a Limited Partner under
this Agreement.
(c) Amendment of Exhibit A. 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 a Limited Partner, in its sole and absolute
---------
discretion, does not provide for the admission of any permitted transferee under
Section 11.4(a) 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 entitled to all the rights of an assignee of a limited
partnership interest under the Act, including the right to receive distributions
from the Partnership and the share of Net Income, Net Losses, gain, loss and
Recapture Income 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 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 shall be subject to all the provisions
of this Article XI 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) Withdrawal of Limited Partner. 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 XI or pursuant to Conversion of all of its Partnership
Units under Section 4.2(e) or the redemption of its Partnership Units under
--------------
Section 8.6(a).
--------------
(b) Transfer of All Partnership Units by Limited Partner. Any
----------------------------------------------------
Limited Partner who shall transfer all of his Partnership Units in a
transfer permitted pursuant to this Article XI or pursuant to the
Conversion Rights of all of its Partnership Units under Section 4.2(e) or
--------------
pursuant to redemption of all of its Partnership Units under Section 8.6(a)
--------------
shall cease to be a Limited Partner.
50
<PAGE>
(c) Timing of Transfers. Transfers pursuant to this Article XI may
-------------------
only be made on the first day of a fiscal quarter of the Partnership,
unless the General Partner otherwise agrees.
(d) Allocation When Transfer Occurs. If any Partnership Interest
-------------------------------
is transferred during any quarterly segment of the Partnership's fiscal
year in compliance with the provisions of this Article XI or converted
pursuant to Section 4.2(e) or redeemed pursuant to Section 8.6(a), Net
-------------- --------------
Income, Net Losses, each item thereof and all other items attributable to
such interest for such fiscal year shall be divided and allocated between
the transferor Partner and the transferee Partner by taking into account
their varying interests during the fiscal year in accordance with Section
706(d) of the Code, based on the portion of the year for which the
transferor Partner and the transferee Partner were Partners. Solely for
purposes of making such allocations, each of such items for the calendar
month in which the transfer or redemption occurs shall be allocated to the
Person who is a Partner as of midnight on the last day of said month. All
distributions of Available Cash with respect to which the Partnership
Record Date is before the date of such transfer or redemption shall be made
to the transferor Partner, and all distributions of Available Cash with
Partnership Record Dates thereafter shall be made to the transferee
Partner.
Section 11.7 Lock-up Agreement.
-----------------
(a) Lock-up Period. Each of the Limited Partners who is a Limited
--------------
Partner as of the closing of the initial public offering of the Common
Shares hereby agrees that, except as set forth in Section 11.7(b), from the
---------------
Effective Date until one year, except such period shall be two years in the
case of any Limited Partner which is a partner of either Cabot Partners
Limited Partnership (a Massachusetts limited partnership) or C-M Holdings
Limited Partnership (a Massachusettes limited partnership) (or any
permitted transferee thereof as provided herein), following the Effective
Date (the "Lock-up Period"), without the prior written consent of the
--------------
General Partner, it will not offer, pledge, sell, contract to sell, grant
any options for the sale of or otherwise dispose of, directly or indirectly
(collectively, "Dispose of"), any Shares or Partnership Units (the "Lock-
---------- ----
up"). Each Limited Partner agrees to be bound by the Registration Rights
and Lock-up Agreement and specifically authorizes the General Partner as
its attorney-in-fact to execute the Registration Rights and Lock-up
Agreement on its behalf.
(b) Exceptions. The following transfers of Shares or Partnership
----------
Units shall not be subject to the Lock-up set forth in Section 11.7(a):
---------------
(1) a Limited Partner who is a natural person may Dispose of
Shares or Partnership Units to his or her spouse, siblings, parents or
any natural or adopted
51
<PAGE>
children or other descendants or to any personal trust in which such
family members or such Limited Partner retain the entire beneficial
interest;
(2) a Limited Partner who is a natural person may Dispose of
Shares or Partnership Units on his or her death to such Limited
Partner's estate, executor, administrator or personal representative
or to such Limited Partner's beneficiaries pursuant to a devise or
bequest or by the laws of descent and distribution;
(3) a Limited Partner that is a corporation, partnership, trust
or other business entity may (A) Dispose of Shares or Partnership
Units to one or more other entities that are wholly owned and
controlled, legally and beneficially, by such Limited Partner or by a
Person or Persons that directly or indirectly wholly owns and controls
such Limited Partner or (B) Dispose of Shares or Partnership Units by
distributing such Shares or Partnership Units in a merger,
liquidation, dissolution, winding up or otherwise without
consideration to the equity owners of such corporation, partnership or
business entity or to any other corporation, partnership or business
entity that is wholly owned by such equity owners;
(4) a Limited Partner that is a master pension or profit sharing
trust or a group trust may Dispose of Shares or Partnership Units to
one or more of its participating trusts or to a successor trustee;
(5) a Limited Partner may Dispose of Shares or Partnership Units
as a bona fide gift; and
(6) a Limited Partner may Dispose of Shares or Partnership Units
pursuant to a pledge, grant of security interest or other encumbrance
effected in a bona fide transaction with an unrelated and unaffiliated
pledgee;
provided, however, that in the case of any transfer of Shares or Partnership
- -------- -------
Units pursuant to clauses (1), (3) and (4), the transfers shall each be effected
pursuant to a bona fide exemption under the 1933 Act, as amended.
In the event any Limited Partner Disposes of Shares or Partnership Units
described in this Section 11.7(b) during the Lock-up Period, such Shares or
---------------
Partnership Units shall be subject to this Section 11.7 and the Registration
------------
Rights and Lock-up Agreement and, as a condition of the validity of such
disposition, the transferee (and any pledgee who acquires Shares or Partnership
Units upon foreclosure or any transferee thereof) shall be required to execute
and deliver a counterpart of this Agreement and the Registration Rights and
Lock-up Agreement. Thereafter, such transferee shall be deemed to be a "Holder"
for purposes of the Registration Rights and Lock-up Agreement.
52
<PAGE>
ARTICLE XII
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner. A successor to all
--------------------------------------
of the General Partner's General Partnership 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.
Section 12.2 Admission of Additional Limited Partners.
----------------------------------------
(a) General. A Person who makes a Capital Contribution to the
-------
Partnership in accordance with this Agreement or who exercises an option to
receive Partnership Units 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 Article XVI 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) Consent of General Partner Required. 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.
Section 12.3 Amendment of Agreement and Certificate. 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 and may for this purpose
exercise the power of attorney granted pursuant to Article XVI hereof.
53
<PAGE>
ARTICLE XII
DISSOLUTION AND LIQUIDATION
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. The Partnership shall dissolve, and its affairs shall be wound
up, upon the first to occur of any of the following ("Events of Dissolution"):
---------------------
(a) Expiration of Term--the expiration of its term as provided in
------------------
Section 2.5 hereof;
-----------
(b) Withdrawal of General Partner--an event of withdrawal of the
-----------------------------
General Partner, as defined in the Act, unless, within 90 days after the
withdrawal all 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 substitute General Partner;
(c) Dissolution Prior to 2097--from and after the date of this
-------------------------
Agreement through December 31, 2097, with the Consent of a majority of the
Percentage Interests of the Limited Partners, an election to dissolve the
Partnership made by the General Partner, in its sole and absolute
discretion;
(d) Judicial Dissolution Decree--entry of a decree of judicial
---------------------------
dissolution of the Partnership pursuant to the provisions of the Act;
(e) Sale of Partnership's Assets--the sale or disposition of all
----------------------------
or substantially all of the assets and properties of the Partnership;
(f) Merger--the merger or other combination of the Partnership
------
with or into another entity;
(g) Bankruptcy or Insolvency of General Partner--the General
-------------------------------------------
Partner
(1) makes an assignment for the benefit of creditors;
(2) files a voluntary petition in bankruptcy;
(3) is adjudged a bankrupt or insolvent, or has entered
against it an order for relief in any bankruptcy or
insolvency proceeding;
54
<PAGE>
(4) files a petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation;
(5) files an answer or other pleading admitting or failing
to contest the material allegations of a petition filed against it in
any proceeding of this nature; or
(6) seeks, consents to or acquiesces in the appointment of a
trustee, receiver or liquidator of the General Partner or of all or
any substantial part of its properties; or
(h) Readjustment, etc. One hundred and twenty (120) days after
-----------------
the commencement of any proceeding against the General Partner seeking
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation, the
proceeding has not been dismissed, or if within 90 days after the
appointment without the General Partner's consent or acquiescence of a
trustee, receiver or liquidator of the General Partner or of all or any
substantial part of its properties, the appointment is not vacated or
stayed, or within 90 days after the expiration of any such stay, the
appointment is not vacated.
Section 13. Winding Up.
----------
(a) General. Upon the occurrence of an Event of Dissolution, 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 "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 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 Partners, pro rata in
accordance with amounts owed to each such Partner; and
55
<PAGE>
(3) 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 XIII.
(b) Where Immediate Sale of Partnership's Assets Impractical.
--------------------------------------------------------
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) or, with the Consent of the Partners holding a
majority of the Partnership Units, 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.
Section 13.3 Compliance with Timing Requirements of Regulations; Allowance
-------------------------------------------------------------
for Contingent or Unforeseen Liabilities or Obligations.
-------------------------------------------------------
(a) Liquidation. Notwithstanding anything to the contrary in this
-----------
Agreement, 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 XIII 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) (including any timing requirements therein). In the
discretion of the General Partner, a pro rata portion of the distributions
that would otherwise be made to the General Partner and Limited Partners
pursuant to this Article XIII may be: (i) distributed to a liquidating
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 of 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 General Partner, in
the same proportions as
56
<PAGE>
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 (ii) withheld 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 amounts shall be distributed to the General
Partner and Limited Partners as soon as practicable.
(b) Deficit Balance of General Partner. Notwithstanding anything
----------------------------------
to the contrary in this Agreement, (i) if the General Partner has a deficit
balance in its Capital Account following the liquidation (within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g)) of its interest in the
Partnership, as determined after taking into account all Capital Account
adjustments for the Partnership taxable year during which such liquidation
occurs (other than any adjustment for a capital contribution of the General
Partner made pursuant to this sentence), the General Partner shall make a
capital contribution to the Partnership in an amount equal to such deficit
balance by the end of the Partnership taxable year during which such
liquidation occurs (or, if later, within 90 days after date of such
liquidation); and (ii) such capital contribution made pursuant to clause
(i) of this Section 13.3(b) shall be distributed or utilized as provided in
---------------
Section 13.3 or 13.4.
------------ ----
Section 13.4 Deemed Distribution and Recontribution. Notwithstanding any
--------------------------------------
other provision of this Article XIII (but subject to Section 13.3(b)), in the
---------------
event the Partnership is liquidated within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g) but no Event of Dissolution 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, 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 specifically provided
--------------------------
in this Agreement, each Limited Partner shall look solely to the assets of the
Partnership for the return of his Capital Contribution and shall have no right
or power to demand or receive property other than cash from the Partnership.
Except as specifically provided in this Agreement, no Limited Partner shall have
priority over any other Limited Partner as to the return of his Capital
Contributions, distributions, or allocations.
Section 13.6 Notice of Dissolution. In the event an Event of Dissolution
---------------------
or an event occurs that would, but for provisions of Section 13.1, result in a
------------
dissolution of the Partnership, the General Partner shall, within 30 days
thereafter, provide written notice thereof to each of the Partners and
57
<PAGE>
to all other parties with whom the Partnership regularly conducts business (as
determined in the discretion of the General Partner) and shall publish notice
thereof in a newspaper of general circulation in each place in which the
Partnership regularly conducts business (as determined in the discretion of the
General Partner).
Section 13.7 Cancellation of Certificate of Limited Partnership. Upon the
--------------------------------------------------
completion of the liquidation of the Partnership as provided in Section 13.2
------------
hereof, the Partnership shall be terminated and the Certificate 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.
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.
ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments.
----------
(a) General. Amendments to this Agreement may be proposed by the
-------
General Partner or by any Limited Partners holding 25 percent 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. Except as provided in Section
-------
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 Limited Partners holding a majority of the
Percentage Interests of the Limited Partners.
(b) General Partner's Power to Amend. 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 for the benefit of the Limited Partners any right or power
granted to the General Partner or any Affiliate of the General
Partner;
58
<PAGE>
(2) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement;
(3) to set forth the rights, powers, duties, and preferences
of the holders of any additional Partnership Interests issued pursuant
to Section 4.2(b) 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 will provide notice to the Limited Partners when
any action under this Section 14.1(b) is taken.
---------------
(c) Consent of Adversely Affected Partner Required. Notwithstanding
----------------------------------------------
Section 14.1(a) and Section 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's interest, (ii) modify the limited liability of a
Limited Partner, (iii) alter rights of the Partner to receive distributions
pursuant to Article V, or the allocations specified in Article VI (except
as permitted pursuant to Section 4.2 and Section 14.1(b)(3) hereof), (iv)
----------- ------------------
alter or modify the Conversion Right or the Redemption Amount as set forth
in Sections 4.2(e), 8.6 and 11.2(b), and related definitions hereof, (v)
--------------- --- -------
cause the termination of the Partnership prior to the time set forth in
Sections 2.5 or 13.1, (vi) amend this Section 14.1(c) or (vii) amend
------------ ---- ---------------
Article VI or any definition used therein that would have the effect of
causing the allocations in Article VI to fail to comply with the
requirements of Section 514(c)(9)(E) of the Code. Further, no amendment
may alter the restrictions on the General Partner's authority set forth in
Section 7.3 without the Consent specified in that section.
-----------
(d) When Consent of Majority of Limited Partnership Interests
---------------------------------------------------------
Required. Notwithstanding Section 14.1(a) hereof, the General Partner shall
-------- ---------------
not amend Section 4.2(b), the second sentence of Section 7.1(a), Sections
-------------- -------------- --------
7.5, 7.6, 7.8, 11.2, and 13.1(c), this Section 14.1(d) or Section 14.2
--- --- --- ---- ------- --------------- ------------
without the Consent of a majority of the Percentage Interests of the
Limited Partners.
59
<PAGE>
Section 14.2 Meetings of the Partners.
------------------------
(a) General. 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 holding 25 percent or more of the
Partnership Interests. The call 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 days nor more than 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 Partners is permitted or required under this
Agreement, such vote or Consent may be given at a meeting of Partners or
may be given in accordance with the procedure prescribed in Section 14.1
------------
hereof. Except as otherwise expressly provided in this Agreement, the
Consent of holders of a majority of the Percentage Interests shall control.
(b) Informal Action. 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) Proxies. 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 11 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.
(d) Conduct of Meeting. Each meeting of 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.
60
<PAGE>
ARTICLE XV
GENERAL PROVISIONS
Section 15.1 Addresses and Notice. All notices and demands under this
--------------------
Agreement shall be in writing, and may be either delivered personally (which
shall include deliveries by courier), by telefax, telex or other wire
transmission (with request for assurance of receipt in a manner appropriate with
respect to communications of that type, provided that a confirmation copy is
concurrently sent by a nationally recognized express courier for overnight
delivery) or mailed, postage prepaid, by certified or registered mail, return
receipt requested, directed to the parties at their respective addresses set
forth on Exhibit A, as it may be amended from time to time, and, if to the
Partnership, such notices and demands sent in the aforesaid manner must be
delivered at its principal place of business set forth above. Unless delivered
personally or by telefax, telex or other wire transmission as above (which shall
be effective on the date of such delivery or transmission), any notice shall be
deemed to have been made three (3) days following the date so mailed. Any party
hereto may designate a different address to which notices and demands shall
thereafter be directed by written notice given in the same manner and directed
to the Partnership at its office hereinabove set forth.
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 Waiver of Partition. The Partners hereby agree that the
-------------------
Partnership properties are not and will not be suitable for partition.
Accordingly, each of the Partners hereby irrevocably waives any and all rights
(if any) that it may have to maintain any action for partition of any of the
Partnership properties.
61
<PAGE>
Section 15.7 Entire Agreement. This Agreement constitutes the entire
----------------
agreement among the parties with respect to the matters contained herein; it
supersedes any prior agreements or understandings among them and it may not be
modified or amended in any manner other than pursuant to Article XIV.
Section 15.8 Securities Law Provisions. The Partnership Units have not
-------------------------
been registered under the Federal or state securities laws of any state and,
therefore, may not be resold unless appropriate Federal and state securities
laws, as well as the provisions of Article XI hereof, have been complied with.
Section 15.9 Remedies Not Exclusive. Any remedies herein contained for
----------------------
breaches of obligations hereunder shall not be deemed to be exclusive and shall
not impair the right of any party to exercise any other right or remedy, whether
for damages, injunction or otherwise.
Section 15.10 Time. Time is of the essence of this Agreement.
----
Section 15.11 Creditors. None of the provisions of this Agreement shall be
---------
for the benefit of, or shall be enforceable by, any creditor of the Partnership.
Section 15.12 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 15.13 Execution Counterparts. This Agreement may be executed in
----------------------
counterparts, all of which together shall constitute one agreement binding on
all 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 15.14 Applicable Law. This Agreement shall be construed in
--------------
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.
Section 15.15 Invalidity of Provisions. If any provision of this Agreement
------------------------
is or becomes invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not be affected thereby.
62
<PAGE>
ARTICLE XVI
POWER OF ATTORNEY
Section 16.1 Power of Attorney.
-----------------
(a) Scope. Each Limited Partner and each Assignee 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, publish, file
and record in the appropriate public offices (a) all certificates,
documents and other instruments (including, without limitation, this
Agreement and the Certificate 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 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 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 XI, XII or XIII hereof or
the Capital Contribution of any Partner; and (e) all certificates,
documents and other instruments relating to the determination of the
rights, preferences and privileges of Partnership Interests; and
(2) execute, swear to, 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, 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, to effectuate the terms or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General
Partner to amend this Agreement except in accordance with Article XIV
hereof or as may be otherwise expressly provided for in this Agreement.
63
<PAGE>
(b) Irrevocability. 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 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, 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, 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
15 days after receipt of the General Partner'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.
64
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
Cabot Industrial Trust
By: ___________________________
Name:
Title:
WITHDRAWING INITIAL LIMITED PARTNER:
________________________________
Name:
LIMITED PARTNERS:
By: ____________________________
Name:
Title:
___________________________
___________________________
___________________________
___________________________
___________________________
___________________________
65
<PAGE>
EXHIBIT A
PARTNERS, CONTRIBUTIONS AND
PARTNERSHIP INTERESTS
<TABLE>
<CAPTION>
Name and Address Agreed Value of Partnership Percentage
of Partner Contributed Property Units Interest
- ---------------- -------------------- ----------- ----------
<S> <C>
General Partner
- ---------------
Cabot Industrial Trust (1)
Limited Partners
- ----------------
(2)
(3)
(4)
---
(5)
Total
(1) Cash contribution.
(2)
(3)
(4)
(5)
</TABLE>
1
<PAGE>
EXHIBIT B
VALUE OF CONTRIBUTED PROPERTY
Underlying Property Basis Agreed Value
- ------------------- ----- ------------
<PAGE>
EXHIBIT C
NOTICE OF CONVERSION
The undersigned hereby irrevocably (a) elects to exercise its Conversion
Right set forth in the Amended and Restated Agreement of Limited Partnership of
Cabot Industrial Properties, L.P. (the "Partnership Agreement"; capitalized
terms used and not otherwise defined herein shall have the meanings assigned to
such terms in the Partnership Agreement), with respect to an aggregate of
__________ Partnership Units, (b) surrenders such Partnership Units and all
right, title and interest therein, and (c) directs that the Common Shares (or
applicable Redemption Amount if so determined by the General Partner)
deliverable upon exercise of the Conversion Right be delivered to the address
specified below, and if Common Shares are to be delivered, such Common Shares
be registered or placed in the name(s) and at the address(es) specified below.
Dated: ____________
Name of Limited Partner:_________________________________________
_____________________________
(Signature of Limited Partner)
_____________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
Signature Guaranteed by:
______________________________
If Common Shares are to be issued, issue to:
Please insert social security or identifying number:
Name:
1
<PAGE>
EXHIBIT D
FORM OF UNIT CERTIFICATE
Attached
<PAGE>
NON-NEGOTIABLE, NON-TRANSFERABLE, NON-ASSIGNABLE
CABOT INDUSTRIAL PROPERTIES, L.P.
The undersigned hereby acknowledges that Units in Cabot Industrial
Properties, L.P. (the "Partnership"), organized under the Revised Uniform
Limited Partnership Act of the State of Delaware, are registered on the records
of said Partnership in the amount and in the name set forth below:
<TABLE>
<CAPTION>
CERTIFICATE SOCIAL SECURITY OR TAXPAYER
NUMBER NAME AND ADDRESS IDENTIFICATION NUMBER NUMBER OF UNITS
- -------------- ---------------- --------------------------- ---------------
<S> <C> <C> <C>
</TABLE>
This document has been issued solely to evidence that the above number of
Units stands in the name of such holder of Units, as of the date appearing
hereon, in the Partnership's Amended and Restated Agreement of Limited
Partnership, as amended (the "Partnership Agreement"), pursuant to Article IV of
the Partnership Agreement, and does not grant or carry with it any rights to the
income, profits or assets of the Partnership, such rights being derived solely
from the Partnership Agreement. This document is NON-NEGOTIABLE, NON-
TRANSFERABLE and NON-ASSIGNABLE. Assignment of Units can only be accomplished
in accordance with the procedure set forth in the Partnership Agreement, and
such assignment is subject to certain limitations contained in Articles IV and
XI of the Partnership Agreement, including a provision that the substitution of
any assignee of Units as a Limited Partner of the Partnership shall be subject
to the consent of the General Partner, which consent may be granted or withheld
in its sole discretion. Subject to Sections 8.6 and 11.7 of the Partnership
Agreement, beginning one year after the Effective Date or earlier with the
consent of the General Partner, a holder of Units has the right to exchange
Units for Common Shares of the General Partner as provided in Section 4.2 of the
Partnership Agreement. Subject to certain limited exemptions, Limited Partners
are prohibited from offering, selling, contracting to sell or otherwise
disposing of any Units or Common Shares obtained in exchange of Units for a
period of two years from the Effective Date without the prior written consent of
the General Partner and the Representative. THIS DOCUMENT IS NOT A SECURITY
UNDER THE APPLICABLE PROVISIONS OF THE UNIFORM COMMERCIAL CODE, AND NEGOTIATION,
TRANSFER OR ASSIGNMENT OF INTERESTS CANNOT BE ACCOMPLISHED BY ANY ATTEMPT TO
NEGOTIATE, TRANSFER OR ASSIGN THIS DOCUMENT. Copies of the Partnership
Agreement may be obtained from the General Partner by contacting Cabot
Industrial Trust, [ ], Attention: Secretary. Terms used herein have the
meanings ascribed to such terms in the Partnership Agreement.
THE UNITS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED ABSENT
REGISTRATION THEREUNDER OR EXEMPTION THEREFROM.
Date: ________________________
_______________________________
Chief Executive Officer
Cabot Industrial Trust
General Partner
<PAGE>
EXHIBIT B
===============================
REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
Dated as of __________, 1997
by and among
CABOT INDUSTRIAL TRUST
and
the Persons Listed on
the Signature Page Hereto
===============================
<PAGE>
<TABLE>
<CAPTION>
|| TABLE OF CONTENTS
-----------------
<S> <C>
1. Definitions............................................................... 1
2. Lock-Up Agreement......................................................... 4
(a) Lock-Up Period...................................................... 4
(b) Exceptions.......................................................... 4
3. Shelf Registration Under the Securities Act............................... 5
(a) Filing of Shelf Registration Statement.............................. 5
(b) Expenses............................................................ 6
(c) Inclusion in Shelf Registration Statement........................... 6
(d) Underwritten Offering............................................... 6
(e) Selection of Underwriters........................................... 7
4. Holdback Agreement........................................................ 7
5. Registration Procedures................................................... 7
6. Repurchase by Company of Shares Subject to Registration Notice............ 12
7. Indemnification; Contribution............................................. 12
(a) Indemnification by the Company...................................... 12
(b) Indemnification by Holders.......................................... 13
(c) Conduct of Indemnification Proceedings.............................. 13
(d) Contribution........................................................ 14
8. Rule 144 Sales............................................................ 15
(a) Compliance.......................................................... 15
(b) Cooperation with Holders............................................ 15
9. Miscellaneous............................................................. 15
(a) Amendments and Waivers.............................................. 15
(b) Notices............................................................. 16
(c) Successors and Assigns.............................................. 16
(d) Counterparts........................................................ 16
(e) Headings............................................................ 16
(f) Governing Law....................................................... 16
(g) Specific Performance................................................ 16
(h) Entire Agreement.................................................... 16
(i) Limitation of Liability of Shareholders, Trustees and Officers
of the Company...................................................... 17
||
</TABLE>
-i-
<PAGE>
REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
THIS REGISTRATION RIGHTS AND LOCK-UP AGREEMENT (this "Agreement") is made
and entered into as of ____________, 1997, by and among CABOT INDUSTRIAL TRUST
(the "Company") and the persons listed on the signature page hereto, including
-------
their successors, assigns and transferees (herein referred to collectively as
the "Holders" and individually as a "Holder").
------
WHEREAS, on the date hereof each Holder is or will become the owner of
either Common Shares (as defined below) of the Company or Units (as defined
below) in the Operating Partnership (as defined below) in connection with the
"Formation Transactions" described in the IPO Registration Statement (as defined
below) or in connection with other grants, awards or transfers of Common Shares
or Units; and
WHEREAS, the Holders of Common Shares have agreed to enter into the Lock-Up
(as defined below) as provided in Section 2 below; and
WHEREAS, the Holders of Units in the Operating Partnership are subject,
pursuant to the terms of the Agreement of Limited Partnership of the Operating
Partnership, to substantially the same restrictions as are being agreed to by
the Holders of Common Shares pursuant to Section 2 below; and
WHEREAS, as a condition to receiving the consent or agreement of the
Holders to the Formation Transactions, the Company has agreed to grant the
Holders the registration rights provided for in Section 3 below; and
WHEREAS, as a condition to the initial public offering of the Common Shares
of the Company, the parties are willing to enter into the agreements contained
herein;
NOW, THEREFORE, the parties hereto, in consideration of the foregoing, the
mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, agree as follows:
1. Definitions.
-----------
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"Block Sale" shall have the same meaning as a "block" sale (without regard
----------
to the proviso in such definition) as defined in Rule 10b-18 as promulgated by
the SEC as of the date hereof.
<PAGE>
"Cabot Partners" shall mean Cabot Partners Limited Partnership, a
--------------
Massachusetts limited partnership.
"Closing Price" of the Common Shares for any given day shall mean (i) if
-------------
the Common Shares are listed or admitted to trading on a national securities
exchange, the reported last sale price of the Common Shares regular way on such
day or, in case no such sale takes place on such day, the average of the
reported closing bid and asked prices regular way, on such national securities
exchange on such day or (ii) if the Common Shares are not listed or admitted to
trading on any national securities exchange but are traded in the over-the-
counter market, the average of the closing bid and asked prices in the over-the-
counter market on such day.
"C-M Holdings" shall mean C-M Holdings Limited Partnership, a Massachusetts
------------
limited partnership.
"Common Shares" shall mean the common shares of beneficial interest, par
-------------
value $.01 per share, of the Company.
"Company" shall mean Cabot Industrial Trust, a Maryland real estate
-------
investment trust, and its successors.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
------------
from time to time.
"Holder" or "Holders" shall mean the persons listed on the signature page
------ -------
hereto, including their successors, assigns and transferees.
"IPO Registration Statement" shall mean the Registration Statement on Form
--------------------------
S-11 (No. 333-______) relating to the initial public offering of the Common
Shares by the Company.
"Lock-up" shall have the meaning set forth in Section 2(a) hereof.
-------
"Lock-up Period" shall have the meaning set forth in Section 2(a) hereof.
--------------
"Operating Partnership" shall mean Cabot Industrial Properties, L.P., a
---------------------
Delaware limited partnership, and its successors.
"Person" shall mean an individual, partnership, corporation, trust,
------
unincorporated organization or other legal entity or a government or agency or
political subdivision thereof.
"Prospectus" shall mean the prospectus included in the Shelf Registration
----------
Statement, including any preliminary prospectus, and any amendment or supplement
thereto, including any supplement relating to the terms of the offering of any
portion of the Registrable Securities covered by the Shelf Registration
Statement, and in each case including all material incorporated by reference
therein.
-2-
<PAGE>
"Registrable Securities" shall mean the Shares, excluding (i) Shares that
----------------------
have been disposed of under the Shelf Registration Statement or any other
effective registration statement, (ii) Shares sold or otherwise transferred
pursuant to Rule 144 under the Securities Act, (iii) Shares that are held by
Holders who are not affiliates of the Company that are eligible for sale
pursuant to Rule 144(k) under the Securities Act, and (iv) Shares held by each
Holder who is an affiliate of the Company if all of such Shares are eligible for
sale pursuant to Rule 144 under the Securities Act and could be sold in one
transaction in accordance with the volume limitations contained in Rule
144(e)(1)(i) under the Securities Act.
"Registration Expenses" shall mean any and all expenses incident to
---------------------
performance of or compliance with this Agreement, including, without limitation:
(i) all applicable registration and filing fees imposed by the SEC, the New York
Stock Exchange or the National Association of Securities Dealers, Inc. ("NASD"),
(ii) all fees and expenses incurred in connection with compliance with state
securities or "blue sky" laws (including reasonable fees and disbursements of
counsel in connection with qualification of any of the Registrable Securities
under any state securities or blue sky laws and the preparation of a blue sky
memorandum) and compliance with the rules of the NASD, (iii) all expenses of any
Persons in preparing or assisting in preparing, word processing, printing and
distributing the Shelf Registration Statement, any Prospectus, certificates and
other documents relating to the performance of and compliance with this
Agreement, (iv) all fees and expenses incurred in connection with the listing,
if any, of any of the Registrable Securities on any securities exchange or
exchanges pursuant to Section 4(l) hereof, and (v) the fees and disbursements of
counsel for the Company and of the independent public accountants of the
Company, including the expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance. Registration
Expenses shall specifically exclude underwriting discounts and commissions, the
fees and disbursements of counsel representing a Selling Holder or any
underwriter or agent acting on behalf of a Holder, and transfer taxes, if any,
relating to the sale or disposition of Registrable Securities by a Selling
Holder, all of which shall be borne by such Holder in all cases.
"Registration Notice" shall have the meaning set forth in Section 5(b)
-------------------
hereof.
"Rule 144(f) Registrable Securities" shall mean that number of Registrable
----------------------------------
Securities which, when aggregated with the number of Shares actually sold
pursuant to Rule 144 by the Holder, is equal to or less than the number
specified in paragraphs (1)(i), (ii) or (iii) of Rule 144(e), whichever is
greater, which Shares are sold in compliance with the "manner of sale"
requirement of Rule 144(f).
"SEC" shall mean the Securities and Exchange Commission.
---
"Securities Act" shall mean the Securities Act of 1933, as amended from
--------------
time to time.
"Selling Holder" shall mean any Holder who sells Registrable Securities
--------------
pursuant to a public offering registered hereunder.
-3-
<PAGE>
"Shares" shall mean any Common Shares issued to the Holders in connection
------
with the Formation Transaction, either directly or issued or issuable upon
conversion of their Units and any additional Common Shares issued as a dividend
distribution or exchange for, or in respect of such Common Shares prior to the
Holder's exercise of its rights hereunder with respect to such Common Shares..
"Shelf Registration" shall mean a registration required to be effected
------------------
pursuant to Section 3 hereof.
"Shelf Registration Statement" shall mean a registration statement of the
----------------------------
Company (and any other entity required to be a registrant with respect to such
registration statement pursuant to the requirements of the Securities Act) that
covers all of the Registrable Securities to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act, or any similar
rule that may be adopted by the SEC, and all amendments (including post-
effective amendments) to such registration statement, and all exhibits thereto
and materials incorporated by reference therein.
"Unit Holders" shall mean the Holders (other than the Company) receiving
------------
Units in the Formation Transactions and their respective successors, assigns and
transferees.
"Units" shall mean the limited partnership interests of the Operating
-----
Partnership issued to Unit Holders in the Formation Transactions, which
interests are exchangeable for Common Shares, or at the Company's option, cash.
2. Lock-Up Agreement.
-----------------
(a) Lock-Up Period. Each of the Holders hereby agrees that, except as set
--------------
forth in Section 2(b) below, from the date hereof until one year, except such
period shall be two years in the case of any Holder which is a partner of either
Cabot Partners or C-M Holdings (or any permitted transferee thereof as provided
herein), following the closing of the sale of Common Shares in connection with
the Company's initial public offering (the "Lock-up Period"), without the prior
written consent of the Company, it will not offer, pledge, sell, contract to
sell, grant any options for the sale of or otherwise dispose of, directly or
indirectly (collectively, "Dispose of"), any Shares (the "Lock-up").
