<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995 Commission file number 1-9700
THE CHARLES SCHWAB CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 94-3025021
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
101 Montgomery Street, San Francisco, CA 94104
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (415) 627-7000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
174,677,878* shares of $.01 par value Common Stock
Outstanding on November 1, 1995
* Reflects the March 1995 three-for-two common stock split and the
September 1995 two-for-one common stock split.
<PAGE>
THE CHARLES SCHWAB CORPORATION
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 1995
Index
Page
----
Part I - Financial Information
Item 1. Condensed Consolidated Financial Statements:
Statement of Income 1
Balance Sheet 2
Statement of Cash Flows 3
Notes 4-5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-13
Part II - Other Information
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13-14
Signature 15
<PAGE>
<TABLE>
Part 1 - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
THE CHARLES SCHWAB CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Commissions $206,831 $121,574 $ 537,023 $414,008
Interest revenue, net of interest expense* 55,180 42,127 150,867 118,114
Principal transactions 51,985 34,180 148,020 124,645
Mutual fund service fees 58,745 41,365 156,585 113,810
Other 12,820 8,843 32,637 23,611
- --------------------------------------------------------------------------------------------------------------
Total 385,561 248,089 1,025,132 794,188
- --------------------------------------------------------------------------------------------------------------
Expenses Excluding Interest
Compensation and benefits 161,456 103,506 423,801 331,140
Communications 34,214 25,639 90,674 81,819
Occupancy and equipment 28,233 22,185 79,062 64,895
Depreciation and amortization 17,773 14,080 46,465 40,472
Commissions, clearance and floor brokerage 22,877 11,385 57,728 35,080
Advertising and market development 10,888 7,346 34,081 28,184
Professional services 10,666 4,388 26,515 15,056
Other 21,396 7,966 52,080 29,185
- --------------------------------------------------------------------------------------------------------------
Total 307,503 196,495 810,406 625,831
- --------------------------------------------------------------------------------------------------------------
Income before taxes on income 78,058 51,594 214,726 168,357
Taxes on income 30,837 20,399 84,710 66,813
- --------------------------------------------------------------------------------------------------------------
Net Income $ 47,221 $ 31,195 $ 130,016 $101,544
==============================================================================================================
Weighted average number of common and
common equivalent shares outstanding** 179,688 174,215 178,001 175,221
==============================================================================================================
Earnings per Common Equivalent Share** $ .26 $ .18 $ .73 $ .58
==============================================================================================================
Dividends Declared per Common Share** $ .040 $ .023 $ .100 $ .069
==============================================================================================================
* Interest revenue is presented net of interest expense. Interest expense
for the three months ended September 30, 1995 and 1994 was $94,039 and
$54,598, respectively. Interest expense for the nine months ended
September 30, 1995 and 1994 was $260,908 and $132,928, respectively.
** Reflects the March 1995 three-for-two common stock split and the September
1995 two-for-one common stock split.
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
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<PAGE>
<TABLE>
THE CHARLES SCHWAB CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
<CAPTION>
September 30, December 31,
1995 1994
---- ----
(Unaudited)
-----------
<S> <C> <C>
Assets
Cash and equivalents (including resale agreements of $242,500 in 1994) $ 474,610 $ 380,616
Cash and investments required to be segregated under Federal or other
regulations (including resale agreements of $4,725,625 in 1995
and $3,787,984 in 1994) 4,943,103 4,206,466
Receivable from brokers, dealers and clearing organizations 146,435 86,028
Receivable from customers (less allowance for doubtful accounts
of $4,497 in 1995 and $3,204 in 1994) 3,551,622 2,923,867
Equipment, office facilities and property (less accumulated
depreciation and amortization of $196,615 in 1995 and $162,474 in 1994) 189,984 129,105
Intangible assets (less accumulated amortization of $149,260 in 1995
and $140,860 in 1994) 69,640 26,813
Other assets 208,445 164,967
- ----------------------------------------------------------------------------------------------------------------
Total $9,583,839 $7,917,862
================================================================================================================
Liabilities and Stockholders' Equity
Drafts payable $ 159,940 $ 117,383
Payable to brokers, dealers and clearing organizations 459,473 296,420
Payable to customers 7,870,512 6,670,362
Accrued expenses 256,373 195,320
Long-term borrowings 216,162 171,363
- ----------------------------------------------------------------------------------------------------------------
Total liabilities 8,962,460 7,450,848
- ----------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock - 10,000,000 shares authorized; $.01 par value
per share; none issued
Common stock - 200,000,000 shares authorized; $.01 par value per
share; 178,459,416 shares issued in 1995 and 1994* 1,785 595
Additional paid-in capital 184,479 166,103
Retained earnings 484,770 373,161
Treasury stock - 4,155,698 shares in 1995 and 7,563,990 shares in
1994, at cost* (38,973) (57,968)
Unearned ESOP shares (5,081) (10,174)
Unamortized restricted stock compensation (4,673) (4,703)
Foreign currency translation adjustment (928)
- ----------------------------------------------------------------------------------------------------------------
Stockholders' equity 621,379 467,014
- ----------------------------------------------------------------------------------------------------------------
Total $9,583,839 $7,917,862
================================================================================================================
* Reflects the March 1995 three-for-two common stock split and the September
1995 two-for-one common stock split.
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
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<PAGE>
<TABLE>
THE CHARLES SCHWAB CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities
Net income $ 130,016 $ 101,544
Noncash items included in net income:
Depreciation and amortization 46,465 40,472
Deferred income taxes (9,553) 8,372
Other 15,275 2,662
Change in accrued expenses 76,211 27,578
Change in other assets (14,201) 5,013
- -----------------------------------------------------------------------------------------------------------------
Net cash provided before change in customer-related balances 244,213 185,641
- -----------------------------------------------------------------------------------------------------------------
Change in customer-related balances (excluding the effects of
businesses acquired):
Payable to customers 1,113,323 457,301
Receivable from customers (616,895) (239,994)
Drafts payable 36,723 (11,922)
Payable to brokers, dealers and clearing organizations 142,047 112,495
Receivable from brokers, dealers and clearing organizations (19,934) (21,151)
Cash and investments required to be segregated under
Federal or other regulations (672,478) (305,928)
- -----------------------------------------------------------------------------------------------------------------
Net change in customer-related balances (17,214) (9,199)
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 226,999 176,442
- -----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Purchase of equipment, office facilities and property - net (94,087) (26,547)
Cash payments for businesses acquired, net of cash received (68,113)
Other (1,898)
- -----------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (162,200) (28,445)
- -----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Proceeds from long-term borrowings 40,000 20,000
Purchase of treasury stock (34,329)
Dividends paid (17,261) (12,026)
Other 7,110 1,796
- -----------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 29,849 (24,559)
- -----------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and equivalents (654)
- -----------------------------------------------------------------------------------------------------------------
Increase in cash and equivalents 93,994 123,438
Cash and equivalents at beginning of period 380,616 279,828
- -----------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $ 474,610 $ 403,266
=================================================================================================================
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
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<PAGE>
THE CHARLES SCHWAB CORPORATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements include The Charles Schwab Corporation (CSC) and its
subsidiaries (collectively the Company), including Charles
Schwab & Co., Inc. (Schwab) and Mayer & Schweitzer, Inc. (M&S).
These financial statements have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission (SEC)
and, in the opinion of management, reflect all adjustments
necessary to present fairly the financial position, results of
operations and cash flows for the periods presented in conformity
with generally accepted accounting principles. All adjustments
were of a normal recurring nature. All material intercompany
balances and transactions have been eliminated. These financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's
1994 Annual Report to Stockholders, which are incorporated by
reference in the Company's 1994 Annual Report on Form 10-K, and the
Company's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1995 and June 30, 1995.
Intangible assets represent goodwill and customer lists. Prior
periods' financial statements have been reclassified to conform to
the 1995 presentation.
Foreign Currency Translation
Assets and liabilities denominated in foreign currencies are
translated at the exchange rate on the balance sheet date, while
revenues and expenses are translated at average rates of exchange
prevailing during the period. Translation adjustments are
accumulated as a separate component of stockholders' equity.
Stock Split
On July 18, 1995, the Board of Directors approved a two-for-one
stock split of the Company's common stock, effected in the form of
a 100% stock dividend, paid September 1, 1995 to stockholders of
record August 1, 1995. Share and per share data have been restated
to reflect this transaction and the March 1995 three-for-two common
stock split. The Board also increased the quarterly cash dividend
from $.03 per share to $.04 per share paid August 15, 1995 to
stockholders of record August 1, 1995.
Commitments and Contingencies
In September 1995, the Company entered into an agreement to
purchase an office building located in Phoenix, Arizona for
$32 million to be used for the expansion of its operations. The
Company expects to close this transaction in April 1996.
In the normal course of its margin lending activities, Schwab is
contingently liable to the Options Clearing Corporation for the
margin requirement of customer margin securities transactions.
Such margin requirement is secured by a pledge of customers' margin
securities. This contingent liability was $169 million at
September 30, 1995.
M&S has been named as one of thirty-three defendant market-
making firms in a consolidated class action which is pending in
Federal District Court in the Southern District of New York
pursuant to an order of the Judicial Panel on Multidistrict
Litigation. On December 16, 1994, the plaintiffs filed a
consolidated amended complaint purportedly on behalf of certain
persons who purchased or sold Nasdaq securities during the period
May 1, 1989 through May 27, 1994. A second consolidated amended
complaint was filed on August 22, 1995. The consolidated complaint
does not set forth any specific conduct by M&S and does not request
any specific amount of damages, although it requests that the
actual damages be trebled where permitted by statute. The
consolidated complaint generally alleges an illegal combination and
conspiracy among the defendant market-making firms to fix and
maintain the spreads between the bid and ask prices of Nasdaq
securities. The ultimate outcome of this consolidated action
cannot currently be determined.
On June 30, 1995, a class was certified in Civil District Court
for the Parish of Orleans in Louisiana for Louisiana residents who
purchased or sold securities through Schwab between February 1,
1985 and February 1, 1995 for which Schwab received monetary
payments from the market maker or stock dealer who executed the
transaction. On August 16, 1995, another class was certified in
Civil District Court for the Parish of Natchitoches in Louisiana
for residents of all states who purchased or sold securities
through Schwab since 1985 for which Schwab received monetary
payments from the market maker or stock dealer who executed the
transaction. Schwab has appealed both class certifications to the
Louisiana Court of Appeals. Schwab has been named as a defendant in eight
- 4 -
<PAGE>
additional class action lawsuits filed in state courts in
Minnesota, Illinois, New York, Texas, Florida and California. The
class actions were filed between August 12, 1993 and October 13,
1995, and purport to be brought on behalf of customers of Schwab
who purchased or sold securities for which Schwab received monetary
payments from the market maker or stock dealer who executed the
transaction. The complaints allege that Schwab failed to disclose
and remit such payments to members of the class, and generally seek
damages equal to the payments received by Schwab. The ultimate
outcome of these actions cannot currently be determined.
There are other various lawsuits pending against the Company
which, in the opinion of management, will be resolved with no
material impact on the Company's financial position or results of
operations.
Acquisition
During the third quarter of 1995, the Company purchased the
remaining outstanding common stock (approximately 7%) of ShareLink
Investment Services plc (ShareLink), bringing the total year-to-
date acquisition cost, including acquisition-related expenses, to
$66 million.
Regulatory Requirements
Schwab and M&S are subject to the SEC's Uniform Net Capital Rule
and each compute net capital under the alternative method permitted
by this Rule, which requires the maintenance of minimum net
capital, as defined, of the greater of 2% of aggregate debit
balances arising from customer transactions or a minimum dollar
amount, which is based on the type of business conducted by the
broker-dealer. The minimum dollar amount for both Schwab and M&S
is $1 million. Under the alternative method, a broker-dealer may
not repay subordinated borrowings, pay cash dividends, or make any
unsecured advances or loans to its parent or employees if such
payment would result in net capital of less than 5% of aggregate
debit balances or less than 120% of its minimum dollar amount
requirement. At September 30, 1995, Schwab's net capital was
$360 million (10% of aggregate debit balances), which was
$285 million in excess of its minimum required net capital and
$173 million in excess of 5% of aggregate debit balances. At
September 30, 1995, M&S' net capital was $4 million (113% of
aggregate debit balances), which was $3 million in excess of its
minimum required net capital.
Schwab and ShareLink had portions of their cash and investments
segregated for the exclusive benefit of customers at September 30,
1995, in accordance with applicable regulations. M&S had no such
cash reserve requirement at September 30, 1995.
Cash Flow Information
Certain information affecting the cash flows of the Company
follows (in thousands):
<TABLE>
<CAPTION>
Nine Months
Ended
September 30,
1995 1994
---- ----
<S> <C> <C>
Income taxes paid $ 61,895 $ 52,434
======== ========
Interest paid:
Customer cash balances $234,381 $117,682
Long-term borrowings 11,221 11,037
Other 13,687 4,924
-------- --------
Total interest paid $259,289 $133,643
======== ========
</TABLE>
- 5 -
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Charles Schwab Corporation (CSC) and its subsidiaries
(collectively referred to as the Company) provide brokerage and
related investment services to customers with 3.3 million active(a)
accounts and assets that totaled $169.6 billion at September 30,
1995. With a network of over 200 branch offices, the Company's
principal subsidiary, Charles Schwab & Co., Inc. (Schwab), is
physically represented in 46 states, the Commonwealth of Puerto
Rico and the United Kingdom. Mayer & Schweitzer, Inc. (M&S), a
market maker in Nasdaq securities, provides trade execution
services to broker-dealers and institutional customers.
The Company's business, like that of other securities brokerage
firms, is directly affected by fluctuations in volumes and price
levels in securities markets, which are in turn affected by many
national and international economic and political factors that
cannot be predicted. Transaction-based revenues, primarily
commission and principal transaction revenues, represent the
majority of the Company's revenues. In the short term, most of the
Company's expenses do not vary directly with fluctuations in
securities trading volume and do not increase or decrease quickly,
which could result in the Company experiencing increased
profitability with rapid increases in revenues, or reduced
profitability (or losses) in the event of a material reduction in
revenues.
Due to the factors discussed above, the results of any interim
period are not necessarily indicative of results for a full year,
and it is not unusual for the Company to experience significant
variations in quarterly revenue growth. In addition, these factors
may subject the Company's future earnings and common stock price to
significant volatility.
The Company has historically used discount pricing as a tactic
in its efforts to gain market share and enhance the value of its
services. In recent years, Schwab has introduced additional price-
competitive product offerings such as its No-Annual-Fee IRA, its
Mutual Fund OneSource (registered trademark) service and its Schwab
500 Brokerage (trademark) service, which includes commission
discounts from Schwab's standard rates. Schwab's on-line brokerage
services such as TeleBroker (registered trademark) and StreetSmart
(registered trademark) also provide customers with discounts on
commissions. Management expects to continue aggressive use of this
value-pricing philosophy in the marketing of new products and
services.
Three Months Ended September 30, 1995
Compared To Three Months Ended
September 30, 1994
Summary
Net income for the third quarter of 1995 totaled $47 million or
$.26 per share, up 51% from third quarter 1994 net income of
$31 million or $.18 per share. All share and per share amounts
reflect the March 1995 three-for-two common stock split and the
September 1995 two-for-one common stock split.