(b) Exceptions. The following transfers of Shares shall not be subject to
----------
the Lock-up set forth in Section 2(a):
(i) a Holder who is a natural person may Dispose of Shares to his or
her spouse, siblings, parents or any natural or adopted children or other
descendants or to any personal trust in which such family members or such
Holder retain the entire beneficial interest;
(ii) a Holder who is a natural person may Dispose of Shares on his or
her death to such Holder's estate, executor, administrator or personal
representative or to such Holder's beneficiaries pursuant to a devise or
bequest or by the laws of descent and distribution;
-4-
<PAGE>
(iii) a Holder that is a corporation, partnership, trust or other
business entity may (A) Dispose of Shares to one or more other entities
that are wholly owned and controlled, legally and beneficially, by such
Holder or by a Person or Persons that directly or indirectly wholly owns
and controls such Holder or (B) Dispose of Shares by distributing such
Shares in a merger, dissolution, liquidation, winding up or otherwise
without consideration to the equity owners of such corporation, partnership
or business entity or to any other corporation, partnership or business
entity that is wholly owned by such equity owners;
(iv) a Holder that is a master pension or profit sharing trust or a
group trust may Dispose of Shares or Units to one or more of its
participating trusts or to a successor trustee;
(v) a Holder that is an insurance company which acquired Shares on
behalf of one or more separate account clients may Dispose of Shares to
such separate account clients;
(vi) a Holder may Dispose of Shares as a bona fide gift; and
(vii) a Holder may Dispose of Shares pursuant to a pledge, grant of
security interest or other encumbrance effected in a bona fide transaction
with an unrelated and unaffiliated pledgee;
provided, however, that in the case of any transfer of Shares pursuant to
-------- -------
clauses (i), (iii), (iv) and (v), the transfers shall each be effected
pursuant to a bonafide exemption under the Securities Act.
In the event any Holder Disposes of Shares described in this Section 2(b), such
Shares shall remain subject to this Agreement and, as a condition of the
validity of such disposition, the transferee (and any pledgee who acquires
Shares upon foreclosure or any transferee thereof) shall be required to execute
and deliver a counterpart of this Agreement. Thereafter, such transferee shall
be deemed to be a Holder for purposes of this Agreement.
3. Shelf Registration Under the Securities Act.
-------------------------------------------
(a) Filing of Shelf Registration Statement. The Company shall cause to be
--------------------------------------
filed on the first business day after the first anniversary of the consummation
of the IPO the Shelf Registration Statement providing for the sale by the
Holders of all, but not less than all, of their Registrable Securities in
accordance with the terms hereof and will use its best efforts to cause such
Shelf Registration Statement to be declared effective by the SEC as soon
thereafter as is practicable. The Company agrees to use its best efforts to keep
the Shelf Registration Statement with respect to the Registrable Securities
continuously effective for a period expiring on the earlier of (i) the date on
which all of the Registrable Securities covered by the Shelf Registration
Statement have been sold pursuant thereto and (ii) the date on which (A) all
Shares (and all Shares that such Holders have the right to obtain in exchange
for Units) held by Holders who are not affiliates of the Company, in the opinion
of counsel for the Company, which counsel shall be reasonably acceptable to such
Holders, are eligible for sale pursuant to Rule 144(k) under the Securities Act
and (B) all Shares (and all
-5-
<PAGE>
Shares that such Holders have the right to obtain in exchange for Units) held by
each Holder who is an affiliate of the Company, in the opinion of counsel for
the Company, which counsel shall be reasonably acceptable to such Holder, are
eligible for sale pursuant to Rule 144 under the Securities Act and could be
sold in one transaction in accordance with the volume limitations contained in
Rule 144(e)(1)(i) under the Securities Act. Subject to Sections 5(b), 5(i) and
6, the Company further agrees to amend the Shelf Registration Statement if and
as required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration Statement or
by the Securities Act or any rules and regulations thereunder; provided,
--------
however, that the Company shall not be deemed to have used its reasonable
- -------
efforts to keep the Shelf Registration Statement effective during the applicable
period if it voluntarily takes any action that would result in selling Holders
not being able to sell Registrable Securities covered thereby during that
period, unless such action is required under applicable law or the Company has
filed a post-effective amendment to the Registration Statement and the SEC has
not declared it effective or except as otherwise permitted by the last three
sentences of Section 5(b).
(b) Expenses. Except as provided herein, the Company shall pay all
--------
Registration Expenses in connection with the registration pursuant to Section
3(a) and the performance of the Company's obligations under this Section 3 and
Section 5. The Company shall not be liable for any underwriting discounts and
commissions, the fees and disbursements of counsel representing a Holder or any
underwriter or agent acting on behalf of a Holder, and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to the Shelf Registration Statement or Rule 144 under the Securities
Act.
(c) Inclusion in Shelf Registration Statement. Any Holder who does not
-----------------------------------------
provide the information reasonably requested by the Company in connection with
the Shelf Registration Statement as promptly as practicable after receipt of
such request, but in no event later than ten (10) days thereafter, shall not be
entitled to have its Registrable Securities included in the Shelf Registration
Statement.
(d) Underwritten Offering. If any of the Registrable Securities covered by
---------------------
the Shelf Registration are to be sold in an underwritten public offering, the
Holder intending to pursue such underwritten offering shall deliver a notice to
the Company of such intent, and within ten days after receipt of the notice of
intent from such Holder for an underwritten offering, the Company shall give
written notice (the "Notice") of such notice of intent to all other Holders and
such other Holders shall be entitled to include in such an underwritten offering
all or part of their respective Registrable Securities by notice to the Company
for inclusion therein within 15 days after the Notice is given. All notices made
pursuant to this Section 3(d) shall specify the aggregate number of Registrable
Securities to be included. The Company agrees to cooperate with any such request
for an underwritten offering and to take all such other reasonable actions in
connection therewith as provided in Section 5(o).
In the case of any firm commitment underwritten offering, if the managing
underwriter or underwriters of such offering advise the Company in writing that
in its or their opinion the number of Registrable Securities proposed to be sold
in such offering exceeds the number of Registrable
-6-
<PAGE>
Securities that can be sold in such offering without adversely affecting the
market for the Company's Common Shares, the Company will include in such
offering the number of Registrable Securities that in the opinion of such
managing underwriter or underwriters can be sold without adversely affecting the
market for the Company's Common Shares. In such event, the number of Registrable
Securities to be offered for the account of each Holder requesting to include
Registrable Securities in such offering (including the Holder providing the
initial Notice) shall be reduced pro rata on the basis of the relative number of
Registrable Securities requested by each such Holder to be included in such
offering to the extent necessary to reduce the total number of Registrable
Securities to be included in such offering to the number recommended by such
managing underwriter or underwriters.
(e) Selection of Underwriters. If any of the Registrable Securities covered
-------------------------
by the Shelf Registration are to be sold in an underwritten offering, the
Company shall have the right to select the investment banker or investment
bankers and manager or managers that will underwrite the offering; provided,
however, that such investment bankers and managers must be reasonably acceptable
to the Selling Holders.
4. Holdback Agreement.
------------------
(a) Each Holder (a) participating in an underwritten offering covered by
the Shelf Registration or (b) in the event the Company is issuing shares of
beneficial interest to the public in an underwritten offering, agrees, if
requested by the managing underwriter or underwriters for such underwritten
offering, not to effect any (i) underwritten offering for resale or (ii) prior
to the second anniversary of the IPO, any transfer involving a Block Sale prior
to the second anniversary of the IPO of Registrable Securities or any securities
convertible into or exchangeable or exercisable for such Registrable Securities,
including a sale pursuant to Rule 144 (or any similar provision then in force)
under the Securities Act, during the period beginning 14 days prior to the
consummation of such underwritten offering and ending on the earlier of (x) 120
days after the consummation of such underwritten offering or (y) one day after
any date on which the Closing Price shall have averaged 115% or more of the
offering price listed in the prospectus for such underwritten offering for a
period of 20 consecutive trading days (or, if no offering price is listed in
such prospectus, the Closing Price on the date of such prospectus).
(b) In addition, each Holder agrees that such Holder shall sell Registrable
Securities prior to the second anniversary of the IPO only as follows: (i) an
amount equal to the amount of Rule 144(f) Registrable Securities during any
three-month period; (ii) in a negotiated principal transaction which involves a
Block Sale; or (iii) in an underwritten offering as provided in Section 3(d).
After the second anniversary of the IPO, sales of all Registrable Securities
shall be permitted hereunder.
5. Registration Procedures.
-----------------------
In connection with the obligations of the Company with respect to the Shelf
Registration Statement contemplated by Section 3 hereof, the Company shall:
-7-
<PAGE>
(a) prepare and file with the SEC a registration statement, which
registration statement shall (i) be available for the sale of the Registrable
Securities in accordance with the intended method or methods of distribution by
the Selling Holders thereof and (ii) comply as to form in all material respects
with the requirements of the applicable form and include all financial
statements required by the SEC to be filed therewith;
(b) subject to the last three sentences of this Section 5(b) and Section
5(i) hereof, (i) prepare and file with the SEC such amendments to such
registration statement as may be necessary to keep such registration statement
effective for the applicable period; (ii) cause the Prospectus to be amended or
supplemented as required and to be filed as required by Rule 424 or any similar
rule that may be adopted under the Securities Act; (iii) respond as promptly as
practicable to any comments received from the SEC with respect to the
registration statement or any amendment thereto; and (iv) comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during the applicable period
in accordance with the intended method or methods of distribution by the selling
Holders thereof. Notwithstanding anything to the contrary contained herein, the
Company shall not be required to take any of the actions described in Section
5(a), clauses (i), (ii) or (iii) in this Section 5(b), Section 5(d) or Section
5(i) with respect to each Holder of Registrable Securities for a period not to
exceed sixty (60) days from the date of the Suspension Notice (as defined below)
(x) to the extent that the Company is in possession of material non-public
information that the Board of Trustees in good faith deems advisable not to
disclose or the Company is engaged in active negotiations or planning for a
merger or material acquisition or disposition transaction and, in either case,
the Company delivers written notice (each, a "Suspension Notice") to each such
Selling Holder of Registrable Securities to the effect that it would be
impractical or unadvisable to cause the registration statement or such filings
to be made or to become effective or to amend or supplement the registration
statement, and that such Selling Holder may not make offers or sales under the
registration statement for a period not to exceed sixty (60) days from the date
of such Suspension Notice; provided, however, that the Company may deliver only
-------- -------
two such Suspension Notices within any twelve-month period, (y) unless and until
the Company has received a written notice (a "Registration Notice") from a
Selling Holder that such Selling Holder intends to make offers or sales under
the a registration statement as specified in such Registration Notice; provided,
--------
however, that the Company shall have ten (10) business days to prepare and file
- -------
any such amendment or supplement after receipt of the Registration Notice or
such longer period as is reasonably necessary if such preparation and filing are
not commercially practicable within ten (10) business days or (z) to the extent
the Company elects pursuant to Section 6 hereof to purchase the Shares which are
the subject of the Registration Notice. Once a Selling Holder has delivered a
Registration Notice to the Company, such Selling Holder shall promptly provide
to the Company such information as the Company reasonably requests in order to
identify such Selling Holder and the method of distribution in a post-effective
amendment to the Registration Statement or a supplement to the Prospectus. Such
Selling Holder also shall notify the Company in writing upon completion of such
offer or sale or at such time as such Selling Holder no longer intends to make
offers or sales under the Registration Statement;
-8-
<PAGE>
(c) furnish to each Selling Holder of Registrable Securities that has
delivered a Registration Notice to the Company, without charge, as many copies
of each Prospectus and any amendment or supplement thereto as such Selling
Holder may reasonably request in order to facilitate the public sale or other
disposition of the Registrable Securities; the Company consents to the use of
the Prospectus and any amendment or supplement thereto by each such Selling
Holder of Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or amendment or supplement
thereto;
(d) use its best efforts to register or qualify the Registrable Securities
by the time a registration statement is declared effective by the SEC under all
applicable state securities or blue sky laws of such jurisdictions in the United
States and its territories and possessions as any Holder of Registrable
Securities covered by the registration statement shall reasonably request in
writing, keep each such registration or qualification effective during the
period such registration statement is required to be kept effective or during
the period offers or sales are being made by a Holder that has delivered a
Registration Notice to the Company, whichever is shorter; provided, however,
-------- -------
that in connection therewith, the Company shall not be required to (i) qualify
as a foreign corporation to do business or to register as a broker or dealer in
any such jurisdiction where it would not otherwise be required to qualify or
register but for this Section 5(d), (ii) subject itself to taxation in any such
jurisdiction, or (iii) file a general consent to service of process in any such
jurisdiction;
(e) notify each Holder of Registrable Securities promptly and, if requested
by such Holder, confirm in writing, (i) when the registration statement and any
post-effective amendments thereto have become effective, (ii) when any amendment
or supplement to the Prospectus has been filed with the SEC, (iii) of the
issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of the registration statement or any part thereof
or the initiation of any proceedings for that purpose, (iv) if the Company
receives any notification with respect to the suspension of the qualification of
the Registrable Securities for offer or sale in any jurisdiction or the
initiation of any proceeding for such purpose, and (v) of the happening of any
event during the period the registration statement is effective as a result of
which (A) such registration statement contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading or (B) the Prospectus
as then amended or supplemented contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(f) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the registration statement or any part thereof
as promptly as possible;
(g) furnish to each Selling Holder of Registrable Securities that has
delivered a Registration Notice to the Company, without charge, at least one
conformed copy of the applicable registration statement and any post-effective
amendment thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested);
-9-
<PAGE>
(h) cooperate with the Selling Holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act legend; and
enable certificates for such Registrable Securities to be issued for such
numbers of shares and registered in such names as the Selling Holders may
reasonably request, upon at least ten business days prior to any sale of
Registrable Securities;
(i) subject to the last three sentences of Section 5(b) hereof, upon the
occurrence of any event contemplated by clause (x) of Section 5(b) or clause (v)
of Section 5(e) hereof, use its reasonable efforts promptly to prepare and file
an amendment or a supplement to the Prospectus or any document incorporated
therein by reference or prepare, file and obtain effectiveness of a post-
effective amendment to the registration statement, or file any other required
document, in any such case to the extent necessary so that, as thereafter
delivered to the purchasers of the Registrable Securities, such Prospectus as
then amended or supplemented will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading;
(j) make available for inspection by the Selling Holders of Registrable
Securities that have provided a Registration Notice to the Company and any
counsel, accountants or other represen tatives retained by such Selling Holders
all financial and other records, pertinent corporate documents and properties of
the Company and cause the officers, directors and employees of the Company to
supply all such records, documents or information reasonably requested by such
Holders, counsel, accountants or representatives in connection with the
registration statement; provided, however, that such records, documents or
-------- -------
information which the Company determines in good faith to be confidential and
notifies such Selling Holders, counsel, accountants or representatives in
writing that such records, documents or information are confidential shall not
be disclosed by such Selling Holders, counsel, accountants or representatives
unless (i) such disclosure is ordered pursuant to a subpoena or other order from
a court of competent jurisdiction, or (ii) such records, documents or
information become generally available to the public other than through a breach
of this Agreement;
(k) a reasonable time prior to the filing of any registration statement or
any amendment thereto, or any Prospectus or any amendment or supplement thereto,
provide copies of such document (not including any documents incorporated by
reference therein unless requested) to the Selling Holders of Registrable
Securities that have provided a Registration Notice to the Company;
(l) use its reasonable efforts to cause all Registrable Securities to be
listed on any securities exchange on which similar securities issued by the
Company are then listed;
(m) provide a CUSIP number for all Registrable Securities, not later than
the effective date of the applicable registration statement;
(n) use its reasonable efforts to make available to its security holders,
as soon as reasonably practicable, an earning statement covering at least 12
months which shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder; and
-10-
<PAGE>
(o) if requested by a Selling Holder or any underwriters engaged by such
Selling Holder for purposes of distributing the Registrable Securities, enter
into such agreements (including an underwriting agreement in form, scope and
substance as is customary in underwritten offerings) and take all such other
reasonable actions in connection therewith (including those reasonably requested
by the underwriters or such Selling Holder) in order to expedite or facilitate
the disposition of such Registrable Securities, and in such connection, (i) make
such representations and warranties to the underwriters with respect to the
business of the Company and the registration statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, in form, substance and scope as are customarily made by
issuers to underwriters in underwritten offerings, and confirm the same if and
when requested; (ii) obtain customary opinions of counsel to the Company and
updates thereof (which shall be in form and substance reasonably satisfactory to
the Selling Holders or to the underwriters and their counsel, as the case may
be), addressed to such Selling Holder and, if applicable, each of the
underwriters; (iii) obtain "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company, addressed to such
Selling Holder and, if applicable, each of the underwriters, such letters to be
in customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with any such offerings (in each case, to the
extent permitted by applicable accounting rules and guidelines); (iv) if an
underwriting agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable to the underwriters than those set
forth in Section 7 hereof and cross indemnification by the underwriters in form
and substance as is customary in connection with such offering, in favor of the
Company or the Selling Holders, as the case may be; (v) with respect to any
underwritten offering in excess of $40 million, make the Company's executive
officers available for a total of five business days to participate in "road
show" presentations (provided that in no event shall the Company be required to
make its executive officers available for more than one "road show" in any year
with respect to offerings pursuant to this Agreement); and (vi) deliver such
documents and certificates as may be reasonably requested by the managing
underwriters and their counsel to evidence the continued validity of the
representations and warranties made pursuant to clause (i) above of this Section
5(o) and to evidence compliance with any customary conditions contained in the
underwriting agreement entered into by the Company.
The Company may require each Selling Holder of Registrable Securities to
furnish to the Company in writing such information regarding the proposed
distribution by such Selling Holder of such Registrable Securities as the
Company may from time to time reasonably request in writing.
In connection with and as a condition to the Company's obligations with
respect to the Shelf Registration Statement pursuant to Section 3 hereof and
this Section 5, each Selling Holder covenants and agrees that (i) it will not
offer or sell any Registrable Securities under the Shelf Registration Statement
until it has provided a Registration Notice pursuant to Section 6(b) and has
received copies of the Prospectus as then amended or supplemented as
contemplated by Section 5(c) and notice from the Company that the Registration
Statement and any post-effective amendments thereto have become effective as
contemplated by Section 5(e); (ii) upon receipt of any notice from the Company
contemplated by Section 5(b) (in respect of the occurrence of an event
contemplated by clause (x) of Section 5(b)) or Section 5(e) (in respect of the
occurrence of an event contemplated
-11-
<PAGE>
by clause (v) of Section 5(e)), such Selling Holder shall not offer or sell any
Registrable Securities pursuant to the Shelf Registration Statement until such
Selling Holder receives copies of the supplemented or amended Prospectus
contemplated by Section 5(i) hereof and receives notice that any post-effective
amendment has become effective, and, if so directed by the Company, such Selling
Holder will deliver to the Company (at the expense of the Company) all copies in
its possession, other than permanent file copies then in such Selling Holder's
possession, of the Prospectus as amended or supplemented at the time of receipt
of such notice; (iii) all offers and sales by such Selling Holder under the
registration statement must be completed within sixty (60) days after the first
date on which offers or sales can be made pursuant to clause (i) above, and upon
expiration of such sixty (60) day period, the Selling Holder may not offer or
sell any registrable securities under the Registration Statement until it has
again complied with the provisions of clause (i) above; (iv) such Holder and any
of its officers, directors or affiliates, if any, must comply with the
provisions of Regulation M under the Exchange Act as applicable to them in
connection with sales of Registrable Securities pursuant to the Shelf
Registration Statement; and (v) such Selling Holder and any of its officers,
directors or affiliates, if any, must enter into such written agreements as the
Company shall reasonably request to ensure compliance with clause (iv) above.
6. Repurchase by Company of Shares Subject to Registration Notice.
--------------------------------------------------------------
(a) Upon receipt by the Company of a Registration Notice, the Company may,
but shall not be obligated to, purchase from such Selling Holder all, but not
less than all, of the Shares which are the subject of such Registration Notice
at a price per share equal to the greater of (i) the average of the Closing
Prices of the Common Shares for the five trading days immediately preceding the
date of the Registration Notice and (ii) the price offered to such Selling
Holder by any bona fide third-party offeror pursuant to a written contract of
sale. In the event the Company elects to purchase the Shares which are the
subject of a Registration Notice, the Company shall notify the Holder of such
Shares within five business days of the date of receipt of the Registration
Notice by the Company, which notice shall indicate: (i) that the Company will
purchase the Shares which are the subject of the Registration Notice, (ii) the
price per share, calculated in accordance with the preceding sentence, which the
Company will pay to such Holder and (iii) the date upon which the Company shall
repurchase such Shares, which date shall not be later than the tenth business
day after receipt of the Registration Notice relating to such Shares.
(b) If the Company elects to purchase the Shares which are the subject of
such Registration Notice in accordance with this Section 7, the Company shall be
relieved of its obligations under Section 5(b), (c), (d), (e), (g), (h), (i) and
(j) with respect to such Shares or as the result of such Registration Notice.
7. Indemnification; Contribution.
-----------------------------
(a) Indemnification by the Company. The Company agrees to indemnify and
------------------------------
hold harmless each Holder and its officers and directors and each Person, if
any, who controls any Holder within the meaning of Section 15 of the Securities
Act as follows:
-12-
<PAGE>
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to which such Holder, officer, director or
controlling Person may become subject under the Securities Act or otherwise
(A) that arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Shelf Registration
Statement or any amendment thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading or (B) that arise out of or are
based upon any untrue statement or alleged untrue statement of a material
fact contained in any Prospectus or any amendment or supplement thereto, or
the omission or alleged omission to state therein a material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or alleged untrue statement
or any omission or alleged omission contained in the Shelf Registration
Statement, if such settlement is effected with the written consent of the
Company; and
(iii) subject to the limitations set forth in Section 7(c), against
any and all expense whatsoever, as incurred (including reasonable fees and
disbursements of counsel), reasonably incurred in investigating, preparing
or defending against any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, in each case whether
or not a party, or any claim whatsoever based upon any such untrue
statement or alleged untrue statement or omission or alleged omission, to
the extent that any such expense is not paid under subparagraph (i) or (ii)
above;
provided, however, that the indemnity provided pursuant to this Section 7(a)
- -------- -------
shall not apply to any Holder with respect to any loss, liability, claim, damage
or expense that arise out of or are based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by such Holder
expressly for use in the Shelf Registration Statement or any amendment thereto
or the Prospectus or any amendment or supplement thereto.
(b) Indemnification by Holders. Each Holder severally agrees to indemnify
--------------------------
and hold harmless the Company and the other Selling Holders, and each of their
respective directors and officers (including each director and officer of the
Company who signed the Registration Statement), and each Person, if any, who
controls the Company or any other Selling Holder within the meaning of Section
15 of the Securities Act, to the same extent as the indemnity contained in
Section 7(a) hereof, but only insofar as such loss, liability, claim, damage or
expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in the Shelf Registration
Statement or any amendment thereto or the Prospectus or any amendment or
supplement thereto in reliance upon and in conformity with written information
furnished to the
-13-
<PAGE>
Company by such selling Holder for use therein relating to the Holder's status
as a selling security holder.
(c) Conduct of Indemnification Proceedings. Each indemnified party shall
--------------------------------------
give reasonably prompt notice to each indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party (i) shall not relieve
it from any liability which it may have under the indemnity agreement provided
in Section 7(a) or (b) above, unless and to the extent it did not otherwise
learn of such action and the lack of notice by the indemnified party materially
prejudices the indemnifying party or results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) shall not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided under Section 7(a) or
(b) above. After receipt of such notice, the indemnifying party shall be
entitled to participate in and, at its option, jointly with any other
indemnifying party so notified, to assume the defense of such action or
proceeding at such indemnifying party's own expense with counsel chosen by such
indemnifying party and approved by the indemnified party, which approval shall
not be unreasonably withheld; provided, however, that, if the defendants in any
-------- -------
such action or proceeding include both the indemnified party and the
indemnifying party and the indemnified party reasonably determines, upon advice
of counsel, that a conflict of interest exists or that there may be legal
defenses available to it or other indemnified parties that are different from or
in addition to those available to the indemnifying party, then the indemnified
party shall be entitled to one separate counsel, the reasonable fees and
expenses of which shall be paid by the indemnifying party. If the indemnifying
party does not assume the defense of any such action or proceeding, after having
received the notice referred to in the first sentence of this paragraph, the
indemnifying party will pay the reasonable fees and expenses of counsel (which
shall be limited to a single law firm in addition to any local counsel necessary
in connection with such action or proceeding) for the indemnified party. In such
event, however, the indemnifying party will not be liable for any settlement
effected without the written consent of such indemnifying party. If the
indemnifying party assumes the defense of any such action or proceeding in
accordance with this paragraph, such indemnifying party shall not be liable for
any fees and expenses of counsel for the indemnified party incurred thereafter
in connection with such action or proceeding except as set forth in the proviso
in the second sentence of this Section 7(c).
(d) Contribution. In order to provide for just and equitable contribution
------------
in circumstances in which the indemnity agreement provided for in this Section 7
is for any reason held to be unenforceable although applicable in accordance
with its terms, the Company and the Selling Holders shall contribute to the
aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement incurred by the Company and the Selling
Holders, in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and the Selling Holders on the other (in such
proportions that the selling Holders are severally, not jointly, responsible for
the balance), in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether the action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a
-14-
<PAGE>
material fact, has been made by, or relates to information supplied by, such
indemnifying party or the indemnified parties, and the parties' relative intent,
pledge, access to information and opportunity to correct or prevent such action.
The parties hereto agree that it would not be just or equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 7(d), no Selling Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such Selling Holder were offered to
the public exceeds the amount of any damages which such Selling Holder would
otherwise have been required to pay by reason of such untrue statement or
omission.
Notwithstanding the foregoing, no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7(d), each Person, if
any, who controls a Holder within the meaning of Section 15 of the Securities
Act and directors and officers of a Holder shall have the same rights to
contribution as such Holder, and each director of the Company, each officer of
the Company who signed the Registration Statement and each Person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act
shall have the same rights to contribution as the Company.
8. Rule 144 Sales.
--------------
(a) Compliance. The Company covenants that, so long as it is subject to
----------
the reporting requirements of the Exchange Act, it will file the reports
required to be filed by it under the Exchange Act so as to enable any Holder to
sell Registrable Securities pursuant to Rule 144 under the Securities Act.
(b) Cooperation with Holders. In connection with any sale, transfer or
------------------------
other disposition by any Holder of any Registrable Securities pursuant to Rule
144 under the Securities Act, the Company shall cooperate with such Holder to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act legend, and
enable certificates for such Registrable Securities to be for such number of
shares and registered in such names as the selling Holders may reasonably
request. The Company's obligation set forth in the previous sentence shall be
subject to the delivery, if reasonably requested by the Company or its transfer
agent, by counsel to such Holder, in form and substance reasonably satisfactory
to the Company and its transfer agent, of an opinion that such Securities Act
legend need not appear on such certificate.
9. Miscellaneous.
-------------
(a) Amendments and Waivers. The provisions of this Agreement, including
----------------------
the provisions of this sentence, may not be amended, modified, supplemented or
waived, nor may
-15-
<PAGE>
consent to departures therefrom be given, without the written consent of the
Company and the Holders of a majority of the outstanding Registrable Securities
(treating for the purpose of such computation the Holders of Units as the
Holders of Registrable Securities issuable upon exchange of such Units);
provided, however, that no amendment, modification, supplement or waiver of, or
- -------- -------
consent to the departure from, the provisions of this Agreement, which has the
purpose or effect of reducing, impairing or adversely affecting the right of any
Holder, shall be effective as against any Holder of Registrable Securities
unless consented to in writing by such Holder of Registrable Securities. Notice
of any such amendment, modification, supplement, waiver or consent adopted in
accordance with this Section 9(a) shall be provided by the Company to each
Holder of Registrable Securities at least thirty (30) days prior to the
effective date of such amendment, modification, supplement, waiver or consent.
(b) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, telex, telecopier, or any courier guaranteeing overnight delivery,
(i) if to a Holder, at such Holder's registered address appearing on the share
register of the Company or the Unit register of the Operating Partnership or
(ii) if to the Company, at Two Center Plaza, Suite 200, Boston, Massachusetts
02108-1906, Attention: Chief Executive Officer.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is knowledged, if telecopied; or at the
time delivered if delivered by an air courier guaranteeing overnight delivery.
(c) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders. If any successor, assignee or transferee of any
Holder shall acquire Registrable Securities, in any manner, whether by operation
of law or otherwise, such Registrable Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding Registrable Securities
such Person shall be conclusively deemed to have agreed to be bound by all of
the terms and provisions hereof.
(d) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Maryland without giving effect to the
conflicts of law provisions thereof.
-16-
<PAGE>
(g) Specific Performance. The parties hereto acknowledge that there would
--------------------
be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement in any
court of the United States or any State thereof having jurisdiction.
(h) Entire Agreement. This Agreement is intended by the parties as a final
----------------
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
(i) Limitation of Liability of Shareholders, Trustees and Officers of the
---------------------------------------------------------------------
Company. ANY OBLIGATION OR LIABILITY WHATSOEVER OF THE COMPANY WHICH MAY ARISE
- -------
AT ANY TIME UNDER THIS AGREEMENT OR ANY OBLIGATION OR LIABILITY WHICH MAY BE
INCURRED BY IT PURSUANT TO ANY OTHER INSTRUMENT, TRANSACTION OR UNDERTAKING
CONTEMPLATED HEREBY SHALL BE SATISFIED, IF AT ALL, OUT OF THE COMPANY'S ASSETS
ONLY. NO SUCH OBLIGATION OR LIABILITY, OTHER THAN THIS AGREEMENT AS IT RELATES
TO EACH OF THE HOLDERS, SHALL BE PERSONALLY BINDING UPON, NOR SHALL RESORT FOR
THE ENFORCEMENT THEREOF BE HAD TO, THE PROPERTY OF ANY OF ITS SHAREHOLDERS,
TRUSTEES, OFFICERS, EMPLOYEES OR AGENTS (SOLELY AS A RESULT OF THEIR STATUS AS
SHAREHOLDERS, TRUSTEES, OFFICERS, EMPLOYEES OR AGENTS), REGARDLESS OF WHETHER
SUCH OBLIGATION OR LIABILITY IS IN THE NATURE OF CONTRACT, TORT OR OTHERWISE.
NOTWITHSTANDING THE FOREGOING, THIS SECTION 9(i) SHALL NOT IN ANY WAY AFFECT OR
LIMIT ANY OBLIGATION OR LIABILITY OF ANY HOLDER UNDER THIS AGREEMENT.
-17-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above
CABOT INDUSTRIAL TRUST
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
HOLDERS:
[TO COME]
-18-
<PAGE>
EXHIBIT C
---------
[PARTNERSHIP AGREEMENT AND PLAN OF MERGER]
AGREEMENT OF MERGER
OF
[TITLE HOLDING PARTNERSHIP]
WITH AND INTO
CABOT INDUSTRIAL PROPERTIES, L.P.
DATED AS OF ________, 1997
[MAY VARY BY STATE LAW]
<PAGE>
THIS AGREEMENT is made by and between [TITLE HOLDING PARTNERSHIP], a
[____________] partnership (the "Merging Partnership"), and Cabot Industrial
-------------------
Properties, L.P., a Delaware limited partnership (the "Surviving Partnership").
---------------------
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, each of the Merging Partnership and the Surviving Partnership
desires that the Merging Partnership be merged pursuant to Section 17-211 of the
Delaware Revised Uniform Limited Partnership Act ("DRULPA") [and other
------
applicable state law, if any] with and into the Surviving Partnership (the
"Merger"), which shall be the surviving partnership.
- -------
WHEREAS, the Surviving Partnership was formed in order to acquire and own
various industrial warehouse facilities in connection with the initial public
offering of common shares of beneficial interest of Cabot Industrial Trust, a
Maryland real estate investment trust ("CIT"), the sole general partner of the
---
Surviving Partnership, for which a registration statement on Form S-11
(Registration No. 333-_____) (the "Registration Statement") under the Securities
----------------------
Act of 1933, as amended (the "Securities Act"), has been filed with the United
--------------
States Securities and Exchange Commission.
WHEREAS, the partners of the Merging Partnership, and CIT, as the general
partner of the Surviving Partnership, have approved the entering into and the
execution of this Agreement of Merger.
NOW THEREFORE:
1. Effective Time. As used in this Agreement of Merger, the term
--------------
"Effective Time" shall mean the date and time of the filing with the office of
the Secretary of State of the State of Delaware of the certificate of merger
with respect to the Merger (a form of which is attached hereto as Exhibit A)
---------
[and other state filing, if any].
2. The Merger. At the Effective Time, the Merging Partnership shall be
----------
merged with and into the Surviving Partnership, which shall continue to be
governed by the laws of the State of Delaware, and the separate legal existence
of the Merging Partnership shall thereupon cease.
3. Agreement of Limited Partnership. The Agreement of Limited
--------------------------------
Partnership of the Cabot Industrial Properties, L.P. (the "Partnership
-----------
Agreement") shall be the Agreement of Limited Partnership of the Surviving
- ---------
Partnership and thereafter may be amended as provided in the Partnership
Agreement or by law. This Agreement of Merger shall effect no amendment or
other change whatsoever to the Partnership Agreement.
4. Terms and Conditions of the Merger. At the Effective Time, by reason
----------------------------------
of the Merger, all the partnership interests of the Merging Partnership shall
cease to exist in consideration of the assumption by the Surviving Partnership
of the obligation to pay all
<PAGE>
liabilities of the Merging Partnership and of the issuance of partnership units
("Units"), as provided in the limited partnership agreement of the Surviving
Partnership to the Partners of the Merging Partnership as set forth on Schedule
--------
A hereto. All of the partnership interests of the Merging Partnership shall be
- -
canceled as of the Effective Time. Each partnership interest of the Surviving
Partnership outstanding immediately prior to the Merger shall upon and after the
Merger remain a partnership interest of the Surviving Partnership.
5. Allocation of Taxable Income, Tax Losses and Dividends. The Merging
------------------------------------------------------
Partnership and the Surviving Partnership hereby agree that, notwithstanding
anything in the organizational documents of the Merging Partnership to the
contrary, the distributive share of the Merging Partnership's taxable income,
tax losses and dividends shall be allocated to the Partners of the Merging
Partnership based on a closing of the Merging Partnership's books on the date of
the Merger.
6. Effect of the Merger. The Merger shall have the effects set forth in
--------------------
the DRULPA [any other state law, if applicable]. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of the Merging Partnership
shall vest in the Surviving Partnership and all debts, liabilities and duties of
the Merging Partnership shall become the debts, liabilities and duties of the
Surviving Partnership.
7. Further Assurances. Each of the Merging Partnership and the Surviving
------------------
Partnership shall execute and deliver such further instruments and do or cause
to be done such further acts as may be necessary to effectuate and confirm the
Merger. The Board of Trustees and the officers of CIT and the general partner
of the Merging Partnership, respectively, are hereby authorized, empowered and
directed to do any and all acts and things, and to make, execute, deliver, file
and record any and all instruments, papers and documents which shall be or
become necessary, proper or convenient to carry out or put into effect any
provision of the Agreement and Plan of Merger.
8. Counterparts. This Agreement of Merger may be executed in any number
------------
of counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original but all such counterparts
shall together constitute one and the same Agreement of Merger.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement of
Merger as of the day and year first above written.
[MERGING PARTNERSHIP]
By:___________________________________
Name:_________________________________
Title:________________________________
CABOT INDUSTRIAL PROPERTIES, L.P.
By: Cabot Industrial Trust
By:___________________________________
Name:_________________________________
Title:________________________________
Consent of Partners
-------------------
The undersigned, constituting all of the partners of the Merging Partnership,
hereby consent to (i) this Agreement and (ii) the waiver of any and all
provisions of the Partnership Agreement of the Merging Partnership that would in
any way limit the effectiveness of this Agreement.
ALL THE PARTNER(S) OF THE MERGING PARTNERSHIP
By:___________________________________
Name:_________________________________
Title:________________________________
-3-
<PAGE>
CERTIFICATE OF MERGER
OF
CABOT INDUSTRIAL PROPERTIES, L.P.
This Certificate of Merger, dated as of the __th day of ________, 199_, is
being filed by the undersigned in the Office of the Secretary of State of the
State of Delaware (the "Secretary of State") in accordance with the provisions
of Title 6, Delaware Code (S)17-211 in order to merge Cabot Industrial
Properties, L.P., a Delaware limited partnership, and [TITLE HOLDING
PARTNERSHIP], a ___________ partnership.
1. The name and jurisdiction of organization of each entity which is to
be merged is: Cabot Industrial Properties, L.P., a limited partnership
formed under the laws of the State of Delaware; and [TITLE HOLDING
PARTNERSHIP], a partnership formed under the laws of the State of
__________.
2. An agreement of merger (the "Merger Agreement") has been approved,
adopted, certified, executed and acknowledged by each of Cabot
Industrial Properties, L.P. and [TITLE HOLDING PARTNERSHIP].
3. The name of the surviving limited partnership is Cabot Industrial
Properties, L.P.
4. The executed Merger Agreement is on file at the principal place of
business of Cabot Industrial Properties, L.P., at the following
address:
Two Center Plaza
Suite 200
Boston, MA 02108
5. A copy of the Merger Agreement will be furnished by Cabot Industrial
Properties, L.P., on request and without cost, to any partner of Cabot
Industrial Properties, L.P. or shareholder of Cabot Industrial Trust.
6. All of the partnership interests of [TITLE HOLDING PARTNERSHIP] have
been canceled as of the date hereof.
<PAGE>
IN WITNESS WHEREOF, the undersigned General Partner of Cabot Industrial
Properties, L.P. has duly executed this Certificate of Merger as of the day and
year first above written.
CABOT INDUSTRIAL TRUST
By:__________________________
Name:________________________
Title:_______________________
-2-
<PAGE>
Schedule A
----------
Units of Surviving
Name of Partner Partnership to be Issued
- --------------- ------------------------
(percentage)
Total
<PAGE>
EXHIBIT D
---------
[SUBSIDIARY AGREEMENT AND PLAN OF MERGER]
AGREEMENT OF MERGER
OF
[TITLE HOLDING CORPORATION]
WITH AND INTO
CABOT INDUSTRIAL PROPERTIES, L.P.
DATED AS OF ________, 1997
[MAY VARY BY STATE LAW]
<PAGE>
THIS AGREEMENT is made by and between [TITLE HOLDING CORPORATION], a Delaware
corporation (the "Merging Corporation"), and Cabot Industrial Properties, L.P.,
-------------------
a Delaware limited partnership (the "Surviving Partnership").
---------------------
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, each of the Merging Corporation and the Surviving Partnership
desires that the Merging Corporation be merged pursuant to Section 263 of the
Delaware General Corporation Law ("DGCL") and Section 17-211 of the Delaware
----
Revised Uniform Limited Partnership Act ("DRULPA") with and into the Surviving
------
Partnership (the "Merger"), which shall be the surviving partnership.
------
WHEREAS, the Surviving Partnership was formed in order to acquire and own
various industrial warehouse facilities in connection with the initial public
offering of common shares of beneficial interest of Cabot Industrial Trust, a
Maryland real estate investment trust ("CIT"), the sole general partner of the
---
Surviving Partnership, for which a registration statement on Form S-11
(Registration No. 333-_____) (the "Registration Statement") under the Securities
----------------------
Act of 1933, as amended (the "Securities Act"), has been filed with the United
--------------
States Securities and Exchange Commission.
WHEREAS, CIT, as the shareholder of the Merging Corporation, and CIT, as
the general partner of the Surviving Partnership, has approved the entering into
and the execution of this Agreement of Merger.
NOW THEREFORE:
1. Effective Time. As used in this Agreement of Merger, the term
--------------
"Effective Time" shall mean the date and time of the filing with the office of
the Secretary of State of the State of Delaware of the certificate of merger
with respect to the Merger (a form of which is attached hereto as Exhibit A).
---------
2. The Merger. At the Effective Time, the Merging Corporation shall be
----------
merged with and into the Surviving Partnership, which shall continue to be
governed by the laws of the State of Delaware, and the separate legal existence
of the Merging Corporation shall thereupon cease.
3. Agreement of Limited Partnership. The Agreement of Limited
--------------------------------
Partnership of the Cabot Industrial Properties, L.P. (the "Partnership
-----------
Agreement") shall be the Agreement of Limited Partnership of the Surviving
Partnership and thereafter may be amended as provided in the Partnership
Agreement or by law. This Agreement of Merger shall effect no amendment or
other change whatsoever to the Partnership Agreement.
4. Terms and Conditions of the Merger. At the Effective Time, by reason
----------------------------------
of the Merger, all the shares of stock of the Merging Corporation shall cease to
exist in consideration of
<PAGE>
the assumption by the Surviving Partnership of the obligation to pay all
liabilities of the Merging Corporation and of the issuance of partnership units
("Units"), as provided in the limited partnership agreement of the Surviving
Partnership to the Shareholder(s) of the Merging Corporation as set forth on
Schedule A hereto. All of the certificates representing shares of stock of the
- ----------
Merging Corporation shall be canceled as of the Effective Time. Each partnership
interest of the Surviving Partnership outstanding immediately prior to the
Merger shall upon and after the Merger remain a partnership interest of the
Surviving Partnership.
5. Allocation of Taxable Income, Tax Losses and Dividends. The Merging
------------------------------------------------------
Corporation and the Surviving Partnership hereby agree that, notwithstanding
anything in the organizational documents of the Merging Corporation to the
contrary, the distributive share of the Merging Corporation's taxable income,
tax losses and dividends shall be allocated to the Shareholder(s) of the Merging
Corporation based on a closing of the Merging Corporation's books on the date of
the Merger.
6. Effect of the Merger. The Merger shall have the effects set forth in
--------------------
the DGCL and the DRULPA. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the property, rights, privileges,
powers and franchises of the Merging Corporation shall vest in the Surviving
Partnership and all debts, liabilities and duties of the Merging Corporation
shall become the debts, liabilities and duties of the Surviving Partnership.
7. Further Assurances. Each of the Merging Corporation and the Surviving
------------------
Partnership shall execute and deliver such further instruments and do or cause
to be done such further acts as may be necessary to effectuate and confirm the
Merger. The Board of Directors (or Trustees, as the case may be) and the
officers of each of the Merging Corporation and CIT, respectively, are hereby
authorized, empowered and directed to do any and all acts and things, and to
make, execute, deliver, file and record any and all instruments, papers and
documents which shall be or become necessary, proper or convenient to carry out
or put into effect any provision of that Agreement and Plan of Merger.
8. Counterparts. This Agreement of Merger may be executed in any number
------------
of counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original but all such counterparts
shall together constitute one and the same Agreement of Merger.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement of Merger
as of the day and year first above written.
[MERGING CORPORATION]
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
CABOT INDUSTRIAL PROPERTIES, L.P.
By: Cabot Industrial Trust
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Consent of Shareholder
----------------------
The undersigned, constituting all of the shareholder of the Merging Corporation,
hereby consents to (i) this Agreement and (ii) the waiver of any and all
provisions of the Articles of Incorporation of the Merging Corporation that
would in any way limit the effectiveness of this Agreement.
ALL THE SHAREHOLDER(S) OF THE MERGING CORPORATION
Cabot Industrial Trust
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
-3-
<PAGE>
CERTIFICATE OF MERGER
OF
CABOT INDUSTRIAL PROPERTIES, L.P.
This Certificate of Merger, dated as of the __th day of ________, 199_, is
being filed by the undersigned in the Office of the Secretary of State of the
State of Delaware (the "Secretary of State") in accordance with the provisions
of Title 6, Delaware Code (S)17-211 in order to merge Cabot Industrial
Properties, L.P., a Delaware limited partnership, and [TITLE HOLDING
CORPORATION], a Delaware corporation.
1. The name and jurisdiction of organization of each entity which is to
be merged is: Cabot Industrial Properties, L.P., a limited partnership
formed under the laws of the State of Delaware; and [TITLE HOLDING
CORPORATION], a corporation formed under the laws of the State of
Delaware.
2. An agreement of merger (the "Merger Agreement") has been approved,
adopted, certified, executed and acknowledged by each of Cabot
Industrial Properties, L.P. and [TITLE HOLDING CORPORATION].
3. The name of the surviving limited partnership is Cabot Industrial
Properties, L.P.
4. The executed Merger Agreement is on file at the principal place of
business of Cabot Industrial Properties, L.P., at the following
address:
Two Center Plaza
Suite 200
Boston, MA 02108
5. A copy of the Merger Agreement will be furnished by Cabot Industrial
Properties, L.P., on request and without cost, to any partner of Cabot
Industrial Properties, L.P. or shareholder of Cabot Industrial Trust.
6. All of the certificates representing shares of stock of [TITLE HOLDING
CORPORATION] have been canceled as of the date hereof.
<PAGE>
IN WITNESS WHEREOF, the undersigned General Partner of Cabot Industrial
Properties, L.P. has duly executed this Certificate of Merger as of the day and
year first above written.
CABOT INDUSTRIAL TRUST
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
-2-
<PAGE>
Schedule A
----------
Units of Surviving
Name of Shareholder Partnership to be Issued
- ------------------- ------------------------
(percentage)
Total
<PAGE>
EXHIBIT E
---------
CERTIFICATE OF DISSOLUTION
OF
[TITLE HOLDING PARTNERSHIP]
DATED AS OF _______, 1997
[MAY VARY BY STATE LAW]
<PAGE>
CERTIFICATE OF DISSOLUTION OF [TITLE HOLDING PARTNERSHIP]
---------------------------------------------------------
This Certificate of Dissolution of [Title Holding Partnership], a _________
general partnership (the "Partnership"), dated as of ________ __, 1997 by Cabot
-----------
Industrial Properties, L.P., a Delaware limited partnership (the "Operating
---------
Partnership"), the sole partner of the Partnership (Operating Partnership being
- -----------
hereinafter sometimes referred to as the "Partner"), provides for the voluntary
-------
dissolution and complete liquidation of the Partnership, in accordance with
Article __ of the Partnership Agreement of the Partnership dated as of
____________ (as previously amended, the "Partnership Agreement") and in
---------------------
accordance with the Uniform Partnership Act of the State of ________.
W I T N E S S E T H:
-------------------
WHEREAS, each of __________ and ___________, the prior partners of the
Partnership has transferred its partnership interest in the Partnership to the
Operating Partnership pursuant to that Contribution Agreement dated as of
________, 1997 by and among, among others, the [Prior Partners], the Operating
Partnership and Cabot Industrial Trust, a Maryland real estate investment trust;
WHEREAS, as a result of such merger, the Operating Partnership is a Partner
of the Partnership; and
WHEREAS, as a result of the transactions described above, the Operating
Partnership is the sole Partner of the Partnership and has determined to have
the Partnership dissolved and to cause itself to receive the remaining assets of
the Partnership upon the terms stated herein:
NOW THEREFORE, the undersigned, being the sole Partner of the Partnership,
does hereby adopt this Certificate of Dissolution, as follows:
1. Definitions. Capitalized terms not otherwise defined herein shall
-----------
have the meanings ascribed to them in the Partnership Agreement.
2. Termination of the Partnership. The Partner has determined that the
------------------------------
voluntary termination and complete liquidation of the Partnership is advisable,
expedient and in the best interests of the Partnership. The Partner hereby
agrees that the business of the Partnership shall not be continued in any manner
but that instead the Partnership shall be liquidated and the remaining assets
distributed to it.
3. Dissolution. In accordance with Article __ of the Partnership
-----------
Agreement, the Partner has conducted an accounting of all property, assets and
liabilities of the Partnership. The Partner has discharged all debts and
liabilities of the Partnership which were due and payable. The
<PAGE>
remaining assets are to be distributed on the date hereof to the Partner as set
forth on Schedule A attached hereto.
----------
4. Distributions. The distribution of the assets shall be made to the
-------------
Partner on the following conditions: (1) the Partner hereby certifies that it
is the owner of its partnership interest in the Partnership, free and clear of
all liens or encumbrances and that it is surrendering all right, title and
interest in and to such partnership interest upon dissolution; and (2) the
Partner acknowledges that such distribution shall be in complete satisfaction of
its rights as a Partner of the Partnership.
5. Authorization. (a) The Partner is hereby authorized to do such acts
-------------
and to take such steps as may be necessary, advisable or convenient to carry
this Certificate of Dissolution into effect, including, but not limited to, the
execution of such instruments as may be required to vest title to any assets of
this Partnership in the Partner as set forth on Schedule A hereto.
----------
(b) As soon as the assets of the Partnership have been distributed in
conformity with this Certificate of Dissolution, the Partner is hereby
authorized and directed to cause any filing and notice to be made effecting such
dissolution, and to do all other things necessary, advisable or convenient for
the dissolution of the Partnership, including without limitation, the providing
of a Notice to Parties in the form of Appendix A hereto.
----------
-2-
<PAGE>
IN WITNESS WHEREOF, this Certificate of Dissolution has been executed by
the duly authorized officer or representative of the sole Partner of the
Partnership, as of the day and year first above written.
CABOT INDUSTRIAL PROPERTIES, L.P.
By: Cabot Industrial Trust, its
general partner
By: _________________________________
Name: _______________________________
Title: ______________________________
-3-
<PAGE>
Schedule A
----------
Assets to be
Distributed
Name of Partner in Liquidation
--------------- --------------
Cabot Industrial Properties, L.P. [Name of Property]
<PAGE>
Appendix A
----------
NOTICE TO PARTIES OF DISSOLUTION AND LIQUIDATION
OF [TITLE HOLDING PARTNERSHIP]
____________, 1997
VIA CERTIFIED MAIL
[Addressee]
Re: Notice of Dissolution and Liquidation of
[Title Holding Partnership]
----------------------------------------
Ladies and Gentlemen:
[Title Holding Partnership], a _________ general partnership (the
"Partnership"), with Cabot Industrial Properties, L.P., as its sole partner, was
formed pursuant to that certain Partnership Agreement dated as of ____________,
as amended. You have been identified by the Partnership or one of its Partners
as having transacted business with the Partnership.
Please be advised that on ________ __, 1997 (the "Dissolution Date"), the
sole Partner of the Partnership elected by voluntary consent to terminate and
dissolve the Partnership. All assets of the Partnership, after payment of all
outstanding liabilities, are being distributed to the Partner. From and after
the Dissolution Date, the Partnership was no longer engaged in any business, and
no Partner has any authority, actual, apparent or otherwise, to bind the
Partnership for any obligation or duty. Therefore, you are advised that, in
dealing with the Partner of the Partnership, you cannot rely on the assets or
net worth of the Partnership or of the Partners.
Very truly yours,
CABOT INDUSTRIAL PROPERTIES, L.P.
By: Cabot Industrial Trust, its
general partner
By:______________________________
Title:___________________________
<PAGE>
EXHIBIT F
TENANT ESTOPPEL CERTIFICATE
---------------------------
To: CABOT INDUSTRIAL TRUST, CABOT INDUSTRIAL PROPERTIES, L.P., and their
respective successors, assigns, subsidiaries and affiliates (collectively,
"New Owner"), and _____________________________, a _________________
("Landlord")
Re: Lease of premises located at _________________________________,
______________, _____, (the "Property")
The undersigned ("Tenant") hereby acknowledges that this Certificate is
being furnished for the benefit of New Owner and Landlord in connection with the
acquisition by New Owner from Landlord of the Property, and that the statements
and certifications set forth herein may be relied upon by New Owner and Landlord
in connection with such transaction.
The undersigned ("Tenant") hereby represents, warrants and certifies to New
Owner and Landlord as follows:
1. Tenant is the sole owner and holder of the tenant's interest in, to
and under that certain Lease Agreement dated _______________, 19__, executed by
________________, as landlord, and __________________, as tenant, with respect
to the Property (said Lease Agreement, together with all addenda, modifications
and supplements thereto, if any, being hereinafter collectively referred to as
the "Lease").
2. A true, correct and complete description of the Lease (including all
addenda, modifications and supplements thereto, if any) is attached hereto as
Exhibit "A", which represents the entire agreement between the parties thereto
- -----------
with respect to the leasing of the Property. The Lease is in full force and
effect and has not been modified, supplemented, amended, terminated or
surrendered, either orally or in writing, except as set forth and attached
hereto as Exhibit "A". There are no events or conditions presently existing
-----------
which with or without notice or lapse of time, or both, (a) constitute a
monetary or other default of Landlord or Tenant under the Lease, (b) entitle
Tenant to offsets or defenses against the prompt, current payment of rent to, or
claims, counterclaims, offsets or defenses arising from the Lease against,
Landlord (or any assignee of Landlord of its interest in, to and under the
Lease) or (c) entitle Tenant to terminate the Lease for any reason.
3. a. The term of the Lease commenced on ______________, 19__, and
shall expire on _____________, ____. Tenant does not have any options to extend
the Lease, nor options or rights of first refusal or rights to renew or cancel
the Lease, nor to purchase any part of the Property, except as expressly
provided in the Lease.
<PAGE>
b. The current fixed monthly rent payment pursuant to the Lease is
in the amount of $_________ and has been paid through and including
_________________, 199___.
c. Tenant has deposited with Landlord $__________________________ as
a security deposit.
4. Except as may be expressly set out on Exhibit "B" attached hereto, all
-----------
conditions under the Lease to be performed by Landlord as of the date hereof
(including, without limitation, construction of improvements) have been
satisfied, and Tenant has accepted possession and is in occupancy of the
Property, with the result that Tenant is fully obligated to pay, and is paying,
the rent, additional rent and other charges due under the Lease, and is
performing all of the other obligations of Tenant under the Lease.
5. The Lease does not provide for any payments (including, without
limitation, rent credits) by Landlord to Tenant which are presently due and
payable or which are due and payable in the future and there are no credits,
concessions, bonuses, free months' rentals, rebates, reimbursements or other
matters benefitting Tenant and affecting the rental under the remaining term of
the Lease, by side letter or otherwise.
6. No rent under the Lease has been paid more than thirty (30) days in
advance.
7. The interest of Tenant in the Lease has not been assigned or
encumbered, and no part of the Property has been sublet; and Tenant has no
notice of any prior assignment, hypothecation or pledge of rent to be paid by
Tenant under the terms of the Lease by Landlord.
8. All insurance policies required to be maintained by Tenant under the
Lease are in full force and effect as therein required.
9. Tenant acknowledges that in connection with the acquisition of the
Property from Landlord, Landlord is assigning and transferring to New Owner all
of Landlord's right, title and interest in, to and under the Lease; and the
Tenant agrees to attorn to New Owner and to perform all of Tenant's obligations
as Tenant under the Lease (including, without limitation, the payment of rent),
directly to New Owner (its successors and assigns) as the new landlord under the
Lease from and after the effective date of such assignment and transfer by
Landlord to New Owner.
10. No petroleum or hazardous wastes, hazardous substance or hazardous
materials have been treated, stored or disposed of in violation of applicable
laws on or about the Property by Tenant.
-2-
<PAGE>
11. This Certificate shall be binding upon Tenant, its successors and
assigns and all parties claiming through or under Tenant or any such successor
or assign and shall inure to the benefit of New Owner, the successors and
assigns of New Owner and all parties claiming through or under New Owner or any
such successor or assign.
DATED: ________________, 1997.
TENANT:
------
By:
-------------------------
Name:
-----------------------
Its:
-----------------------
-3-
<PAGE>
EXHIBIT "A"
Description of Lease Agreement
<PAGE>
EXHIBIT "B"
List of Landlord's Unperformed Obligations
<PAGE>
EXHIBIT G-1
(Instructions when existing title insurance policy remains in effect)
___________________, 1997
_________________Title Company
_____________________________
_____________________________
Re: Your Owners Title Policy No. _________, dated _________________,
issued to ______________ (the "Title Policy")
Gentlemen:
The undersigned (the "Assured"), being the named insured in the Title
Policy, continues to be the owner of the Property described in the Title Policy.
All of the stock in the Assured is being assigned to Cabot Industrial Trust, a
Maryland real estate investment trust. Promptly after the assignment, the
Assured will merge into and become Cabot Industrial Properties, L.P., a Delaware
limited Partnership ("Cabot").
Upon receipt of written instructions from Cabot or its counsel, Mayer,
Brown & Platt, you are directed to do the following:
l. Record the deed in the appropriate office in your County;
2. Deliver to Cabot such of the following items which it requests:
a. A date-down endorsement to the Title Policy;
b. An endorsement modifying the named insured to be Cabot;
c. an endorsement increasing the insured amount to $__________;
d. such of the following endorsements which are available in
your State:
(1) an ALTA 3.1 zoning endorsement;
(2) a non-imputation endorsement;
<PAGE>
(3) an owner's comprehensive endorsement;
(4) an access endorsement;
(5) a contiguity endorsement, if applicable;
(6) a survey endorsement; and
(7) such other endorsements as Cabot shall request.
If no instructions have been received by you from Cabot by
_________________, 1998, these instructions shall become void. If you have any
questions, please contact __________________ at ( )_____________.
Yours very truly,
-2-
<PAGE>
EXHIBIT G-2
(Instruction when new title insurance policy being obtained)
___________________, 1997
_________________Title Company
_____________________________
_____________________________
Re: Your Owners Title Policy No. ________, dated ________________,
issued to ____________( the "Existing Title Policy")
Gentlemen:
Enclosed is a fully executed and acknowledged deed from
________________ to Cabot Industrial Properties, L.P., a Delaware limited
partnership ("Cabot"), covering the real property described in the Existing
Title Policy.
Upon receipt of written instructions from Cabot or its counsel, Mayer,
Brown & Platt, you are directed to do the following:
1. Record the deed in the appropriate office in your County;
2. Deliver to Cabot an owner's policy of title insurance issued by
your Company in favor of Cabot, (i) dated on the date designated by Cabot; (ii)
in the amount of $____________; (iii) in the form of an American Land Title
Association Owner's Policy, Standard Form B (or such other form as is acceptable
to Cabot if such ALTA form is not available in the State where the property is
located; (iv) subject only to the standard exclusions from coverage contained in
such policy and Permitted Exceptions which are acceptable to Cabot, with full
extended coverage over all standard and general exceptions, if available; and
(v) which policy shall contain such of the following endorsements requested by
Cabot, to the extent they are available in your State:
a. an ALTA 3.1 zoning endorsement;
b. a non-imputation endorsement;
c. an owner's comprehensive endorsement;
d. an access endorsement;
<PAGE>
e. a contiguity endorsement, if applicable; and
f. such other endorsements as Cabot may request.
If no instructions have been received by you from Cabot by ________,
the unrecorded deed should be returned to the undersigned. If you have any
questions, please call ________________________ at ( )_____________.
Yours very truly,
-2-
<PAGE>
EXHIBIT H
FORM OF BILL OF SALE AND ASSIGNMENT
This instrument is executed and delivered as of the ____ day of _________,
199___ pursuant to that certain Contribution Agreement ("Contribution
------------
Agreement") dated ____________, 199___, by and among __________________, a
_________
_____________________ ("Contributor"), party thereto, Cabot Partners Limited
-----------
Partnership, a Massachusetts limited partnership, Cabot Industrial Trust, a
Maryland real estate investment trust, and Cabot Industrial Properties, L.P., a
Delaware limited partnership ("Partnership"), covering the real property
-----------
described in Exhibit A attached hereto ("Real Property").
--------- -------------
1. Sale of Personalty. For good and valuable consideration, Contributor
------------------
hereby sells, assigns, transfers, sets over and conveys to Partnership the
following:
(a) Tangible Personalty. All of the right, title and interest of
-------------------
Contributor in and to any and all tangible personal property of every nature and
description and all replacements thereof owned by Contributor (or in which
Contributor has any interest) and used in connection with or relating to the
use, operation, maintenance, ownership and/or occupancy of the Real Property
including, without limitations: furniture; furnishings; art work; sculptures;
paintings; office equipment and supplies; interior appliances; machinery;
apparatus; landscaping; plants; lawn equipment; whether stored on or off the
Real Property, tools, materials and supplies, and maintenance equipment used in
connection with the use, operation, maintenance, ownership and/or occupancy of
the Real Property; shelving and partitions and any construction and finish
material and supplies not incorporated into the buildings and other improvements
located on or affixed to the Real Property and held for repairs and replacements
thereto, wherever located; and all of the personal property described on Exhibit
-------
B attached hereto; provided, however, that the conveyance contemplated herein
- - -------- -------
shall not include tools, supplies and equipment owned by the property manager of
the Real Property or any personal property owned by tenants under the Leases (as
hereinafter defined) affecting the Real Property (the property described in this
Section 1(a), collectively, the "Personal Property").
(b) Intangible Personalty. All of the right, title and interest of
---------------------
Contributor in and to any and all of the intangible personal property owned by
Contributor (or in which Contributor has any interest) and used in connection
with or relating to the Real Property or Personal Property to the extent
assignable in accordance with its terms or under applicable law including,
without limitation: all licenses, approvals, applications and permits issued or
approved by any governmental authority and relating to the use, operation,
ownership, occupancy and/or maintenance of the Real Property or the Personal
Property; utility arrangements; indemnities; warranties; guarantees; claims
against third parties; plans, drawings (including, without limitation,
architectural and engineering drawings); specifications; surveys; maps,
engineering reports and other technical descriptions; books and records;
insurance proceeds and condemnation awards; all trade names, trademarks,
trademark applications, copyrights, service marks, logos or other proprietary
information (including Contributor's interest in the current and
<PAGE>
past names of the Real Property), contract rights (but excluding Contributor's
obligations under contracts except those expressly assumed in this instrument);
telephone exchange numbers; and all other intangible rights used in connection
with or relating to the Real Property or the Personal Property.
2. Assignment of Leases and Contracts. For good and valuable
----------------------------------
consideration, Contributor hereby assigns, transfers, sets over and conveys to
Partnership, and Partnership hereby accepts, subject to the terms hereof, the
following:
(a) Leases. All of the landlord's right, title and interest in and to the
------
tenant leases ("Leases") covering the Real Property, as set forth on the Rent
------
Roll attached hereto as Exhibit C, which Contributor certifies is true and
---------
correct in all material respects as of the date stated thereon, and Partnership
hereby assumes all of the landlord's obligations under the Leases arising from
and after the Closing Date (as defined in the Contribution Agreement) but as to
the landlord's obligations with regard to security deposits and other deposits
only to the extent the security deposits have been transferred or credited to
Partnership;
(b) Tenant Improvement and Service Contracts. The tenant improvement and
----------------------------------------
service contracts described in Exhibit D attached hereto (the "Contracts"), and
--------- ---------
Partnership hereby assumes the obligations of Contributor under such service
contracts arising from and after the Closing Date.
3. Warranty. Contributor hereby represents and warrants to Partnership
--------
that it is the owner of the property described above, that such property is free
and clear of all liens, charges and encumbrances other than the Permitted
Exceptions (as defined in the Contribution Agreement), and Contributor warrants
and defends title to the above-described property unto Partnership, its
successors and assigns, against any person or entity claiming, or to claim, the
same or any part thereof by, through or under Contributor, subject only to the
Permitted Exceptions.
4. Indemnification. Subject to the provisions of the Contribution
---------------
Agreement, Contributor shall defend, indemnify and hold harmless Partnership
from and against any liability, damages, causes of action, expenses, and
attorneys' fees incurred by Partnership by reason of the failure of Contributor
to fulfill, perform, discharge, and observe its obligations with respect to the
Leases, Contracts or other intangibles arising on or before the date hereof.
Subject to the provisions of the Contribution Agreement, Partnership shall
defend, indemnify and hold harmless Contributor from and against any liability,
damages, causes of action, expenses, and attorneys' fees incurred by Contributor
by reason of the failure of Partnership to fulfill, perform, discharge, and
observe its obligations with respect to the Leases, Contracts or other
intangibles arising after the date hereof.
5. Limitation of Liability. Any obligation or liability of Partnership
-----------------------
whatsoever which may arise at any time under this Assignment or any obligation
or liability which may be incurred by Partnership pursuant to any other
instrument, transaction or undertaking contemplated hereby shall be satisfied,
if at all, out of Partnership's assets only. No obligation
-2-
<PAGE>
or liability shall be personally binding upon, nor shall resort for the
enforcement thereof be had to, the property of any of Partnership's trustees,
officers, employees, shareholders or agents, regardless of whether such
obligation or liability is in the nature of contract, tort or otherwise.
IN WITNESS WHEREOF, the undersigned have caused this Bill of Sale and
Assignment to be executed as of the date written above.
CONTRIBUTOR:
--------------------------------------------
By:
----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
PARTNERSHIP:
CABOT INDUSTRIAL PROPERTIES, L.P.
By: Cabot Industrial Trust, its general partner
By:
----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
[ACKNOWLEDGMENTS]
---------------
-3-
<PAGE>
EXHIBIT I
FORM OF EQUITY HOLDER CONSENT
The undersigned, being [a] [the sole] stockholder of ____________________,
a _______________ _______________ (the "Title Holding Entity"), in accordance
with the authority contained in the Title Holding Entity's charter, without the
formality of convening a meeting, hereby consents to the following actions and
waives any notice, whether provided by statute or otherwise, required to be
given in connection therewith:
RESOLVED, that the proposed merger of the Title Holding Entity with
and into Cabot Industrial Properties, L.P., on substantially the terms and
conditions set forth in the form of Contribution Agreement attached hereto,
and the other transactions contemplated therein, are hereby approved and
adopted in all respects; and
FURTHER RESOLVED, that the officers of the Title Holding Entity are
each hereby authorized and directed to execute and deliver the Contribution
Agreement in substantially the form attached hereto, with such changes
therein as the executing officer may approve, and all other agreements,
certificates, instruments and other documents in connection with the
transactions contemplated therein and to do all acts and make all payments,
for and in the name and on behalf of the Title Holding Entity, as they may
deem necessary or desirable, the execution of any such document or doing of
any such act or making of any such payment by any such officer to be
conclusive evidence of such officer's approval.