Third quarter 1995 revenues were $386 million, up 55% from
$248 million for the third quarter of 1994, due to increases in all
revenue categories primarily resulting from higher trading volume
and an increase in customer assets.
Assets in customer accounts totaled $169.6 billion at
September 30, 1995, $52.9 billion, or 45%, more than a year ago
primarily resulting from increases in customers' equity securities
of $22.6 billion, or 48%, and increases in customer assets in
Schwab's Mutual Fund Marketplace (registered trademark) of
$14.5 billion, or 45%. Customer assets in cash and money market
funds
(a) Accounts with balances or activity within the preceding twelve months.
- 6 -
<PAGE>
at September 30, 1995 increased 37% over the year-ago level
to $35.4 billion. Schwab added 164,400 new customer accounts
during the third quarter of 1995, compared to 145,400 new accounts
during the third quarter of 1994.
Total operating expenses excluding interest during the third
quarter of 1995 were $308 million, up 56% from $196 million for the
third quarter of 1994, primarily resulting from additional staff to
support the Company's continued growth and expansion, higher
variable compensation and higher transaction-related expenses. In
the third quarter of 1995, the Company continued the expansion of
its customer telephone service centers and opened three new branch
offices. In 1994's third quarter, the Company instituted certain
cost reduction measures, mainly relating to reductions in staffing
and capacity expenses, to respond to declines in customer trading
activity. Such cost reduction measures were not in place during
the third quarter of 1995 as customer trading levels were
significantly higher resulting in higher expenses for 1995's third
quarter compared to 1994's third quarter.
The profit margin for the third quarter of 1995 was 12%, down
from 13% for the third quarter of 1994. The return on
stockholders' equity for the third quarter of 1995 was 32%, up from
29% for the third quarter of 1994.
Commissions
Schwab executes commission transactions for customers on an
agency basis. Commission revenues totaled $207 million for the
third quarter of 1995, up $85 million, or 70%, from the third
quarter of 1994. Commissions earned on retail agency trades, which
exclude commissions from institutional customers, totaled
$194 million on a daily average retail agency trade level of 41,100
in the third quarter of 1995, compared with commission revenues of
$116 million on a daily average retail agency trade level of 25,800
for the comparable period in 1994. The following table shows a
comparison of certain factors that influence retail agency
commission revenues:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Three Months
Ended
September 30, Percent
1995 1994 Change
- -------------------------------------------------------------------
<S> <C> <C> <C>
Number of customer
accounts that traded during
the quarter (in thousands) 720 559 29%
Average number of retail agency
transactions per account
that traded 3.59 2.95 22
Total number of retail agency
transactions (in thousands) 2,588 1,651 57
Average commission per
retail agency transaction $74.85 $70.52 6
Total retail agency commission
revenues (in millions) $ 194 $ 116 67
==================================================================
Note: The above table excludes customer transactions in
Schwab's Mutual Fund OneSource (registered trademark) service.
</TABLE>
The increase in average commission per retail agency transaction
was due to a higher proportion of equity transactions, which carry
a higher average commission per trade.
Schwab continues to experience significant commission price
competition and expects to continue to develop price-competitive
products and services that address the needs of customers for whom
pricing is a primary factor in their selection of financial
services.
Interest Revenue, Net of Interest Expense
Interest revenue, net of interest expense, increased
$13 million, or 31%, to $55 million from the prior year's third
quarter as shown in the following table (in millions):
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<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Three Months
Ended
September 30,
1995 1994
- -----------------------------------------------------------
<S> <C> <C>
Interest Revenue
Investments, customer-related $ 76 $ 46
Margin loans to customers 68 49
Other 5 2
- -----------------------------------------------------------
Total 149 97
- -----------------------------------------------------------
Interest Expense
Customer cash balances 84 49
Long-term borrowings 3 3
Other 7 3
- -----------------------------------------------------------
Total 94 55
- -----------------------------------------------------------
Interest Revenue, Net of
Interest Expense $55 $42
===========================================================
</TABLE>
Customer-related daily average balances, interest rates and
average net interest margin for the third quarters of 1995 and 1994
are summarized in the following table (dollars in millions):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Three Months Ended
September 30,
1995 1994
- -------------------------------------------------------------------
<S> <C> <C>
Earning Assets (customer-related):
Investments:
Average balance outstanding $5,188 $3,919
Average interest rate 5.95% 4.60%
Margin loans to customers:
Average balance outstanding $3,306 $2,777
Average interest rate 8.31% 6.95%
Average yield on earning assets 6.86% 5.58%
Funding Sources (customer-related
and other):
Interest-bearing customer cash balances:
Average balance outstanding $6,891 $5,484
Average interest rate 4.95% 3.53%
Other interest-bearing sources:
Average balance outstanding $ 449 $ 385
Average interest rate 4.46% 3.16%
Average noninterest-bearing portion $1,154 $ 827
Average interest rate on funding sources 4.25% 3.08%
Summary:
Average yield on earning assets 6.86% 5.58%
Average interest rate on funding sources 4.25% 3.08%
- ------------------------------------------------------------------
Average net interest margin 2.61% 2.50%
==================================================================
</TABLE>
The increase in interest revenue, net of interest expense, from
the prior year's third quarter was primarily due to higher levels of
average earning assets compared to funding sources, and to sharper
increases in average interest rates on earning assets
compared to funding sources.
Principal Transactions
During the third quarter of 1995, principal transaction revenues
increased $18 million, or 52%, from the comparable period in 1994
to $52 million. This increase was due to higher trading volume
handled by M&S and higher revenues relating to specialist posts.
During the end of 1994's third quarter, Schwab commenced operation
of specialist posts on the Pacific Stock Exchange. At
September 30, 1995, Schwab had nine posts that collectively made
markets in over 420 securities. The increase in principal
transaction revenues was partially offset by providing price
improvement to customers on certain trades in Nasdaq securities
beginning in August 1995 (see discussion below).
During 1994, the Department of Justice, the Securities and
Exchange Commission (SEC) and the National Association of
Securities Dealers, Inc. (NASD) commenced a series of
investigations and regulatory actions involving the activities of
many market makers in Nasdaq securities. These investigations and
regulatory actions have continued into 1995. During the third
quarter of 1995, Nasdaq's daily average share volume was
443 million shares, of which orders handled by M&S totaled approximately 8%
of such shares. Thus, M&S is a significant participant in the
Nasdaq market.
Current and proposed rulemaking, regulatory actions,
improvements in technology, changes in market practices and new
market systems, if approved, could significantly impact the manner
in which business is currently conducted in the Nasdaq market. For
example, the Company's new service, Assurance Trading (trademark),
provides an opportunity for price improvement to customers
- 8 -
<PAGE>
on certain trades in certain Nasdaq securities through technological
innovation by scanning multiple computer systems for a price better
than the current quoted Nasdaq inside price. The above factors
may, individually or in the aggregate, have a material adverse
impact on M&S' future revenues from principal transactions.
Mutual Fund Service Fees
Mutual fund service fees increased $17 million, or 42%, to
$59 million in the third quarter of 1995 from the comparable period
in 1994. The increase was primarily attributable to significant
increases in customer assets in Schwab's proprietary funds,
collectively referred to as the SchwabFunds (registered trademark),
and customer assets in funds purchased through Schwab's Mutual Fund
OneSource (registered trademark) service. Most of these fees are
earned for transfer agent, shareholder and investment management
services provided to proprietary money market funds, and for record
keeping and shareholder services provided to funds in the Mutual
Fund OneSource service.
Customer assets invested in the SchwabFunds, substantially all
of which are in money market funds, were $29.5 billion at
September 30, 1995, compared to $21.0 billion at September 30,
1994, a 40% increase. Customer assets held by Schwab that have been
purchased through the Mutual Fund OneSource service, excluding
SchwabFunds, totaled $21.8 billion at September 30, 1995, compared
to $12.8 billion at September 30, 1994, a 70% increase.
Expenses Excluding Interest
Total operating expenses excluding interest for the third
quarter of 1995 were $308 million, up 56% from $196 million for the
third quarter of 1994. Compensation and benefits expense for the
third quarter of 1995 increased $58 million, or 56%, to
$161 million primarily due to increases in salaries and wages, and
variable compensation. At September 30, 1995, the Company had full-
time, part-time and temporary employees, and persons employed on a
contract basis that represented the equivalent of approximately
8,400 full-time employees, compared to approximately 6,000 at
September 30, 1994.
Communications expense increased $9 million, or 33%, to
$34 million from the prior year's third quarter primarily due to
higher customer trading and call volumes, which contributed to
higher telephone, financial news and securities quotation services
expenses.
Occupancy and equipment expense increased $6 million, or 27%, to
$28 million from the prior year's third quarter primarily due to
increased data processing equipment expense, and to customer
telephone service center and branch network expansions.
Commissions, clearance and floor brokerage expense increased
$11 million, or 101%, to $23 million from the prior year's third
quarter primarily due to increases in the number of trades
processed by M&S and Schwab.
Professional services expense increased $6 million, or 143%, to
$11 million from the prior year's third quarter primarily due to
increases in consulting fees relating to various company
development projects.
Other expenses increased $13 million, or 169%, to $21 million from
the prior year's third quarter due in part to increases in travel-related
expenses, losses relating to trading system problems experienced on two
occasions during the quarter, and the handling of customer orders for a
security following its initial public offering.
The Company's effective income tax rate for the third quarter of
1995 and the third quarter of 1994 was 39.5%.
- 9 -
<PAGE>
Nine Months Ended September 30, 1995
Compared To Nine Months Ended
September 30, 1994
Summary
Net income for the first nine months of 1995 totaled $130
million or $.73 per share, compared with net income of $102 million
or $.58 per share for the first nine months of 1994.
Revenues for the first nine months of 1995 were $1.0 billion, up
29% from $794 million for the first nine months of 1994, due to
increases in all revenue categories primarily resulting from higher
trading volume and an increase in customer assets.
Total operating expenses excluding interest during the first
nine months of 1995 were $810 million, up 29% from $626 million for
the first nine months of 1994, primarily resulting from additional
staff to support the Company's continued growth and expansion,
higher variable compensation and higher-transaction related
expenses. In the first nine months of 1995, Schwab's trading
volume was 11.1 million trades, up 26% from the first nine months
of 1994. Also during this period, the Company continued the
expansion of its customer telephone service centers and opened five
new branch offices.
The profit margin for the first nine months of 1995 and the
first nine months of 1994 was 13%. The return on stockholders'
equity for the first nine months of 1995 was 32%, down from 33% for
the first nine months of 1994.
Commissions
Commission revenues totaled $537 million for the first nine
months of 1995, up $123 million, or 30%, from the first nine months
of 1994. Commissions earned on retail agency trades, which exclude
commissions from institutional customers, totaled $510 million on a
daily average retail agency trade level of 36,700 in the first nine
months of 1995, compared with commission revenues of $397 million
on a daily average retail agency trade level of 29,100 for the
comparable period in 1994. The following table shows a comparison
of certain factors that influence retail agency commission
revenues:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Nine Months
Ended
September 30, Percent
1995 1994 Change
- --------------------------------------------------------------------
<S> <C> <C> <C>
Number of customer
accounts that traded during
the period (in thousands) 1,326 1,163 14%
Average number of retail agency
transactions per account
that traded 5.29 4.73 12
Total number of retail agency
transactions (in thousands) 7,008 5,506 27
Average commission per
retail agency transaction $72.81 $72.08 1
Total retail agency commission
revenues (in millions) $ 510 $ 397 28
====================================================================
Note: The above table excludes customer transactions in Schwab's
Mutual Fund OneSource (registered trademark) service.
</TABLE>
Schwab added 508,200 new customer accounts during the first nine
months of 1995, compared to 589,700 new accounts during the first
nine months of 1994. The decrease was due in part to the $1,000
minimum opening balance requirement implemented in July 1994 for
basic brokerage accounts.
Interest Revenue, Net of Interest Expense
Interest revenue, net of interest expense, increased
$33 million, or 28%, to $151 million from the prior year's first
nine months as shown in the following table (in millions):
- 10 -
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Nine Months
Ended
September 30,
1995 1994
- -------------------------------------------------------
<S> <C> <C>
Interest Revenue
Investments, customer-related $209 $115
Margin loans to customers 188 130
Other 15 6
- -------------------------------------------------------
Total 412 251
- -------------------------------------------------------
Interest Expense
Customer cash balances 235 118
Long-term borrowings 9 9
Other 17 6
- -------------------------------------------------------
Total 261 133
- -------------------------------------------------------
Interest Revenue, Net of
Interest Expense $151 $118
=======================================================
</TABLE>
Customer-related daily average balances, interest rates, and
average net interest margin for the first nine months of 1995 and
1994 are summarized in the following table (dollars in millions):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Nine Months Ended
September 30,
1995 1994
- --------------------------------------------------------------------
<S> <C> <C>
Earning Assets (customer-related):
Investments:
Average balance outstanding $4,701 $3,929
Average interest rate 6.00% 3.91%
Margin loans to customers:
Average balance outstanding $3,038 $2,704
Average interest rate 8.31% 6.44%
Average yield on earning assets 6.91% 4.94%
Funding Sources (customer-related
and other):
Interest-bearing customer cash balances:
Average balance outstanding $6,312 $5,413
Average interest rate 5.01% 2.92%
Other interest-bearing sources:
Average balance outstanding $ 400 $ 351
Average interest rate 4.31% 2.80%
Average noninterest-bearing portion $1,027 $ 869
Average interest rate on funding sources 4.31% 2.53%
Summary:
Average yield on earning assets 6.91% 4.94%
Average interest rate on funding sources 4.31% 2.53%
- --------------------------------------------------------------------
Average net interest margin 2.60% 2.41%
====================================================================
</TABLE>
The increase in interest revenue, net of interest expense, from
the first nine months of 1994 was primarily due to higher levels of
average earning assets compared to funding sources, and to sharper
increases in average interest rates on earning assets compared to funding
sources.
Principal Transactions
Principal transaction revenues increased $23 million, or 19%,
from prior year's first nine months to $148 million. This increase
was due to higher trading volume handled by M&S and higher revenues
relating to specialist posts. The increase in principal
transaction revenues was partially offset by the continuing impact,
beginning in July 1994, of the NASD Interpretation to its Rules of
Fair Practice governing the way in which market makers in Nasdaq
securities handle the execution of customer limit orders. The
increase in principal transaction revenues was also partially
offset by providing price improvement to customers on certain
trades in Nasdaq securities beginning in August 1995.
Mutual Fund Service Fees and Expenses Excluding Interest
The changes in mutual fund service fees and expenses excluding
interest between the nine-month periods are generally attributable
to the changes described in the comparisons between the three-month
periods.
The Company's effective income tax rate for the first nine
months of 1995 was 39.5% compared to 39.7% for the comparable
period in 1994.
- 11 -
<PAGE>
Liquidity and Capital Resources
Liquidity
Schwab
Liquidity needs relating to customer trading and margin
borrowing activities are met primarily through cash balances in
customer accounts, which totaled $7.8 billion at September 30,
1995, up 18% from the December 31, 1994 level of $6.7 billion.
Earnings from Schwab's operations are the primary source of
liquidity for capital expenditures and investments in new services,
marketing and technology. Management believes that customer cash
balances and operating earnings will continue to be the primary
sources of liquidity for Schwab in the future.
To manage Schwab's regulatory capital position, CSC provides
Schwab with a $180 million subordinated revolving credit facility
maturing in September 1996, of which $99 million was outstanding at
September 30, 1995. At quarter end, Schwab also had outstanding
$25 million in fixed-rate subordinated term loans from CSC maturing
in 1997. Borrowings under these subordinated lending arrangements
qualify as regulatory capital for Schwab.
For use in its brokerage operations, Schwab maintains
uncommitted bank credit lines totaling $505 million, of which
$425 million is available on an unsecured basis. Schwab used such
borrowings for eight days during the first nine months of 1995,
with the daily amounts borrowed averaging $24 million. These lines
were unused at September 30, 1995.
The Charles Schwab Corporation
CSC's liquidity needs are generally met through cash generated
by its subsidiaries. Schwab and M&S are subject to regulatory
requirements that are intended to ensure the general financial
soundness and liquidity of broker-dealers. These regulations would
prohibit Schwab and M&S from repaying subordinated borrowings to
CSC, paying cash dividends, or making any unsecured advances or
loans to their parent or employees if such payment would result in
net capital of less than 5% of their aggregate debit balances or
less than 120% of their minimum dollar amount requirement of
$1 million. At September 30, 1995, Schwab had $360 million of net
capital (10% of aggregate debit balances), which was $285 million
in excess of its minimum required net capital. At September 30,
1995, M&S had $4 million of net capital (113% of aggregate debit
balances), which was $3 million in excess of its minimum required
net capital. Management believes that funds generated by the
operations of CSC's subsidiaries will continue to be the primary
funding source in meeting CSC's liquidity needs and maintaining
Schwab's and M&S' net capital.
CSC has individual liquidity needs that arise from its issued
and outstanding $210 million Senior Medium-Term Notes, Series A
(Medium-Term Notes), as well as from the funding of cash dividends,
common stock repurchases and acquisitions. The Medium-Term Notes
have maturities ranging from 1996 to 2003 and fixed interest rates
ranging from 4.95% to 7.72% with interest payable semiannually.
In August 1995, a prospectus supplement covering the issuance of
up to $140 million in Senior or Senior Subordinated Medium-Term
Notes, Series A, was filed with the SEC. At September 30, 1995,
all $140 million in securities remain unissued under the prospectus
supplement.
In June 1995, CSC's committed unsecured credit facility with a
group of ten banks was increased to $250 million from $225 million.
This facility expires in June 1996. The funds are available for
general corporate purposes for which CSC pays a commitment fee on
the unused balance. The terms of this facility require CSC to
maintain minimum levels of stockholders' equity and Schwab and M&S
to maintain minimum levels of net capital, as defined. This
facility has never been used.
- 12 -
<PAGE>
See "Commitments and Contingencies" note in the Notes to
Condensed Consolidated Financial Statements.
Cash Flows
Net cash provided by operating activities was $227 million for
the first nine months of 1995, up 29% from $176 million for the
first nine months of 1994. This increase was primarily due to
increases in accrued expenses and net income. During the first
nine months of 1995, the Company invested $94 million in equipment
and office facilities as it continued to enhance its data
processing and telecommunications systems. The Company also
continued the expansion of its customer telephone service centers
and opened five new branch offices. Capital expenditures may vary
significantly from period to period depending upon such factors as
general business conditions, the growth in the Company's customer
base, and the rate of development of new products and services. In
addition, the Company paid approximately $68 million, net of cash
received, for businesses acquired, and issued $40 million in Medium-
Term Notes during the first nine months of 1995.
In addition, the Company paid common stock cash dividends
totaling $17 million, up from $12 million paid during the first
nine months of 1994.
Capital Adequacy
The Company's stockholders' equity at September 30, 1995 totaled
$621 million. In addition to its equity, the Company had long-term
borrowings of $216 million that bear interest at a weighted average
rate of 6.22%. These borrowings, together with the Company's
equity, provided total financial capital of $837 million at
September 30, 1995, up $199 million, or 31% from December 31, 1994.
At September 30, 1995, the ratio of total assets to total
stockholders' equity was 15 to 1 compared to a ratio of 17 to 1 at
December 31, 1994. Over 94% of the Company's total assets relate
to customer activity (primarily segregated investments and margin
loans). Management believes that the Company's present level of
equity could support up to $6.9 billion of additional assets
relating to customer activity.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Discussed in Notes to Condensed Consolidated Financial
Statements, under "Commitments and Contingencies" in Part I,
Item 1, and in Management's Discussion and Analysis of Financial
Condition and Results of Operations, under "Principal Transactions"
in Part I, Item 2, and incorporated herein by reference. Also, see
the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1995.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this quarterly
report on Form 10-Q.
- 13 -
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
<S> <C>
10.155 Forms of Restricted Share Award Agreements, incorporating
performance vesting provisions and/or supplemental cash
payment provisions.
10.156 Agreement of Sale, dated as of September 18, 1995, as amended
by letter agreement dated September 21, 1995 and by Second
Amendment to Agreement of Sale dated September 22, 1995,
between American Express Company and Charles Schwab & Co.,
Inc., regarding American Express Western Regional Operations
Center located at 2423 Lincoln Drive, Phoenix, Arizona.
11.1 Computation of Earnings per Common Equivalent Share.
12.1 Computation of Ratio of Earnings to Fixed Charges.
27.1 Financial Data Schedule (electronic only).
</TABLE>
(b) Reports on Form 8-K
On September 25, 1995, the Registrant filed a Current Report on
Form 8-K relating to up to $140 million aggregate principal
amount of debt securities issuable by the Registrant pursuant to
Registration Statement Numbers 33-61943 and 33-50923 declared
effective by the SEC on August 18, 1995 and April 12, 1994,
respectively. Certain exhibits relating to Medium-Term Notes,
Series A, issuable pursuant to the Registration Statements are
contained in the Current Report.
- 14 -
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
THE CHARLES SCHWAB CORPORATION
(Registrant)
Date: November 9, 1995 /s/ A. John Gambs
---------------- -------------------------------------
A. John Gambs
Executive Vice President - Finance,
and Chief Financial Officer
- 15 -
EXHIBIT 10.87
SECURITY PACIFIC NATIONAL BANK
TRUST AGREEMENT FOR THE
CHARLES SCHWAB PROFIT SHARING
AND EMPLOYEE STOCK OWNERSHIP PLAN
<PAGE>
SECURITY PACIFIC NATIONAL BANK
TRUST AGREEMENT FOR THE
CHARLES SCHWAB PROFIT SHARING
AND EMPLOYEE STOCK OWNERSHIP PLAN
INDEX
Page
ARTICLE I ACCEPTANCE OF TRUST............................... 1
1.01 Acceptance of the Trust....................... 1
ARTICLE II DEFINITIONS....................................... 1
2.01 Plan Definitions.............................. 1
2.02 Special Definitions........................... 1
ARTICLE III CONTRIBUTIONS..................................... 1
3.01 Contributions................................. 1
3.02 Fund Assets................................... 2
ARTICLE IV PAYMENTS FROM TRUST FUND.......................... 2
4.01 Payments by the Trustee....................... 2
4.02 Plan Administrator's Directions............... 2
4.03 The Trustee's Reliance on Directions.......... 3
4.04 Disputed Payments............................. 3
4.05 Trust Expenses................................ 3
4.06 Taxes......................................... 3
4.07 Expenses of Administration.................... 3
4.08 Restrictions on Alienation.................... 3
4.09 Payment on Court Order........................ 4
ARTICLE V INVESTMENTS....................................... 4
5.01 Management by the Trustee..................... 4
5.02 Investment Manager............................ 4
5.03 Participant Directed Accounts................. 5
5.04 Securities Voting Rights...................... 5
5.05 Employer Securities........................... 6
ARTICLE VI FIDUCIARY RESPONSIBILITIES AND INDEMNITIES........ 7
6.01 Relationship of Fiduciaries................... 7
6.02 Benefits of Participants...................... 8
6.03 Duty of Care.................................. 8
6.04 Indicia of Ownership.......................... 8
6.05 The Trustee's Reliance........................ 8
6.06 Indemnities................................... 8
6.07 Responsibility with Respect to Securities Law. 9
ARTICLE VII POWERS OF THE TRUSTEE............................. 9
7.01 Investment Powers............................. 9
7.02 Securities Depositories....................... 11
7.03 Investment in Common Trust Funds.............. 11
ARTICLE VIII ACCOUNTS OF THE TRUSTEE........................... 11
8.01 Records...................................... 11
8.02 Reports...................................... 11
8.03 Valuation.................................... 12
ARTICLE IX RESIGNATION AND REMOVAL OF THE TRUSTEE............ 12
9.01 Resignation.................................. 12
9.02 Removal...................................... 12
9.03 Appointment of a Successor................... 12
9.04 Settlement of Account........................ 13
9.05 Indemnity for Expenses and Compensation...... 13
ARTICLE X AMENDMENT AND TERMINATION......................... 13
10.01 Amendment.................................... 13
10.02 Termination.................................. 13
10.03 Failure to Maintain Qualification............ 14
ARTICLE XI MISCELLANEOUS..................................... 14
11.01 Participation by Affiliated Companies........ 14
11.02 Multiple Plans............................... 14
11.03 Exclusive Benefit Rule....................... 14
11.04 Refunds to Employer.......................... 14
11.05 Construction................................. 15
11.06 Execution and Counterparts................... 15
11.07 Successors and Assigns....................... 15
11.08 Gender....................................... 16
<PAGE>
SECURITY PACIFIC NATIONAL BANK
TRUST AGREEMENT FOR THE
CHARLES SCHWAB PROFIT SHARING
AND EMPLOYEE STOCK OWNERSHIP PLAN
ARTICLE I
_________
ACCEPTANCE OF TRUST
___________________
1.01 Acceptance of the Trust. The Trust agrees to hold and
_______________________
administer the assets of the Plan that are delivered to it pursuant to the
instructions of the Employer, together with additional contributions that
are delivered to the Trustee under the terms of the Plan.
ARTICLE II
__________
DEFINITIONS
___________
2.01 Plan Definitions. Words defined in the Plan shall have the
________________
same definition in this Trust Agreement except when such definition would be
inconsistent with the definitions in the Trust Agreement or would be
contrary to Trust Agreement terms.
2.02 Special Definitions. The following definitions are in
___________________
addition to those in the Plan.
(a) ERISA. The Employee Retirement Income Security Act of
_____
1974, as it may be amended from time to time.
(b) Investment Manager. A person, other than the Trustee,
__________________
appointed by the Employer or Plan Administrator to manager the investment of
the Plan assets, who meets the requirements of Section 3(38) of ERISA.
(c) Code. The Internal Revenue Code of 1986, as it may be
____
amended from time to time.
ARTICLE III
___________
CONTRIBUTIONS
_____________
3.01 Contributions. The Trustee shall receive contributions from
_____________
the Employer or Plan Administrator in cash or other property acceptable to
the Trustee. The Trustee shall have no duty to collect or enforce payment
to it of any contributions, or to require any contributions to be made, and
shall have no duty to compute any amount to be paid to it nor to determine
whether amounts paid comply with the Plan.
3.02 Fund Assets. The trust fund assets consist of all money and
___________
property received as contributions, together with any income on or increment
in such assets. The Trustee shall hold the fund assets without distinction
between principal and income.
ARTICLE IV
__________
PAYMENTS FROM TRUST FUND
________________________
4.01 Payments by the Trustee. Payments of money or property from
_______________________
the trust fund shall be made by the Trustee for any purpose authorized under
the Plan upon written direction from the Plan Administrator. The Trustee
shall have no duty to inquire whether directions by the Plan Administrator
conform to the Plan provisions.
If the Plan Administrator directs that any payment or payments be made
or continued contingent upon future events, it shall be the responsibility of
the Plan Administrator to notify the Trustee in writing that the event has
occurred and any payments made by the Trustee prior to the date of such
notification shall, as to the Trustee, be proper payments.
Payments by the Trustee shall be delivered or mailed to addresses
supplied by the Plan Administrator and the Trustee's obligation to make such
payments shall be satisfied upon such delivery or mailing. The Trustee
shall have no obligation to determine the identity of persons entitled to
benefits or their mailing addresses.
4.02 Plan Administrator's Directions. Directions by the Plan
_______________________________
Administrator to the Trustee shall be in writing and signed by the Plan
Administrator or persons authorized by the Plan Administrator.
The Plan Administrator shall be identified to the Trustee by a copy of
the resolution of the Board of Directors of the Employer appointing such Plan
Administrator. Persons authorized to give directions to the Trustee on
behalf of the Plan Administrator shall be identified to the Trustee by
written notice from the Board of Directors or the Plan Administrator
and such notice shall contain specimens of the authorized signatures. The
Trustee shall be entitled to rely upon such written notice as evidence of the
identity and authority of the persons appointed until a written cancellation
of the appointment, or the written appointment of a successor, is received by
the Trustee.
4.03 The Trustee's Reliance on Directions. The Trustee may rely
____________________________________
upon directions from the Plan Administrator in making payments from the
trust fund. The Trustee shall have no liability for payments made,
or for failure to make payments, or for discontinuing payments, on direction
of the Plan Administrator. The Trustee shall have no liability for failure
to make payments in the absence of proper written directions.
The Trustee shall have no responsibility to determine whether trust
assets are sufficient to meet the liabilities under the Plan, and shall not
be liable for payments or Plan liabilities in excess of trust assets.
4.04 Disputed Payments. If a dispute arises over the propriety of
_________________
any payment from the trust fund, the Trustee may withhold payment until the
dispute has been resolved by a court of competent jurisdiction or settled by
the parties to the dispute. The Trustees may consult its legal counsel or
legal counsel of the Employer and shall be protected to the extent permitted
by law in acting upon advice of counsel.
4.05 Trust Expenses. The Trustee shall be entitled to reasonable
______________
compensation for its services as from time to time agreed upon in writing
between the Trustee and Charles Schwab & Co., Inc. If the Trustee and
Charles Schwab & Co., Inc. fail to agree upon a compensation, the Trustee
shall be entitled to compensation at a rate equal to the rate charged for
similar services rendered by it during the preceding fiscal year. The
Trustee shall be entitled to reimbursement for actual expenses incurred by
it in the performance of its duties as the Trustee, including reasonable
fees for legal counsel.
4.06 Taxes. If the trust fund becomes liable for the payment of
_____
any taxes, charges or assessments by federal, state or local units, the
Trustee may pay such taxes, charges, or assessments out of the trust fund
and deduct those amounts from payments due to the person whose interest in
the trust fund was the cause of the tax, charge, or assessment; provided,
however, that the Trustee shall give ten days notice by mail to the Plan
Administrator of its intention to make such payment.
4.07 Expenses of Administration. Expenses incurred by the
__________________________
Employer or Plan Administrator, Investment Managers, or other persons
designated to act on behalf of the Employer or Plan Administrator, shall be
the obligation of the Employer. However, such expenses may be paid from the
Trust and upon the written request of the Employer.
4.08 Restrictions on Alienation. The interest of any Participant
__________________________
or Beneficiary in the trust fund shall not be subject to the claims of their
creditors and may not be assigned, transferred, alienated, or encumbered.