The undersigned, as an Equity Holder of the Title Holding Entity, hereby
agrees (i) to indemnify, defend and hold the Company and the Partnership
harmless from and against any liability, claim, demand, loss or damage, to the
same extent and in the same manner as the Title Holding Entity has so agreed in
Article 13 of the Contribution Agreement, provided that (a) the aggregate
--------
liability of the undersigned under Article 13 shall not exceed its IPO Proceeds
and the liability of the undersigned under Article 13 with respect to any
particular Property shall not exceed its percentage share of the Contribution
Amount with respect to such Property and provided, further, that, if the
-------- -------
undersigned elects to deliver Ownership Units to satisfy its indemnification
amount and delivers all Ownership Units received by it in the Consolidation to
the Company or the Partnership pursuant to Section 13.1 of the Contribution
Agreement, the undersigned shall have no further liability under Article 13, and
(ii) that any permitted transferee of the undersigned's Ownership Units shall
first also agree to be bound by the obligations described in clause (i) above
for so long as any such obligations shall exist under the Contribution Agreement
(although such agreement shall not release the undersigned from its
obligations). The undersigned acknowledges that a copy of this consent will be
delivered to the Company, the Partnership and Cabot Partners, who will be
relying on this consent in connection with entering into the Contribution
Agreement, and that this consent is hereby made a part of the Contribution
Agreement. This consent is being delivered in reliance on the representations,
warranties and covenants of Cabot Partners contained in Section 3.13 of the
Contribution Agreement. Capitalized terms used and not defined above are used as
defined in the Contribution Agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this consent as of this
_____ day of October, 1997.
[SIGNATURE OF EQUITY HOLDER]
ACKNOWLEDGED AND AGREED:
CABOT INDUSTRIAL TRUST
By:_____________________
Name:___________________
Title:__________________
CABOT INDUSTRIAL PROPERTIES, L.P.
By: Cabot Industrial Trust,
its general partner
By:____________________
Name:__________________
Title:_________________
CABOT PARTNERS LIMITED PARTNERSHIP
By: Cabot Realty Advisors Corporation,
its general partner
By:____________________
Name:__________________
Title:_________________
-2-
<PAGE>
EXHIBIT J
FORM OF BILL OF SALE, ASSIGNMENT AND CONVEYANCE
WHEREAS, Cabot Industrial Properties, L.P., a Delaware limited partnership
(the "Company"), and Cabot Partners Limited Partnership, a Massachusetts limited
partnership ("Cabot Partners"), and certain others have entered into a
Contribution Agreement dated as of __________, 1997 (which, together with the
exhibits and schedules thereto, is hereinafter referred to as the "Contribution
------------
Agreement"); and
- ---------
WHEREAS, pursuant to Section 2.5 of the Contribution Agreement, Cabot
Partners has agreed to sell, transfer and convey to the Company the Cabot
Partner Assets (as defined in the Contribution Agreement).
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Cabot Partners does hereby grant, bargain, sell, transfer, convey,
assign and deliver to the Company, subject to the terms of the Contribution
Agreement, all of the Cabot Partner Assets.
TO HAVE AND TO HOLD unto the Company, its successors and assigns forever,
all of the Cabot Partner Assets hereby granted, bargained, sold, transferred,
conveyed, assigned and delivered, free and clear of all liens, charges, pledges,
security interests or other encumbrances, except as provided in the Contribution
Agreement and the schedules thereto, and subject to the terms thereof.
From time to time after the date hereof, Cabot Partners, without further
consideration, will execute, deliver and record or cause to be executed,
delivered and recorded such other instruments of conveyance, assignment,
transfer and delivery and will take such other actions as the Company may
request in order to more effectively convey, assign, transfer and deliver to the
Company, and to place the Company in possession and control of, any of the Cabot
Partner Assets, or to enable the Company to exercise and enjoy all rights and
benefits of Cabot Partners with respect thereto.
This instrument shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to the principles of conflict of
laws.
<PAGE>
IN WITNESS WHEREOF, Cabot Partners and the Company have caused this
instrument to be executed and delivered this ____ day of __________, 1997.
CABOT PARTNERS LIMITED PARTNERSHIP
By: Cabot Realty Advisors Corporation, its
general partner
By:_______________________________
Name:_____________________________
Title:____________________________
Accepted:
CABOT INDUSTRIAL PROPERTIES, L.P.
By: Cabot Industrial Trust, its
general partner
By:_____________________________
Name:___________________________
Title:__________________________
-2-
<PAGE>
EXHIBIT K
FORM OF AUDIT LETTER
__________________________
__________________________
__________________________
Dear Sirs:
We are writing at your request to confirm our understanding that your audit
of the statement of operating income for the year ended ______________, 199_,
was made for the purpose of expressing an opinion as to whether the statement of
operating income presents fairly, in all material respects, the results of
operations of [NAME OF PROJECT] in conformity with generally accepted accounting
principles. These representations are made exclusively to [AUDITOR] and not to
the buyer of the Project or any other third party. In connection with your
______________, 199_ audit we confirm, to the best of our knowledge and belief,
with respect to our daily operations and without independent inquiry or
investigation, the following representations made during your audits:
1. We have made available to you all financial records and related data
concerning this Project, which are in our possession.
2. We are not aware of any:
a. Irregularities involving any member of management or employees that
could have a materially adverse effect on the statement of operating
income.
b. Notices of violations of laws or regulations, the effects of which
should be considered for disclosure in the financial statements or as
a basis for recording a loss contingency.
[c. Material liabilities, gain or loss contingencies or other transactions
(including oral and written guarantees) that are required to be but
have not been accrued or disclosed).]
d. Material events that have occurred subsequent to _____________, 199_
that would require material adjustment to the statement of operating
income.
3. The Company has complied with all material aspects of contractual
agreements relating to the Project (e.g. management contracts) that would
have a material affect on the statement of operating income in the event of
noncompliance.
4. All significant payments to affiliated companies of the undersigned have
been properly recorded or disclosed in the financial statements.
Further, we acknowledge that the owner signing this letter is responsible for
the fair presentation in the financial statements of the results of operations
in conformity with generally accepted accounting principles.
[ ]
By: ________________________________
Name:_______________________________
Title:______________________________
<PAGE>
SCHEDULE A
----------
Properties; Descriptions and Contribution Amounts per Title Holding Entity
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRIBUTION
ENTITY PROPERTY CITY STATE AMOUNT
- ------ -------- ---- ----- ------
<S> <C> <C> <C> <C>
West Coast Industrial, LLC 2350 Artesia Avenue Fullerton CA $ 2,350,000
West Coast Industrial, LLC 2330 Artesia Avenue Fullerton CA $ 1,970,000
West Coast Industrial, LLC 2337 Commonwealth Avenue Fullerton CA $ 2,000,000
West Coast Industrial, LLC 6030 Avenida Encinas Carlsbad CA $ 7,350,000
West Coast Industrial, LLC 3200 Reed Avenue West Sacramento CA $ 3,970,000
West Coast Industrial, LLC 3250 Reed Avenue West Sacramento CA $ 3,880,000
West Coast Industrial, LLC 1212 E. Howell Avenue Anaheim CA $ 1,080,000
West Coast Industrial, LLC 1222 E. Howell Avenue Anaheim CA $ 3,450,000
West Coast Industrial, LLC 6020 Avenida Encinas Carlsbad CA $ 6,210,000
------------
TOTAL $ 32,260,000
C-M Howe Properties, L.P. 8055 N. State Rd #9 Howe IN $ 7,170,000
C-M Taunton Investment Company 75 John Hancock Road Taunton MA $ 2,130,000
C-M Michigan Investment Co. 3710 Sysco Court Grand Rapids MI $ 2,110,000
C-M Madison Investment Co. 555 Industrial Drive Madison MS $ 6,030,000
C-M Monroe Investment Co. U.S. Hwy. 74 & 1902 Airport Rd. Monroe NC $ 8,410,000
C-M Harrisburg Investment Co. 5045 Ritter Rd. #15 Mechanicsburg PA $ 2,170,000
------------
TOTAL $ 28,020,000
CP REPROP Corp. 601 South 55th Avenue Phoenix AZ $ 2,310,000
CP REPROP Corp. 431 North 47th Avenue Phoenix AZ $ 4,200,000
CP REPROP Corp. 4 South 84th Ave. Tolleson AZ $ 7,610,000
CP REPROP Corp. 602 South 63rd Ave. Phoenix AZ $ 5,090,000
CP REPROP Corp. 101 N. 104th Ave. Tolleson AZ $ 7,320,000
CP REPROP Corp. 13333 Lakefront Drive Earth City MO $ 6,510,000
CP REPROP Corp. 3800 Twin Creek Drive Columbus OH $ 4,170,000
CP REPROP Corp. 2700 International Street Columbus OH $ 3,210,000
CP REPROP Corp. 3965 Pilot Drive Memphis TN $ 7,730,000
------------
TOTAL $ 48,150,000
CP Investment Properties, Inc. 515 East Dyer Road Santa Ana CA $ 14,690,000
CP Investment Properties, Inc. 185 Valley Drive Brisbane CA $ 1,220,000
CP Investment Properties, Inc. 105-115 Park Lane Brisbane CA $ 2,710,000
CP Investment Properties, Inc. 240 Valley Drive Brisbane CA $ 640,000
CP Investment Properties, Inc. 41-43 Park Lane Brisbane CA $ 1,160,000
CP Investment Properties, Inc. 60 Park Lane Brisbane CA $ 2,360,000
CP Investment Properties, Inc. 120 Park Lane Brisbane CA $ 2,010,000
CP Investment Properties, Inc. 235 Valley Drive Brisbane CA $ 1,790,000
CP Investment Properties, Inc. 280 Old County Rd. Brisbane CA $ 1,690,000
CP Investment Properties, Inc. 50-58 Cypress Lane Brisbane CA $ 2,130,000
CP Investment Properties, Inc. 145 Park Lane Brisbane CA $ 3,260,000
CP Investment Properties, Inc. 165 Valley Drive Brisbane CA $ 1,190,000
CP Investment Properties, Inc. 1291 & 1391 South Vintage Ave. Ontario CA $ 15,970,000
CP Investment Properties, Inc. 280 Valley Drive Brisbane CA $ 2,030,000
CP Investment Properties, Inc. 30955 Huntwood Ave. Hayward CA $ 4,630,000
CP Investment Properties, Inc. 91-99 Park Lane Brisbane CA $ 2,110,000
CP Investment Properties, Inc. 150-159 Park Lane Brisbane CA $ 1,350,000
CP Investment Properties, Inc. 5401 East Jurupa St. Ontario CA $ 3,920,000
</TABLE>
- Page 1 -
<TABLE>
<S> <C> <C> <C> <C>
CP Investment Properties, Inc. 40 Pepes Farm Road Milford CT $ 8,300,000
CP Investment Properties, Inc. 4500 Western Avenue Lisle IL $ 3,390,000
CP Investment Properties, Inc. 6220 West 73rd St. Bedford Park IL $ 10,600,000
CP Investment Properties, Inc. 777 Mark Street Wood Dale IL $ 9,270,000
CP Investment Properties, Inc. 6112 West 73rd St. Bedford Park IL $ 6,700,000
CP Investment Properties, Inc. 1155 Harvester Drive Chicago IL $ 7,230,000
CP Investment Properties, Inc. 2400 Arthur Avenue Elk Grove IL $ 7,330,000
CP Investment Properties, Inc. 6100 West 73rd St. Bedford Park IL $ 6,770,000
CP Investment Properties, Inc. 7453 Empire Drive Florence KY $ 3,000,000
CP Investment Properties, Inc. 19 Technology Drive Auburn MA $ 2,070,000
CP Investment Properties, Inc. 114 First Avenue Needham MA $ 7,450,000
CP Investment Properties, Inc. 7970 Tar Bay Drive Jessup MD $ 7,980,000
CP Investment Properties, Inc. 8332 Bristol Court Jessup MD $ 3,540,000
CP Investment Properties, Inc. 7951 Oceano Avenue Jessup MD $ 9,620,000
CP Investment Properties, Inc. 8306 Patuxent Range Rd. Jessup MD $ 3,460,000
CP Investment Properties, Inc. 502 Birch Creek Rd. Bridgeport NJ $ 8,280,000
CP Investment Properties, Inc. 912 113th Street Arlington TX $ 2,580,000
CP Investment Properties, Inc. 850 North Lake Drive Coppell TX $ 5,820,000
CP Investment Properties, Inc. 455 Airline Drive Coppell TX $ 2,550,000
CP Investment Properties, Inc. 2055 Diplomat Drive Carrollton TX $ 2,610,000
CP Investment Properties, Inc. 555 Airline Drive Coppell TX $ 4,770,000
CP Investment Properties, Inc. Oakville Industrial Park Alexandria VA $ 20,170,000
------------
TOTAL $208,350,000
The Four B's 2000 Landstreet Rd. Orlando FL $ 14,580,000
------------
TOTAL $ 14,580,000
Knickerbocker Properties, Inc. XI 8170 Holton Drive Erlanger KY $ 10,460,000
Knickerbocker Properties, Inc. XI 510810 Reames Road Charlotte NC $ 3,310,000
Knickerbocker Properties, Inc. XI 57600 Kingspointe Pkwy Orlando FL $ 3,390,000
Knickerbocker Properties, Inc. XV 1812 High Grove Lane Naperville IL $ 3,900,000
Knickerbocker Industrial Properties East L.P. 4 South Middlesex Ave. Monroe Township NJ $ 7,110,000
Knickerbocker Industrial Properties East L.P. 21 South Middlesex Ave. Monroe Township NJ $ 8,150,000
Knickerbocker Industrial Properties East L.P. 500 Pierce Street Franklin Twsp NJ $ 8,150,000
Knickerbocker Properties, Inc. II(1) Kent West Corp. Pk\Bldgs A-E Kent WA $ 19,280,000
Knickerbocker Properties, Inc. XXXI 140 Ambassador Road Naperville IL $ 8,060,000
Knickerbocker Properties, Inc. XXXI 555 Remington Street Bolingbrook IL $ 8,480,000
Knickerbocker NJ Industrial Properties L.P. 329 Herrod Blvd. S. Brunswick Twsp. NJ $ 18,100,000
Knickerbocker Properties, Inc. XXXII 4650 Lake Forest Drive Blue Ash OH $ 5,020,000
Knickerbocker Properties, Inc. XXXII 4750 Lake Forest Drive Blue Ash OH $ 6,760,000
Knickerbocker Properties, Inc. XXXII 4601 Creek Road Blue Ash OH $ 3,680,000
Knickerbocker Properties, Inc. XXX 2201 Luna Road Carrollton TX $ 7,170,000
------------
TOTAL $121,020,000
</TABLE>
(1) Knickerbocker Properties, Inc., II shall not be a party to this Agreement
and the Properties listed on this Schedule A as being contributed by it to the
Partnership shall not be contributed to the Company or the Partnership unless
the contribution of such Properties is approved by the Board of NYSTRS on or
before November 17, 1997 or such later date to which the Company may agree.
- Page 2 -
<TABLE>
<S> <C> <C> <C> <C>
The Prudential Insurance Company of America(1) 1777 Vintage Ave. Ontario CA $ 9,450,000
The Prudential Insurance Company of America 1700 Westgate Pwy Fulton Co. GA $ 6,420,000
The Prudential Insurance Company of America 2550 John Glen Avenue Columbus OH $ 6,860,000
The Prudential Insurance Company of America World Park 25/9842 Int'l Blvd. Union Twp. OH $ 6,570,000
The Prudential Insurance Company of America 2626 Port Road Columbus OH $ 4,760,000
The Prudential Insurance Company of America World Park 24/9756 Int'l. Blvd. Union Twp. OH $ 5,650,000
The Prudential Insurance Company of America South Park 2/1910 Int'l Way Hebron KY $ 5,610,000
------------
TOTAL $ 45,320,000
Keystone - Illinois Property Holding Corp. 440 Medinah Rd. Chicago IL $ 20,720,000
Keystone - New Jersey Property Holding Corp. 150 Pulaski St Bayonne NY $ 7,409,000
Keystone - New Jersey Property Holding Corp. 201 Port Jersey Blvd Jersey City NJ $ 7,250,000
Keystone - New Jersey Property Holding Corp. 150 Industrial Blvd. Jersey City NJ $ 9,690,000
Keystone - New Jersey Property Holding Corp. 2 Colony Rd. Jersey City NJ $ 8,760,000
Keystone - New Jersey Property Holding Corp. 107 Industrial Dr. Jersey City NJ $ 1,770,000
Keystone - New Jersey Property Holding Corp. 202 Port Jersey Blvd Jersey City NJ $ 17,560,000
Keystone - New Jersey Property Holding Corp. 108 Industrial Blvd. Jersey City NJ $ 5,250,000
Keystone - New Jersey Property Holding Corp. 1 Colony Rd. Jersey City NJ $ 4,570,000
Keystone - Ohio Property Holding Corp. 1616-1634 Westbelt Drive Columbus OH $ 5,780,000
Keystone - Ohio Property Holding Corp. 4401-4419 Equity Drive Columbus OH $ 5,330,000
Keystone - Ohio Property Holding Corp. 1901-1919 Dividend Drive Columbus OH $ 4,320,000
Keystone - Ohio Property Holding Corp. 4343 Equity Drive Columbus OH $ 4,790,000
Keystone - Ohio Property Holding Corp. 1999 Westbelt Drive Columbus OH $ 8,700,000
------------
TOTAL $111,899,000
State of Wisconsin Investment Board 602 S. Rockefeller Ave. Ontario CA $ 5,570,000
State of Wisconsin Investment Board 9545 Santa Anita Avenue Rancho Cucamonga CA $ 7,770,000
State of Wisconsin Investment Board Pk VII/2901 Titan Row Orlando FL $ 8,900,000
State of Wisconsin Investment Board Pk VIII/2900 Titan Row Orlando FL $ 13,000,000
State of Wisconsin Investment Board Pk VI/7455-7488 Brokerage Dr. Orlando FL $ 4,020,000
State of Wisconsin Investment Board Pk III/8259 Exchange Dr. Orlando FL $ 5,210,000
State of Wisconsin Investment Board Pk V/7550-7584 Brokerage Dr Orlando FL $ 5,000,000
State of Wisconsin Investment Board Pk IV/7451-7469 Brokerage Dr Orlando FL $ 3,770,000
State of Wisconsin Investment Board 500 Memorial Dr. Franklin Twsp NJ $ 6,940,000
------------
TOTAL $ 60,180,000
GRAND TOTAL $669,779,000
</TABLE>
(1) The Prudential Insurance Company of America ("Prudential") shall not be a
party to this Agreement and the Properties listed on this Schedule A and on
Schedule 2.3 as being contributed to the Company by Prudential shall not be
contributed to the Company or the Partnership unless the contribution of such
Properties is approved by Prudential's Investment Committee on or before October
21, 1997 or such later date to which the Company may agree.
- Page 3 -
<PAGE>
SCHEDULE B
----------
Cabot Partner Contracts and Contribution Amount with Respect to Cabot Partner
- -----------------------------------------------------------------------------
Assets
- ------
{List of Contracts omitted}
Contribution amount with respect to Cabot Partners Assets: $37,000,000
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1.1
ACQUISITION PROPERTIES
<S> <C> <C> <C> <C>
Knickerbocker NJ Industrial Properties L.P. 329 Herrod Blvd. S. Brunswick Twsp NJ $18,100,000
Knickerbocker Properties, Inc. XXXII 4650 Lake Forest Drive Blue Ash OH $5,020,000
Knickerbocker Properties, Inc. XXXII 4750 Lake Forest Drive Blue Ash OH $6,760,000
Knickerbocker Properties, Inc. XXXII 4601 Creek Road Blue Ash OH $3,680,000
Knickerbocker Properties, Inc. XXX 2201 Luna Road Carrollton TX $7,170,000
-----------
TOTAL $40,730,000
</TABLE>
-Page 1-
<PAGE>
SCHEDULE 1.2
------------
Assumed Mortgage Debt
---------------------
<TABLE>
<CAPTION>
Amount Due
Original on June 30
Description Amount 1997
------------------------------------------------ --------- ----------
<C> <S> <C> <C>
1) Loan from John Hancock Mutual Life Insurance
Company to C-M Madison Investment Company 4,000,000 3,659,734
2) Loan from John Hancock Mutual Life Insurance
Company to C-M Monroe Investment Company 5,850,000 5,331,465
3) Loan from John Hancock Mutual Life Insurance
Company to C-M Howe Properties, L.P. 5,000,000 4,518,190
4) Loan from John Hancock Mutual Life Insurance
Company to C-M Harrisburg Investment Company 1,600,000 1,521,600
5) Loan from John Hancock Mutual Life Insurance
Company to C-M Michigan Investment Company 2,450,000 2,256,464
6) Loan from John Hancock Mutual Life Insurance
Company to C-M Taunton Investment Company 1,650,000 1,584,166
</TABLE>
1
<PAGE>
SCHEDULE 1.3
------------
Ownership Unit Calculation Example
----------------------------------
Contributor "A" Adjusted Contribution Amount = $100,000,000
Adjusted Contribution Amount of All Contributors and Cabot Partners =
$900,000,000
Number of Common Shares Sold in IPO = 5,000,000 Shares
Percentage Ownership Interest of IPO Shares in Partnership = 10%
Calculation:
100,000,000 x ( 5,000,000-5,000,000) = 5,000,000 Shares
----------- ----------
900,000,000 .10 To Contributor "A"
1
<PAGE>
SCHEDULE 1.4
------------
Current Title Policies
----------------------
{List ot title policies omitted}
<PAGE>
Schedule 1.5
------------
Exempt Equity Holders
---------------------
- ----------------------------------------- ----------------------------------
Name of Equity Holder Subject to ERISA Exemption Relied Upon
- -------------------------------------- ---------------------
- ------------------------------------------------------------------------------
IBM Pension Trust PTE 84-14,
49 Fed. Reg. 9494 (March 13, 1984)
- ------------------------------------------------------------------------------
The Prudential Insurance Company of PTE 84-14
America 49 Fed. Reg. 9494 (March 13, 1984)
- ------------------------------------------------------------------------------
1
<PAGE>
SCHEDULE 2.1
------------
Partnership Merger Title Holding Entities and Equity Holders
------------------------------------------------------------
<TABLE>
<CAPTION>
Percentage
Partnership Merger Contributor Title Holding Entities Shares
- ------------------------------ ---------------------- ------
<S> <C> <C>
IBM Retirement Plan Trust CP Investment Properties, Inc. 100%
Leland Stanford Jr. Endowment Fund CP REPROP Corp. 100%
Pennsylvania Public School Employes' Keystone - New Jersey Property Holding
Retirement System Corp. 100%
Keystone - Ohio Property Holding Corp. 100%
Keystone - Illinois Property Holding Corp. 100%
New York State Teachers' Retirement System Knickerbocker Properties, Inc. II (1) 100%
Knickerbocker Properties, Inc. XXX 100%
Knickerbocker Properties, Inc. XXXI 100%
Knickerbocker Properties, Inc. XXXII 100%
Knickerbocker Properties, Inc. XIII Knickerbocker NJ Industrial Properties, L.P. 1% GP
Interest
New York State Teachers' Retirement System Knickerbocker NJ Industrial Properties, L.P. 99% LP
Interest
</TABLE>
(1) Knickerbocker Properties, Inc. II shall not be a party to this Agreement and
the Properties listed on Schedule A as being contributed by it to the
Partnership shall not be contributed to the Company or the Partnership unless
the contribution of such Properties is approved by the Board of NYSTRS on or
before November 17, 1997 or such later date to which the Company may agree.
<PAGE>
SCHEDULE 2.2
------------
Stock Contributors and Title Holding Corporations
-------------------------------------------------
[In the event the revenue ruling contemplated by Section 2.1 is not favorably
issued substantially in the manner requested prior to the determination time,
the Stock Contributors will consist of the Equity Holders of the Title Holding
Corporations Listed on Schedule 2.1]
<PAGE>
SCHEDULE 2.3
------------
Property Contributors
---------------------
<TABLE>
<CAPTION>
Title Holding Entity Properties
- -------------------- ----------
<S> <C>
State of Wisconsin Investment Board 602 S. Rockefeller Ave., Ontario, CA
9545 Santa Anita Avenue, Rancho Cucamonga, CA
Pk VII/2900 Titan Row, Orlando, FL
Pk VIII/2901 Titan Row, Orlando, FL
Pk VI/7455-7488 Brokerage Dr., Orlando, FL
Pk III/8259 Exchange Dr., Orlando, FL
Pk V/7550-7584 Brokerage Dr, Orlando, FL
Pk IV/7451-7469 Brokerage Dr, Orlando, FL
500 Memorial Drive, Franklin Township, NJ
(1) The Prudential Insurance Company of America 1777 Vintage Ave., Ontario, CA
1700 Westgate Pwy, Fulton County, GA
2550 John Glen Avenue, Franklin County, OH
2626 Port Road, Franklin County, OH
1910 International Way, Hebron, KY
9842 International Road, Cincinnati, OH
9756 International Road, Cincinnati, OH
Knickerbocker Properties, Inc. XI 7600 Kingspointe Ctr, Orlando, FL
10810 Reames Road, Charlotte, NC
8170 Holton Drive, Erlanger, KY
Knickerbocker Properties, Inc. XV 1812 High Grove, Naperville, IL
Knickerbocker Industrial Properties East, LP 4 South Middlesex, Cranbury, NJ
21 South Middlesex, Cranbury, NJ
500 Pierce Street, Franklin, NJ
The Four B's 2000 Land Street, Orlando, FL
West Coast Industrial, LLC 2350 Artesia Avenue, Fullerton, CA
2330 Artesia Avenue, Fullerton, CA
2337 Commonwealth Avenue, Fullerton, CA
6030 Avenida Encinas, Carlsbad, CA
3200 Reed Avenue, West Sacramento, CA
3250 Reed Avenue, West Sacramento, CA
1212 E. Howell Avenue, Anaheim, CA
1222 E. Howell Avenue, Anaheim, CA
6020 Avenida Encinas, Carlsbad, CA
(1) The Prudential Insurance Company of America ("Prudential") shall not be a
party to this agreement and the Properties listed on Schedule A and this
Schedule 2.3 as being contributed to the Company by Prudential shall not be
contributed to the Company or the Partnership unless the contribution of such
Properties is approved by Prudential's Investment Committee on or before October
21, 1997 or such later date to which the Company may agree.
</TABLE>
<PAGE>
SCHEDULE 2.4
------------
Partnership Interest Contributors and Title Holding Partnerships
----------------------------------------------------------------
<TABLE>
<S> <C>
Partnership Interest Contributor Title Holding Partnership
- -------------------------------- -------------------------
C-M Holdings Limited Partnership C-M Michigan Investment Company
C-M Monroe Investment Company
C-M Madison Investment Company
C-M Harrisburg Investment Company
C-M Taunton Investment Company
C-M Howe Investment Company C-M Howe Properties L.P.
C-M Michigan Associates Limited Partnership C-M Michigan Investment Company
C-M Monroe Associates Limited Partnership C-M Monroe Investment Company
C-M Madison Associates Limited Partnership C-M Madison Investment Company
C-M Harrisburg Associates Limited Partnership C-M Harrisburg Investment Company
C-M Taunton Associates Limited Partnership C-M Taunton Investment Company
</TABLE>
<PAGE>
SCHEDULE 4.1
------------
Persons Having Knowledge for Contributors and Title Holding Entities
--------------------------------------------------------------------
<TABLE>
<S> <C>
Contributor or Equity Individual
- --------------------- ----------
SWIB Steve Spiekerman
Charles Carpenter
IBM Kyle Escherich
NYSTRS James Campbell
PSERS Charles Spiller
Prudential John Maurer
Stanford Larry Owen
ARGO John Rivard
National Freight Sid Brown
</TABLE>
<PAGE>
SCHEDULE 4.9
------------
Environmental Reports
---------------------
{Reports omitted}
<PAGE>
SCHEDULE X
----------
Disclosure Letters
------------------
{Disclosure Letters omitted}
<PAGE>
EXHIBIT 5.1
January 22, 1998
The Board of Trustees
Cabot Industrial Trust
Two Center Plaza, #200
Boston, MA 02108-1906
Re: Registration Statement on Form S-11 (File No. 333-38383)
Ladies and Gentlemen:
We have acted as counsel to Cabot Industrial Trust, a Maryland real estate
investment trust (the "Company"), in connection with its offering of up to
7,500,000 common shares of beneficial interest (the "Common Shares") of the
Company, $.01 par value per share, as described in the Registration Statement on
Form S-11 (together with all amendments thereto, the "Registration Statement")
filed with the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended, to which this opinion is an exhibit.
Capitalized terms used herein, unless otherwise defined, shall have the meanings
set forth in the Registration Statement.
As counsel to the Company, we have examined originals or copies certified
to our satisfaction as being true and complete copies of the Company's
Declaration of Trust, the Company's Bylaws, resolutions of the Company's Board
of Trustees and such records, certificates and other documents and such
questions of law as we have considered necessary or appropriate for the purpose
of this opinion. As to certain facts relevant to our opinion, we have relied
upon certificates of public officials and officers of the Company. In rendering
such opinion, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity to
authentic original documents of all documents submitted to us as copies.
Based upon and subject to the foregoing, we are of the opinion that the
issuance of the Common Shares has been duly authorized by all necessary
corporate action and, that when and if delivered and sold in the manner
described in the Registration Statement, the Common Shares will be validly
issued, fully paid and nonassessable.
<PAGE>
Cabot Industrial Trust
January 22, 1998
Page 2
Insofar as the foregoing opinion involves matters governed by Maryland law,
we have relied, with your approval, upon the opinion of the law firm of Ballard
Spahr Andrews & Ingersoll, a copy of which is attached as Exhibit A, and our
opinion is subject to the assumptions, limitations and qualifications set forth
therein.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to all references to our firm in the Registration Statement.
Very truly yours,
MAYER, BROWN & PLATT
<PAGE>
EXHIBIT A TO EXHIBIT 5.1
[LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL]
FILE NUMBER
864196
January 22, 1998
Cabot Industrial Trust
Two Center Plaza, Suite 200
Boston Massachusetts 02108
Re: Registration Statement on Form S-11
Registration No. 333-38383
------------------------------------
Ladies and Gentlemen:
We have served as Maryland counsel to Cabot Industrial Trust, a
Maryland real estate investment trust (the "Company"), in connection with
certain matters of Maryland law arising out of the registration of up to
7,500,000 common shares (the "Shares") of beneficial interest, $.01 par value
per share, of the Company (the "Common Shares"), covered by the above-referenced
Registration Statement, and all amendments thereto (the "Registration
Statement"), under the Securities Act of 1933, as amended (the "1933 Act").
Unless otherwise defined herein, capitalized terms used shall have the meanings
assigned to them in the Registration Statement.
In connection with our representation of the Company, and as a basis
for the opinion hereinafter set forth, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of the following
documents (hereinafter collectively referred to as the "Documents"):
1. The Registration Statement and the related form of prospectus
included therein in the form in which it was transmitted to the Securities and
Exchange Commission (the "Commission") under the 1933 Act;
2. The Declaration of Trust of the Company, certified as of a recent
date by the State Department of Assessments and Taxation of Maryland (the
"SDAT");
<PAGE>
Cabot Industrial Trust
January 22, 1998
Page 2
3. The Bylaws of the Company, certified as of a recent date by its
Secretary.
4. Resolutions adopted by the Board of Trustees and shareholders of
the Company relating to the sale, issuance and registration of the Shares,
certified as of a recent date by the Secretary of the Company;
5. The form of certificate evidencing a Common Share, certified as of
a recent date by the Secretary of the Company.
6. A certificate of the SDAT as to the good standing of the Company,
dated January 22, 1998;
7. A certificate executed by Neil E. Waisnor, Secretary of the
Company, dated January 22, 1998;
8. Such other documents and matters as we have deemed necessary or
appropriate to express the opinion set forth in this letter, subject to the
assumptions, limitations and qualifications stated herein.
In expressing the opinion set forth below, we have assumed, and so far
as is known to us there are no facts inconsistent with, the following:
1. Each of the parties (other than the Company) executing any of the
Documents has duly and validly executed and delivered each of the Documents to
which such party is a signatory, and such party's obligations set forth therein
are legal, valid and binding.
2. Each individual executing any of the Documents on behalf of a
party (other than the Company) is duly authorized to do so.
3. Each individual executing any of the Documents, whether on behalf
of such individual or any other person, is legally competent to do so.
4. All Documents submitted to us as originals are authentic. All
Documents submitted to us as certified or photostatic copies conform to the
original documents. All signatures on all such Documents are genuine. All
public records reviewed or relied upon by us or on our behalf are true and
complete. All statements and information contained in the Documents are true
and complete. There are no oral or written modifications or amendments to the
Documents, and there has been no waiver of any of the provisions of the
Documents, by action or conduct of the parties or otherwise.
5. Prior to the issuance of the Shares, the Board of Trustees, or a
duly authorized committee of the Board of Trustees, will adopt resolutions
satisfying the requirements of the Maryland General Corporation Law with respect
to the issuance of shares of stock.
The phrase "known to us" is limited to the actual knowledge, without
independent inquiry, of the lawyers at our
<PAGE>
Cabot Industrial Trust
January 22, 1998
Page 3
firm who have performed legal services in connection with the issuance of this
opinion.
Based upon the foregoing, and subject to the assumptions, limitations
and qualifications stated herein, it is our opinion that:
1. The Company is a real estate investment trust duly formed and
existing under and by virtue of the laws of the State of Maryland and is in good
standing with the SDAT.
2. The Shares have been duly authorized and, when issued, sold and
delivered against payment therefor in the manner described in the Registration
Statement and in accordance with the resolutions of the Board of Trustees of
the Company authorizing their issuance, will be validly issued, fully paid and
nonassessable.
The foregoing opinion is limited to the substantive laws of the State
of Maryland and we do not express any opinion herein concerning any other law.