Any attempt at alienation shall be void, and the Trustee shall disregard any
attempted alienation. The trust assets shall not be liable for or subject
to debts or torts of any Participant or Beneficiary, and benefits shall not
be considered an asset of a Participant in bankruptcy. This does not preclude
the Trustee from complying with a qualified domestic relations order, as
that term is defined in the Code.
4.09 Payment on Court Order. To the extent permitted under ERISA
______________________
and the Code, the Trustee is authorized to make any payments directed by
court order in any action in which the Trustee has been named as a party.
The Trustees is not obligated to defend actions in which the Trustee is
named by shall notify the employer or Plan Administrator or any such
action and may tender defense of the action to the Employer, Plan
Administrator, or Participant or Beneficiary whose interest is affected.
The Trustee may in its discretion defend any action in which the Trustee is
named, and any expenses incurred by the Trustee shall be a charge upon the
Trust Fund unless paid by the Employer; provided, however, that in the
event of a decision by a court of competent jurisdiction that the Trustee
has breached its duty under the terms of this Agreement or ERISA, the
Trustee shall make reimbursement of such expenses, in whole or in part,
pursuant to the decision of the court.
ARTICLE V
_________
INVESTMENTS
___________
5.01 Management by the Trustee. The Trustee shall manage the
_________________________
investment of the trust fund unless the Plan Administrator has given the
Trustee written notice of the appointment of an Investment Manager or
other person designated to direct Investment of all or a portion of the
trust fund.
5.02 Investment Manager. Subject to Section 5.05, the Plan
__________________
Administrator may appoint one or more Investment Managers to direct the
Trustee in the investment of all or a specified portion of the assets of the
trust fund. The Plan Administrator may also remove any Investment Manager.
The Plan Administrator shall promptly notify the Trustee in writing of the
appointment or removal of any Investment Manager.
If there is more than one Investment Manager under appointment at any
one time, the Trustee shall, upon instructions from the Plan Administrator,
establish separate funds for control by each Investment Manager. The funds
shall consist of those trust assets or that portion of the trust fund
designated by the Plan Administrator.
Investment instructions from Investment Mangers to the Trustee shall be
made in writing unless the Trustee consents to receive oral instructions
from an Investment Manager. An Investment Manager may issue orders for the
purchase or sale of securities directly to a broker dealer provided the
Investment Manger immediately notifies the Trustee in writing of the
issuance of such order and requires the broker dealer to confirm execution
of the order to the Trustee.
The Trustee shall have no liability for the acts or omissions of any
Investment Manager or be under any obligation to invest or otherwise manage
any assets of the trust fund which are subject to control of an Investment
Manager. If any foreign securities are purchased by the Investment Manager,
it shall be the responsibility of the Investment Manager to advise the
Trustee in writing of any laws or regulations, either foreign or domestic,
which apply to such foreign securities or to the receipt of dividends or
interest on such securities.
5.03 Participant Directed Accounts. In plans providing for
_____________________________
Participant directed accounts, the Trustee may, upon written instructions
from the Plan Administrator with the Trustee's consent, segregate assets
representing the value of an individual Participant's account under the Plan
and allow the Participant to manage the investment of those assets
attributable to his account. The Trustee shall have no obligation to invest
or otherwise manage assets earmarked for an individual Participant's account
until written notice is received from the Plan Administrator terminating the
Participant directed account. The Participant shall have full investment
responsibility for the assets aggregated for his account and the Trustee
shall have no duty to oversee the Participant's investment except that the
Trustee shall not accept a Participant's direction to invest in
"collectibles" [within the meaning of Section 408(m)(2) of the Code]
including, but not limited to, tangible personal property such as a work of
art, rug, antique, metal, gem, stamp, coin, alcoholic beverage or any other
such property specified by the Internal Revenue Service. Neither the
Trustee nor any other fiduciary shall be liable for any loss which results
from a Participant's or his Beneficiary's exercise of control over the assets
segregated to his individual account.
5.04 Securities Voting Rights. Except as provided in Section 5.05
________________________
regarding Employer Securities, voting or other rights in securities held
in the Trust shall be exercised by the Trustee, unless an Investment Manager
has been appointed or the Plan Administrator has reserved to itself the
authority, or subsequently elects to assume the authority, to exercise
voting and other rights in such securities. Where an Investment Manger has
been authorized to acquire and dispose of all or a portion of the assets
of the Trust, the Investment Manger shall be responsible and liable for
voting or exercising other rights in the securities subject to its
management and control.
5.05 Employer Securities.
___________________
(a) Employer Securities are required to be purchased
pursuant to the Plan (i) to be the primary investment under the employee
stock ownership plan part of the Plan and (ii) to accommodate investment
directions given by Participants with respect to the investment of their
Accounts under the profit sharing plan part of the Plan (including salary
deferrals and Employer matching contributions credited to such Accounts).
Investment in such Employer Securities shall be made from time to time by a
direct issue of such Employer Securities from the Employer (in the event of
Employer Securities used to fund the employee stock ownership plan only) or
by purchase through securities dealers or by private purchase. However, no
private purchase of such Employer Securities shall be made at a total cost
greater than the total cost (including brokers' fees and other expenses of
purchase) of purchasing such shares at the then prevailing price of such
shares on the open market, such prevailing price to be determined by the
Trustee as nearly as practicable.
(b) Employer Securities purchased as an investment of the
employee stock ownership plan shall be purchased pursuant to directions to
the Plan Administrator with regard to such purchase. Employer Securities
purchased as an investment of the profit sharing plan shall be purchased at
such prices, in such amounts, in such manner, at such times and through such
broker-dealer as the Trustee may determine in its absolute and uncontrolled
discretion.
(c) Cash dividends received on any Employer Securities held as
part of the profit sharing plan shall be invested as soon as possible in
additional shares of Employer Securities. Cash dividends received on any
Employer Securities held as an investment of the employee stock ownership
plan shall be invested as directed by the Plan Administrator.
(d) The Trustee shall invest funds awaiting investment in
Employer Securities in the manner authorized by Section 7.01(e).
(e) All Employer Securities purchased by the Trustee
shall be registered in the name of the Trustee or its nominee and legal
title to such Employer Securities shall remain in the Trustee until the
Participant shall become entitled to distribution thereof pursuant
to the Plan.
(f) Voting or proxy or other rights with respect to
Employer Securities shall be disposed of as provide in this Section.
With respect to Employer Securities that are allocated to Participants'
Accounts, each Participant shall be entitled to direct the Trustee as
to the manner in which such Employer Securities then allocated to his
Account shall be voted. Such directions may be achieved through the use of
proxy or similar statements delivered to the Participants with respect to
the Employer Securities allocated to their Accounts. The Plan Administrator
shall provide any information requested by the Trustee that is necessary
or convenient in connection with obtaining and preserving the
confidentiality of the Participants' directions. Any allocated Employer
Securities with respect to which Participants are entitled to issue
directions pursuant to the foregoing and for which such directions are not
received by the Trustee shall not be voted by the Trustee unless the Trustee
is required to exercise its discretion in voting such Employer Securities
pursuant to ERISA. All unallocated Employer Securities shall be voted by the
Trustee at the direction of the Plan Administrator; provided, however, that
subject to the requirements of ERISA, the Plan Administrator shall direct
the Trustee to vote such unallocated Employer Securities in the same
proportion as the share of Employer Securities for which Participant voting
instructions have been received as provided in the agreement between the
Employer and the New York Stock Exchange.
ARTICLE VI
__________
FIDUCIARY RESPONSIBILITIES AND INDEMNITIES
__________________________________________
6.01 Relationship of Fiduciaries. Each fiduciary of the Plan and
___________________________
this Trust shall be solely responsible for his own acts or omissions. The
Trustee shall have no duty to question any other fiduciary's performance of
fiduciary duties allocated to other fiduciaries by the Plan Administrator.
No fiduciary shall be responsible for breach by another fiduciary unless he
participates knowingly in, or knowingly undertakes to conceal, an act or
omission of such other fiduciary, knowing such act or omission is a breach;
he has actual knowledge of a breach by such other fiduciary and fails to
make reasonable effort under the circumstances to remedy the breach; or his
failure to perform his own specific fiduciary duties has enabled another
fiduciary to commit a breach.
6.02 Benefits of Participants. A fiduciary shall discharge his
________________________
duties with respect to the Plan and Trust solely in the interest of the
Participants and their Beneficiaries and for the exclusive purpose of
providing benefits to Participants and their Beneficiaries and defraying
reasonable expenses of the Plan.
6.03 Duty of Care. A fiduciary shall discharge his duties with the
____________
care, skill, prudence, and diligence under the circumstances then prevailing
that a prudent man acting in like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and with like
aims; and in accordance with the documents and instruments governing the
Plan and this Trust. A fiduciary managing investments shall diversify
investments so as to minimize the risk of large losses, unless under the
circumstances it is clearly prudent not to do so.
6.04 Indicia of Ownership. Except as authorized by regulation by
____________________
the Secretary of the Department of Labor, the Trustee shall not maintain
the indicia of ownership of any assets of the trust fund outside the
jurisdiction of the district courts of the United States.
6.05 The Trustee's Reliance. The Trustee shall have no liability
______________________
to any Participant, Beneficiary, or any other person for payments made,
failure to make payments, or discontinuance of payments, on direction of the
Plan Administrator; or for failure to make payments in the absence of
instructions from the Plan Administrator.
Except as provided in Section 5.05, the Trustee may request
instructions from the Plan Administrator. The Trustee shall have no duty to
act or liability for failure to act if such instructions are not forthcoming
from the Plan Administrator. If requested instructions are not received
within a reasonable time, the Trustee may, but is under no duty to, act on
its direction to carry out the provisions of the Plan and Trust.
6.06 Indemnities. The Employer shall indemnify and hold the Trustee
___________
and trust fund harmless against any loss or liability, including reasonable
attorney's fees, imposed upon the Trustee as a result of any acts taken in
accordance with written directions (or failure to act in the absence of such
directions) from the Plan Administrator, Investment Manger, or any other
person designated to act on their behalf, or by reason of the Trustee's good
faith execution of its duties in the administration of this trust, except in
the event of the Trustee's negligence in performing its own specific
fiduciary duties as described under this Trust Agreement and under ERISA.
If the trust ceases to be a tax-exempt trust under Section 401 and
Section 501 of the Code, the Employer shall indemnify the Trustee for any
federal or state taxes which the Trustee is required to pay as a result of
the distribution made at the direction of the Plan Administrator.
6.07 Responsibility with Respect to Securities Law. It shall be the
_____________________________________________
responsibility of the Plan Administrator, and not the Trustee, to assure
compliance with all requirements imposed under the securities laws of the
United States or any State, including, but not limited to, registration and
filing requirements. The Trustee is hereby specifically indemnified and
held harmless for any loss or liability it may incur, or for any penalties
that may be imposed as a result of the Plan Administrator's failure to
comply with such requirements.
ARTICLE VII
___________
POWERS OF THE TRUSTEE
_____________________
7.01 Investment Powers. The Trustee, except as provided in Article
_________________
V, and only to the extent it has not received directions pursuant to Article V,
is authorized and empowered in its sole discretion:
(a) To invest and reinvest trust assets, together with the
income therefrom, in common stock, preferred stock, convertible preferred
stock, bonds, debentures, convertible debentures and bonds, mortgages, notes,
time certificates of deposit, commercial paper and other evidence of
indebtedness (including those issued by the Trustee or any affiliate), other
securities, policies of life insurance, annuity contracts, options or buy or
sell securities or other assets, and property (personal, real, or mixed, and
tangible or intangible);
(b) To deposit or invest all or any part of the assets of
the trust in savings accounts or certificates of deposit or other deposits
which bear a reasonable interest rate in a bank, including the commercial
department of the Trustee, if such bank is supervised by the United States
or a State;
(c) To hold, manage, improve, repair and control all
property, real or personal, forming part of the trust assets; to sell,
convey, transfer, exchange, partition, lease for any term, even extending
beyond the duration of this trust, and otherwise dispose of the same from
time to time in such manner, for such consideration, and upon such terms and
conditions as the Trustee shall determine.
(d) To have, respecting securities, all the rights, powers
and privileges of an owner, including the power to give proxies, pay
assessment and other sums deemed by the Trustee to be necessary for the
protection of the trust fund, to vote any corporate stock either in person
or by proxy, with or without power of substitution, for any purpose; to
participate in voting trusts, pooling agreements, foreclosures,
reorganizations, consolidations, mergers and liquidations, and in connection
therewith to deposit securities with and transfer title to any protective
or other committee under such terms as the Trustee may deem advisable; to
exercise or sell stock subscriptions or conversion rights; and, regardless of
any limitation elsewhere in this instrument relative to investment by the
Trustee, to accept and retain as an investment any securities or other
property received through the exercise of any of the foregoing powers;
(e) In the ordinary course of administration of the trust
fund, all uninvested cash balances shall be invested in short term
obligations, including obligations of the United States of America or any
agency or instrumentality thereof, trust and participation certificates,
beneficial interests in any trust and such other short term obligations as the
Trustee deems to be appropriate for such interim investment purposes,
including the Short Term Investment Fund maintained by the Trustee; provided,
however, that the Trustee may hold in cash without liability for interest
such portion of the trust fund that in its discretion shall be reasonable
under the circumstances, pending investments, or payment of expenses, or the
distribution of benefits;
(f) To take such actions as may be necessary or desirable
to protect the trust from loss, including the appointment of agents or
trustees in such other jurisdictions as may seem desirable, to transfer
property to such agents or trustees, to grant such powers as are necessary
or desirable to protect the trust or its assets, to direct such agent or
trustee, or to delegate such power to direct, and to remove such agent or
trustee;
(g) To employ such agents including custodians and counsel
as may be reasonably necessary and to pay them reasonable compensation; to
settle, compromise or abandon all claims and demands in favor of or against
the trust assets;
(h) To cause title to property of the trust to be issued,
held or registered in the individual name of the Trustee, or in the name of its
nominee(s) or agents, or in such form that title will pass by delivery;
(i) To exercise all of the further rights, powers, options
and privileges granted, provided for, or vested in trustees generally under the
laws of the State of California, so that the powers conferred upon the
Trustee herein shall not be in limitation of any authority conferred by law,
but shall be in addition thereto;
(j) To borrow money from any source to purchase
Employer Securities and to execute promissory notes or other obligations and
to pledge or mortgage any trust assets as security, subject to applicable
requirements of the Code and ERISA; provided, however, that any money needed
for the purchase of Employer Securities shall not be borrower from the
Trustee;
(k) To lend certificates representing stocks, bonds, or
other securities to any brokerage or other firm selected by the Trustee,
provided such loans are adequately secured; and
(l) To do all other acts necessary or desirable for the
proper administration of the Trust assets, as if the Trustee were the
absolute owner thereof.
7.02 Securities Depositories. Notwithstanding anything herein to
_______________________
the contrary, the Trustee in its discretion is authorized to use securities
depositories or custodians. Further, such securities as are held by a
depository or custodian may be registered in the name of such depository or
its nominee or in the name of such custodian or its nominee.
7.03 Investment in Common Trust Funds. Notwithstanding any
________________________________
provision herein to the contrary, the Trustee is hereby expressly authorized
to invest in any common, collective or pooled fund maintained by the Trustee
or any other bank or trust company and the Declarations of Trust
establishing or amending such funds are hereby incorporated by reference
into this Agreement.