We express no opinion as to compliance with the securities (or "blue sky") laws
or the real estate syndication laws of the State of Maryland.
We assume no obligation to supplement this opinion if any applicable
law changes after the date hereof or if we become aware of any fact that might
change the opinion expressed herein after the date hereof.
This opinion is being furnished to you for submission to the
Commission as an exhibit to the Registration Statement, and, accordingly, may
not be relied upon by, quoted in any manner to, or delivered to any other person
or entity (except Mayer, Brown & Platt, counsel to the Company) without, in each
instance, our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of the name of our firm therein. In giving
this consent, we do not admit that we are within the category of persons whose
consent is required by Section 7 of the 1933 Act.
Very truly yours,
Ballard Spahr Andrews & Ingersoll
<PAGE>
Exhibit 8.1
January 22, 1998
Cabot Industrial Trust
Two Center Plaza, Suite 200
Boston, Massachusetts 02108
Re: Partnership Classification; Status
as a Real Estate Investment Trust ("REIT");
Information in the Prospectus under
"FEDERAL INCOME TAX CONSEQUENCES"
--------------------------------------------
Dear Sir or Madam:
In connection with the offering of Common Shares/1/ in Cabot Industrial
Trust, a Maryland real estate investment trust (the "Company"), pursuant to the
Registration Statement on Form S-11 (File No. 333-38383), filed with the
Securities Exchange Commission on October 21, 1997, as amended (the
"Registration Statement"), you have requested our opinions concerning (i) the
treatment of the Operating Partnership as a partnership for Federal income tax
purposes, and not as an association taxable as a corporation; (ii) the
qualification and taxation for Federal income tax purposes of the Company as a
REIT; and (iii) the information in the Prospectus under the heading "FEDERAL
INCOME TAX CONSEQUENCES."
In connection with such offering, as counsel to the Company, we assisted in
the preparation of the Amended and Restated Partnership Agreement of Cabot
Industrial Properties, L.P., a Delaware limited partnership (the "Operating
Partnership"), as well as in the preparation of the Prospectus and in the
formation of the Company and the Management Company. In formulating our
opinions, we have reviewed and relied upon the partnership agreement, the
Declaration of Trust of the Company, the Articles and By-Laws of the Management
Company, the Contribution Agreement
- ------------------------
/1/ Unless otherwise specifically defined herein, all capitalized terms have
respective the meanings assigned to them in the Prospectus (the
"Prospectus") as contained in the Registration Statement.
<PAGE>
Cabot Industrial Trust
January 22, 1998
Page 2
entered into with respect to the Formation Transactions, and the Prospectus
(collectively, the "Organizational Documents").
In addition, we have relied upon the Company's certificate (the "Officer's
Certificate"), executed by a duly appointed officer of the Company, setting
forth certain representations relating to the organization and proposed
operation of the Company, the Operating Partnership, and the Management Company.
For purposes of our opinions, we have not made an independent investigation of
the facts set forth in the Officer's Certificate or in the Organizational
Documents. We have, consequently, relied upon your representations that the
information presented in such documents accurately and completely describes all
material facts. No facts have come to our attention, however, that would cause
us to question the accuracy or completeness of such facts or documents in a
material way.
In rendering these opinions, we have assumed that the Formation
Transactions will be consummated in accordance with the operative Organizational
Documents. In addition, our opinions are based on the correctness of the
following specific assumptions: (i) the Company, the Operating Partnership, and
the Management Company will each be operated in the manner described in the
applicable partnership agreement or other Organizational Documents and in the
Prospectus, and all terms and provisions of such agreements and documents will
be complied with by all parties thereto; and (ii) each partner in the Operating
Partnership has been motivated in acquiring its partnership interest by its
anticipation of economic rewards apart from tax considerations.
Based upon and subject to the foregoing, it is our opinion that:
1. The Operating Partnership will be treated, for Federal income tax
purposes, as a partnership, and not as an association taxable as a corporation.
2. Beginning with the Company's taxable year ending December 31, 1998,
and assuming that the actions contemplated in the Prospectus are completed in a
timely fashion, the Company has been organized in conformity with the
requirements for qualification as a REIT under the Code, and the Company's
proposed method of operation, as described in the Prospectus and as represented
in the Officer's Certificate, will enable it to satisfy the requirements for
qualifications as a REIT.
<PAGE>
Cabot Industrial Trust
January 22, 1998
Page 3
3. The information in the Prospectus under the heading "FEDERAL INCOME
TAX CONSEQUENCES," to the extent that it constitutes matters of law, summaries
of legal matters, or legal conclusions, has been reviewed by us and is correct
in all material respects.
Our Opinion is based on the Code, the regulations promulgated thereunder
by the Treasury Department, and the interpretations of the Code and such
regulations by the courts and the Internal Revenue Service, all as they are in
effect and exist at the date of this letter. It should be noted that statutes,
regulations, judicial decisions, and administrative interpretations are subject
to change at any time and, in some circumstances, with retroactive effect. A
material change that is made after the date hereof in any of the foregoing bases
for our opinions, could affect our conclusions. Other than as expressly stated
above, we express no opinion on any issue relating to the Operating Partnership,
the Company or to any investment therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of the name of our firm therein and under
the caption "FEDERAL INCOME TAX CONSEQUENCES" in the Prospectus filed as a part
of the Registration Statement.
Very truly yours,
MAYER, BROWN & PLATT
<PAGE>
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
AGREEMENT, made and entered into as of February __, 1998, between Cabot
Industrial Trust, a Maryland real estate investment trust (the "Trust"), and
________________ ("Indemnitee").
WHEREAS, the Trust is a Maryland real estate investment trust;
WHEREAS, at the request of the Trust, Indemnitee has agreed to serve as a
[Trustee][officer] of the Trust [(a "Trustee")][(an "Officer")] and may,
therefore, be subjected to claims, suits or proceedings arising as a result of
his service in such capacity;
WHEREAS, Title 8 of the Corporations and Associations Article of the
Annotated Code of Maryland authorizes the Trust to indemnify and advance
expenses to trustees and officers of Maryland real estate investment trusts to
the same extent as is permitted for directors and officers of a Maryland
corporation under Section 2-418 of the Maryland General Corporation Law (the
"MGCL"); and
WHEREAS, as an inducement to Indemnitee to serve as a [Trustee][Officer] of
the Trust, the Trust has agreed to indemnify Indemnitee against such expenses
and costs as may be incurred by Indemnitee in connection with any such claims,
suits or proceedings, to the fullest extent permitted by Maryland; and
WHEREAS, the parties by this Agreement desire to set forth their agreement
regarding such indemnification;
NOW, THEREFORE, the parties hereto agree as follows:
1. Acts or Omissions Covered by This Agreement. This Agreement shall
-------------------------------------------
cover any act or omission by Indemnitee after the date of his commencement of
service as a [Trustee][Officer] of the Trust, regardless of whether said act or
omission occurred prior to the date of this Agreement, which act or omission
(i) occurs or is alleged to have occurred by reason of his being or having been
a [Trustee][Officer], (ii) occurs or is alleged to have occurred, during or
after the time when Indemnitee served as a [Trustee][Officer] or (iii) gives
rise to, or is the direct or indirect subject of a claim in any threatened,
pending or completed action, suit or proceeding at any time or times whether
during or after his service as [Trustee][Officer].
2. Indemnity.
---------
(a) The Trust shall indemnify the Indemnitee to the fullest extent
permitted by Maryland law (including, without limitation, indemnification
permitted under Section 2-418(g)
<PAGE>
of the MGCL), in connection with any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(each a "Proceeding"), by reason of the fact that he is or was a
[Trustee][Officer] of the Trust or is or was serving at the request of the Trust
as a director, trustee, officer, partner, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise and whether
or not such action is by or in the right of the Trust or such other corporation,
partnership, joint venture, trust or other enterprise with respect to which the
Indemnitee serves or has served.
(b) Notwithstanding anything to the contrary in paragraph (a), the Trust
shall indemnify Indemnitee in a Proceeding initiated by Indemnitee only if
Indemnitee acted with the authorization of the Trust in initiating that
Proceeding, except that any Proceeding brought by the Indemnitee to enforce his
rights under this Agreement shall not be subject to this paragraph (b).
(c) Indemnification under this Agreement shall be provided upon
Indemnitee's written request to the board of trustees of the Trust (the "Board
of Trustee"), setting forth the grounds and lawfulness of such indemnification.
(d) For purposes of this Agreement, references to "other enterprises" shall
include, without limitation, employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Trust" shall
include any service as a trustee, director, officer, employee or agent of any
other partnership, joint venture, trust or corporation which imposes duties on,
or involves services by, Indemnitee which are requested in writing by the
trustees of, or which involve services by, such trustee, director, officer,
employee or agent with respect to, an employee benefit plan, its participants or
beneficiaries.
3. Burden of Proof. Indemnitee shall be presumed to be entitled to
---------------
indemnification for any act or omission covered in Section 1 or 2 of this
Agreement. The burden of proof of establishing that Indemnitee is not entitled
to indemnification or advancement of expenses because of a failure to fulfill a
requirement of Maryland law, the Trust's Declaration of Trust, as the same may
be amended from time to time (the "Declaration of Trust"), or by-laws as in
effect from time to time or this Agreement, shall be on the Trust. In any
Proceeding brought by or on behalf of or in the right of Indemnitee to obtain
benefits provided to Indemnitee by this Agreement, it shall not be a defense to
such proceeding that the Board of Trustees has previously determined that
Indemnitee is not entitled to such benefits hereunder, it being the intention of
the parties hereto that any such determination shall be required to be made de
novo by the court or other prior effect in such Proceeding.
4. Notice by Indemnitee. Indemnitee shall notify the Secretary of the
--------------------
Trust of any matter with respect to which Indemnitee intends to seek
indemnification hereunder as soon as reasonably practicable following the
receipt by Indemnitee of written threat thereof, provided that failure to so
--------
notify the Secretary of the Trust shall not constitute a waiver by Indemnitee of
his rights hereunder, except to the extent that the Trust is materially
prejudiced thereby.
-2-
<PAGE>
5. Advancement of Expenses. In the event of any Proceeding involving
-----------------------
Indemnitee which may give rise to a right of indemnification from the Trust
pursuant to this Agreement, the Trust shall advance to Indemnitee such amounts
as shall be sufficient to cover expenses (including fees and disbursements of
counsel) incurred by Indemnitee in connection with any Proceeding as incurred
and in advance of final disposition within five business days after receipt by
the Trust of (i) an undertaking by or on behalf of the Indemnitee to repay the
amounts advanced in the event that it ultimately shall be determined in
accordance with this Agreement that he is not entitled to indemnification by the
Trust, (ii) [a written affirmation by the Indemnitee of his or her good faith
belief that the standard of conduct necessary for indemnification by the Trust
has been met and (iii)] satisfactory evidence as to the amount of such expenses.
Indemnitee's written certification, together with a copy of the statement paid
or to be paid by Indemnitee, shall constitute satisfactory evidence of the
amount of such expenses.
6. Defense of Claim. The Indemnitee shall have the absolute right to
----------------
employ his own counsel in respect of any Proceeding; provided, that in the event
--------
that more than one [Trustee][Officer] is entitled to indemnification under this
Agreement or a similar agreement arising out of the same Proceeding, all such
[Trustees][Officers], including Indemnitee, shall, to the extent practicable,
endeavor to use the same counsel; and further provided, that, prior to selection
------- --------
by the Indemnitee, the counsel selected by the Indemnitee would not be precluded
as a matter of professional ethics from representing the Trust or a person
adverse to the Trust.
7. Non-Exclusivity of Right of Indemnification. The indemnification
-------------------------------------------
rights granted to Indemnitee under this Agreement shall not be deemed exclusive
of, or in limitation of, any rights to which Indemnitee may be entitled under
Maryland law, the Declaration of Trust, as amended, or by-laws, any other
agreement, vote of shareholders or Trustees or otherwise.
8. Termination of Agreement and Survival of Right of Indemnification.
-----------------------------------------------------------------
The rights granted to Indemnitee hereunder shall continue after termination of
this Agreement as provided in Section 1 and shall inure to the benefit of
Indemnitee, his personal representative, heirs, executors, administrators and
beneficiaries, and this Agreement shall be binding upon the Trust, its
successors and assigns.
9. Legal Fees and Expenses. The Trust shall pay all legal fees and
-----------------------
expenses which Indemnitee may incur to collect money due under this Agreement or
as a result of the Trust's contesting the validity or enforceability of this
Agreement.
10. Governing Law. This Agreement shall be governed by the laws of the
-------------
State of Maryland.
11. Severability. If any provision of this Agreement is determined to be
------------
invalid or unenforceable, the invalidity or unenforceability shall not affect
the validity or enforceability of any other provision of this Agreement, and
this Agreement shall be interpreted as though the invalid or unenforceable
provision was not a part of this Agreement.
-3-
<PAGE>
12. Changes in Law. This Agreement is intended to provide to Indemnitee,
--------------
to the fullest lawful extent permitted by Maryland law as in effect from time to
time, indemnification and advancement of expenses in connection with a
Proceeding as described in Sections 2 and 5 hereof; provided, however, that no
-------- -------
change in Maryland law shall have the effect of reducing the benefits available
to Indemnitee hereunder based on Maryland law as in effect on the date hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above stated.
CABOT INDUSTRIAL TRUST
By:______________________________________
Name:____________________________________
Title:___________________________________
INDEMNITEE
_________________________________________
Name:____________________________________
-4-
<PAGE>
EXHIBIT 10.2
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "Agreement") is entered into as of
December 17, 1997 between Cabot Industrial Trust, a Maryland real estate
investment trust (the "Company"), and Stichting Bedrijspensioenfonds Voor de
Metaalnijhverheid, Stichting Pensionfonds ABP, MS Real Estate Special
Situtations Inc., The Morgan Stanley Real Estate Special Situations Fund I,
L.P., The Morgan Stanley Real Estate Special Situations Fund II, L.P. and Morgan
Stanley Real Estate Special Situations Real Estate Investors, L.P. (the
"Purchaser").
R E C I T A L S:
- - - - - - - -
WHEREAS, the Company proposes to make an initial public offering (the
"Public Offering") of its common shares of beneficial interest, par value $.01
per share ("Common Shares"), underwritten by certain underwriters (the
"Underwriters"); and
WHEREAS, the Company desires to sell and the Purchaser desires to purchase,
immediately following the Closing (as defined below), up to $20 million of
Common Shares (the "Concurrent Shares") at a price per share equal to the price
to public per share in the Public Offering upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, the parties hereto agree as follows:
1. Purchase and Sale of Concurrent Shares. The Purchaser hereby agrees to
--------------------------------------
purchase from the Company and the Company hereby agrees to issue and sell to the
Purchaser the Concurrent Shares at a price per share equal to the price to
public per share in the Public Offering (the "Price Per Share") at the Closing
(as defined below). At the Closing, the Company shall sell to the Purchaser and,
subject to the terms and conditions set forth herein, the Purchaser shall
purchase from the Company the Concurrent Shares at an aggregate price equal to
the Price Per Share multiplied by the number of Concurrent Shares so purchased
which shall equal $20 million (as nearly as possible, subject to the number of
Concurrent Shares being a whole number); provided however, that in the event the
gross proceeds in the Public Offering will be less than $125 million, the
Purchaser may in its discretion elect, as of the date the Price Per Share is
determined, to reduce the amount of Concurrent Shares to a dollar amount (as
nearly as possible, subject to the number of Concurrent Shares being a whole
number) which is not less than 15% of the gross proceeds in the Public Offering.
The Company and the Purchaser agree to cooperate reasonably to accomplish the
Public Offering and to work in good faith to revise the terms of this Agreement
in the event the Securities and Exchange Commission raises any objections to the
terms of this Agreement, and in the event such objections of the Securities and
Exchange Commission cannot be satisfied by the parties in such manner, the
Company may in its discretion terminate this Agreement (other than Section 7).
<PAGE>
2. Closing. The closing of the purchase and sale of the Concurrent Shares
-------
(the "Closing") shall take place at the same location as, and immediately
following, the closing of the sale of Common Shares in the Public Offering. At
the Closing, the Company shall deliver to the Purchaser a certificate or
certificates evidencing the Concurrent Shares being purchased by the Purchaser,
registered in the Purchaser's or its nominee's name, upon payment of the
purchase price therefor by wire transfer of immediately available funds to the
Company's account at a bank designated by the Company.
3. Conditions of Purchaser's Obligation at the Closing. The obligation of
---------------------------------------------------
the Purchaser to purchase and pay for the Concurrent Shares at the Closing is
subject to the satisfaction as of the Closing of the following conditions:
(a) Representations and Warranties. The representations and warranties
------------------------------
made by or on behalf of the Company in Section 5 and in the underwriting
agreement between the Company and the Underwriters in connection with the Public
Offering shall be accurate in all material respects at and as of the Closing as
though then made.
(b) Registration Agreement. The Company shall have entered into a
----------------------
Registration Rights and Lock-Up Agreement substantially in the form of Exhibit A
hereto (the "Registration Agreement").
(c) Public Offering Pricing. The Company shall have entered into a
-----------------------
binding agreement with the Underwriters not later than February 15, 1997 as to
the Price Per Share in the Public Offering.
(d) Closing Documents. The Company shall have delivered to the
-----------------
Purchaser all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing,
certifying to the Purchaser the same representations and warranties made by or
on behalf of the Company to or for the benefit of the Underwriters in the
underwriting agreement between the Company and the Underwriters in connection
with the Public Offering and, as the Purchaser may reasonably request, relating
to the issuance and sale of the concurrent Shares; and stating that the
conditions specified in Sections 3(a) and (c) have been fully satisfied;
(ii) a copy of the resolutions duly adopted by the Company's
Board of Trustees authorizing the execution, delivery and performance of this
Agreement and the Registration Agreement, and the issuance and sale of the
Concurrent Shares;
(ii) a copy of the Company's Declaration of Trust and Bylaws,
each as in effect at the Closing;
(iv) an originally executed copy of each opinion and certificate
delivered to or for the benefit of the Underwriters by or on behalf of the
Company at the closing of the
-2-
<PAGE>
Public Offering, each addressed directly to the Purchaser and, as the Purchaser
may reasonably request, relating to the issuance and sale of the concurrent
Shares; and
(v) a copy of the final prospectus (the "Prospectus") and
Registration Statement on Form S-11 (the "Registration Statement") filed by the
Company with the Securities and Exchange Commission pursuant to the Securities
Act of 1933, as amended (the "Securities Act"), in connection with the Public
Offering.
4. Conditions of Company's Obligation at the Closing. The obligation of
-------------------------------------------------
the Company to issue and sell the Concurrent Shares at the Closing is subject to
the satisfaction as of the Closing of the following conditions:
(a) Representations and Warranties. The representations and warranties
------------------------------
contained in Section 6 shall be accurate in all material respects at and as of
the Closing as though then made.
(b) Registration Agreement. The Purchaser shall have entered into the
----------------------
Registration Agreement.
(c) Closing Documents. The Purchaser shall have delivered to the
-----------------
Company all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing,
stating that the condition specified in Section 4(a) has been fully satisfied;
and
(ii) a copy of the resolutions duly adopted by the appropriate
Board of Directors authorizing the execution, delivery and performance of this
Agreement and the Registration Agreement, and the purchase of the Concurrent
Shares.
5. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to the Purchaser as follows:
(a) This Agreement has been duly authorized, executed and delivered by
the Company.
(b) The Concurrent Shares have been duly authorized and, when
delivered to and paid for by the Purchaser in accordance with the terms of this
Agreement, will be validly issued, fully paid and, except as described in the
Registration Statement, non-assessable and will conform to the description
thereof in the Registration Statement.
6. Representations and Warranties of the Purchaser. The Purchaser
-----------------------------------------------
hereby represents and warrants to the Company as follows:
-3-
<PAGE>
(a) The Purchaser is composed of (i) The Morgan Stanley Real Estate
Special Situations Funds I, L.P., (ii) The Morgan Stanley Real Estate Special
Situations Fund II, L.P., (iii) Stichting Pensionfonds ABP, (iv) Stichting
Bedrijspensioenfonds Voor De Metaalnijhverheid, (v) MS Real Estate Special
Situations Inc. and (vi) Morgan Stanley Real Estate Special Situations
Investors, L.P., each of which is an "accredited investor" within the meaning of
Rule 501 of Regulation D as promulgated under the Securities Act.
(b) Morgan Stanley Asset Management Inc. ("MSAM") is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware. MSAM has all requisite power and authority to own and operate
its properties and carry on its business as now conducted.
(c) MSAM is duly authorized to enter into and perform this Agreement
and the Registration Rights Agreement on behalf of the Purchaser. This
Agreement has been duly executed and delivered by MSAM on behalf of the
Purchaser.
(d) The Purchaser is acquiring the Concurrent Shares being purchased
by it for its own account for the purpose of investment and not with a view to
or for sale in connection with any distribution thereof, except that at or after
Closing the Purchaser may direct that an affiliate of the Republic of Singapore
be issued a portion of the Concurrent Shares. The Purchaser does not have a
present intention or plan to effect any distribution of the Concurrent Shares,
provided that the disposition of the Concurrent Shares owned by Purchaser shall
at all times be and remain within its respective control, subject to the
provisions of the Agreement and the Registration Rights Agreement. The
Purchaser is able to bear the economic risk of the acquisition of the Concurrent
Shares pursuant hereto and can afford to sustain a total loss on such
investment, and MSAM, on its own behalf and on that of the person included in
the Purchaser, has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the proposed
investment, and therefore has the capacity to protect the interests of the
Purchaser in connection with the acquisition of the Concurrent Shares pursuant
hereto. The Purchaser is advised by, and includes certain persons which are, a
"qualified institutional buyer" as defined in Rule 144A under the Securities
Act.
(e) The Purchaser understands and acknowledges and agrees that the
Concurrent Shares have not been registered under the Securities Act or any other
applicable securities law and, unless so registered, may not be offered, sold or
otherwise transferred except in compliance with the registration requirements of
the Securities Act or any other applicable securities law, pursuant to an
exemption therefrom or in a transaction not subject thereto. The Purchaser
acknowledges that the Concurrent Shares received by it pursuant to this
Agreement shall be in the form of physical certificates and that, unless and
until the Concurrent Shares have been registered under the Securities Act, the
certificates shall bear a legend to the following effect:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
-4-
<PAGE>
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS (i) IN THE CASE OF A
SALE, DISPOSITION OR OTHER TRANSFER TO A PERSON WITH RESPECT TO ASSETS OF WHICH
ARE UNDER MANAGEMENT BY MORGAN STANLEY ASSET MANAGEMENT INC. OR ANY OF ITS
AFFILIATES, THE TRANSFEROR REPRESENTS THAT THE PROPOSED SALE, DISPOSITION OR
OTHER TRANSFER MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT AND
(ii) IN ALL OTHER CASES, THE TRANSFEROR DELIVERS TO THE COMPANY AN OPINION OF
COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY, IN FORM AND
SUBSTANCE SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT THE PROPOSED SALE,
TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT. THESE SECURITIES MAY NOT BE TRANSFERRED IN VIOLATION OF ANY
APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS.
7. Expenses. Each party shall pay all costs and expenses which it incurs
--------
in connection with the negotiation, execution, delivery and performance of this
Agreement; provided, however, that, on or prior to the earlier of the Closing or
February 15, 1998, the Company shall pay the reasonable fees and expenses of the
Purchaser's outside legal counsel, up to a maximum of $25,000.
8. Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties. Except
as specifically provided hereby, the Purchaser shall not be permitted to assign
any of its rights hereunder to any third party without the consent of the
Company, other than to (a) one or more Affiliates of the Purchaser of which the
Purchaser, directly or indirectly, beneficially owns a majority of the voting
power and the economic interests, and (b) a Person, with respect to assets of
which are under management by Morgan Stanley Asset Management, Inc. or any of
its affiliates, provided that such affiliate and such Person agree to be bound
hereby and provided that any bona fide financial institution to which any
Purchaser or any permitted transferee has sold, transferred, pledged or
otherwise disposed of (including upon foreclosure of a pledge) Common Shares for
the purpose of securing bona fide indebtedness of a Purchaser shall also be
entitled to enforce the rights of the Purchaser hereunder.
9. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
10. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same Agreement.
-5-
<PAGE>
11. Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
12. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York without giving effect to the
conflicts of law provisions thereof.
13. Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand delivery, registered first-
class mail, telex, telecopier or any courier guaranteeing overnight delivery (a)
if to the Purchaser, at the address indicated below:
Morgan Stanley Asset Management, Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: Theodore R. Bigman
and if to the Company, at the address indicated below:
Cabot Industrial Trust
Two Center Plaza, Suite 200
Boston, Massachusetts 02108
Attention: Chief Executive Officer
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party. All
such notices and communications shall be deemed to have been duly given: at the
time delivered by hand, if personally delivered; five business days after being
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt is acknowledged, if telecopied; or at the time delivered,
if delivered by an air courier guaranteeing overnight delivery.
14. Entire Agreement. This Agreement is intended by the parties as a final
----------------
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
15. Limitation of Liability of Shareholders, Trustees and Officers of the
---------------------------------------------------------------------
Company. ANY OBLIGATION OR LIABILITY WHATSOEVER OF THE COMPANY WHICH MAY ARISE
- -------
AT ANY TIME UNDER THIS AGREEMENT OR ANY OBLIGATION OR LIABILITY WHICH MAY BE
INCURRED BY IT PURSUANT TO ANY OTHER INSTRUMENT, TRANSACTION OR UNDERTAKING
CONTEMPLATED HEREBY SHALL
-6-
<PAGE>
BE SATISFIED, IF AT ALL, OUT OF THE COMPANY'S ASSETS ONLY. NO SUCH OBLIGATION OR
LIABILITY SHALL BE PERSONALLY BINDING UPON, NOR SHALL RESORT FOR THE ENFORCEMENT
THEREOF BE HAD TO, THE PROPERTY OF ANY OF ITS SHAREHOLDERS, TRUSTEES, OFFICERS,
EMPLOYEES OR AGENTS, REGARDLESS OF WHETHER SUCH OBLIGATION OR LIABILITY IS IN
THE NATURE OF CONTRACT, TORT OR OTHERWISE.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
CABOT INDUSTRIAL TRUST
By: /s/ Franz Colloredo-Mansfeld
----------------------------------
Name: Franz Colloredo-Mansfeld
--------------------------------
Title: Chief Financial Officer
-------------------------------
MORGAN STANLEY ASSET MANAGEMENT
INC.
As Attorney-In-Fact for each of the clients set
forth on Exhibit B hereto:
By: /s/ Theodore R. Bigman
----------------------------------
Name: Theodore R. Bigman
--------------------------------
Title: Principal
-------------------------------
Agreed and acknowledged for
purposes of guaranteeing the
payment of expenses in
Section 7 hereof:
CABOT PARTNERS LIMITED PARTNERSHIP
By: Cabot Realty Advisors Corporation
By: /s/ Robert E. Patterson
-----------------------------------------
Name: Robert E. Patterson
---------------------------------------
Title: Executive Vice President
--------------------------------------
-8-
<PAGE>
EXHIBIT B
---------
Purchaser Schedule
------------------
Stichting Bedrijspensioenfonds Voor De Metaalnijhverheid
Stichting Pensionfonds ABP
MS Real Estate Special Situations Inc.
The Morgan Stanley Real Estate Special Situations Funds I, L.P.
The Morgan Stanley Real Estate Special Situations Fund II, L.P.
Morgan Stanley Real Estate Special Situations Real Estate Investors, L.P.
-9-
<PAGE>
EXHIBIT 10.3
EXHIBIT A
REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
DATED AS OF __________ ___, 1997
BY AND BETWEEN
CABOT INDUSTRIAL TRUST
AND
CERTAIN HOLDERS ADVISED BY
MORGAN STANLEY ASSET MANAGEMENT, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. Definitions........................................................ 1
2. LockUp Agreement................................................... 3
(a) LockUp Period................................................. 3
(b) Exceptions.................................................... 3
3. Shelf Registration Under the Securities Act........................ 4
(a) Request for Shelf Registration................................ 4
(b) Expenses...................................................... 4
(c) Inclusion in Shelf Registration Statement..................... 4
(d) Underwritten Offering......................................... 5
(e) Selection of Underwriters..................................... 5
(f) Piggyback Rights.............................................. 5
(g) Holdback...................................................... 6
4. Shelf Registration Procedures...................................... 6
5. Repurchase by Company of Shares.................................... 10
6. Indemnification; Contribution...................................... 11
(a) Indemnification by the Company................................ 11
(b) Indemnification by Holders.................................... 12
(c) Conduct of Indemnification Proceedings........................ 12
(d) Contribution.................................................. 13
7. Rule 144 Sales..................................................... 14
(a) Compliance.................................................... 14
(b) Cooperation with Holders...................................... 14
8. Miscellaneous...................................................... 14
(a) Amendments and Waivers........................................ 14
(b) Notices....................................................... 14
(c) Successors and Assigns........................................ 15
(d) Counterparts.................................................. 15
(e) Headings...................................................... 15
(f) Severability.................................................. 15
(g) Governing Law................................................. 15
(h) Specific Performance.......................................... 15
(i) Entire Agreement.............................................. 15
(j) Limitation of Liability of Shareholders, Trustees
and Officers of the Company................................... 15
</TABLE>
-i-
<PAGE>
REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
THIS REGISTRATION RIGHTS AND LOCK-UP AGREEMENT (this "Agreement") is made
---------
and entered into as of __________ ___, 1997, by and between Cabot Industrial
Trust (the "Company") and those institutions listed on Schedule A ("Purchaser")
------- ---------
being advised by Morgan Stanley Asset Management, Inc. ("MSAM"), including their
----
respective successors, assigns and transferees (herein referred to collectively
as the "Holders" and individually as a "Holder").
------
WHEREAS, pursuant to a Share Purchase Agreement dated as of December 17,
1997 (the "Purchase Agreement"), the Purchaser has agreed to purchase, and the
------------------
Company has agreed to issue and sell to MSAM, approximately $20,000,000 of
Common Shares (as defined below) at the price and time and upon the terms and
conditions specified therein; and
WHEREAS, as a condition to such purchase of Common Shares, the parties have
agreed to enter into this Agreement;
NOW, THEREFORE, the parties hereto, in consideration of the foregoing, the
mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, agree as follows:
1. Definitions.
-----------
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"Closing" shall have the same meaning as provided in the Purchase
-------
Agreement.
"Closing Price" of the Common Shares for any given day shall mean (i) if
-------------
the Common Shares are listed or admitted to trading on a national securities
exchange, the reported last sale price of the Common Shares regular way on such
national securities exchange on such day or, in case no such sale takes place on
such day, the average of the reported closing bid and asked prices regular way
on such national securities exchange on such day or (ii) if the Common Shares
are not listed or admitted to trading on any national securities exchange but
are traded in the over-the-counter market, the average of the closing bid and
asked prices in the over-the-counter market on such day.
"Common Shares" shall mean the common shares of beneficial interest, par
-------------
value $.01 per share, of the Company.
"Company" shall mean Cabot Industrial Trust, a Maryland real estate
-------
investment trust, and its successors.
<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
------------
from time to time.
"Person" shall mean an individual, partnership, corporation, limited
------
liability company, trust, unincorporated organization or other legal entity or a
government or agency or political subdivision thereof.
"Prospectus" shall mean the prospectus included in the Shelf Registration
----------
Statement, including any preliminary prospectus, and any amendment or supplement
thereto, and in each case including all material incorporated by reference
therein.
"Registrable Securities" shall mean the Common Shares purchased pursuant to
----------------------
the Purchase Agreement, excluding (i) Common Shares which have been disposed of
under the Shelf Registration Statement or any other effective Shelf Registration
statement, (ii) Common Shares sold or otherwise transferred pursuant to Rule 144
under the Securities Act, (iii) Common Shares which are held by Holders who are
not affiliates of the Company which are eligible for sale pursuant to Rule
144(k) under the Securities Act and (iv) Common Shares held by each Holder who
is an affiliate of the Company if all of such Common Shares are eligible for
sale pursuant to Rule 144 under the Securities Act and could be sold in one
transaction in accordance with the volume limitations contained in Rule
144(e)(1)(i) under the Securities Act.
"Shelf Registration" shall mean the registration required to be effected
------------------
pursuant to Section 3 hereof.
"Shelf Registration Expenses" shall mean any and all expenses incident to
---------------------------
performance of or compliance with this Agreement, including, without limitation:
(i) all applicable Shelf Registration and filing fees imposed by the SEC, the
New York Stock Exchange or the National Association of Securities Dealers, Inc.
("NASD"); (ii) all fees and expenses incurred in connection with compliance with
state securities or "blue sky" laws (including reasonable fees and disbursements
of counsel in connection with qualification of any of the Registrable Securities
under any state securities or blue sky laws and the preparation of a blue sky
memorandum) and compliance with the rules of the NASD; (iii) all expenses of any
Persons in preparing or assisting in preparing, word processing, printing and
distributing the Shelf Registration Statement, the Prospectus, certificates and
other documents relating to the performance of and compliance with this
Agreement; (iv) all fees and expenses incurred in connection with the listing,
if any, of any of the Registrable Securities on any securities exchange or
exchanges pursuant to Section 4(l) hereof; and (v) the fees and disbursements of
counsel for the Company and of the independent public accountants of the
Company, including the expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance. Shelf Registration
Expenses shall specifically exclude underwriting discounts and commissions, the
fees and disbursements of counsel representing a Selling Holder or any
underwriter or agent acting on behalf of a Holder, and transfer taxes, if any,
relating to the sale or disposition of Registrable Securities by a Selling
Holder, all of which shall be borne by such Holder in all cases.