ARTICLE VIII
____________
ACCOUNTS OF THE TRUSTEE
_______________________
8.01 Records. The Trustee shall maintain accurate records and
_______
accounts of all trust transactions and assets. The records and accounts
shall be available at reasonable times for inspection or audit by any
person or persons designated by the Plan Administrator.
8.02 Reports. Within ninety days following the close of each Plan
_______
Year, or the effective date of the removal or resignation of the Trustee,
the Trustee shall file with the Plan Administrator a written account setting
forth all transactions since the end of the period covered by the last
previous accounting. The report shall include a listing of the trust
assets, showing carrying and market values of such assets at the close of
the period covered by the account. On direction of the Plan Administrator,
the Trustee shall submit to the Plan Administrator interim valuations,
reports, or other information.
The Plan Administrator may approve the accounting by written approval
delivered to the Trustee or by failure to deliver written objection to the
Trustee within sixty days after receipt of the accounting.
8.03 Valuation. Trust assets shall be valued at fair market value
_________
on the date of valuation, as determined by the Trustee based upon such
sources of information as it may deem reliable including, but not limited
to, stock market quotations, statistical evaluation services, newspapers of
general circulation, financial publications, advice from investment
counselors or brokerage firms, or any combination of sources. The value of
unlisted or very thinly traded company stock shall be based on an appraisal
by a qualified independent appraiser acceptable to the Trustee.
The Plan Administrator shall instruct the Trustee as to the value of
assets for which market value is not readily obtainable by the Trustee. If
the Plan Administrator fails to provide values the Trustee may take whatever
action it deems reasonable, including employment of attorneys, appraisers or
other professions, the expense of which will be an expense of the
administration of the trust.
ARTICLE IX
__________
RESIGNATION AND REMOVAL OF THE TRUSTEE
______________________________________
9.01 Resignation. The Trustee may resign at any time upon at
___________
least thirty days written notice to Charles Schwab & Co., Inc.
9.02 Removal. Charles Schwab & Co., Inc. may remove the Trustee upon
_______
at least thirty days written notice to the Trustee.
9.03 Appointment of a Successor. Upon resignation or removal of
__________________________
the Trustee, Charles Schwab & Co., Inc., by resolution of its Board of
Directors, shall appoint a successor trustee. Upon failure of the Board of
Directors to appoint a successor trustee by the effective date of
resignation or removal, the individual members of the Board of Directors of
Charles Schwab & Co., Inc. shall become successor trustee until another
successor trustee is appointed.
Upon appointment of the successor trusteethe Trustee shall deliver to
the successor trustee such records as may be reasonably required to enable the
successor trustee properly to administer the trust fund, and shall deliver to
the successor trustee all property of the trust after deducting such amounts as
the Trustee deems necessary to provide for expenses, compensation, and taxes.
9.04 Settlement of Account. Upon resignation or removal, the
_____________________
Trustee shall have the right to a settlement of its account which settlement
shall be made, at the Trustee's options, either by a judicial settlement in
an action instituted by the Trustee, or by an agreement of settlement
between the Trustee and the Employer.
9.05 Indemnity for Expenses and Compensation. The Trustee shall
_______________________________________
not be obligated to transfer assets of the trust until the Trustee is
indemnified in a manner satisfactory to it for all fees and expenses
reasonably anticipated.
9.06 Termination of Liability. Upon settlement of its account and
________________________
transfer of the trust assets to the successor trustee, all rights and
privileges under the Plan and this Trust Agreement shall vest in the
successor trustee and thereafter liability of the Trustee shall terminate
with respect to acts of the successor trustee not related to prior acts of
the Trustee subject only to the requirement that the Trustee execute all
necessary documents to transfer the trust assets to the successor trustee.
ARTICLE X
_________
AMENDMENT AND TERMINATION
_________________________
10.01 Amendment. The Trustee and Charles Schwab & Co., Inc. may
_________
amend any or all of the provisions of this Trust Agreement. Amendments to
the Trust Agreement shall be executed by two officers of the Trustee and a
copy of such amendments shall be mailed to Charles Schwab & Co., Inc.
No amendment shall be made which will permit any part of the trust fund to
be used for, or diverted to, purposes other than the exclusive benefit of
Participants or their Beneficiaries.
10.02 Termination. The trust is irrevocable but may be terminated
___________
by Charles Schwab & Co., Inc. by resolution of its Board of Directors and
with at least sixty days written notice to the Trustee. Upon termination
of the trust, the trust assets shall be distributed as directed by the Plan
Administrator; provided, however, that the Trustee shall not be required to
make any distribution prior to receipt of a determination letter from the
Internal Revenue Service that the termination does not affect the tax exempt
status of the plan and trust. In the event the plan is not required to
obtain the prior approval of the Internal Revenue Service, the Trustee may,
in lieu of such determination letter, accept an indemnification of the
Trustee by the Employer for any liability the Trustee may incur for
compliance with directions to distribute the assets of the Trust, including
taxes and attorney's fees.
10.03 Failure to Maintain Qualification. If the Plan and Trust fail
_________________________________
to qualify or the Plan loses it status as a Qualified Plan, the Trustee may,
without notice or direction, remove the trust fund assets from any common or
collective trust fund or pooled investment fund maintained by the Trustee for
investments by Qualified Plans.
ARTICLE XI
__________
MISCELLANEOUS
_____________
11.01 Participation by Affiliated Companies. Any company affiliated
_____________________________________
with the Employer may become a party to this Trust Agreement by adopting the
Employer's Plan and this Trust Agreement.
11.02 Multiple Plans. With the consent of the Trustee, the assets of
______________
two or more Qualified Plans maintained by the Employer and affiliated
companies may be maintained as one trust and their assets may be commingled.
11.03 Exclusive Benefit Rule. Except as provided in Section 11.04,
______________________
no part of the principal or income of this trust shall be used for, or
diverted to, purposes other than the exclusive benefit of Participants or
their Beneficiaries or for the reasonable expenses of administering the Plan
until all liabilities for benefits due Participants or their Beneficiaries
have been satisfied.
11.04 Refunds to Employer. Notwithstanding the foregoing Section
___________________
11.03, if the Internal Revenue Service finds that this Plan does not
initially meet the requirements of a qualified plan whose trust is a
qualified trust exempt from federal income tax, the Trustee may within one
year after the date the initial qualification is denied and upon written
directions from the Employer, return any initial contribution made by the
Employer and the trust shall then be terminated.
The Trustee may, upon instructions from the Plan Administrator, return
to the Employer or individual Participants contributions made on mistake of
fact or in excess of the amount determined to be deductible by the Employer
within one year of the date the contribution was made, or within one year of
the date the deduction for the Employer was disallowed.
11.05 Construction. The Trust will be administered in the State of
____________
California, and its validity, construction and all rights hereunder shall
be governed by ERISA and, to the extent not preempted, by the laws of
California. If the provisions of this Trust Agreement and the Plan shall be
inconsistent or otherwise in conflict regarding the rights, duties or
obligations of the Trustee, the provisions of this Agreement shall control.
If any provisions of this Agreement shall be ruled invalid or unenforceable,
the remaining provisions thereof shall continue to be fully effective.
Headings or subheading are inserted for convenience of reference only
and are not to be considered in the construction of the provisions of
the Trust Agreement.
11.06 Execution and Counterparts. This Trust Agreement may be
__________________________
executed in several counterpart, each of which shall be deemed an original
and said counterparts shall constitute but one instrument which may be
sufficiently evidenced by any one counterpart.
11.07 Successors and Assigns. This Trust Agreement shall inure to
______________________
the benefit of any and shall be binding upon, the parties and their
successor and assigns.
11.08 Gender. As used in this Trust Agreement, the masculine gender
______
shall include the feminine and neuter genders and the singular shall include
the plural and the plural the singular as the context requires.
Executed by the Employer and the Trustee on 10/25, 1990, effective as
of 11/01, 1990.
CHARLES SCHWAB & CO., INC.
By: /s/ Charles R. Schwab
Its: Chairman/CEO
SECURITY PACIFIC NATIONAL BANK
By: /s/ Mary Lau
Its: Assistant Vice President
By:
Its:
EXHIBIT 10.155
THE CHARLES SCHWAB CORPORATION
1992 STOCK INCENTIVE PLAN
RESTRICTED SHARES AWARD AGREEMENT
THIS AGREEMENT is entered into between The Charles Schwab Corporation,
a Delaware corporation (the "Company") and (First Name)(Last Name) (the
_____________________
"Employee").
WITNESSETH:
WHEREAS, the Company has adopted The Charles Schwab Corporation 1992
Stock Incentive Plan (the "Plan"), which provides for the granting of
restricted shares of Common Stock of the Company ("Restricted Shares") to
key employees of the Company and its Subsidiaries; and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company (the "Committee"), which is responsible for the administration of
the Plan, has authorized the granting of an award of Restricted Shares to
the Employee, effective as of October 17, 1995, (the "Grant Date"); and
WHEREAS, this Agreement is prepared in conjunction with and pursuant to
the terms of the Plan and, although all of the terms of the Plan and the
definitions used in this Plan have not been set forth herein, such terms and
definitions are incorporated herein and made a part hereof by reference, and,
except as otherwise expressly stated herein, the provisions of the Plan
shall govern any interpretation of this Agreement; and
WHEREAS, the Employee has accepted the grant of Restricted Shares and
agreed to the terms and conditions hereinafter stated;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Company
and the Employee hereby agree as follows:
1. Grant of Restricted Shares. The Company hereby grants to the
__________________________
Employee, as a separate incentive in connection with his or her
employment and not in lieu of any salary or other cash compensation for his
or her services, an award of (Number of Shares) Restricted hares, effective
October 17, 1995, subject to all the terms and conditions in this Agreement
and the Plan.
2. Restriction on Transfer. The Restricted Shares awarded pursuant
_______________________
to this Agreement shall be issued in the name of The Employee and held
by the Secretary of the Company as escrow agent (the "Escrow Agent"), and
shall not be sold, transferred, otherwise disposed of, pledged or
otherwise hypothecated until the date such Restricted Shares become vested
pursuant to paragraph 3 hereof (the "Restriction on Transfer"). The Company
may instruct the transfer agent for its Common Stock to place a legend
on the certificates representing the Restricted Shares or otherwise note its
records as to the restrictions on transfer set forth in this Agreement and
the Plan. The certificate or certificates representing such shares shall be
delivered by the Escrow Agent to The Employee only after the shares become
vested on the date specified in paragraph 3 and after all other terms and
conditions in this Agreement have been satisfied.
3. Vesting of Shares. The Restricted Shares awarded by this
_________________
Agreement shall become vested as follows:
(I) Effective as of the date hereof, the Restricted Shares
shall be 0% vested.
(II) 10% of the Restricted Shares shall become vested on
October 17, 1997 (the "First Vesting Date") if (A) the Employee is employed
for a continuous period beginning on the Grant Date and ending on the
First Vesting Date, and (B) the Compound Annual Total Shareholder Return
exceeds the Market Index Total Shareholder Return by at least two percentage
points for the period beginning on the Grant Date and ending on the First
Vesting Date.
(III) 20% of the Restricted Shares (less any shares which
became vested pursuant to subparagraph (II) above) shall become vested on
October 17, 1998 (the "Second Vesting Date") if (A) the Employee is employed
for a continuous period beginning on the Grant Date and ending on the Second
Vesting Date, and (B) the Compound Annual Total Shareholder Return exceeds
the Market Index Total Shareholder Return by at least two percentage points
for the period beginning on the Grant Date and ending on the Second Vesting
Date.
(IV) 35% of the Restricted Shares (less any shares which
became vested pursuant to subparagraphs (II) or (III) above) shall become
vested on October 17, 1999 (the "Third Vesting Date") if (A) the Employee is
employed for a continuous period beginning on the Grant Date and ending on
the Third Vesting Date, and (B) the Compound Annual Total Shareholder Return
exceeds the Market Index Total Shareholder Return by at least two percentage
points for the period beginning on the Grant Date and ending on the Third
Vesting Date.
(V) 100% of the Restricted Shares (less any shares which
became vested pursuant to subparagraphs (II), (III) or (IV) above) shall
become vested on October 17, 2000 (the "Final Vesting Date") if (A) the
Employee is employed for a continuous period beginning on the Grant Date
and ending on the Final Vesting Date, and (B) the Compound Annual Total
Shareholder Return exceeds the Market Index Total Shareholder Return by at
least two percentage points for the period beginning on the Grant Date and
ending on the Final Vesting Date.
(VI) Any Restricted Shares that are not vested on the Final
Vesting Date will revert back to the Company.
For purposes of the foregoing, the Compound Annual Total Shareholder
Return for a period shall mean the annualized compound return (consisting of
both stock price appreciation and dividends, and assuming reinvestment of
dividends) to shareholders of the Company, and the Market Index Total
Shareholder Return for a period shall mean the average annualized compound
return (consisting of both stock price appreciation and dividends, and assuming
reinvestment of dividends) to shareholders of corporations comprising the
Standard & Poor's 500.
Notwithstanding the foregoing, however, the accrual of vesting pursuant
to this paragraph is contingent upon the Employee's satisfactory job
performance, and the Company may, in its sole discretion, upon notice to the
Employee, suspend or delay the vesting of the Restricted Shares hereunder
for any period of time in the event that the Company determines, within its
sole discretion, that the Employee's performance is unsatisfactory. Upon the
vesting of Restricted Shares hereunder, the certificate or certificates
representing such Restricted Shares shall be delivered to the Employee.
4. Supplemental Cash Payment. In the event any Restricted Shares
_________________________
become vested pursuant to Section 3 above, the Employee shall be eligible to
receive a Supplemental Cash Payment on the Vesting Date (the "Payment
Date"), in an amount calculated pursuant to the following table, but only if
(i) the employee is employed for a continuous period beginning on the date
the shares become vested (the "Vesting Date") and ending on the Payment
Date, and (ii) the Employee still holds the Restricted Shares on the Payment
Date.
With respect to Restricted Shares that become vested on any Vesting
Date, the amount payable pursuant to this section, if any, shall be a
multiple of the value of the Restricted Shares on the Vesting Date, based
upon the number of percentage points by which the Compound Annual Total
Shareholder Return exceeds the Market Index Total Shareholder Return for
the period beginning on the Grant Date and ending on the Vesting Date
("Excess Annual Total Shareholder Return"), as follows:
Excess Annual Total Shareholder Return Multiple
Less than four percentage points 0 %
At least four, but less than six percentage points 25%
At least six, but less than eight percentage points 50%
At least eight, but less than ten percentage points 100%
Ten percentage points or more 150%
5. Full Vesting on Change in Control. Upon the determination of the
_________________________________
Committee that a Change in Control of the Company has occurred, or in the
event of the liquidation or dissolution of the Company, the Restricted
Shares shall become fully vested and the Restriction on Transfer shall be
lifted, notwithstanding any other provision of this Agreement, and the
certificate or certificates representing such Restricted Shares shall be
delivered to the Employee.
6. Discretion of Committee. The Committee may decide, in its
_______________________
absolute discretion, to lift at any time the Restriction on Transfer or to
accelerate the vesting of the Restricted Shares, and the certificate or
certificates representing such Restricted Shares shall be delivered to the
Employee.
7. Delivery of Shares to Estate of Deceased Employee. Any
_________________________________________________
distribution or delivery to be made to the Employee under this Agreement
shall, if the Employee is then deceased, be made to the Employee's
estate in accordance with the terms of Section 7.5 of the Plan.
8. Conditions to Issuance of Shares. The Restricted Shares
________________________________
deliverable to the Employee may be either previously authorized but unissued
shares or issued shares which have been reacquired by the Company. The
Company shall not be required to issue any certificate or certificates for
Restricted Shares hereunder prior to fulfillment of all of the following
conditions:
(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;
(b) The completion of any registration or other
qualification of such shares under any State or federal law or under the
rulings or regulations of the Securities and Exchange Commission or any other
governmental regulatory body, which the Committee shall, in its absolute
discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from
any State or federal governmental agency, which the Committee shall, in its
absolute discretion, determine to be necessary or advisable; and
(d) The lapse of such reasonable period of time following
the date of the grant of the Restricted Shares as the Committee may
establish from time to time for reasons of administrative convenience.
Neither the Employee nor any person claiming under or through the
Employee shall be, or have any of the rights or privileges of, a stockholder
of the Company in respect of any Restricted Shares deliverable hereunder
unless and until certificates representing such shares shall have been
issued, recorded on the records of the Company or its transfer agents or
registrars, and delivered to the Employee or the Escrow Agent. Except as
provided in paragraph 9, after such issuance, recordation and delivery, the
Employee shall have all rights of a stockholder of the Company with respect
to voting such Restricted Shares and receipt of dividends and distributions
on such Restricted Shares.
9. Certain Adjustments to Shares. In the event that as a result of
_____________________________
a stock dividend, stock split, reclassification, recapitalization, combination
of shares or the adjustment in capital stock of the Company or otherwise,
or as a result of a merger, consolidation, spin-off or other reorganization,
the Company's Common Stock shall be increased, reduced or otherwise changed,
and by virtue of any such change the Employee shall in his or her capacity
as owner of Restricted Shares which have been awarded to him or her (the
"Prior Shares") be entitled to new or additional or different shares or
securities (other than rights or warrants to purchase securities), such
new or additional or different shares or securities shall thereupon be
considered to be Restricted Shares and shall be subject to all of the
conditions and restrictions which were applicable to the Prior Shares
pursuant to the Plan. If the Employee receives rights or warrants with
respect to any Prior Shares, such rights or warrants may be held or
exercised by the Employee, provided that until such exercise any such
rights or warrants and after such exercise any shares or other securities
acquired by the exercise of such rights or warrants shall be considered to be
Restricted Shares and shall be subject to all of the conditions and
restrictions which were applicable to the Prior Shares pursuant to the Plan.
The Committee in its absolute discretion at any time may lift the Restriction
on Transfer of all or any portion of such new or additional shares of stock or
securities, rights or warrants to purchase securities or shares or other
securities acquired by the exercise of such rights or warrants.
10. Contribution of Par Value to Capital of the Company.
___________________________________________________
Notwithstanding the provisions of Section 7.2 of the Plan, the Company will
contribute to the capital of the Company on behalf of the Employee, as
an Award recipient, an amount equal to the par value of the Restricted
Shares issued to the Employee hereunder.
11. Tax Withholding. To the extent required by applicable federal,
_______________
state, local or foreign law, the Employee shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise by reason of the awarding or vesting of the
Restricted Shares hereunder, or by reason of any election made by the
Employee pursuant to Section 83(b) of the Internal Revenue Code, and no
Share certificates shall be issued to the Employee unless such obligation
is satisfied.
12. Plan Shall Control. This Agreement is subject to all the
__________________
terms and provisions of the Plan. In the event of a conflict between any
provisions of this Agreement and any provisions of the Plan, the provisions
of the Plan shall govern. Terms used in this Agreement that are not defined
in this Agreement shall have the meaning set forth in the Plan.
13. Powers of the Committee. The Committee shall have the power to
_______________________
interpret and construe the Plan and this Agreement and to adopt such rules
for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret or revoke any such rules. All actions
taken and all interpretations and determinations made by the Committee in
good faith shall be final and binding upon the Employee, the Employee's estate,
the Company and all other interested persons. No member of the Committee
shall be personally liable for any action, determination or interpretation
made in good faith with respect to the Plan or this Agreement.
14. No Effect on Other Benefit Plans. Nothing herein contained
________________________________
shall affect the Employee's right to participate in and receive benefits
under and in accordance with the then current provisions of any pension,
insurance or other the Employee welfare plan or program of the Company or
any Subsidiary.
15. Nonassignability. So long as the Restriction on Transfer is in
________________
effect, the Restricted Shares herein granted and the rights and privileges
conferred hereby shall not be transferred, assigned, pledged or hypothecated
in any way (whether by operation or law or otherwise) and shall not be
subject to sale under execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of
such award or any right or privilege conferred hereby, contrary to the
provisions hereof, or upon any attempted sale under any execution,
attachment or similar process upon the rights and privileges conferred
hereby, such award and the rights and privileges conferred hereby shall
immediately become null and void.
16. Successors and Assigns. Subject to the limitation on the
______________________
transferability of the Restricted Shares contained herein, this Agreement
shall be binding upon and inure to the benefit of the heirs, legatees, legal
representatives, successor and assigns of the Employee and the Company.
17. Notices. Any notice to be given to the company under the terms
_______
of this Agreement shall be addressed to the Company, in care of its
Secretary, at 101 Montgomery Street, San Francisco, California 94104, or at
such other address as the Company may hereafter designate in writing. Any
notice to be given to the Employee shall be addressed to the Employee at the
address set forth beneath the Employee's signature hereto, or at such other
address as the Employee may hereafter designate in writing. Any such notice
shall be deemed to have been duly given if and when enclosed in a properly
sealed envelope, addressed as aforesaid, registered or certified and
deposited, postage and registry fee prepaid, in a United States post office.
18. Severability. In the event that any provision of this
____________
Agreement shall be held invalid or unenforceable, such provision shall be
severable from, and such invalidity or unenforceability shall not be
construed to have any effect on, the remaining provisions of this Agreement.
19. Governing Law. This Agreement shall be construed in accordance
_____________
with the laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date set forth below.
THE CHARLES SCHWAB CORPORATION
By: /s/ Charles R. Schwab
Title: Chairman and Chief Executive Officer
_______________________________
Employee's Signature
_______________________________
_______________________________
Address
_______________________________
Date
<PAGE>
THE CHARLES SCHWAB CORPORATION
1992 STOCK INCENTIVE PLAN
RESTRICTED SHARES AWARD AGREEMENT
THIS AGREEMENT is entered into between The Charles Schwab Corporation,
a Delaware corporation (the "Company") and (First Name)(Last Name) (the
_____________________
"Employee").
WITNESSETH:
WHEREAS, the Company has adopted The Charles Schwab Corporation 1992
Stock Incentive Plan (the "Plan"), which provides for the granting of
restricted shares of Common Stock of the Company ("Restricted Shares") to key
employees of the Company and its Subsidiaries; and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company (the "Committee"), which is responsible for the administration of the
Plan, has authorized the granting of an award of Restricted Shares to the
Employee, effective as of October 17, 1995, (the "Grant Date"); and
WHEREAS, this Agreement is prepared in conjunction with and pursuant to
the terms of the Plan and, although all of the terms of the Plan and the
definitions used in this Plan have not been set forth herein, such terms and
definitions are incorporated herein and made a part hereof by reference, and,
except as otherwise expressly stated herein, the provisions of the Plan
shall govern any interpretation of this Agreement; and
WHEREAS, the Employee has accepted the grant of Restricted Shares and
agreed to the terms and conditions hereinafter stated;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Company and
the Employee hereby agree as follows:
1. Grant of Restricted Shares. The Company hereby grants to the
__________________________
Employee, as a separate incentive in connection with his or her employment
and not in lieu of any salary or other cash compensation for his or her
services, an award of (Number of Shares) Restricted Shares, effective
October 17, 1995, subject to all the terms and conditions in this Agreement
and the Plan.
2. Restriction on Transfer. The Restricted Shares awarded pursuant
_______________________
to this Agreement shall be issued in the name of The Employee and held by
the Secretary of the Company as escrow agent (the "Escrow Agent"), and
shall not be sold, transferred, otherwise disposed of, pledged or otherwise
hypothecated until the date such Restricted Shares become vested pursuant to
paragraph 3 hereof (the "Restriction on Transfer"). The Company may
instruct the transfer agent for its Common Stock to place a legend on the
certificates representing the Restricted Shares or otherwise note its
records as to the restrictions on transfer set forth in this Agreement and
the Plan. The certificate or certificates representing such shares shall be
delivered by the Escrow Agent to The Employee only after the shares become
vested on the date specified in paragraph 3 and after all other terms and
conditions in this Agreement have been satisfied.
3. Vesting of Shares. The Restricted Shares awarded by this
_________________
Agreement shall become vested as follows:
(I) Effective as of the date hereof, the Restricted Shares
shall be 0% vested.
(II) 10% of the Restricted Shares shall become vested on
October 17, 1997 (the "First Vesting Date") if the Employee is employed for a
continuous period beginning on the Grant Date and ending on the First
Vesting Date.
(III) 10% of the Restricted Shares shall become vested on
October 17, 1998 (the "Second Vesting Date") if the Employee is employed
for a continuous period beginning on the Grant Date and ending on the Second
Vesting Date.
(IV) 15% of the Restricted Shares shall become vested on
October 17, 1999 (the "Third Vesting Date") if the Employee is employed for
a continuous period beginning on the Grant Date and ending on the Third
Vesting Date.
(V) 65% of the Restricted Shares shall become vested on
October 17, 2000 (the "Final Vesting Date") if the Employee is employed for
a continuous period beginning on the Grant Date and ending on the Final
Vesting Date.
The accrual of vesting pursuant to this paragraph is contingent upon
the Employee's satisfactory job performance, and the Company may, in its sole
discretion, upon notice to the Employee, suspend or delay the vesting of the
Restricted Shares hereunder for any period of time in the event that the
Company determines, within its sole discretion, that the Employee's
performance is unsatisfactory. Upon the vesting of Restricted Shares
hereunder, the certificate or certificates representing such Restricted
Shares shall be delivered to the Employee.
4. Supplemental Cash Payment. In the event any Restricted Shares
_________________________
become vested pursuant to Section 3 above, the Employee shall be eligible to
receive a Supplemental Cash Payment on the Vesting Date (the "Payment
Date"), in an amount calculated pursuant to the following table, but only if
(i) the employee is employed for a continuous period beginning on the date
the shares become vested (the "Vesting Date") and ending on the Payment
Date, and (ii) the Employee still holds the Restricted Shares on the Payment
Date. With respect to Restricted Shares that become vested on any Vesting
Date, the amount payable pursuant to this section, if any, shall be a
multiple of the value of the Restricted Shares on the Vesting Date, based
upon the number of percentage points by which the Compound Annual Total
Shareholder Return exceeds the Market Index Total Shareholder Return for
the period beginning on the Grant Date and ending on the Vesting Date
("Excess Annual Total Shareholder Return"), as follows:
Excess Annual Total Shareholder Return Multiple
Less than four percentage points 0%
At least four, but less than six percentage points 25%
At least six, but less than eight percentage points 50%
At least eight, but less than ten percentage points 100%
Ten percentage points or more 150%
For purposes of the foregoing, the Compound Annual Total Shareholder
Return for a period shall mean the annualized compound return (consisting of
both stock price appreciation and dividends, and assuming reinvestment of
dividends) to shareholders of the Company, and the Market Index Total
Shareholder Return for a period shall mean the average annualized compound
return (consisting of both stock price appreciation and dividends, and
assuming reinvestment of dividends) to shareholders of corporations
comprising the Standard & Poor's 500.
5. Full Vesting on Change in Control. Upon the determination of
_________________________________
the Committee that a Change in Control of the Company has occurred, or in the
event of the liquidation or dissolution of the Company, the Restricted
Shares shall become fully vested and the Restriction on Transfer shall be
lifted, notwithstanding any other provision of this Agreement, and the
certificate or certificates representing such Restricted Shares shall be
delivered to the Employee.
6. Discretion of Committee. The Committee may decide, in its
_______________________
absolute discretion, to lift at any time the Restriction on Transfer or to
accelerate the vesting of the Restricted Shares, and the certificate or
certificates representing such Restricted Shares shall be delivered to the
Employee.
7. Delivery of Shares to Estate of Deceased Employee. Any
_________________________________________________
distribution or delivery to be made to the Employee under this Agreement
shall, if the Employee is then deceased, be made to the Employee's estate in
accordance with the terms of Section 7.5 of the Plan.
8. Conditions to Issuance of Shares. The Restricted Shares
________________________________
deliverable to the Employee may be either previously authorized but unissued
shares or issued shares which have been reacquired by the Company. The
Company shall not be required to issue any certificate or certificates for
Restricted Shares hereunder prior to fulfillment of all of the following
conditions:
(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;
(b) The completion of any registration or other
qualification of such shares under any State or federal law or under the
rulings or regulations of the Securities and Exchange Commission or any other
governmental regulatory body, which the Committee shall, in its absolute
discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from
any State or federal governmental agency, which the Committee shall, in its
absolute discretion, determine to be necessary or advisable; and
(d) The lapse of such reasonable period of time following
the date of the grant of the Restricted Shares as the Committee may
establish from time to time for reasons of administrative convenience.
Neither the Employee nor any person claiming under or through the
Employee shall be, or have any of the rights or privileges of, a stockholder of
the Company in respect of any Restricted Shares deliverable hereunder unless
and until certificates representing such shares shall have been issued,
recorded on the records of the Company or its transfer agents or registrars,
and delivered to the Employee or the Escrow Agent. Except as provided in
paragraph 9, after such issuance, recordation and delivery, the Employee
shall have all rights of a stockholder of the Company with respect to
voting such Restricted Shares and receipt of dividends and distributions on
such Restricted Shares.
9. Certain Adjustments to Shares. In the event that as a result of
_____________________________
a stock dividend, stock split, reclassification, recapitalization, combination
of shares or the adjustment in capital stock of the Company or otherwise, or
as a result of a merger, consolidation, spin-off or other reorganization, the
Company's Common Stock shall be increased, reduced or otherwise changed, and
by virtue of any such change the Employee shall in his or her capacity as
owner of Restricted Shares which have been awarded to him or her (the "Prior
Shares") be entitled to new or additional or different shares or securities
(other than rights or warrants to purchase securities), such new or
additional or different shares or securities shall thereupon be considered
to be Restricted Shares and shall be subject to all of the conditions and
restrictions which were applicable to the Prior Shares pursuant to the Plan.
If the Employee receives rights or warrants with respect to any Prior Shares,
such rights or warrants may be held or exercised by the Employee, provided
that until such exercise any such rights or warrants and after such exercise
any shares or other securities acquired by the exercise of such rights or
warrants shall be considered to be Restricted Shares and shall be subject to
all of the conditions and restrictions which were applicable to the Prior
Shares pursuant to the Plan. The Committee in its absolute discretion at any
time may lift the Restriction on Transfer of all or any portion of such
new or additional shares of stock or securities, rights or warrants to
purchase securities or shares or other securities acquired by the exercise
of such rights or warrants.