-2-
<PAGE>
"Shelf Registration Statement" shall mean the registration statement of the
----------------------------
Company (and any other entity required to be a registrant with respect to the
Shelf Registration Statement pursuant to the requirements of the Securities Act)
filed in connection with the Shelf Registration.
"SEC" shall mean the Securities and Exchange Commission.
---
"Securities Act" shall mean the Securities Act of 1933, as amended from
--------------
time to time.
"Selling Holder" shall mean any Holder who sells Registrable Securities
--------------
pursuant to the Shelf Registration.
2. Lock-Up Agreement.
-----------------
(a) Lock-Up Period. Each of the Holders hereby agrees that, except as set
--------------
forth in Section 2(b) below, from the date hereof until six months after the
Closing (the "Lock-Up Period"), without the prior written consent of the
--------------
Company, it will not offer, pledge, sell, contract to sell, grant any options
for the sale of or otherwise dispose of, directly or indirectly (collectively,
"Dispose of"), any Common Shares (the "Lock-Up"); provided, however, the Company
- ----------- ------- -----------------
will not withhold its written consent under this Section 2(a) in the event any
Holder will Dispose of Common Shares to a (i) Qualified Institutional Buyer (as
such term is defined in SEC Rule 144A) and (ii) a Person with respect to assets
of which are under management by Morgan Stanley Asset Management Inc or any of
its affiliates, provided that such transaction shall be effected pursuant to a
bona fide exemption under the Securities Act and provided such transferee agrees
to be similarly bound by this Agreement.
(b) Exceptions. The following transfers of Common Shares shall not be
----------
subject to the Lock-Up set forth in Section 2(a):
(i) a Holder who is a natural person may Dispose of Common Shares
to his or her spouse, siblings, parents or any natural or adopted children
or other descendants or to any personal trust in which such family members
or such Holder retains the entire beneficial interest;
(ii) a Holder who is a natural person may Dispose of Common Shares
on his or her death to such Holder's estate, executor, administrator or
personal representative or to such Holder's beneficiaries pursuant to a
devise or bequest or by the laws of descent and distribution;
(iii) a Holder which is a corporation, partnership, trust or other
business entity may (A) Dispose of Common Shares to one or more other
entities which are wholly owned and controlled, legally and beneficially,
by such Holder or by a Person or Persons which directly or indirectly
wholly own and control such Holder or (B) Dispose of Common Shares by
distributing such Common Shares in a merger, dissolution,
-3-
<PAGE>
liquidation, winding up or otherwise without consideration to the equity
owners of such corporation, partnership, trust or business entity or to any
other corporation, partnership, trust or business entity which is wholly
owned by such equity owners;
(iv) a Holder may Dispose of Common Shares as a bona fide gift; and
(v) a Holder may Dispose of Common Shares pursuant to a pledge,
grant of security interest or other encumbrance effected in a bona fide
transaction with an unrelated and unaffiliated pledgee;
provided, however, that in the case of any transfer of Common Shares
-------- -------
pursuant to clauses (i) and (iii), the transfers shall each be effected
pursuant to a bona fide exemption under the Securities Act.
In the event any Holder Disposes of Common Shares pursuant to this Section 2(b),
such Common Shares shall remain subject to this Agreement and, as a condition of
the validity of such disposition, the transferee (and any pledgee who acquires
Common Shares upon foreclosure or any transferee thereof) shall be required to
execute and deliver a counterpart of this Agree ment. Thereafter, such
transferee shall be deemed to be a Holder for purposes of this Agreement.
3. Shelf Registration Under the Securities Act.
-------------------------------------------
(a) Shelf Registration. On or prior to the date which is 180 days after
------------------
the Closing, subject to the terms and conditions set forth herein, the Company
shall cause to be filed a registration statement of the Company (the "Shelf
Registration") that covers all of the Registrable Securities to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act or any
successor or similar rule that may be adopted by the SEC, and the Company shall
use its best efforts to cause the Shelf Registration to be declared effective by
the SEC as soon as is practicable. The Company agrees to use its best efforts
to keep the Shelf Registration Statement with respect to the Registrable
Securities continuously effective for a period expiring on the earlier of (i)
the date on which all of the Registrable Securities covered by the Shelf
Registration Statement have been sold pursuant thereto and (ii) the date on
which all Registrable Securities held by Holders who are not affiliates of the
Company, in the opinion of counsel for the Company, which counsel shall be
reasonably acceptable to such Holders, are eligible for sale pursuant to Rule
144(k) under the Securities Act and all Registrable Securities held by each
Holder who is an affiliate of the Company, in the opinion of counsel for the
Company, which counsel shall be reasonably acceptable to such Holder, are
eligible for sale pursuant to Rule 144 under the Securities Act and could be
sold in one transaction in accordance with the volume limitations contained in
Rule 144(e)(1)(i) under the Securities Act.
(b) Expenses. Except as provided herein, the Company shall pay all Shelf
--------
Registration Expenses in connection with the Shelf Registration pursuant to
Section 3(a) and the performance of the Company's obligations under this Section
3 and Section 4. The Company shall not be
-4-
<PAGE>
liable for any underwriting discounts and commissions, the fees and
disbursements of counsel representing a Holder or any underwriter or agent
acting on behalf of a Holder, and transfer taxes, if any, relating to the sale
or disposition of such Holder's Registrable Securities pursuant to the Shelf
Registration Statement or Rule 144 under the Securities Act.
(c) Inclusion in Shelf Registration Statement. Any Holder who does not
-----------------------------------------
provide the information reasonably requested by the Company in connection with
the Shelf Registration Statement as promptly as practicable after receipt of
such request, but in no event later than ten days thereafter, shall not be
entitled to have its Registrable Securities included in the Shelf Registration
Statement.
(d) Underwritten Offering. If any of the Registrable Securities covered by
---------------------
the Shelf Registration are to be sold in an underwritten offering, the Holder
intending to pursue such underwritten offering shall deliver a notice to the
Company of such intent, and within ten days after receipt of the notice of
intent from such Holder for an underwritten offering, the Company shall give
written notice of such notice of intent to all other Holders and such other
Holders shall be entitled to include in such underwritten offering all or part
of their respective Registrable Securities by notice to the Company for
inclusion therein within 15 days after the notice is given. All notices made
pursuant to this Section 3(d) shall specify the aggregate number of Registrable
Securities to be included. The Company agrees to cooperate with any such
request for an underwritten offering and to take all such other reasonable
actions in connection therewith as provided in Section 4(o).
In the case of any firm commitment underwritten offering, if the managing
underwriter or underwriters of such offering advise the Company in writing that
in its or their opinion the number of Registrable Securities proposed to be sold
in such offering exceeds the number of Registrable Securities which can be sold
in such offering without adversely affecting the market for the Common Shares,
the Company will include in such offering the number of Registrable Securities
which in the opinion of such managing underwriter or underwriters can be sold
without adversely affecting the market for the Common Shares. In such event,
the number of Registrable Securities to be offered for the account of each
Holder requesting to include Registrable Securities in such offering (including
the Holder providing the initial notice) shall be reduced pro rata on the basis
of the relative number of Registrable Securities requested by each such Holder
to be included in such offering to the extent necessary to reduce the total
number of Registrable Securities to be included in such offering to the number
recommended by such managing underwriter or underwriters.
(e) Selection of Underwriters. If any of the Registrable Securities
-------------------------
covered by the Shelf Registration are to be sold in an underwritten offering,
the Company shall have the right to select the investment banker or investment
bankers and manager or managers which will underwrite the offering; provided,
--------
however, that such investment bankers and managers must be reasonably acceptable
- -------
to the Selling Holders.
-5-
<PAGE>
(f) Piggyback Rights. Notwithstanding Section 2(a) of this Agreement, if
----------------
the Company proposes to undertake an offering of its Shares to occur at any time
prior to the date the Shelf Registration is declared effective by the SEC, the
Company will give prompt written notice to all Holders of its intention to
effect such a Shelf Registration, and, subject to the succeeding proviso, the
Company will include in such Shelf Registration all Registrable Securities with
respect to which the Company has received written requests for inclusion within
15 days after the date of sending of the Company's notice; provided, however,
that if the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such Shelf
Registration exceeds the number that can be sold in an orderly manner within a
price range acceptable to the Company, the Company will include in such Shelf
Registration (a) first, the securities the Company proposes to sell and (b)
second, the Registrable Securities requested to be included in such Shelf
Registration by the Holders (and any other securities requested to be included
in such Shelf Registration that are held by Persons other than Holders pursuant
to Shelf Registration rights), pro rata among the Holders and such other
participating Persons (if any) on the basis of the number of Registrable
Securities owned by each such Holder and other participating Person.
(g) Holdback. In the event the Company is issuing shares of beneficial
--------
interest to the public in an underwritten offering, each Holder agrees, if
requested by the managing underwriter or underwriters for such underwritten
offering, not to effect any underwritten offering for resale of Registrable
Securities during the period beginning 14 days prior to the consummation of such
underwritten offering and ending on the earlier of (x) 90 days after the
consummation of such underwritten offering or (y) one day after any date on
which the Closing Price shall have averaged 115% or more of the offering price
listed in the prospectus for such underwritten offering for a period of 20
consecutive trading days (or, if no offering price is listed in such prospectus,
the Closing Price on the date of such prospectus).
4. Shelf Registration Procedures.
-----------------------------
In connection with the obligations of the Company with respect to the Shelf
Registration Statement contemplated by Section 3 hereof, the Company shall:
(a) prepare and file with the SEC the Shelf Registration Statement, which
Shelf Registration Statement shall (i) be available for the sale of the
Registrable Securities in accordance with the intended method or methods of
distribution by the Selling Holders thereof and (ii) comply as to form in all
material respects with the requirements of the applicable form and include all
financial statements required by the SEC to be filed therewith;
(b) subject to the last three sentences of this Section 4(b) and Section
4(i) hereof, (i) prepare and file with the SEC such amendments to the Shelf
Registration Statement as may be necessary to keep such Shelf Registration
Statement effective for the applicable period; (ii) cause the Prospectus to be
amended or supplemented as required and to be filed as required by Rule 424 or
any similar rule which may be adopted under the Securities Act; (iii) respond as
promptly as practicable to any comments received from the SEC with respect to
the Shelf Registration Statement or any amendment thereto; and (iv) comply with
the provisions of the
-6-
<PAGE>
Securities Act with respect to the disposition of all securities covered by the
Shelf Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the Selling Holders thereof.
Notwithstanding anything to the contrary contained herein, the Company shall not
be required to take any of the actions described in Section 4(a), clauses (i),
(ii) or (iii) in this Section 4(b), Section 4(d) or Section 4(i) with respect to
each Holder of Registrable Securities for a period not to exceed sixty days from
the date of the Suspension Notice (as defined below) (x) to the extent that the
Company is in possession of material non-public information which the Board of
Trustees in good faith deems advisable not to disclose or the Company is engaged
in active negotiations or planning for a merger or material acquisition or
disposition transaction and, in either case, the Company delivers written notice
( a "Suspension Notice") to each such Selling Holder of Registrable Securities
-----------------
to the effect that it would be impractical or unadvisable to cause the Shelf
Registration Statement or such filings to be made or to become effective or to
amend or supplement the Shelf Registration Statement, and that such Selling
Holder may not make offers or sales under the Shelf Registration Statement for a
period not to exceed sixty days from the date of such Suspension Notice;
provided, however, that the Company may deliver only two such Suspension Notices
- -------- -------
within any twelve-month period, or (y) in the case of the Shelf Registration,
unless and until the Company has received a written notice (a "Sale Notice")
-----------
from a Selling Holder that such Selling Holder intends to make offers or sales
under the Shelf Registration Statement as specified in such Sale Notice;
provided, however, that the Company shall have ten business days to prepare and
- -------- -------
file any such amendment or supplement after receipt of such Sale Notice or such
longer period as is reasonably necessary if such preparation and filing are not
commercially practicable within ten business days. Once a Selling Holder has
delivered a Sale Notice to the Company, such Selling Holder shall promptly
provide to the Company such information as the Company reasonably requests in
order to identify such Selling Holder and the method of distribution in a post-
effective amendment to the Shelf Registration Statement or a supplement to the
Prospectus. Such Selling Holder also shall notify the Company in writing upon
completion of such offer or sale or at such time as such Selling Holder no
longer intends to make offers or sales under the Shelf Registration Statement;
(c) furnish to each Selling Holder of Registrable Securities, without
charge, as many copies of the Prospectus and any amendment or supplement thereto
as such Selling Holder may reasonably request in order to facilitate the public
sale or other disposition of the Registrable Securities; the Company consents to
the use of the Prospectus and any amendment or supplement thereto by each such
Selling Holder of Registrable Securities in connection with the offering and
sale of the Registrable Securities covered by the Prospectus or amendment or
supplement thereto;
(d) use its best efforts to register or qualify the Registrable Securities
by the time the Shelf Registration Statement is declared effective by the SEC
under all applicable state securities or blue sky laws of such jurisdictions in
the United States and its territories and possessions as any Holder of
Registrable Securities covered by the Shelf Registration Statement shall
reasonably request in writing, keep each such Shelf Registration or
qualification effective during the period the Shelf Registration Statement is
required to be kept effective or during the period offers or
-7-
<PAGE>
sales are being made by a Holder which has delivered a Sale Notice to the
Company, whichever is shorter; provided, however, that in connection therewith,
-------- -------
the Company shall not be required to (i) qualify as a foreign corporation to do
business or to register as a broker or dealer in any such jurisdiction where it
would not otherwise be required to qualify or register but for this Section
4(d), (ii) subject itself to taxation in any such jurisdiction or (iii) file a
general consent to service of process in any such jurisdiction;
(e) notify each Holder of Registrable Securities promptly and, if
requested by such Holder, confirm in writing, (i) when the Shelf Registration
Statement and any post-effective amendments thereto have become effective, (ii)
when any amendment or supplement to the Prospectus has been filed with the SEC,
(iii) of the issuance by the SEC or any state securities authority of any stop
order suspending the effectiveness of the Shelf Registration Statement or any
part thereof or the initiation of any proceedings for that purpose, (iv) if the
Company receives any notification with respect to the suspension of the
qualification of the Registrable Securities for offer or sale in any
jurisdiction or the initiation of any proceeding for such purpose and (v) of the
happening of any event during the period the Shelf Registration Statement is
effective as a result of which (A) the Shelf Registration Statement contains any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
or (B) the Prospectus as then amended or supplemented contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading;
(f) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the Shelf Registration Statement or any part
thereof as promptly as possible;
(g) furnish to each Selling Holder of Registrable Securities, without
charge, at least one conformed copy of the Shelf Registration Statement and any
post-effective amendment thereto (without documents incorporated therein by
reference or exhibits thereto, unless requested);
(h) cooperate with the Selling Holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act legend; and
enable certificates for such Registrable Securities to be issued for such
numbers of shares and registered in such names as the Selling Holders may
reasonably request, at least ten business days prior to any sale of Registrable
Securities;
(i) subject to the last three sentences of Section 4(b) hereof, upon the
occurrence of any event contemplated by clause (x) of Section 4(b) or clause (v)
of Section 4(e) hereof, use its reasonable efforts promptly to prepare and file
an amendment or a supplement to the Prospectus or any document incorporated
therein by reference or prepare, file and obtain effectiveness of a post-
effective amendment to the Shelf Registration Statement, or file any other
required document, in any such case to the extent necessary so that, as
thereafter delivered to the purchasers of the Registrable Securities, the
Prospectus as then amended or supplemented
-8-
<PAGE>
will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they are made, not misleading;
(j) make available for inspection by the Selling Holders of Registrable
Securities and any counsel, accountants or other representatives retained by
such Selling Holders all financial and other records, pertinent corporate
documents and properties of the Company and cause the officers, directors and
employees of the Company to supply all such records, documents or information
reasonably requested by such Holders, counsel, accountants or representatives in
connection with the Shelf Registration Statement; provided, however, that such
-------- -------
records, documents or information which the Company determines in good faith to
be confidential and notifies such Selling Holders, counsel, accountants or
representatives in writing that such records, documents or information are
confidential shall not be disclosed by such Selling Holders, counsel,
accountants or representatives unless (i) such disclosure is ordered pursuant to
a subpoena or other order from a court of competent jurisdiction or (ii) such
records, documents or information become generally available to the public other
than through a breach of this Agreement;
(k) a reasonable time prior to the filing of any Shelf Registration
Statement or any amendment thereto, or any Prospectus or any amendment or
supplement thereto, provide copies of such document (not including any documents
incorporated by reference therein unless requested) to the Selling Holders of
Registrable Securities;
(l) use its reasonable efforts to cause all Registrable Securities to be
listed on any securities exchange on which similar securities issued by the
Company are then listed;
(m) provide a CUSIP number for all Registrable Securities, not later than
the effective date of the Shelf Registration Statement;
(n) use its reasonable efforts to make available to its security holders,
as soon as reasonably practicable, an earning statement covering at least 12
months which shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder; and
(o) if requested by a Selling Holder or any underwriters engaged by such
Selling Holder for purposes of distributing the Registrable Securities, enter
into such agreements (including an underwriting agreement in form, scope and
substance as is customary in underwritten offerings) and take all such other
reasonable actions in connection therewith (including those reasonably requested
by the underwriters or such Selling Holder) in order to expedite or facilitate
the disposition of such Registrable Securities, and in such connection, (i) make
such representations and warranties to the underwriters with respect to the
business of the Company and the Shelf Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, in form, substance and scope as are customarily made by
issuers to underwriters in underwritten offerings, and confirm the same if and
when requested; (ii) obtain customary opinions of counsel to the Company and
-9-
<PAGE>
updates thereof (which shall be in form and substance reasonably satisfactory to
the Selling Holders or to the underwriters and their counsel, as the case may
be), addressed to such Selling Holder and, if applicable, each of the
underwriters; (iii) obtain "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company, addressed to such
Selling Holder and, if applicable, each of the underwriters, such letters to be
in customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with any such offerings (in each case, to the
extent permitted by applicable accounting rules and guidelines); (iv) if an
underwriting agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable to the underwriters than those set
forth in Section 6 hereof and cross indemnification by the underwriters in form
and substance as is customary in connection with such offering, in favor of the
Company or the Selling Holders, as the case may be; and (v) deliver such
documents and certificates as may be reasonably requested by the managing
underwriters and their counsel to evidence the continued validity of the
representations and warranties made pursuant to clause (i) above of this Section
4(o) and to evidence compliance with any customary conditions contained in the
underwriting agreement entered into by the Company.
The Company may require each Selling Holder of Registrable Securities to
furnish to the Company in writing such information regarding the proposed
distribution by such Selling Holder of such Registrable Securities as the
Company may from time to time reasonably request in writing.
In connection with and as a condition to the Company's obligations with
respect to the Shelf Registration Statement pursuant to Section 3 hereof and
this Section 4, each Selling Holder covenants and agrees that (i) it will not
offer or sell any Registrable Securities under the Shelf Registration Statement
until it has received copies of the Prospectus as then amended or supplemented
as contemplated by Section 4(c) and notice from the Company that the Shelf
Registration Statement and any post-effective amendments thereto have become
effective as contemplated by Section 4(e); (ii) upon receipt of any notice from
the Company contemplated by Section 4(b) (in respect of the occurrence of an
event contemplated by clause (x) of Section 4(b)) or Section 4(e) (in respect of
the occurrence of an event contemplated by clause (v) of Section 4(e)), such
Selling Holder shall not offer or sell any Registrable Securities pursuant to
the Shelf Registration Statement until such Selling Holder receives copies of
the amended or supplemented Prospectus contemplated by Section 4(i) hereof and
receives notice that any post-effective amendment has become effective, and, if
so directed by the Company, such Selling Holder shall deliver to the Company (at
the expense of the Company) all copies in its possession, other than permanent
file copies then in such Selling Holder's possession, of the Prospectus as
amended or supplemented at the time of receipt of such notice; (iii) all offers
and sales by such Selling Holder under the Shelf Registration Statement must be
completed within sixty days after the first date on which offers or sales can be
made pursuant to clause (i) above, and upon expiration of such sixty-day period,
the Selling Holder may not offer or sell any Registrable Securities under the
Shelf Registration Statement until it has again complied with the provisions of
clause (i) above; (iv) such Holder and any of its officers, directors or
affiliates, if any, must comply with the provisions of Regulation M under the
Exchange Act as applicable
-10-
<PAGE>
to them in connection with sales of Registrable Securities pursuant to the Shelf
Registration Statement; and (v) such Selling Holder and any of its officers,
directors or affiliates, if any, must enter into such written agreements as the
Company shall reasonably request to ensure compliance with clause (iv) above.
5. [Section Intentionally Omitted].
6. Indemnification; Contribution.
-----------------------------
(a) Indemnification by the Company. The Company agrees to indemnify and
------------------------------
hold harmless each Holder and its officers and directors and each Person, if
any, who controls any Holder within the meaning of Section 15 of the Securities
Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to which such Holder, officer, director or
controlling Person may become subject under the Securities Act or otherwise
(A) which arise out of or are based on any untrue statement or alleged
untrue statement of a material fact contained in the Shelf Registration
Statement or any amendment thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading or (B) which arise out of or are
based on any untrue statement or alleged untrue statement of a material
fact contained in the Prospectus or any amendment or supplement thereto, or
the omission or alleged omission to state therein a material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based on any such untrue statement or alleged untrue statement
or any omission or alleged omission contained in the Shelf Registration
Statement, if such settlement is effected with the written consent of the
Company; and
(iii) subject to the limitations set forth in Section 6(c), against
any and all expense whatsoever, as incurred (including reasonable fees and
disbursements of counsel), reasonably incurred in investigating, preparing
or defending against any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, in each case whether
or not a party, or any claim whatsoever based on any such untrue statement
or alleged untrue statement or omission or alleged omission, to the extent
that any such expense is not paid under subparagraph (i) or (ii) above;
provided, however, that the indemnity provided pursuant to this Section 6(a)
- -------- -------
shall not apply to any Holder with respect to any loss, liability, claim, damage
or expense which arises out of or is based on any untrue statement or alleged
untrue statement or omission or alleged omission
-11-
<PAGE>
made in reliance on and in conformity with written information furnished to the
Company by such Holder expressly for use in the Shelf Registration Statement or
any amendment thereto or the Prospectus or any amendment or supplement thereto.
(b) Indemnification by Holders. Each Holder severally agrees to indemnify
--------------------------
and hold harmless the Company and the other Selling Holders, and each of their
respective directors and officers (including each director and officer of the
Company who signed the Shelf Registration Statement), and each Person, if any,
who controls the Company or any other Selling Holder within the meaning of
Section 15 of the Securities Act, to the same extent as the indemnity contained
in Section 6(a) hereof, but only insofar as such loss, liability, claim, damage
or expense arises out of or is based on any untrue statement or alleged untrue
statement or omission or alleged omission made in the Shelf Registration
Statement or any amendment thereto or the Prospectus or any amendment or
supplement thereto in reliance on and in conformity with written information
furnished to the Company by such Selling Holder for use therein relating to the
Holder's status as a selling security holder.
(c) Conduct of Indemnification Proceedings. Each indemnified party shall
--------------------------------------
give reasonably prompt notice to each indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party (i) shall not relieve
it from any liability which it may have under the indemnity agreement provided
in Section 6(a) or (b) above, unless and to the extent it did not otherwise
learn of such action and the lack of notice by the indemnified party materially
prejudices the indemnifying party or results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) shall not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided under Section 6(a) or
(b) above. After receipt of such notice, the indemnifying party shall be
entitled to participate in and, at its option, jointly with any other
indemnifying party so notified, to assume the defense of such action or
proceeding at such indemnifying party's own expense with counsel chosen by such
indemnifying party and approved by the indemnified party, which approval shall
not be unreasonably withheld; provided, however, that, if the defendants in any
-------- -------
such action or proceeding include both the indemnified party and the
indemnifying party and the indemnified party reasonably determines, upon advice
of counsel, that a conflict of interest exists or that there may be legal
defenses available to it or other indemnified parties which are different from
or in addition to those available to the indemnifying party, then the
indemnified party shall be entitled to one separate counsel, the reasonable fees
and expenses of which shall be paid by the indemnifying party. If the
indemnifying party does not assume the defense of any such action or proceeding,
after having received the notice referred to in the first sentence of this
paragraph, the indemnifying party will pay the reasonable fees and expenses of
counsel (which shall be limited to a single law firm in addition to any local
counsel necessary in connection with such action or proceeding) for the
indemnified party. In such event, however, the indemnifying party will not be
liable for any settlement effected without the written consent of such
indemnifying party. If the indemnifying party assumes the defense of any such
action or proceeding in accordance with this paragraph, such indemnifying party
shall not be liable for any fees and
-12-
<PAGE>
expenses of counsel for the indemnified party incurred thereafter in connection
with such action or proceeding except as set forth in the proviso in the second
sentence of this Section 6(c).
(d) Contribution. In order to provide for just and equitable contribution
------------
in circumstances in which the indemnity agreement provided for in this Section 6
is for any reason held to be unenforceable although applicable in accordance
with its terms, the Company and the Selling Holders shall contribute to the
aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement incurred by the Company and the Selling
Holders, in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and the Selling Holders on the other (in such
proportions that the Selling Holders are severally, not jointly, responsible for
the balance), in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether the action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
the indemnified parties, and the parties' relative intent, pledge, access to
information and opportunity to correct or prevent such action.
The parties hereto agree that it would not be just or equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6(d), no Selling Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such Selling Holder were offered to
the public exceeds the amount of any damages which such Selling Holder would
otherwise have been required to pay by reason of such untrue statement or
omission.
Notwithstanding the foregoing, no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 6(d), each Person, if
any, who controls a Holder within the meaning of Section 15 of the Securities
Act and directors and officers of a Holder shall have the same rights to
contribution as such Holder, and each trustee of the Company, each officer of
the Company who signed the Shelf Registration Statement and each Person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act
shall have the same rights to contribution as the Company.
7. Rule 144 Sales.
--------------
(a) Compliance. The Company covenants that, so long as it is subject to
----------
the reporting requirements of the Exchange Act, it will file the reports
required to be filed by it under the Exchange Act so as to enable any Holder to
sell Registrable Securities pursuant to Rule 144 under the Securities Act.
-13-
<PAGE>
(b) Cooperation with Holders. In connection with any sale, transfer or
------------------------
other disposition by any Holder of any Registrable Securities pursuant to Rule
144 under the Securities Act, the Company shall cooperate with such Holder to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act legend, and
enable certificates for such Registrable Securities to be for such number of
shares and registered in such names as the selling Holders may reasonably
request. The Company's obligation set forth in the previous sentence shall be
subject to the delivery, if reasonably requested by the Company or its transfer
agent, by counsel to such Holder, in form and substance reasonably satisfactory
to the Company and its transfer agent, of an opinion that such Securities Act
legend need not appear on such certificate.
8. Miscellaneous.
-------------
(a) Amendments and Waivers. The provisions of this Agreement, including
----------------------
the provisions of this sentence, may not be amended, modified, supplemented or
waived, nor may consent to departures therefrom be given, without the written
consent of the Company and the Holders of a majority of the outstanding
Registrable Securities; provided, however, that no amendment, modification,
-------- -------
supplement or waiver of, or consent to the departure from, the provisions of
this Agreement, which has the purpose or effect of reducing, impairing or
adversely affecting the right of any Holder, shall be effective as against any
Holder of Registrable Securities unless consented to in writing by such Holder
of Registrable Securities. Notice of any such amendment, modification,
supplement, waiver or consent adopted in accordance with this Section 8(a) shall
be provided by the Company to each Holder of Registrable Securities at least
thirty days prior to the effective date of such amendment, modification,
supplement, waiver or consent.
(b) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, telex, telecopier or any courier guaranteeing overnight delivery,
(i) if to a Holder, at such Holder's registered address appearing on the share
register of the Company or (ii) if to the Company, at Two Center Plaza, Suite
200, Boston, Massachusetts 02108-1906, Attention: Chief Executive Officer. All
such notices and communications shall be deemed to have been duly given: at the
time delivered by hand, if personally delivered; five business days after being
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt is knowledged, if telecopied; or at the time delivered if
delivered by an air courier guaranteeing overnight delivery.
(c) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding on the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders. If any successor, assignee or transferee of any
Holder shall acquire Registrable Securities, in any manner, whether by operation
of law or otherwise, such Registrable Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding Registrable Securities
such Person shall be conclusively deemed to have agreed to be bound by all of
the terms and provisions hereof.
-14-
<PAGE>
(d) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(g) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York without giving effect to the
conflicts of law provisions thereof.
(h) Specific Performance. The parties hereto acknowledge that there would
--------------------
be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement in any
court of the United States or any State thereof having jurisdiction.
(i) Entire Agreement. This Agreement is intended by the parties as a final
----------------
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
(j) Limitation of Liability of Shareholders, Trustees and Officers of the
---------------------------------------------------------------------
Company. ANY OBLIGATION OR LIABILITY WHATSOEVER OF THE COMPANY WHICH MAY ARISE
- -------
AT ANY TIME UNDER THIS AGREEMENT OR ANY OBLIGATION OR LIABILITY WHICH MAY BE
INCURRED BY IT PURSUANT TO ANY OTHER INSTRUMENT, TRANSACTION OR UNDERTAKING
CONTEMPLATED HEREBY SHALL BE SATISFIED, IF AT ALL, OUT OF THE COMPANY'S ASSETS
ONLY. NO SUCH OBLIGATION OR LIABILITY, OTHER THAN THIS AGREEMENT AS IT RELATES
TO EACH OF THE HOLDERS, SHALL BE PERSONALLY BINDING ON, NOR SHALL RESORT FOR THE
ENFORCEMENT THEREOF BE HAD TO, THE PROPERTY OF ANY OF ITS SHAREHOLDERS,
TRUSTEES, OFFICERS, EMPLOYEES OR AGENTS (SOLELY AS A RESULT OF THEIR STATUS AS
SHAREHOLDERS, TRUSTEES, OFFICERS, EMPLOYEES OR AGENTS), REGARDLESS OF WHETHER
SUCH OBLIGATION OR LIABILITY IS IN THE NATURE OF CONTRACT, TORT OR OTHERWISE.
NOTWITHSTANDING THE FOREGOING, THIS SECTION 9(i) SHALL NOT IN ANY WAY AFFECT OR
LIMIT ANY OBLIGATION OR LIABILITY OF ANY HOLDER UNDER THIS AGREEMENT.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above
CABOT INDUSTRIAL TRUST
By:______________________________________
Name:____________________________________
Title:___________________________________
HOLDERS:
MORGAN STANLEY ASSET MANAGEMENT, INC.
As Attorney-In-Fact for each of the
clients set forth on Schedule A hereto:
By:______________________________________
Name:____________________________________
Title:___________________________________
-16-
<PAGE>
SCHEDULE A
----------
Client Schedule
---------------
Stichting Bedrijspensioenfonds Voor de Metaalnijhverheid
Stichting Pensionfonds ABP
MS Real Estate Special Situations Inc.
The Morgan Stanley Real Estate Special Situations Fund I, L.P.
The Morgan Stanley Real Estate Special Situations Fund II, L.P.
Morgan Stanley Real Estate Special Situations Real Estate Investors, L.P.