10. Contribution of Par Value to Capital of the Company.
___________________________________________________
Notwithstanding the provisions of Section 7.2 of the Plan, the Company will
contribute to the capital of the Company on behalf of the Employee, as
an Award recipient, an amount equal to the par value of the Restricted
Shares issued to the Employee hereunder.
11. Tax Withholding. To the extent required by applicable federal,
_______________
state, local or foreign law, the Employee shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise by reason of the awarding or vesting of the
Restricted Shares hereunder, or by reason of any election made by the
Employee pursuant to Section 83(b) of the Internal Revenue Code, and no
Share certificates shall be issued to the Employee unless such obligation
is satisfied.
12. Plan Shall Control. This Agreement is subject to all the
__________________
terms and provisions of the Plan. In the event of a conflict between any
provisions of this Agreement and any provisions of the Plan, the provisions
of the Plan shall govern. Terms used in this Agreement that are not defined
in this Agreement shall have the meaning set forth in the Plan.
13. Powers of the Committee. The Committee shall have the power to
_______________________
interpret and construe the Plan and this Agreement and to adopt such rules
for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret or revoke any such rules. All actions
taken and all interpretations and determinations made by the Committee in
good faith shall be final and binding upon the Employee, the Employee's
estate, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or this Agreement.
14. No Effect on Other Benefit Plans. Nothing herein contained
________________________________
shall affect the Employee's right to participate in and receive benefits
under and in accordance with the then current provisions of any pension,
insurance or other the Employee welfare plan or program of the Company or
any Subsidiary.
15. Nonassignability. So long as the Restriction on Transfer is in
________________
effect, the Restricted Shares herein granted and the rights and privileges
conferred hereby shall not be transferred, assigned, pledged or hypothecated
in any way (whether by operation or law or otherwise) and shall not be
subject to sale under execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of
such award or any right or privilege conferred hereby, contrary to the
provisions hereof, or upon any attempted sale under any execution,
attachment or similar process upon the rights and privileges conferred
hereby, such award and the rights and privileges conferred hereby shall
immediately become null and void.
16. Successors and Assigns. Subject to the limitation on the
______________________
transferability of the Restricted Shares contained herein, this Agreement
shall be binding upon and inure to the benefit of the heirs, legatees,
legal representatives, successor and assigns of the Employee and the
Company.
17. Notices. Any notice to be given to the Company under the
_______
terms of this Agreement shall be addressed to the Company, in care of its
Secretary, at 101 Montgomery Street, San Francisco, California 94104, or at
such other address as the Company may hereafter designate in writing. Any
notice to be given to the Employee shall be addressed to the Employee at
the address set forth beneath the Employee's signature hereto, or at such other
address as the Employee may hereafter designate in writing. Any such notice
shall be deemed to have been duly given if and when enclosed in a properly
sealed envelope, addressed as aforesaid, registered or certified and
deposited, postage and registry fee prepaid, in a United States post office.
18. Severability. In the event that any provision of this
____________
Agreement shall be held invalid or unenforceable, such provision shall be
severable from, and such invalidity or unenforceability shall not be
construed to have any effect on, the remaining provisions of this Agreement.
19. Governing Law. This Agreement shall be construed in accordance
_____________
with the laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date set forth below.
THE CHARLES SCHWAB CORPORATION
By: /s/ Charles R. Schwab
Title: Chairman and Chief Executive Officer
_______________________________
Employee's Signature
_______________________________
_______________________________
Address
_______________________________
Date
EXHIBIT 10.156
AGREEMENT OF SALE
_________________
THIS AGREEMENT OF SALE (this "Agreement"), is entered into as of the
18th day of September 1995 by and between Charles Schwab & Co., Inc., a
California corporation ("Purchaser"), and American Express Company, a New
York corporation ("Seller").
W I T N E S S E T H:
____________________
1. PURCHASE AND SALE. Purchaser agrees to purchase and Seller
_________________
agrees to sell the American Express Western Regional Operations Center,
known by the street address, 2423 East Lincoln Drive, Phoenix, Arizona,
consisting of the following: (i) that certain land, in fee simple,
legally described on Exhibit A attached hereto (the "Fee Parcel");
_________
(ii) all of Seller's right, title and interest in, to and under Lease
No. 21319, dated March 1, 1979, by and between the City of Phoenix, a
municipal corporation (the "City"), as ground lessor, and Seller as ground
lessee, recorded in the Official Records of Maricopa County, Arizona on
May 29, 1979 in Docket No. 13661, Page 578-587, as modified by that certain
First Addendum to Lease No. 21319, dated August 26, 1985, a memorandum of
which was recorded in the Official Records of Maricopa County, Arizona on
August 30, 1995 as Instrument #95-0525797 and by that certain Second
Addendum to Lease No. 21319, dated January 5, 1986, a memorandum of which
was recorded in the Official Records of Maricopa County, Arizona on
August 30, 1995 as Instrument #0525798 (collectively, the "Ground Lease"),
which Ground Lease affects that certain property legally described on
Exhibit B attached hereto (the "Ground Lease Parcel"); (iii) all of the
_________
improvements and fixtures (including, without limitation, all built-in
cabinets, counters and shelving, lighting and plumbing fixtures, venetian
blinds, shades, screens, storm windows and other window treatments, switch
plates and door hardware and those specific video monitors and built-in
cameras set forth on Exhibit Q, but excluding all telephone switches and
artwork and sculpture) (collectively, the "Improvements") located on the Fee
Parcel and the Ground Lease Parcel (subject, in the case of the Ground Lease
Parcel, to the terms of the Ground Lease); and (iv) all of the personal
property set forth in Exhibit C attached hereto and the then remaining spare
parts for the fixtures and systems (collectively the "Personal Property"), all
of which are owned by Seller and will be transferred to Purchaser free and
clear of all claims, adverse interests, liens, security interests and
encumbrances. Provided that Seller shall have delivered to Purchaser, on or
before October 15, 1995, a list describing the insertion equipment at the
Property that Seller wishes, at Seller's sole discretion, to make available to
Purchaser, Purchaser shall have the right to notify Seller on or before
November 30, 1995 that Purchaser desires to receive any such available
insertion equipment at the Property or portion of such available insertion
equipment and upon such notice the term "Personal Property" shall include such
available insertion equipment requested by Purchaser and Seller shall remove
the insertion equipment not so requested by Purchaser prior to the Closing
(hereinafter defined). The Fee Parcel, Seller's leasehold estate in the
Ground Lease Parcel and Seller's interest in the Ground Lease, the
Improvements and the Personal Property are referred to collectively herein as
the "Property".
The term Property shall also include: (a) all of Seller's right,
title, estate or interest, if any, in and to the land lying in the bed of any
streets or roads in front of or adjoining the Property to the center lines
thereof, and any award made or to be made in lieu thereof, and any award
for damage to the Property by reason of change of grade of any street; and
Seller will execute and deliver to Purchaser at Closing or thereafter on
demand, all proper instruments for the conveyance of such title and for the
assignment and collection of any such award; (b) all of Seller's right,
title, estate or interest, if any, in strips and gores of land adjacent,
abutting or used in connection with the Property; (c) all of Seller's right,
title, estate or interest, if any, in easements inuring to the benefit of
the Property, including, without limitation, any privilege or right-of-way
over, contiguous or adjoining the Property; and (d) all of Seller's right,
title, estate or interest, if any, in and to all rights (including, without
limitation, all well and water rights and related water and well equipment
and facilities, if any), privileges, appurtenances and hereditaments
belonging or in any way appertaining to the Property or incident to the
ownership thereof.
2. PURCHASE PRICE.
______________
2.1. The "Purchase Price" to be paid by Purchaser to Seller
for the Property is Thirty Two Million Three Hundred Seventy Five Thousand
And No/100 Dollars ($32,375,000.00).
2.2. The Purchase Price shall be paid by Purchaser as
follows:
2.2.1. Upon the execution of this Agreement, the
sum of Three Million Two Hundred Thirty Seven Thousand Five Hundred and
No/100 Dollars ($3,237,500.00) (the "Earnest Money") by check or wire
transfer of "immediately available" funds, which shall be held in escrow
(the "Escrow"), in accordance with the provisions of the Escrow Agreement
(the "Escrow Agreement") attached hereto as Exhibit D, by the Escrow Agent
_________
(as such term is defined in the Escrow Agreement); and
2.2.2. The Earnest Money shall be increased on the
dates and in the amounts set forth in Paragraph of this Agreement, which
additional deposits shall be in the form of a cashier's or certified check
or by federally wired "immediately available" funds and shall be delivered
to Escrow Agent and held in Escrow by and in accordance with the provisions
of the Escrow Agreement.
2.2.3. On the "Closing Date" (hereinafter defined),
the balance of the Purchase Price (after application of the Earnest Money
deposited pursuant to Paragraph 2.2.1 and all accrued interest thereon and
all increases to the Earnest Money deposited pursuant to Paragraph 2.2.2 and
all accrued interest thereon from and after March 31, 1996), adjusted in
accordance with the prorations and other credits to which Purchaser may
become entitled under this Agreement, by federally wired "immediately
available" funds, on or before 2:00 p.m. New York time.
All interest accruing on that portion of the Earnest Money deposited
by Purchaser pursuant to Paragraph 2.2.1 of this Agreement and all interest
accruing from and after March 31, 1996 on that portion of the Earnest Money
deposited by Purchaser pursuant to Paragraph 2.2.2 of this Agreement shall
belong to Purchaser (except as may otherwise be provided in Paragraph 14)
and shall be credited or paid to Purchaser at the "Closing" (hereinafter
defined) or returned to Purchaser where provided in this Agreement. All
interest accruing prior to March 31, 1996 on that portion of the Earnest
Money deposited by Purchaser pursuant to Paragraph 2.2.2 of this Agreement
shall belong to Seller except if this Agreement is terminated pursuant to
any provision hereof other than Paragraph 14 hereof. In the event this
Agreement is terminated for any reason other than pursuant to Paragraph 14
hereof, Purchaser shall be entitled to receive all interest accruing on the
Earnest Money deposited by Purchaser pursuant to Paragraphs 2.2.1 and 2.2.2.
2.3. The parties agree that all right, title and interest of
Seller in any Personal Property transferred hereunder shall be deemed
transferred to Purchaser and only $30,000.00 of the Purchase Price shall be
deemed to have been paid by Purchaser for the same. Seller shall pay any
sales tax due thereon.
3. TITLE COMMITMENT AND SURVEY.
___________________________
3.1. Attached hereto as Exhibit E is a copy of the 7th
_________
Amended title commitment for an owner's extended coverage title insurance
policy to be issued by Chicago Title Insurance Company (hereinafter referred
to as the "Title Insurer"), dated September 12, 1995 for the Fee Parcel
(the "Fee Commitment"). Attached hereto as Exhibit F is a copy of the 6th
_________
Amended title commitment for a leasehold owner's extended coverage title
insurance policy to be issued by the Title Insurer dated September 12, 1995 for
the Ground Lease Parcel (the "Leasehold Commitment"). The Fee Commitment
and the Leasehold Commitment are referred to together hereinafter as, the
"Title Commitments". For purposes of this Agreement, "Permitted Exceptions"
shall mean: (a) the general exclusions contained in the pre-printed portion
of each of the standard title policies (each of which shall be a Form B 1970
(revised 10/17/84) ALTA Extended Coverage Owner's Policy) to be issued by the
Title Insurer based on the Title Commitments (collectively, with all
Endorsements (as hereinafter defined), the "Title Policies"); (b) matters
shown on the "Current Survey" (hereinafter defined); (c) matters caused by
the actions of Purchaser pursuant to Paragraph 7.1; (d) the "Special
Exceptions" set forth in Schedule B - Section 2 of the Fee Commitment as
Numbers 1 through 10 inclusive and 13 (provided further that the Title
Insurer delivers the endorsements annexed to the applicable "Pro Forma
Policies" [hereinafter defined]); (e) the "Special Exceptions" set forth in
Schedule B - Section 2 of the Leasehold Commitment as Numbers 1, 3 through 9
inclusive, 12 and 13 (provided further that the Title Insurer delivers the
endorsements annexed to the appropriate Pro Forma Policies); and (f) 1996
real estate taxes. All other exceptions to title shall be referred to as
"Unpermitted Exceptions". On the Closing Date, Seller shall cause the Title
Insurer to deliver to Purchaser the Title Policies in conformance with the
Title Commitments substantially in the forms attached to the Agreement as
Exhibits E and F with the amount of insurance filled in as provided by
Purchaser not to exceed the Purchase Price in the aggregate (the "Pro Forma
Policies") and all endorsements currently attached to the Pro Forma Policies
(collectively, the "Endorsements") which shall insure (i) in the case of the
Fee Parcel and the Improvements thereon, marketable fee simple, indefeasible
title to the Property in the name of Purchaser as legal owner, and (ii) in
the case of the Ground Lease Parcel and the Improvements thereon, marketable
title to the leasehold estate created by the Ground Lease in the name of
Purchaser as lessee under the Ground Lease, subject only to the Permitted
Exceptions and any Unpermitted Exceptions accepted by Purchaser in
accordance herewith. Seller shall pay for the costs of the Title
Commitments and the basic premium of the Title Policies, but excluding the
cost of all endorsements to, or extended coverage on, the Title Policies.
Purchaser shall pay for the cost of the Endorsements including, without
limitation, extended coverage and the cost of any other endorsement
requested by Purchaser (provided that except as otherwise set forth in this
Paragraph 3 or in Paragraph 5, the transaction set forth herein is not
contingent upon Purchaser receiving any endorsements to the Title Policies
other than the Endorsements).
3.2. Purchaser has received a survey of the Fee Parcel and
the Ground Lease Parcel prepared by Superior Surveying Services, Inc., dated
September 5, 1995, designated as Job No. 950624 (the "Current Survey").
Seller shall pay for the cost of the Current Survey. Seller shall cause the
Current Survey to be certified to Purchaser and its successors and assigns,
to the Title Insurer, Commonwealth Land Title Insurance Company and all
parties reasonably designated by Purchaser and shall cause at Seller's cost
and expense the Current Survey to be updated and redated to a date not earlier
than March 1, 1996, and otherwise to be put into a form sufficient to enable
the Title Insurer to issue the Title Policies.
3.3. The obligation of Seller and Purchaser to pay the
various costs set forth in Paragraphs 3.1 and 3.2 shall survive the termination
of this Agreement, as well as the Closing.
4. PAYMENT OF CLOSING COSTS. In addition to the costs set forth in
________________________
Paragraphs 3.1 and 3.2, Seller shall pay for the costs of the documentary or
transfer stamps and all recording fees to be paid with reference to any
conveyances hereunder and all other stamps, intangible, transfer,
documentary, recording, sales tax and surtax imposed by law with reference
to any other sale documents delivered in connection with the sale of the
Property to Purchaser and all other charges of the Title Insurer in
connection with this transaction, unless specifically set forth herein to
the contrary.