-17-
<PAGE>
EXHIBIT 10.4
CABOT INDUSTRIAL TRUST
LONG-TERM INCENTIVE PLAN
------------------------
<PAGE>
CABOT INDUSTRIAL TRUST
LONG-TERM INCENTIVE PLAN
------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
SECTION 1................................................................ 1
GENERAL............................................................. 1
1.1. Purpose................................................. 1
1.2. Participation........................................... 1
SECTION 2................................................................ 2
OPTIONS............................................................. 2
2.1. Definitions............................................. 2
2.2. Eligibility............................................. 2
2.3. Formula Awards of Options to Non-Employee Trustees...... 2
2.4. Price................................................... 3
2.5. Exercise................................................ 5
2.6. Post-Exercise Limitations............................... 5
2.7. Expiration Date......................................... 5
SECTION 3................................................................ 6
DIVIDEND AND DISTRIBUTION EQUIVALENT UNITS.......................... 6
3.1. Award of Dividend and Distribution Equivalent Units..... 6
3.2. Terms and Conditions of Dividend and
Distribution Equivalent Units........................... 8
SECTION 4................................................................ 8
OPERATION AND ADMINISTRATION........................................ 8
4.1. Effective Date.......................................... 8
4.2. Shares and Units Subject to Plan........................ 8
4.3. Reservation of Shares................................... 9
4.4. Adjustment.............................................. 9
4.5. Individual Limits on Awards............................. 10
4.6. Limitation on Grant of Options.......................... 10
4.7. Change in Control....................................... 10
4.8. Limit on Distribution................................... 12
4.9. Withholding............................................. 12
4.10. Transferability......................................... 13
4.11. Notices................................................. 13
4.12. Form and Time of Elections.............................. 13
4.13. Option Agreement........................................ 13
4.14. Limitation of Implied Rights............................ 14
4.15. Evidence................................................ 14
4.16. Action by REIT or Related Company....................... 14
4.17. Gender and Number....................................... 14
4.18. Applicable Law.......................................... 15
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 5............................................................... 15
COMMITTEES......................................................... 15
5.1. Administration......................................... 15
5.2. Selection of REIT Committee............................ 15
5.3. Powers of Committees................................... 15
5.4. Delegation by Committee................................ 16
5.5. Information to be Furnished to Committees.............. 16
5.6. Liability and Indemnification of Committees............ 16
SECTION 6............................................................... 17
AMENDMENT AND TERMINATION.......................................... 17
</TABLE>
<PAGE>
CABOT INDUSTRIAL TRUST
LONG-TERM INCENTIVE PLAN
------------------------
SECTION 1
----------
GENERAL
-------
1.1 Purpose. The Cabot Industrial Trust Long-Term Incentive Plan (the
-------
"Plan") has been established by Cabot Industrial Trust, a Maryland real estate
investment trust (the "REIT"), to:
(a) attract and retain employees and other persons providing services to
the REIT and the Related Companies (as defined below);
(b) motivate Participants (as defined in subsection 1.2), by means of
appropriate incentives, to achieve long-range goals;
(c) provide incentive compensation opportunities that are competitive with
those of other corporations and real estate investment trusts; and
(d) further identify Participants' interests with those of the REIT's
other shareholders through compensation that is based on the value of
the REIT's common shares;
and thereby promote the long-term financial interest of the REIT and the Related
Companies, including the growth in value of the REIT's equity and enhancement of
long-term shareholder return. The term "Related Company" means any company
during any period in which it is a "subsidiary corporation" (as that term is
defined in section 424(f) of the Internal Revenue Code of 1986, as amended (the
"Code")), with respect to the REIT or any affiliate of the REIT which is
designated as a Related Company by the REIT Committee (as defined in subsection
5.1 below), including Cabot Industrial Properties, L.P. (the "Partnership") and
Cabot Advisors, Inc. (the "Management Company").
1.2 Participation. Subject to the terms and conditions of the Plan, the
-------------
Committees (as described in Section 5) shall determine and designate, from time
to time, from among the Eligible Individuals (as defined below), those persons
who will be granted one or more awards under Sections 2 or 3 of the Plan (an
"Award"), and thereby become "Participants" in the Plan. In the discretion of
the granting Committee, and subject to the terms of the Plan, a Participant may
be granted any Award permitted under the provisions of the Plan, and more than
one
<PAGE>
Award may be granted to a Participant. Except as otherwise agreed by the REIT
and the Participant, or except as otherwise provided in the Plan, an Award under
the Plan shall not affect any previous Award under the Plan or an award under
any other plan maintained by the REIT or the Related Companies. For purposes of
the Plan, the term "Eligible Individual" shall mean any employee, officer,
consultant, adviser or member of the Board of the REIT or a Related Company;
provided, however, that a member of the Board of Trustees of the REIT (the
"Board") who is not an employee of the REIT or a Related Company (a "Non-
Employee Trustee") shall be granted Options in accordance with the formula award
provisions of subsection 2.3.
SECTION 2
---------
OPTIONS
-------
2.1 Definitions. The grant of an "Option" under this Section 2 entitles
-----------
the Participant to purchase common shares of beneficial interest of the REIT
("Shares") or units of interest in the Partnership ("Units") at a price fixed at
the time the Option is granted, subject to the terms of this Section. Share
Options granted under this Section may be either Incentive Share Options or
Share Options that are Non-Qualified Options, as determined in the discretion of
the REIT Committee. An "Incentive Share Option" is a Share Option that is
intended to satisfy the requirements applicable to an "incentive stock option"
described in section 422 of the Code. A "Non-Qualified Option" is an Option
that is not intended to be an Incentive Share Option.
2.2 Eligibility. Each Committee shall designate the Participants to whom
-----------
Options are to be granted under this Section and shall determine the number of
Shares or Units, as applicable, subject to each such Option. If the REIT
Committee grants Incentive Share Options, to the extent that the aggregate fair
market value of Shares with respect to which Incentive Share Options are
exercisable for the first time by any individual during any calendar year (under
all plans of the REIT and all related companies within the meaning of section
424(f) of the Code) exceeds $100,000, such Options shall be treated as Non-
Qualified Options, to the extent required by section 422 of the Code.
2.3 Formula Awards of Options to Non-Employee Trustees. At the time of his
--------------------------------------------------
initial election or appointment as a Trustee (or, if later, as of the date of
closing of the initial public offering of Shares pursuant to the REIT's first
effective registration statement for the sale to the public of the Shares filed
under the Securities Act of 1933, as amended (the "Initial
2
<PAGE>
Public Offering")), each Non-Employee Trustee shall automatically receive a Non-
Qualified Option for 10,000 Shares, which Option shall become exercisable on the
first anniversary after the date of grant, provided the Non-Employee Trustee
remains in continuous service as a Non-Employee Trustee until such anniversary
of the date of grant. Thereafter, at the closing of each annual meeting of the
REIT's shareholders, each Non-Employee Trustee who has been reelected or who is
continuing as a Trustee as of the adjournment of the annual meeting shall
automatically receive a Non-Qualified Option for an additional 4,000 Shares,
which Option shall become exercisable on the first anniversary after the date of
grant. To the extent Options granted pursuant to subsection 2.2 of the Plan are
adjusted pursuant to subsection 4.4 of the Plan, Options granted under this
subsection shall automatically be adjusted in the same manner. All Options
granted under this subsection 2.3 shall provide for an exercise price per Share
equal to the Fair Market Value (as defined below) of a Share as of the date of
grant (or par value, if greater). Each Option granted under this subsection
shall be awarded with Dividend Equivalent Units, as described in subsection 3.1.
2.4 Price. The exercise price for each Share purchasable under any Non-
-----
Qualified Option granted to a Non-Employee Trustee is set forth in subsection
2.3. The determination and payment of the purchase price of a Share or Unit
under each other Option granted under this Section shall be subject to the
following:
(a) The purchase price shall be established by the granting Committee at
the time the Option is granted; provided, however, that:
(i) in no event shall the price of a Share Option be less than the
par value of a Share on such date;
(ii) in no event shall the purchase price of a Share under an
Incentive Share Option be less than the Fair Market Value of a
Share at the time the Option is granted and in the case of any
Incentive Share Option granted to an optionee who, at the time
the Option is granted, owns shares of beneficial interest
representing more than 10% of the voting power of all classes of
shares of beneficial interest of the REIT or any of its
subsidiaries within the meaning of section 424(f) of the Code,
the exercise price for each Share purchasable under such Option
shall not be less than 110% of the Fair Market Value of a Share
on the date of grant of the Option; and
(b) Subject to the following provisions of this subsection, the full
purchase price of each Share or Unit purchased
3
<PAGE>
upon the exercise of any Option shall be paid at the time of such
exercise (or such later date as may be permitted by the Committee in
the case of a cashless exercise) and, as soon as practicable
thereafter, a certificate representing the Shares or Units so
purchased shall be delivered to the person entitled thereto.
(c) The purchase price of a Share Option shall be payable in cash or in
Shares (valued at Fair Market Value as of the day of exercise) that
have been held by the Participant at least six months, or in any
combination thereof, as determined by the REIT Committee. The
purchase price of a Unit Option shall be payable in cash or in Units
(valued at Fair Market Value as of the day of exercise) that have been
held by the Participant at least six months, or in any combination
thereof, as determined by the REIT Committee.
(d) The "Fair Market Value" of a Share or Unit as of any date shall be
determined in accordance with the following rules:
(i) If the Shares are at the time listed or admitted to trading on
any stock exchange, then the Fair Market Value of a Share shall
be the average of the highest and lowest sales price per Share
on such date on the principal exchange on which the Shares are
then listed or admitted to trading or, if no such sale is
reported on that date, on the last preceding date on which a
sale was so reported.
(ii) If the Shares are not at the time listed or admitted to trading
on a stock exchange, the Fair Market Value of a Share shall be
the average of the lowest reported bid price and highest
reported asked price of the Shares on the date in question in
the over-the-counter market, as such prices are reported in a
publication of general circulation selected by the REIT
Committee and regularly reporting the market price of Shares in
such market.
(iii) If the Shares are not listed or admitted to trading on any
stock exchange or traded in the over-the-counter market, the
Fair Market Value of a Share shall be as determined by the REIT
Committee in good faith.
4
<PAGE>
(iv) For purposes of determining the Fair Market Value of Shares
that are sold pursuant to a cashless exercise program, Fair
Market Value shall be the price at which such Shares are sold.
(v) As of any date, the Fair Market Value of a Unit shall equal the
Fair Market Value of a Share on such date.
(vi) For a Share or Unit subject to an Option granted on the date of
the closing of the Initial Public Offering, the Fair Market
Value of such Share or Unit will be deemed to be the initial
public offering price for a Share.
2.5 Exercise. Except as otherwise expressly provided in the Plan, an
--------
Option granted under this Section shall be exercisable in accordance with the
following terms of this subsection:
(a) The terms and conditions relating to exercise of an Option granted
pursuant to subsection 2.2 shall be established by the granting
Committee, and may include, without limitation, conditions relating to
completion of a specified period of service (subject to paragraph (b)
below), achievement of performance standards prior to exercise of the
Option or the achievement of Share ownership objectives by the
Participant. The granting Committee, in its sole discretion, may
accelerate the vesting of any Option under circumstances designated by
it at the time the Option is granted or thereafter.
(b) No Option may be exercised by a Participant after the Expiration Date
(as defined in subsection 2.7) applicable to that Option.
2.6 Post-Exercise Limitations. The REIT Committee, in its discretion,
-------------------------
may impose such restrictions on Shares acquired pursuant to the exercise of a
Share Option or delivered in connection with the right described in Section
4.2(e) of the Agreement of Limited Partnership of Cabot Industrial Properties,
L.P. providing for the exchange of Units for Shares (the "Conversion Right") as
it determines to be desirable, including, without limitation, restrictions
relating to disposition of the Shares and forfeiture restrictions based on
service, performance, Share ownership by the Participant and such other factors
as the REIT Committee determines to be appropriate.
2.7 Expiration Date. The "Expiration Date" with respect to an Option
---------------
granted pursuant to subsection 2.2 means the date established as the Expiration
Date by the granting Committee at
5
<PAGE>
the time of the grant; provided, however, that unless determined otherwise by
the Committee, the Expiration Date with respect to any Option shall not be later
than the earliest to occur of:
(a) the ten-year anniversary of the date on which the Option is granted;
(b) if the Participant's Date of Termination occurs by reason of death or
Disability, the one-year anniversary of such Date of Termination; or
(c) if the Participant's Date of Termination occurs for reasons other than
death or Disability, the three-month anniversary of such Date of
Termination.
The "Expiration Date" with respect to any Option granted to a Non-Employee
Trustee pursuant to subsection 2.3 means the date which is the earlier to occur
of the ten-year anniversary of the date on which the Option is granted or the
five-year anniversary of the date his trusteeship terminates. For purposes of
the Plan, a Participant's "Date of Termination" shall be the date on which he
both ceases to be an employee of the REIT and the Related Companies and ceases
to perform material services for the REIT and the Related Companies, regardless
of the reason for the cessation; provided that a "Date of Termination" shall not
be considered to have occurred during the period in which the reason for the
cessation of services is a leave of absence approved by the REIT or the Related
Company which was the recipient of the Participant's services. Except as
otherwise provided by the Committee, a Participant shall be considered to have a
"Disability" during the period in which he is unable, by reason of a medically
determinable physical or mental impairment, to engage in the material and
substantial duties of his regular occupation, which condition is expected to be
permanent.
SECTION 3
---------
DIVIDEND AND DISTRIBUTION EQUIVALENT UNITS
------------------------------------------
3.1 Award of Dividend and Distribution Equivalent Units. Unless determined
---------------------------------------------------
otherwise by the granting Committee, a Participant who is awarded an Option
under the Plan shall also be entitled to receive "Dividend Equivalent Units"
with respect to a Share Option and "Distribution Equivalent Units" with respect
to a Unit Option, as applicable.
(a) Annual crediting of Dividend and Distribution Equivalent Units. As of
--------------------------------------------------------------
the last day of each calendar year, each Participant shall be credited
with a number of Dividend Equivalent Units equal to (i) the amount the
REIT Committee determines to be the average
6
<PAGE>
dividend yield per Share for such calendar year, reduced by the amount
that the Committee determines to be the S&P 500 average dividend yield
for such year, multiplied by (ii) the number of Shares underlying the
Participant's outstanding Options that are entitled to Awards under
this Section 3 during such calendar year (reduced pro rata to reflect
Shares underlying such Options that were not outstanding on the record
date with respect to each dividend payment date during such year). As
of the last day of each calendar year, each Participant shall be
credited with a number of Distribution Equivalent Units equal to (i)
the amount the Management Company Committee determines to be the
average distribution per Unit for such calendar year, reduced by the
amount that the Committee determines to be the S&P 500 average
distribution yield for such year, multiplied by (ii) the number of
Units underlying the Participant's outstanding Options that are
entitled to Awards under this Section 3 during such calendar year
(reduced pro rata to reflect Units underlying such Options that were
not outstanding on the date each distribution was paid during such
year).
(b) Additional credits to reflect dividend and distribution payments on
-------------------------------------------------------------------
Dividend and Distribution Equivalent Units. As of the last day of each
------------------------------------------
calendar year, each Participant shall be credited with additional
Dividend Equivalent Units equal to (i) the amount the REIT Committee
determines to be the average dividend yield per Share for such
calendar year, multiplied by (ii) the number of Dividend Equivalent
Units outstanding during such calendar year (reduced pro rata to
reflect Dividend Equivalent Units that were not outstanding on each
dividend payment date during such year). As of the last day of each
calendar year, each Participant shall be credited with additional
Distribution Equivalent Units equal to (i) the amount the Management
Company Committee determines to be the average distribution yield per
Unit for such calendar year, multiplied by (ii) the number of
Distribution Equivalent Units outstanding during such calendar year
(reduced pro rata to reflect Distribution Equivalent Units that were
not outstanding on the date each distribution was paid during such
year).
3.2 Terms and Conditions of Dividend and Distribution Equivalent Units.
------------------------------------------------------------------
Unless determined otherwise by the granting Committee, Dividend and Distribution
Equivalent Units shall be subject to the following terms and conditions:
7
<PAGE>
(a) Dividend and Distribution Equivalent Units shall vest in accordance
with the vesting schedule applicable to the Option with respect to
which the Dividend or Distribution Equivalent Unit was awarded.
(b) Each vested Dividend and Distribution Equivalent Unit shall entitle
the holder thereof to a Share or Unit, as applicable, on the last day
of the calendar year in which occurs the first of (i) the date the
Participant exercises the Option with respect to which the Dividend or
Distribution Equivalent Unit was awarded, or (ii) the date such Option
expires by its terms (whether by reason of termination of employment
or otherwise); provided, however, prior to the date the Shares or
Units would otherwise be payable, to the extent permitted by the REIT
Committee, a Participant may irrevocably elect to defer receipt of
such Shares or Units until the last date of a later calendar year, but
in no event later than the last day of the calendar year in which
occurs the tenth anniversary of the grant of the underlying Option.
Any such deferral election shall be made in such form and at such
times as the Committee may determine and shall be subject to such
other terms, conditions and limitations as the Committee may
establish.
(c) All Dividend and Distribution Equivalent Units which are not vested
upon the Participant's Date of Termination or, in the case of a Non-
Employee Trustee, the date his trusteeship terminates, shall be
forfeited.
(d) Settlement of all Dividend and Distribution Equivalent Units shall be
made in the form of whole Shares or Units, as applicable. Any
fractional Shares or Units shall be settled in cash.
SECTION 4
----------
OPERATION AND ADMINISTRATION
-----------------------------
4.1 Effective Date. The Plan shall be effective as of the date it is
--------------
adopted by the Board; provided, however, that Awards granted under the Plan
prior to its approval by shareholders will be contingent on approval of the Plan
by the REIT's shareholders. The Plan shall be unlimited in duration and, in the
event of Plan termination, shall remain in effect as long as any Options awarded
under it are outstanding and have not been exercised, terminated or expired;
provided, however, that no new Awards
8
<PAGE>
shall be made under the Plan on or after the tenth anniversary of the date on
which the Plan is adopted by the Board.
4.2 Shares and Units Subject to Plan. The Shares with respect to which
--------------------------------
Awards may be made under the Plan, including Shares delivered in connection with
the Conversion Right, shall be Shares currently authorized but unissued or
currently held or subsequently acquired by the REIT as treasury shares,
including Shares purchased in the open market or in private transactions.
Subject to the provisions of subsection 4.4, the number of Shares and Units
which may be issued with respect to Awards under the Plan shall not exceed
____________ Shares or ___________ Units in the aggregate. In the event the
number of outstanding Shares and Units increases after the Effective Date, the
maximum number of Shares and Units reserved for Awards will be adjusted
automatically so that the maximum number equals 10% of the outstanding Shares
and Units on a fully-diluted basis, provided that the number of Shares reserved
for grants of Options designated as Incentive Share Options will not be so
increased over the number of such Shares as of the date the shareholders approve
the Plan. Except as otherwise provided herein, any Shares or Units subject to
an Award which for any reason expires or is terminated without issuance of
Shares or Units (including Shares reserved in connection with the Conversion
Rights of the Units and Shares or Units that are not issued because they are
withheld to satisfy tax withholding) shall again be available under the Plan.
4.3 Reservation of Shares. There shall be reserved by the REIT at all
---------------------
times for sale under the Plan and for exchange pursuant to a Conversion Right
for a Unit received upon the exercise of a Unit Option an aggregate number of
Shares equal to the maximum number of Shares and Units which may be subject to
the granting of Awards under subsection 4.2.
4.4 Adjustment. In the event the REIT Committee shall determine that any
----------
extraordinary dividend or other distribution (whether in the form of cash,
Shares, Units, other securities or other property), recapitalization, stock
split, reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase or exchange of Shares, Units or other
securities, the issuance of warrants or other rights to purchase Shares, Units
or other securities, or other similar corporate, trust or partnership
transaction or event affects the Shares or Units with respect to which Options
have been or may be issued under the Plan, such that an adjustment is determined
by the REIT Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan, then the REIT Committee shall, in such manner as it may deem
equitable, adjust any or all of (i) the number and type of Shares and Units that
thereafter may be
9
<PAGE>
made the subject of Options, (ii) the number and type of Shares and Units
subject to outstanding Options, and (iii) the grant or exercise price with
respect to any Option, or, if deemed appropriate, make provisions for a cash
payment to the holder of any outstanding Option; provided, that:
(a) with respect to Incentive Share Options, no adjustment shall be
made to the extent that the adjustment would cause the Option to
violate section 422 of the Code or any successor provision;
(b) the number of Shares or Units subject to any Option shall always
be a whole number; and
(c) in the event of a merger or sale of substantially all of the
assets of the REIT, the Board, in its sole discretion, may
substitute awards of equal value for Awards under the Plan or
cancel outstanding Awards, provided that the Participant receives
an amount that the Board believes is reasonable payment therefor.
4.5 Individual Limits on Awards. Notwithstanding any other provision of
---------------------------
the Plan to the contrary, no Participant shall receive any Award of an Option
under the Plan to the extent that the sum of:
(a) the number of Shares and Units subject to such Award;
(b) the number of Shares and Units subject to all other prior Awards of
Options under the Plan during the one-year period ending on the date
of the Award; and
(c) the number of Shares and Units subject to all other prior awards of
options granted to the Participant under other plans or arrangements
of the REIT or the Partnership during the one-year period ending on
the date of the award;
would exceed the Participant's Individual Limit under the Plan. The
determination made under the foregoing provisions of this subsection shall be
based on the Shares and Units subject to the Awards at the time of grant,
regardless of when the Awards become exercisable. Subject to the provisions of
subsection 4.4, a Participant's "Individual Limit" shall be 500,000 Shares or
500,000 Units, or any combination of the foregoing.
4.6 Limitation on Grant of Options. Notwithstanding any provision of the
------------------------------
Plan to the contrary, in no event shall an Option be granted under the Plan if
the granting of such Option may, in the determination of the REIT Committee,
cause the REIT
10
<PAGE>
to lose its status as a real estate investment trust under section 856 of the
Code (including sections 856()(6) and 856(h) thereof) and applicable regulations
thereunder.
4.7 Change in Control. In the event of a Change in Control of the REIT
-----------------
(as defined below), all Options and related Awards which have not otherwise
expired shall become immediately exercisable and all other Awards shall become
fully vested. For purposes of the Plan, a "Change in Control" means the
happening of any of the following:
(a) the shareholders of the REIT approve a definitive agreement to merge
the REIT into or consolidate the REIT with another entity, sell or
otherwise dispose of all or substantially all of its assets or adopt a
plan of liquidation, provided, however, that a Change in Control shall
not be deemed to have occurred by reason of a transaction, or a
substantially concurrent or otherwise related series of transactions,
upon the completion of which 50% or more of the beneficial ownership
of the voting power of the REIT, the surviving corporation or
corporation directly or indirectly controlling the REIT or the
surviving corporation, as the case may be, is held by the same persons
(as defined below) (although not necessarily in the same proportion)
as held the beneficial ownership of the voting power of the REIT
immediately prior to the transaction or the substantially concurrent
or otherwise related series of transactions, except that upon the
completion thereof, employees or employee benefit plans of the REIT
may be a new holder of such beneficial ownership; provided, further,
that any transaction described in this paragraph (a) with an
"Affiliate" of the REIT (as defined in the Securities Exchange Act of
1934, as amended (the "Exchange Act")) shall not be treated as a
Change in Control; or
(b) the "beneficial ownership" (as defined in Rule 13d-3 under the
Exchange Act) of securities representing 25% or more of the combined
voting power of the REIT is acquired, other than from the REIT, by any
"person" as defined in Sections 13(d) and 14(d) of the Exchange Act
(other than any trustee or other fiduciary holding securities under an
employee benefit or other similar stock plan of the REIT); or
(c) at any time during any period of two consecutive years, individuals
who at the beginning of such period were members of the Board cease
for any reason to constitute at least a majority thereof (unless the
election, or the nomination for election by the REIT's shareholders,
11
<PAGE>
of each new trustee was approved by a vote of at least two-thirds of
the trustees still in office at the time of such election or
nomination who were trustees at the beginning of such period).
4.8 Limit on Distribution. Distribution of Shares or Units under the Plan
---------------------
shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the REIT shall have
no liability to deliver any Shares or Units under the Plan unless such
delivery would comply with all applicable laws and the applicable
requirements of any securities exchange or similar entity.
(b) In the case of a Participant who is subject to Section 16(a) and 16(b)
of the Exchange Act, the REIT Committee may, at any time, add such
conditions and limitations to any Award to such Participant, or any
feature of any such Award, as the REIT Committee, in its sole
discretion, deems necessary or desirable to comply with Section 16(a)
or 16(b) and the rules and regulations thereunder or to obtain any
exemption therefrom.
(c) To the extent that the Plan provides for issuance of certificates to
reflect the transfer of Shares or Units, the transfer of such Shares
or Units may be effected on a non-certificated basis, to the extent
not prohibited by applicable law or the rules of any stock exchange.
4.9 Withholding. All Awards and other payments under the Plan are
-----------
subject to withholding of all applicable taxes, which withholding obligations
with respect to Share Options may be satisfied, with the consent of the REIT
Committee, through the surrender of Shares which the Participant already owns or
to which a Participant is otherwise entitled under the Plan; provided, however,
previously-owned Shares that have been held by the Participant less than six
months or Shares to which the Participant is entitled under the Plan may only be
used to satisfy the minimum tax withholding required by applicable law.
4.10 Transferability. Awards under the Plan are not transferable except
---------------
as designated by the Participant by will or by the laws of descent and
distribution. In no event shall an Incentive Share Option be transferable to
the extent that such transferability would violate the requirements applicable
to such option under Code section 422. To the extent that the Participant who
receives an Award under the Plan has the right to exercise such Award, the Award
may be exercised during the lifetime of the Participant only by the Participant.
12
<PAGE>
Notwithstanding the foregoing provisions of this subsection, the Committee may
permit Awards under the Plan to be transferred to or for the benefit of the
Participant's family (including, without limitation, to a trust or partnership
for the benefit of a Participant's family), subject to such limits as the
Committee may establish. In no event shall an Incentive Share Option be
transferable to the extent that such transferability would violate the
requirements applicable to such option under Code section 422.
4.11. Notices. Any notice or document required to be filed with the
-------
granting Committee under the Plan will be properly filed if delivered or mailed
by registered mail, postage prepaid, to such Committee, in care of the REIT or
the Management Company, as applicable, at its principal executive offices. The
Committee may, by advance written notice to affected persons, revise such notice
procedure from time to time. Any notice required under the Plan (other than a
notice of election) may be waived by the person entitled to notice.
4.12. Form and Time of Elections. Unless otherwise specified herein,
--------------------------
each election required or permitted to be made by any Participant or other
person entitled to benefits under the Plan, and any permitted modification or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.
4.13. Option Agreement. At the time of an Award to a Participant under
----------------
the Plan, the granting Committee may require a Participant to enter into an
agreement with the REIT or the Management Company, as applicable (the
"Agreement"), in a form specified by the Committee, agreeing to the terms and
conditions of the Plan and to such additional terms and conditions, not
inconsistent with the Plan, as the Committee may, in its sole discretion,
prescribe.
13
<PAGE>
4.14. Limitation of Implied Rights.
----------------------------
(a) Neither a Participant nor any other person shall, by reason of the
Plan, acquire any right in or title to any assets, funds or property
of the REIT or any Related Company whatsoever, including, without
limitation, any specific funds, assets, or other property which the
REIT or any Related Company, in its sole discretion, may set aside in
anticipation of a liability under the Plan. A Participant shall have
only a contractual right to the amounts, if any, payable under the
Plan, unsecured by any assets of the REIT and any Related Company.
Nothing contained in the Plan shall constitute a guarantee by the REIT
or any Related Company that the assets of such companies shall be
sufficient to pay any benefits to any person.
(b) The Plan does not constitute a contract of employment, and selection
as a Participant will not give any employee the right to be retained
in the employ of the REIT or any Related Company, nor any right or
claim to any benefit under the Plan, unless such right or claim has
specifically accrued under the terms of the Plan. Except as otherwise
provided in the Plan, no Award under the Plan shall confer upon the
holder thereof any right as a shareholder of the REIT or as a holder
of interests in the Partnership prior to the date on which he fulfills
all service requirements and other conditions for receipt of such
rights and Shares or Units are registered in his name.
4.15. Evidence. Evidence required of anyone under the Plan may be by
--------
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
4.16. Action by REIT or Related Company. Any action required or
---------------------------------
permitted to be taken by the REIT or any Related Company shall be by resolution
of its board of trustees or directors, as applicable, or by action of one or
more members of the board (including a committee of the board) who are duly
authorized to act for the board or (except to the extent prohibited by
applicable law or the rules of any stock exchange) by a duly authorized officer
of the REIT.
4.17. Gender and Number. Where the context admits, words in any gender
-----------------
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
14
<PAGE>
4.18. Applicable Law. The provisions of the Plan shall be construed in
--------------
accordance with the laws of the State of Maryland, without giving effect to
choice of law principles.
SECTION 5
---------
COMMITTEES
----------
5.1 Administration. The authority to control and manage the operation
--------------
and administration of the Plan shall be vested in a REIT Committee and a
Management Company Committee (the "Committees") in accordance with this Section
5.
5.2 Selection of REIT Committee. So long as the REIT is subject to
---------------------------
Section 16 of the Exchange Act, the Committee shall be selected by the Board and
shall consist of not fewer than two members of the Board or such greater number
as may be required for compliance with Rule 16b-3 issued under the Exchange Act.
5.3 Powers of Committees. The authority to manage and control the
--------------------
operation and administration of the Plan shall be vested in the Committees,
subject to the following:
(a) Subject to the provisions of the Plan, the REIT Committee will have
the authority and discretion to grant Share Options and Unit Options
and Dividend and Distribution Equivalent Unit rights to individuals
who, at the time of grant, perform services for the REIT or the
Partnership, or who are officers, trustees, directors or other persons
subject to Section 16(a) of the Exchange Act with respect to the REIT.
The Management Company Committee shall have sole and exclusive
authority to grant Unit Options and Distribution Equivalent Unit
rights to persons who, at the time of grant, perform services for the
Management Company and are not officers, trustees, directors or other
persons subject to Section 16(a) of the Exchange Act with respect to
the REIT. Each Committee shall have the authority to determine the
time or times of receipt, to determine the types of Awards and the
number of Shares or Units covered by the Awards, to establish the
terms, conditions, performance criteria, restrictions, and other
provisions of such Awards, and to cancel or suspend Awards. In making
such Award determinations, the Committee may take into account the
nature of services rendered by the respective individual, the
individual's present and potential contribution to the REIT's success
and such other factors as the Committee deems relevant.
15
<PAGE>
(b) The Committee will have the authority and discretion to interpret the
Plan, to establish, amend and rescind any rules and regulations
relating to the Plan, to determine the terms and provisions of any
agreements made pursuant to the Plan and to make all other
determinations that may be necessary or advisable for the
administration of the Plan.
(c) Any interpretation of the Plan by the Committee and any decision made
by it under the Plan is final and binding on all persons.
(d) Except as otherwise expressly provided in the Plan, where the
Committee is authorized to make a determination with respect to any
Award, such determination shall be made at the time the Award is made,
except that the Committee may reserve the authority to have such
determination made by the Committee in the future (but only if such
reservation is made at the time the Award is granted and is expressly
stated in the Agreement reflecting the Award).
5.4 Delegation by Committee. Except to the extent prohibited by
-----------------------
applicable law or the rules of any stock exchange or NASDAQ (if appropriate), a
Committee may allocate all or any portion of its responsibilities and powers to
any one or more of its members and may delegate all or any part of its
responsibilities and powers to any person or persons selected by it. Any such
allocation or delegation may be revoked by the Committee at any time.
5.5 Information to be Furnished to Committees. The REIT and Related
-----------------------------------------
Companies shall furnish the Committee such data and information as may be
required for it to discharge its duties. The records of the REIT and Related
Companies as to an employee's or Participant's employment (or other provision of
services), termination of employment (or cessation of the provision of
services), leave of absence, reemployment and compensation shall be conclusive
on all persons unless determined to be incorrect. Participants and other persons
entitled to benefits under the Plan must furnish the Committees such evidence,
data or information as the Committees consider desirable to carry out the terms
of the Plan.
5.6 Liability and Indemnification of Committees. No member or authorized
-------------------------------------------
delegate of either Committee shall be liable to any person for any action taken
or omitted in connection with the administration of the Plan unless attributable
to his own fraud or willful misconduct; nor shall the REIT or any Related
Company be liable to any person for any such action unless
16
<PAGE>
attributable to fraud or willful misconduct on the part of a trustee or employee
of the REIT or Related Company. Each Committee, the individual members thereof,
and persons acting as the authorized delegates of the Committee under the Plan,
shall be indemnified by the REIT against any and all liabilities, losses, costs
and expenses (including legal fees and expenses) of whatsoever kind and nature
which may be imposed on, incurred by or asserted against the Committee or its
members or authorized delegates by reason of the performance of a Committee
function if the Committee or its members or authorized delegates did not act
dishonestly or in willful violation of the law or regulation under which such
liability, loss, cost or expense arises. This indemnification shall not
duplicate but may supplement any coverage available under any applicable
insurance.
SECTION 6
---------
AMENDMENT AND TERMINATION
-------------------------
The Board may, at any time, amend or terminate the Plan, provided that,
subject to subsection 4.4 (relating to certain adjustments to shares), no
amendment or termination may materially adversely affect the rights of any
Participant or beneficiary under any Award made under the Plan prior to the date
such amendment is adopted by the Board.
17
<PAGE>
EXHIBIT 10.5
Cabot Industrial Properties, L.P.
Two Center Plaza, Suite 200
Boston, MA 02108-1906
February __, 1998
[Name and Address]
Dear Mr. Ferdinand Colloredo-Mansfeld:
This letter reflects our agreement relative to your appointment as Chairman
of Cabot Industrial Trust (the "Trust") and your employment by Cabot Industrial
Properties, L.P. (the "Partnership").
The Partnership agrees to employ you in such capacity for a three-year term
(the "Term"), beginning [___________] (the "Effective Date"). After the third
anniversary of the Effective Date, the Term shall be automatically extended for
12-month periods, unless you or the Partnership provides written notice of non-
renewal to the other at least 120 days before the last day of the Term. During
the Term, while you are employed by the Partnership, you agree that you shall
devote substantially all of your business time, energies and talents to serving
as Chairman of the Trust, you shall perform your duties faithfully and
efficiently subject to the directions of the Board of Trustees of the Trust and
you will not engage, directly or indirectly, in any activities that compete with
those of the Trust or the Partnership.
During the Term while you are employed by the Partnership, you will be paid
base compensation in the amount of $265,000 per year and you will be eligible
for a cash bonus in such amount as may be determined by the Board of Trustees of
the Trust or the Compensation Committee thereof, in its sole discretion. The
amount of your base compensation and your bonus will be reviewed by the Board
each year during the Term. You also will be granted such options under the
Cabot Industrial Trust Long Term Incentive Plan (the "Plan") as the committee of
the Plan determines.
If, during the Term, after a Change in Control (as described in the Plan),
(i) the Trust or the Partnership or the successor of either (A) terminates your
employment without Cause (as defined below) or does not extend the Term or (B)
constructively terminates your employment by substantially adversely altering
either your status or responsibilities or your annual base compensation and
bonus from those in effect immediately prior to the Change in Control or by
moving the location of your office more than 50 miles from its then current
location, or (ii) if you terminate your employment on or before the first
anniversary of the Change in Control, you will be entitled to a lump sum payment
as soon as practicable after the date of such termination, subject to payroll
tax withholding as required by law, in an amount equal to three times the sum
<PAGE>
of the rate of your annual base compensation as in effect on such date (or as in
effect on the date of the Change in Control, if higher) plus the amount of your
bonus for the year prior to the year in which your employment terminates;
provided, that if termination occurs within 12 months of the Effective Date, the
amount of the bonus shall be deemed to be 30% of the rate of your annual base
compensation as in effect on such date. In the event it is determined that any
payment or benefit (or combination thereof), including acceleration of any share
options, by the Trust to you or for your benefit would be subject to the excise
tax imposed by section 4999 of the Internal Revenue Code, the Trust or the
Partnership shall pay you a tax gross-up payment in accordance with Exhibit A,
which is attached to and forms a part of this agreement. For purposes of this
agreement, "Cause" shall mean your willful engaging in conduct which is
demonstrably monetarily injurious to the Trust or the Partnership or your
engaging in egregious misconduct involving serious moral turpitude.
If this letter satisfactorily reflects our agreement, please sign and
return the attached copy to my attention. Thank you for your efforts on behalf
of the Trust and the Partnership.
Cabot Industrial Properties, L.P.
By: Cabot Industrial Trust,
its general partner
-----------------------------
Name:
Title:
Accepted this ____ day of
____________, 1998.
_______________________
Executive
<PAGE>
Exhibit A
---------
Tax Gross-Up Payment
--------------------
1. Gross-Up Payment. In the event that it is determined that any payments,
----------------
benefits or distributions (or any combination thereof) to or for the
benefit of Executive (whether paid or payable or distributed or
distributable pursuant to the terms of the attached letter agreement, or
otherwise) by the Trust or any of its affiliates (including the
Partnership) or by one or more trusts established by the Trust or any of
its affiliates for the benefit of their employees, are subject to the
excise tax imposed by section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), which payments are collectively referred to as
"Parachute Payments", the Trust or the Partnership shall pay to or for the
benefit of Executive a payment (a "Gross-Up Payment") equal to the sum of
the following amounts:
a. the amount of the excise tax attributable to the Parachute Payments
(referred to as the "Excise Tax") and the amount of any additional
excise tax under section 4999 of the Code imposed with respect to
additional payments, if any, made pursuant to this paragraph 1;
b. any interest or penalties incurred by Executive with respect to the
Excise Tax and other payments, if any, made pursuant to this paragraph
1; and
c. any taxes, including income taxes, incurred by Executive on the Excise
Tax and other payments, if any, made pursuant to this paragraph 1.
2. Determination and Payment of Gross-Up Payment. Subject to the provisions
---------------------------------------------
of paragraph 3 below, all determinations required to be made under this
Exhibit A, including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by a nationally recognized
certified public accounting firm as may be designated by the Trust or the
Partnership (the "Accounting Firm") which shall provide detailed supporting
calculations to the Trust, the Partnership and Executive within fifteen
(15) business days of the effective time of a Change in Control or such
earlier time as is requested by the Trust or the Partnership. All fees and
expenses of the Accounting Firm shall be borne solely by the Trust or the
Partnership. Any Gross-Up Payment, as determined pursuant to paragraph 1,
shall be paid by the Trust or the Partnership to Executive within five (5)
days after the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by Executive, it
shall so indicate to Executive in writing. Any determination by the
Accounting Firm shall be binding upon the Trust, the Partnership and
Executive. As a result of the uncertainty in the application of section
4999 of the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that a Gross-Up Payment which will not have
been made by the Trust or the Partnership should have been made
("Underpayment"),
<PAGE>
consistent with the calculations required to be made hereunder. In the
event that the Trust or the Partnership exhausts its remedies pursuant to
paragraph 3 and Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Trust or the Partnership to or for the benefit of Executive.
3. Claims by IRS. Executive shall notify the Trust and the Partnership in
-------------
writing of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Trust or the Partnership of the Gross-Up
Payment. Such notification shall be given as soon as practicable but no
later than ten (10) business days after Executive is informed in writing of
such claim and shall apprise the Trust and the Partnership of the nature of
such claim and the date on which such claim is requested to be paid.
Executive shall not pay such claim prior to the expiration of the thirty
(30) day period following the date on which it gives such notice to the
Trust and the Partnership (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Trust or
the Partnership notifies Executive in writing prior to the expiration of
such period that it desires to contest such claim, Executive shall:
a. give the Trust and the Partnership any information requested by either
relating to such claim;
b. take such action in connection with contesting such claim as the Trust
or the Partnership shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Trust or the Partnership;
c. cooperate with the Trust and the Partnership in good faith in order to
effectively contest such claim; and
d. permit the Trust and the Partnership to participate in any proceedings
relating to such claim;
provided, however, that the Trust or the Partnership shall bear and pay
directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify and
hold Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto) imposed
as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this paragraph 3, the
Trust or the Partnership shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a
2
<PAGE>
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Trust or the
Partnership shall determine; provided, however, that if the Trust or the
Partnership directs Executive to pay such claim and sue for a refund, the
Trust or the Partnership shall advance the amount of such payment to
Executive, on an interest-free basis, and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect
to such advance; and provided, further, that if Executive is required to
extend the statute of limitations to enable the Trust or the Partnership to
contest such claim, Executive may limit this extension solely to such
contested amount. The control of the contest by the Trust or the
Partnership shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
4. Refunds. If, after the receipt by Executive of an amount advanced by the
-------
Trust or the Partnership pursuant to paragraph 3, Executive becomes
entitled to receive any refund with respect to such claim, Executive shall
(subject to the Trust's or the Partnership's complying with the
requirements of paragraph 3) promptly pay to the Trust or the Partnership
the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
Executive of an amount advanced by the Trust or the Partnership pursuant to
paragraph 3, a determination is made that Executive shall not be entitled
to any refund with respect to such claim and the Trust or the Partnership
does not notify Executive in writing of its intent to contest such denial
of refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
3
<PAGE>
EXHIBIT 10.6
Cabot Industrial Properties, L.P.
Two Center Plaza, Suite 200
Boston, MA 02108-1906
February __, 1998
[Name and Address]
Dear Mr. Patterson:
This letter reflects our agreement relative to your appointment as
President of Cabot Industrial Trust (the "Trust") and your employment by Cabot
Industrial Properties, L.P. (the "Partnership").
The Partnership agrees to employ you in such capacity for a three-year term
(the "Term"), beginning [___________] (the "Effective Date"). After the third
anniversary of the Effective Date, the Term shall be automatically extended for
12-month periods, unless you or the Partnership provides written notice of non-
renewal to the other at least 120 days before the last day of the Term. During
the Term, while you are employed by the Partnership, you agree that you shall
devote substantially all of your business time, energies and talents to serving
as President of the Trust, you shall perform your duties faithfully and
efficiently subject to the directions of the Chairman of the Trust and you will
not engage, directly or indirectly, in any activities that compete with those of
the Trust or the Partnership.
During the Term while you are employed by the Partnership, you will be paid
base compensation in the amount of $245,000 per year and you will be eligible
for a cash bonus in such amount as may be determined by the Board of Trustees of
the Trust or the Compensation Committee thereof, in its sole discretion. The
amount of your base compensation and your bonus will be reviewed by the Board
each year during the Term. You also will be granted such options under the
Cabot Industrial Trust Long Term Incentive Plan (the "Plan") as the committee of
the Plan determines.
If, during the Term, after a Change in Control (as described in the Plan),
(i) the Trust or the Partnership or the successor of either (A) terminates your
employment without Cause (as defined below) or does not extend the Term or (B)
constructively terminates your employment by substantially adversely altering
either your status or responsibilities or your annual base compensation and
bonus from those in effect immediately prior to the Change in Control or by
moving the location of your office more than 50 miles from its then current
location, or (ii) if you terminate your employment on or before the first
anniversary of the Change in Control, you will be entitled to a lump sum payment
as soon as practicable after the date of such termination, subject to payroll
tax withholding as required by law, in an amount equal to three times the sum
<PAGE>
of the rate of your annual base compensation as in effect on such date (or as in
effect on the date of the Change in Control, if higher) plus the amount of your
bonus for the year prior to the year in which your employment terminates;
provided, that if termination occurs within 12 months of the Effective Date, the
amount of the bonus shall be deemed to be 30% of the rate of your annual base
compensation as in effect on such date. In the event it is determined that any
payment or benefit (or combination thereof), including acceleration of any share
options, by the Trust to you or for your benefit would be subject to the excise
tax imposed by section 4999 of the Internal Revenue Code, the Trust or the
Partnership shall pay you a tax gross-up payment in accordance with Exhibit A,
which is attached to and forms a part of this agreement. For purposes of this
agreement, "Cause" shall mean your willful engaging in conduct which is
demonstrably monetarily injurious to the Trust or the Partnership or your
engaging in egregious misconduct involving serious moral turpitude.
If this letter satisfactorily reflects our agreement, please sign and
return the attached copy to my attention. Thank you for your efforts on behalf
of the Trust and the Partnership.
Cabot Industrial Properties, L.P.
By: Cabot Industrial Trust,
its general partner
--------------------------------
Name:
Title:
Accepted this ____ day of
____________, 1998.
_______________________
Executive
<PAGE>
Exhibit A
---------
Tax Gross-Up Payment
--------------------
1. Gross-Up Payment. In the event that it is determined that any payments,
----------------
benefits or distributions (or any combination thereof) to or for the
benefit of Executive (whether paid or payable or distributed or
distributable pursuant to the terms of the attached letter agreement, or
otherwise) by the Trust or any of its affiliates (including the
Partnership) or by one or more trusts established by the Trust or any of
its affiliates for the benefit of their employees, are subject to the
excise tax imposed by section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), which payments are collectively referred to as
"Parachute Payments", the Trust or the Partnership shall pay to or for the
benefit of Executive a payment (a "Gross-Up Payment") equal to the sum of
the following amounts:
a. the amount of the excise tax attributable to the Parachute Payments
(referred to as the "Excise Tax") and the amount of any additional
excise tax under section 4999 of the Code imposed with respect to
additional payments, if any, made pursuant to this paragraph 1;
b. any interest or penalties incurred by Executive with respect to the
Excise Tax and other payments, if any, made pursuant to this paragraph
1; and
c. any taxes, including income taxes, incurred by Executive on the Excise
Tax and other payments, if any, made pursuant to this paragraph 1.
2. Determination and Payment of Gross-Up Payment. Subject to the provisions
---------------------------------------------
of paragraph 3 below, all determinations required to be made under this
Exhibit A, including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by a nationally recognized
certified public accounting firm as may be designated by the Trust or the
Partnership (the "Accounting Firm") which shall provide detailed supporting
calculations to the Trust, the Partnership and Executive within fifteen
(15) business days of the effective time of a Change in Control or such
earlier time as is requested by the Trust or the Partnership. All fees and
expenses of the Accounting Firm shall be borne solely by the Trust or the
Partnership. Any Gross-Up Payment, as determined pursuant to paragraph 1,
shall be paid by the Trust or the Partnership to Executive within five (5)
days after the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by Executive, it
shall so indicate to Executive in writing. Any determination by the
Accounting Firm shall be binding upon the Trust, the Partnership and
Executive. As a result of the uncertainty in the application of section
4999 of the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that a Gross-Up Payment which will not have
been made by the Trust or the Partnership should have been made
("Underpayment"),
<PAGE>
consistent with the calculations required to be made hereunder. In the
event that the Trust or the Partnership exhausts its remedies pursuant to
paragraph 3 and Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Trust or the Partnership to or for the benefit of Executive.
3. Claims by IRS. Executive shall notify the Trust and the Partnership in
-------------
writing of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Trust or the Partnership of the Gross-Up
Payment. Such notification shall be given as soon as practicable but no
later than ten (10) business days after Executive is informed in writing of
such claim and shall apprise the Trust and the Partnership of the nature of
such claim and the date on which such claim is requested to be paid.
Executive shall not pay such claim prior to the expiration of the thirty
(30) day period following the date on which it gives such notice to the
Trust and the Partnership (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Trust or
the Partnership notifies Executive in writing prior to the expiration of
such period that it desires to contest such claim, Executive shall:
a. give the Trust and the Partnership any information requested by either
relating to such claim;
b. take such action in connection with contesting such claim as the Trust
or the Partnership shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Trust or the Partnership;
c. cooperate with the Trust and the Partnership in good faith in order to
effectively contest such claim; and
d. permit the Trust and the Partnership to participate in any proceedings
relating to such claim;
provided, however, that the Trust or the Partnership shall bear and pay
directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify and
hold Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto) imposed
as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this paragraph 3, the
Trust or the Partnership shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a
2
<PAGE>
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Trust or the
Partnership shall determine; provided, however, that if the Trust or the
Partnership directs Executive to pay such claim and sue for a refund, the
Trust or the Partnership shall advance the amount of such payment to
Executive, on an interest-free basis, and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect
to such advance; and provided, further, that if Executive is required to
extend the statute of limitations to enable the Trust or the Partnership to
contest such claim, Executive may limit this extension solely to such
contested amount. The control of the contest by the Trust or the
Partnership shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
4. Refunds. If, after the receipt by Executive of an amount advanced by the
-------
Trust or the Partnership pursuant to paragraph 3, Executive becomes
entitled to receive any refund with respect to such claim, Executive shall
(subject to the Trust's or the Partnership's complying with the
requirements of paragraph 3) promptly pay to the Trust or the Partnership
the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
Executive of an amount advanced by the Trust or the Partnership pursuant to
paragraph 3, a determination is made that Executive shall not be entitled
to any refund with respect to such claim and the Trust or the Partnership
does not notify Executive in writing of its intent to contest such denial
of refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
3
<PAGE>
EXHIBIT 10.7
Cabot Industrial Properties, L.P.
Two Center Plaza, Suite 200
Boston, MA 02108-1906
February __, 1998
[Name and Address]
Dear Mr. Franz Colloredo-Mansfeld:
This letter reflects our agreement relative to your appointment as Chief
Financial Officer of Cabot Industrial Trust (the "Trust") and your employment by
Cabot Industrial Properties, L.P. (the "Partnership").
The Partnership agrees to employ you in such capacity for a three-year term
(the "Term"), beginning [___________] (the "Effective Date"). After the third
anniversary of the Effective Date, the Term shall be automatically extended for
12-month periods, unless you or the Partnership provides written notice of non-
renewal to the other at least 120 days before the last day of the Term. During
the Term, while you are employed by the Partnership, you agree that you shall
devote substantially all of your business time, energies and talents to serving
as Chief Financial Officer of the Trust, you shall perform your duties
faithfully and efficiently subject to the directions of the Chairman of the
Trust and you will not engage, directly or indirectly, in any activities that
compete with those of the Trust or the Partnership.
During the Term while you are employed by the Partnership, you will be paid
base compensation in the amount of $175,000 per year and you will be eligible
for a cash bonus in such amount as may be determined by the Board of Trustees of
the Trust or the Compensation Committee thereof, in its sole discretion. The
amount of your base compensation and your bonus will be reviewed by the Board
each year during the Term. You also will be granted such options under the
Cabot Industrial Trust Long Term Incentive Plan (the "Plan") as the committee of
the Plan determines.
If, during the Term, after a Change in Control (as described in the Plan),
(i) the Trust or the Partnership or the successor of either (A) terminates your
employment without Cause (as defined below) or does not extend the Term or (B)
constructively terminates your employment by substantially adversely altering
either your status or responsibilities or your annual base compensation and
bonus from those in effect immediately prior to the Change in Control or by
moving the location of your office more than 50 miles from its then current
location, or (ii) if you terminate your employment on or before the first
anniversary of the Change in Control, you will be entitled to a lump sum payment
as soon as practicable after the date of such termination,
<PAGE>
subject to payroll tax withholding as required by law, in an amount equal to
three times the sum of the rate of your annual base compensation as in effect on
such date (or as in effect on the date of the Change in Control, if higher) plus
the amount of your bonus for the year prior to the year in which your employment
terminates; provided, that if termination occurs within 12 months of the
Effective Date, the amount of the bonus shall be deemed to be 30% of the rate of
your annual base compensation as in effect on such date. In the event it is
determined that any payment or benefit (or combination thereof), including
acceleration of any share options, by the Trust to you or for your benefit would
be subject to the excise tax imposed by section 4999 of the Internal Revenue
Code, the Trust or the Partnership shall pay you a tax gross-up payment in
accordance with Exhibit A, which is attached to and forms a part of this
agreement. For purposes of this agreement, "Cause" shall mean your willful
engaging in conduct which is demonstrably monetarily injurious to the Trust or
the Partnership or your engaging in egregious misconduct involving serious moral
turpitude.
If this letter satisfactorily reflects our agreement, please sign and
return the attached copy to my attention. Thank you for your efforts on behalf
of the Trust and the Partnership.
Cabot Industrial Properties, L.P.
By: Cabot Industrial Trust,
its general partner
------------------------------
Name:
Title:
Accepted this ____ day of
____________, 1998.
_______________________
Executive
<PAGE>
Exhibit A
---------
Tax Gross-Up Payment
--------------------
1. Gross-Up Payment. In the event that it is determined that any payments,
----------------
benefits or distributions (or any combination thereof) to or for the
benefit of Executive (whether paid or payable or distributed or
distributable pursuant to the terms of the attached letter agreement, or
otherwise) by the Trust or any of its affiliates (including the
Partnership) or by one or more trusts established by the Trust or any of
its affiliates for the benefit of their employees, are subject to the
excise tax imposed by section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), which payments are collectively referred to as
"Parachute Payments", the Trust or the Partnership shall pay to or for the
benefit of Executive a payment (a "Gross-Up Payment") equal to the sum of
the following amounts:
a. the amount of the excise tax attributable to the Parachute Payments
(referred to as the "Excise Tax") and the amount of any additional
excise tax under section 4999 of the Code imposed with respect to
additional payments, if any, made pursuant to this paragraph 1;
b. any interest or penalties incurred by Executive with respect to the
Excise Tax and other payments, if any, made pursuant to this paragraph
1; and
c. any taxes, including income taxes, incurred by Executive on the Excise
Tax and other payments, if any, made pursuant to this paragraph 1.
2. Determination and Payment of Gross-Up Payment. Subject to the provisions
---------------------------------------------
of paragraph 3 below, all determinations required to be made under this
Exhibit A, including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by a nationally recognized
certified public accounting firm as may be designated by the Trust or the
Partnership (the "Accounting Firm") which shall provide detailed supporting
calculations to the Trust, the Partnership and Executive within fifteen
(15) business days of the effective time of a Change in Control or such
earlier time as is requested by the Trust or the Partnership. All fees and
expenses of the Accounting Firm shall be borne solely by the Trust or the
Partnership. Any Gross-Up Payment, as determined pursuant to paragraph 1,
shall be paid by the Trust or the Partnership to Executive within five (5)
days after the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by Executive, it
shall so indicate to Executive in writing. Any determination by the
Accounting Firm shall be binding upon the Trust, the Partnership and
Executive. As a result of the uncertainty in the application of section
4999 of the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that a Gross-Up Payment which will not have
been made by the Trust or the Partnership should have been made
("Underpayment"),
<PAGE>
consistent with the calculations required to be made hereunder. In the
event that the Trust or the Partnership exhausts its remedies pursuant to
paragraph 3 and Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Trust or the Partnership to or for the benefit of Executive.
3. Claims by IRS. Executive shall notify the Trust and the Partnership in
-------------
writing of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Trust or the Partnership of the Gross-Up
Payment. Such notification shall be given as soon as practicable but no
later than ten (10) business days after Executive is informed in writing of
such claim and shall apprise the Trust and the Partnership of the nature of
such claim and the date on which such claim is requested to be paid.
Executive shall not pay such claim prior to the expiration of the thirty
(30) day period following the date on which it gives such notice to the
Trust and the Partnership (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Trust or
the Partnership notifies Executive in writing prior to the expiration of
such period that it desires to contest such claim, Executive shall:
a. give the Trust and the Partnership any information requested by either
relating to such claim;
b. take such action in connection with contesting such claim as the Trust
or the Partnership shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Trust or the Partnership;
c. cooperate with the Trust and the Partnership in good faith in order to
effectively contest such claim; and
d. permit the Trust and the Partnership to participate in any proceedings
relating to such claim;
provided, however, that the Trust or the Partnership shall bear and pay
directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify and
hold Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto) imposed
as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this paragraph 3, the
Trust or the Partnership shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a
2
<PAGE>
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Trust or the
Partnership shall determine; provided, however, that if the Trust or the
Partnership directs Executive to pay such claim and sue for a refund, the
Trust or the Partnership shall advance the amount of such payment to
Executive, on an interest-free basis, and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect
to such advance; and provided, further, that if Executive is required to
extend the statute of limitations to enable the Trust or the Partnership to
contest such claim, Executive may limit this extension solely to such
contested amount. The control of the contest by the Trust or the
Partnership shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
4. Refunds. If, after the receipt by Executive of an amount advanced by the
-------
Trust or the Partnership pursuant to paragraph 3, Executive becomes
entitled to receive any refund with respect to such claim, Executive shall
(subject to the Trust's or the Partnership's complying with the
requirements of paragraph 3) promptly pay to the Trust or the Partnership
the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
Executive of an amount advanced by the Trust or the Partnership pursuant to
paragraph 3, a determination is made that Executive shall not be entitled
to any refund with respect to such claim and the Trust or the Partnership
does not notify Executive in writing of its intent to contest such denial
of refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
3
<PAGE>
EXHIBIT 10.8
Cabot Industrial Properties, L.P.
Two Center Plaza, Suite 200
Boston, MA 02108-1906
February __, 1998
[Name and Address]
Dear Mr.[Andrew D. Ebbott][Howard B. Hodgson, Jr.][Neil E. Waisnor][Eugene F.
Reilly]:
This letter reflects our agreement relative to your appointment as Senior
Vice President of Cabot Industrial Trust (the "Trust") and your employment by
Cabot Industrial Properties, L.P. (the "Partnership").
The Partnership agrees to employ you in such capacity for a two-year term
(the "Term"), beginning [___________] (the "Effective Date"). After the second
anniversary of the Effective Date, the Term shall be automatically extended for
12-month periods, unless you or the Partnership provides written notice of non-
renewal to the other at least 120 days before the last day of the Term. During
the Term, while you are employed by the Partnership, you agree that you shall
devote substantially all of your business time, energies and talents to serving
as Senior Vice President of the Trust, you shall perform your duties faithfully
and efficiently subject to the directions of the Chairman of the Trust and you
will not engage, directly or indirectly, in any activities that compete with
those of the Trust or the Partnership.
During the Term while you are employed by the Partnership, you will be paid
base compensation in the amount of $175,000 per year and you will be eligible
for a cash bonus in such amount as may be determined by the Board of Trustees of
the Trust or the Compensation Committee thereof, in its sole discretion. The
amount of your base compensation and your bonus will be reviewed by the Board
each year during the Term. You also will be granted such options under the
Cabot Industrial Trust Long Term Incentive Plan (the "Plan") as the committee of
the Plan determines.
If, during the Term, after a Change in Control (as described in the Plan),
(i) the Trust or the Partnership or the successor of either (A) terminates your
employment without Cause (as defined below) or does not extend the Term or (B)
constructively terminates your employment by substantially adversely altering
either your status or responsibilities or your annual base compensation and
bonus from those in effect immediately prior to the Change in Control or by
moving the location of your office more than 50 miles from its then current
location, or (ii) if you terminate your employment on or before the first
anniversary of the Change in Control, you will be entitled to a lump sum payment
as soon as practicable after the date of such termination, subject to payroll
tax withholding as required by law, in an amount equal to three times the sum
<PAGE>
of the rate of your annual base compensation as in effect on such date (or as in
effect on the date of the Change in Control, if higher) plus the amount of your
bonus for the year prior to the year in which your employment terminates;
provided, that if termination occurs within 12 months of the Effective Date, the
amount of the bonus shall be deemed to be 30% of the rate of your annual base
compensation as in effect on such date. In the event it is determined that any
payment or benefit (or combination thereof), including acceleration of any share
options, by the Trust to you or for your benefit would be subject to the excise
tax imposed by section 4999 of the Internal Revenue Code, the Trust or the
Partnership shall pay you a tax gross-up payment in accordance with Exhibit A,
which is attached to and forms a part of this agreement. For purposes of this
agreement, "Cause" shall mean your willful engaging in conduct which is
demonstrably monetarily injurious to the Trust or the Partnership or your
engaging in egregious misconduct involving serious moral turpitude.
If this letter satisfactorily reflects our agreement, please sign and
return the attached copy to my attention. Thank you for your efforts on behalf
of the Trust and the Partnership.
Cabot Industrial Properties, L.P.
By: Cabot Industrial Trust,
its general partner
------------------------------
Name:
Title:
Accepted this ____ day of
____________, 1998.
_______________________
Executive
<PAGE>
Exhibit A
---------
Tax Gross-Up Payment
--------------------
1. Gross-Up Payment. In the event that it is determined that any payments,
----------------
benefits or distributions (or any combination thereof) to or for the
benefit of Executive (whether paid or payable or distributed or
distributable pursuant to the terms of the attached letter agreement, or
otherwise) by the Trust or any of its affiliates (including the
Partnership) or by one or more trusts established by the Trust or any of
its affiliates for the benefit of their employees, are subject to the
excise tax imposed by section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), which payments are collectively referred to as
"Parachute Payments", the Trust or the Partnership shall pay to or for the
benefit of Executive a payment (a "Gross-Up Payment") equal to the sum of
the following amounts:
a. the amount of the excise tax attributable to the Parachute Payments
(referred to as the "Excise Tax") and the amount of any additional
excise tax under section 4999 of the Code imposed with respect to
additional payments, if any, made pursuant to this paragraph 1;
b. any interest or penalties incurred by Executive with respect to the
Excise Tax and other payments, if any, made pursuant to this paragraph
1; and
c. any taxes, including income taxes, incurred by Executive on the Excise
Tax and other payments, if any, made pursuant to this paragraph 1.
2. Determination and Payment of Gross-Up Payment. Subject to the provisions
---------------------------------------------
of paragraph 3 below, all determinations required to be made under this
Exhibit A, including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by a nationally recognized
certified public accounting firm as may be designated by the Trust or the
Partnership (the "Accounting Firm") which shall provide detailed supporting
calculations to the Trust, the Partnership and Executive within fifteen
(15) business days of the effective time of a Change in Control or such
earlier time as is requested by the Trust or the Partnership. All fees and
expenses of the Accounting Firm shall be borne solely by the Trust or the
Partnership. Any Gross-Up Payment, as determined pursuant to paragraph 1,
shall be paid by the Trust or the Partnership to Executive within five (5)
days after the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by Executive, it
shall so indicate to Executive in writing. Any determination by the
Accounting Firm shall be binding upon the Trust, the Partnership and
Executive. As a result of the uncertainty in the application of section
4999 of the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that a Gross-Up Payment which will not have
been made by the Trust or the Partnership should have been made
("Underpayment"),
<PAGE>
consistent with the calculations required to be made hereunder. In the
event that the Trust or the Partnership exhausts its remedies pursuant to
paragraph 3 and Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Trust or the Partnership to or for the benefit of Executive.
3. Claims by IRS. Executive shall notify the Trust and the Partnership in
-------------
writing of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Trust or the Partnership of the Gross-Up
Payment. Such notification shall be given as soon as practicable but no
later than ten (10) business days after Executive is informed in writing of
such claim and shall apprise the Trust and the Partnership of the nature of
such claim and the date on which such claim is requested to be paid.
Executive shall not pay such claim prior to the expiration of the thirty
(30) day period following the date on which it gives such notice to the
Trust and the Partnership (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Trust or
the Partnership notifies Executive in writing prior to the expiration of
such period that it desires to contest such claim, Executive shall:
a. give the Trust and the Partnership any information requested by either
relating to such claim;
b. take such action in connection with contesting such claim as the Trust
or the Partnership shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Trust or the Partnership;
c. cooperate with the Trust and the Partnership in good faith in order to
effectively contest such claim; and
d. permit the Trust and the Partnership to participate in any proceedings
relating to such claim;
provided, however, that the Trust or the Partnership shall bear and pay
directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify and
hold Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto) imposed
as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this paragraph 3, the
Trust or the Partnership shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a
2
<PAGE>
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Trust or the
Partnership shall determine; provided, however, that if the Trust or the
Partnership directs Executive to pay such claim and sue for a refund, the
Trust or the Partnership shall advance the amount of such payment to
Executive, on an interest-free basis, and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect
to such advance; and provided, further, that if Executive is required to
extend the statute of limitations to enable the Trust or the Partnership to
contest such claim, Executive may limit this extension solely to such
contested amount. The control of the contest by the Trust or the
Partnership shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
4. Refunds. If, after the receipt by Executive of an amount advanced by the
-------
Trust or the Partnership pursuant to paragraph 3, Executive becomes
entitled to receive any refund with respect to such claim, Executive shall
(subject to the Trust's or the Partnership's complying with the
requirements of paragraph 3) promptly pay to the Trust or the Partnership
the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
Executive of an amount advanced by the Trust or the Partnership pursuant to
paragraph 3, a determination is made that Executive shall not be entitled
to any refund with respect to such claim and the Trust or the Partnership
does not notify Executive in writing of its intent to contest such denial
of refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
3
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports,
Cabot Industrial Trust, dated December 18, 1997, Cabot Partners Limited Part-
nership, dated March 20, 1997 (except with respect to certain matters discussed
in Notes 3 and 6, as to which the date is November 24, 1997), Existing
Investors Property Group, dated December 13, 1997, Prudential Properties Group,
dated December 15, 1997, West Coast Industrial, LLC, dated September 10, 1997,
Blue Ash Office L.L.C. and Blue Ash Industrial L.L.C., dated November 24, 1997,
Seefried Properties Group, dated November 24, 1997, Prudential Properties Group
II, dated November 24, 1997, DFW Trade Center I, L.P., Buildings 1, 2 and 3,
dated November 24, 1997, 1055 Dornoch Court, San Diego, CA, dated December 16,
1997, Hampden I and II Properties Group, dated December 15, 1997, South Royal
Associates Properties Group, dated December 15, 1997, Joseph A. Leroy Family LP
Property, dated December 15, 1997, Raco/Melaver, L.L.C., dated December 15,
1997, and TLI/Cahill Partnership--Spiral Drive, dated December 15, 1997,
included in this registration statement of Cabot Industrial Trust on Form S-11,
dated January 22, 1998.
Arthur Andersen LLP
Boston, Massachusetts
January 21, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS'
The Board of Directors of Cabot Industrial Trust:
We consent to the use of our report included herein dated December 15, 1997,
relating to the combined balance sheets of the Pennsylvania Public School
Employes' Retirement System Industrial Properties Portfolio as of September 30,
1997, December 31, 1996 and 1995, and the related combined statements of opera-
tions, owner's equity, and cash flows for the nine months ended September 30,
1997, the year ended December 31, 1996 and the period from July 6, 1995 (date
of acquisition) to December 31, 1995, and the related schedule as of September
30, 1997, included herein, and to the reference to our firm under the heading
"Experts" in this Amendment No. 3 to the registration statement on Form S-11 of
Cabot Industrial Trust.
KPMG Peat Marwick LLP
Chicago, Illinois
January 21, 1998
<PAGE>
EXHIBIT 23.4.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this registration statement of Cabot Industrial
Trust on Form S-11 of our report dated October 6, 1997 on our audits of the
historical cost basis combined financial statements of Orlando Central Park and
500 Memorial Drive as of December 31, 1996 and 1995 and for the years then
ended. We also consent to the reference to our firm under the caption "Ex-
perts."
Coopers & Lybrand L.L.P.
New York, New York
January 21, 1998
<PAGE>
EXHIBIT 23.4.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this registration statement of Cabot Industrial
Trust on Form S-11 of our report dated April 25, 1997 on our audits of the his-
torical cost basis combined financial statements of Knickerbocker Properties,
Inc. II as of December 31, 1996 and 1995 and for the years then ended. We also
consent to the reference to our firm under the caption "Experts."
Coopers & Lybrand L.L.P.
Atlanta, Georgia
January 21, 1998
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated March 5, 1997, accompanying the financial
statement of Herrod Associates contained in the Registration Statement and Pro-
spectus. We consent to the use of the aforementioned report in the Registration
Statement and Prospectus, and to the use of our name as it appears under the
caption "Experts".
Grant Thornton LLP
Philadelphia, Pennsylvania
January 21, 1998