5. CONDITION OF TITLE.
__________________
5.1. Seller agrees to convey to Purchaser good, marketable
and fee simple title to the Fee Parcel and all of the Improvements located
on the Fee Parcel and, subject to the terms of Paragraphs 5.2 through 5.4,
without defect and free and clear of all liens, encumbrances, easements,
tenancies, covenants, restrictions, reservations, conditions and other
exceptions to title by special warranty deed (the "Deed") in recordable
form, subject only to the Permitted Exceptions relating to the Fee Parcel
and the Improvements located on the Fee Parcel and any Unpermitted
Exceptions relating to the Fee Parcel or the Improvements located on the
Fee Parcel waived or accepted by Purchaser in accordance with the terms
hereof. Seller agrees to convey all of its right, title and interest in,
to and under the Ground Lease and all of the Improvements located on the
Ground Lease Parcel to Purchaser by a recordable assignment and assumption
of lease ("Assignment of Lease and Conveyance of Improvements"), in the
form attached hereto as Exhibit G and, subject only to the Permitted
_________
Exceptions relating to the Ground Lease Parcel and the Improvements located
on the Ground Lease Parcel and any Unpermitted Exceptions relating to the
Ground Lease Parcel or the Improvements located on the Ground Lease Parcel
waived or accepted by Purchaser in accordance with the terms hereof.
5.2. If, prior to Closing, a date-down to the Title
Commitments or the Current Survey discloses any Unpermitted Exceptions not
set forth in the Title Commitments and not caused by the deliberate acts of
Seller ("New Unpermitted Exceptions"), Seller shall have thirty (30) days
from receipt of the date-down to cure said New Unpermitted Exceptions at
Seller's sole cost and expense and the Closing shall be delayed as necessary
to give effect to such time periods set forth in this Paragraph 5. If
Seller, despite undertaking commercially reasonable efforts to do so, is
unable to cure all New Unpermitted Exceptions (the parties agreeing that
Seller shall not be required to cure any New Unpermitted Exceptions with
the payment of money, other than in accordance with Paragraph 5.4 herein)
on or before the expiration of said thirty (30) days, then within the next
ten (10)-day period Purchaser and Seller shall jointly determine the "Title
Costs" (hereinafter defined) with respect to said New Unpermitted
Exceptions. If the Title Insurer is unwilling to insure over the New
Unpermitted Exceptions to Purchaser's reasonable satisfaction and the New
Unpermitted Exceptions cannot be cured with the payment of money, Seller
shall notify Purchaser of same and Purchaser shall, by written election
given to Seller within ten (10) business days after Purchaser's receipt of
such notice from Seller, either accept title subject to said New Unpermitted
Exceptions which cannot be cured with the payment of money without a
reduction in the Purchase Price or terminate this Agreement. If Purchaser
fails to make an election within said ten (10)-business day period, then
Purchaser shall be deemed to have elected to terminate this Agreement.
Upon such election (or deemed election) to terminate, the Earnest Money
together with all interest earned thereon shall be immediately returned to
Purchaser and thereupon neither party shall have any rights against the
other or any further liability to the other, except for Purchaser's
obligations pursuant to Paragraphs 7.1 and 7.2 hereof and as otherwise
specifically set forth in this Agreement to survive the termination hereof.
If the Title Insurer is willing to insure over the New Unpermitted Exceptions
to Purchaser's reasonable satisfaction or if the New Unpermitted Exceptions
can be cured with the payment of money, then the amount required to cure or
remove the New Unpermitted Exceptions or to cause the Title Insurer to
insure over the New Unpermitted Exceptions to Purchaser's reasonable
satisfaction shall be referred to as the "Title Costs". Seller shall be
obligated to cure or to cause the Title Insurer to insure over to
Purchaser's reasonable satisfaction all Unpermitted Exceptions not set
forth on the Title Commitments as of the date hereof which are caused by the
deliberate acts of Seller. Furthermore, Seller agrees to pay any and all
liability to the County of Maricopa or other appropriate governmental
authority for the possessory interest tax or any other tax on the Ground
Lease and/or Ground Lease Parcel accruing prior to the date of Closing to
the extent such a liability is imposed against Seller's interest in the
Ground Lease and/or Ground Lease Parcel. In no event shall the possessory
interest tax on Seller's interest in the Ground Lease or Ground Lease Parcel
be included in the definition of "Title Costs".
5.3. In the event the Title Costs aggregate a sum that is
less than or equal to $500,000.00, then, at Closing, Purchaser shall receive
a credit to the Purchase Price equal to the aggregate Title Costs less
$250,000.00 and Purchaser shall take title to the Property free and clear of
all Unpermitted Exceptions and all New Unpermitted Exceptions or with the
Unpermitted Exceptions and the New Unpermitted Exceptions insured over to
Purchaser's reasonable satisfaction. If the aggregate Title Costs are
greater than $500,000.00, then Seller shall have the right to elect, by
written notice given to Purchaser within ten (10) business days after the
determination of the aggregate Title Costs, to either (i) terminate this
Agreement (a "Title Termination Notice") in which case this Agreement shall
be terminated and the Earnest Money shall be immediately returned to
Purchaser together with all interest earned thereon and thereupon neither
party shall have any rights against the other or any further liability to
the other, except for Purchaser's obligations pursuant to Paragraphs 7.1
and 7.2 hereof and as otherwise specifically set forth in this Agreement to
survive the termination hereof, or (ii) give Purchaser a credit, at Closing,
against the Purchase Price equal to the Title Costs less $250,000.00 (a
"Title Credit Notice"). The failure of Seller to deliver a Title
Termination Notice or a Title Credit Notice within the time period above
provided shall be deemed delivery of the Title Credit Notice. If Seller
delivers a Title Termination Notice, then Purchaser shall have the right to
negate the Title Termination Notice (in which case the Title Termination
Notice shall be null and void and this Agreement shall remain in full force
and effect), by delivering to Seller, on or before ten (10) business days
after Purchaser's receipt of the Title Termination Notice, a statement
agreeing to purchase the Property with a $250,000.00 credit to the Purchase
Price, in which event Seller shall have no obligation to remove or cause the
Title Insurer to insure over such New Unpermitted Exceptions and Seller
shall give Purchaser a credit, at the Closing, equal to $250,000.00.
Notwithstanding the foregoing, if Seller delivers or is deemed to have
delivered the Title Credit Notice and the aggregate Title Costs exceed
$1,500,000.00, then Purchaser shall have the right to negate the Title
Credit Notice by written notice to Seller given on or before ten (10)
business days after receipt of the Title Credit Notice, in which case this
Agreement shall terminate and the Earnest Money together with all interest
earned thereon shall be immediately returned to Purchaser and thereupon
neither party shall have any rights against the other or any further
liability to the other, except for Purchaser's obligations pursuant to
Paragraphs 7.1 and 7.2 hereof and as otherwise specifically set forth in
this Agreement to survive the termination hereof.
5.4. Notwithstanding anything contained in this Agreement
to the contrary: (a) the term Title Costs excludes all monetary liens,
charges and encumbrances evidencing an obligation for the payment of money
as of the date of this Agreement affecting the Property and all "New
Monetary Liens" (hereinafter defined) that Seller is required to cure or
cause the Title insurer to insure over, and (b) Seller agrees (i) to cause
all requirements appearing in the Title Commitments to be satisfied at
Seller's own sole cost and expense at or prior to the Closing, (ii) to cure
or cause the Title Insurer to insure over all Unpermitted Exceptions caused
by the deliberate acts of Seller and Special Exceptions set forth on
Schedule B - Section 2 of the Fee Commitment as Numbers 11 and 12 and
Special Exceptions set forth on Schedule B - Section 2 of the Leasehold
Commitment as Numbers 10 and 11, and (iii) to cause all monetary liens,
charges and encumbrances evidencing an obligation for the payment of money
to be released from the Property at or prior to the Closing at Seller's own
sole cost and expense, and Purchaser agrees that the proceeds of the
Purchase Price may be used at the Closing for such purpose; provided,
however, that if any monetary liens, charges or encumbrances evidencing an
obligation for the payment of money are placed against the Property after
7:30 a.m. September 12, 1995 ("New Monetary Liens"), Seller shall not be
obligated to convey title free and clear of such New Monetary Liens and
close the transaction set forth herein, unless such New Monetary Liens
arise out of the "Asbestos Abatement" (hereinafter defined), were placed on
the Property by reason of Seller's deliberate act or the aggregate amount
required to remove or bond over such New Monetary Liens is less than
$3,237,500.00. If Seller elects not to remove such New Monetary Liens that
are not required to be removed, Purchaser shall not be obligated to close
title and this Agreement shall terminate and the Earnest Money together with
all interest earned thereon shall be immediately returned to Purchaser and
thereupon neither party shall have any rights against the other or any
further liability to the other, except for Purchaser's obligations pursuant
to Paragraphs 7.1 and 7.2 hereof and as otherwise specifically set forth in
this Agreement to survive the termination hereof.
6. CONDEMNATION, EMINENT DOMAIN, DAMAGE AND CASUALTY.
_________________________________________________
6.1. Except as provided in the indemnity provisions
contained in Paragraphs 7.1 and 7.2 of this Agreement, Seller shall bear all
risk of loss with respect to the Property up to the date upon which title is
transferred to Purchaser in accordance with this Agreement. Notwithstanding
the foregoing, in the event of damage to the Property by fire or other
casualty prior to the Closing Date, repair of which would cost less than or
equal to $1,000,000.00 (as determined by a responsible independent licensed
contractor (the "Contractor") selected by Seller in a binding written
proposal (the "Binding Proposal") made both to Seller and Purchaser offering
to repair such damage for the cost specified therein), Purchaser shall not
have the right to terminate its obligations under this Agreement by reason
thereof, but Seller shall repair and restore the Property at Seller's sole
cost and expense if same can be accomplished prior to the earlier of the
then-scheduled Closing Date (if any) and April 1, 1996, or, if it cannot be
accomplished by such date, assign and transfer to Purchaser at the Closing
all of Seller's right, title and interest in and to all insurance proceeds
paid or payable to Seller on account of such fire or casualty and credit
Purchaser with the amount of any applicable deductible under such insurance
policy, provided such proceeds and deductible shall be in an amount
sufficient to pay the full cost to repair and restore such damage. Seller
shall immediately notify Purchaser in writing of any such fire or other
casualty and deliver a copy of the Binding Proposal containing the
Contractor's determination of the cost to repair the damage caused thereby.
In the event of damage to the Property by fire or other casualty prior to
the Closing Date, repair of which would cost in excess of $1,000,000.00 (as
determined by the Contractor in the Binding Proposal), then this Agreement
may be terminated at the option of Purchaser, which option shall be
exercised, if at all, by Purchaser's written notice thereof given to Seller
within ten (10) business days after Purchaser receives written notice from
Seller of such fire or other casualty and a copy of the Binding Proposal
containing the Contractor's determination of the cost to repair the damage.
Upon the exercise of such option by Purchaser, this Agreement shall become
null and void, the Earnest Money together with all interest earned thereon
shall be immediately returned to Purchaser and thereupon neither party shall
have any rights against the other or any further liability to the other,
except for Purchaser's obligations under Paragraphs 7.1 (but only to the
extent of the Property not destroyed pursuant to the above-described
casualty) and 7.2 and except as otherwise specifically set forth in this
Agreement to survive termination hereof. In the event that Purchaser does
not exercise the option to terminate set forth in the preceding sentence,
Seller shall repair and restore the Property at Seller's sole cost and
expense if same can be accomplished prior to the earlier of the then-
scheduled Closing Date (if any) and April 1, 1996 or, if it cannot be so
accomplished by such date, assign and transfer to Purchaser at the Closing
all of Seller's right, title and interest in and to all insurance proceeds
paid or payable to Seller on account of the fire or casualty and credit
Purchaser with the amount of any applicable deductible under such insurance
policy.
6.1.1. Seller shall keep in effect until the Closing
Date the all-risk building insurance coverage on the Property covering full
replacement value of the Improvements, as listed in the policies referred to
in Exhibit O annexed with deductibles not in excess of $50,000.00 for any
_________
one casualty.
6.2. If between the date of this Agreement and the Closing
Date, any condemnation or eminent domain proceedings are initiated, which
might result in the taking of any part of the Property or the taking or
closing of any right of access to the Property, Seller shall immediately
notify Purchaser of such occurrence. In the event that the taking shall:
(i) impair access to the Property so that Purchaser is unable to utilize the
Property for Purchaser's intended purposes or is unable to utilize at least
1,500 parking spaces; (ii) cause any non-compliance with any applicable law,
ordinance, rule or regulation of any federal, state or local authority or
governmental agencies having jurisdiction over the Property or any portion
thereof which would cause the appropriate governmental authority to prevent
Purchaser from utilizing the Property for Purchaser's intended purpose;
(iii) take or cause the permanent loss of use of any part of the
Improvements on the Property or reduce the amount of available parking
spaces below 1,500; or (iv) result in the termination of the Ground Lease
(hereinafter collectively referred to as a "Material Event") Purchaser may:
6.2.1. terminate this Agreement by written notice
to Seller, in which event the Earnest Money together with all interest earned
thereon shall be immediately returned to Purchaser and thereupon neither
party shall have any rights against the other or any further liability to
the other, except for Purchaser's obligations under Paragraphs 7.1 and 7.2
and except as otherwise specifically set forth in this Agreement to survive
termination hereof; or
6.2.2. proceed with the Closing, in which event
Seller shall assign to Purchaser all of Seller's right, title and interest in
and to any award made or to be made in connection with such condemnation or
eminent domain proceedings and damages to which Seller may have become
entitled by reason of such taking, and shall turn over to Purchaser any
portion of the award and damages received by Seller.
6.3. Purchaser shall notify Seller, within ten (10) business
days after Purchaser's receipt of Seller's notice, whether Purchaser elects
to exercise its rights under Paragraph 6.2.1 or Paragraph 6.2.2. The Closing
Date shall be adjourned, if necessary, until Purchaser makes such election. If
Purchaser fails to make an election within such ten (10)-business day period,
Purchaser shall be deemed to have elected to exercise its right to terminate
under Paragraph 6.2.1. If between the date of this Agreement and the Closing
Date, any condemnation or eminent domain proceedings are initiated which do
not constitute a Material Event, Purchaser shall be required to proceed with
the Closing, in which event Seller shall assign to Purchaser all of Seller's
right, title and interest in and to any award made or to be made in
connection with such condemnation or eminent domain proceedings and damages
to which Seller may have become entitled by reason of such taking, and shall
turn over to Purchaser any portion of the award and damages theretofore
received by Seller.
7. INSPECTION.
__________
7.1. During the period commencing on the date of mutual
execution of this Agreement and ending at 5:00 p.m. Arizona time on
September 22, 1995 (said period being herein referred to as the "Inspection
Period"), Purchaser and the agents, architects, engineers, employees,
contractors and surveyors retained by Purchaser may enter upon the Property,
at any reasonable time and upon reasonable prior notice to Seller (which
notice may be oral notwithstanding any provision to the contrary contained
in this Agreement), to inspect the Property, and to conduct and prepare such
investigations, studies, tests and surveys (collectively, the
"Investigations") as Purchaser may deem necessary or appropriate. Since
Purchaser has conducted certain of its investigations and tests prior to
the execution of this Agreement, the definition of "Investigations" includes,
without limitation, any and all tests and studies conducted by Purchaser or
Purchaser's agents, architects, engineers, employees, contractors or
surveyors prior to the execution of this Agreement at the Property. Seller
shall cooperate with and assist Purchaser in connection with the performance
of the Investigations at no cost to Seller. Without limiting the generality
of the foregoing, Purchaser intends to cause to be performed those
Investigations described in Exhibit P annexed. Seller shall promptly
_________
conduct those Investigations identified in Exhibit P, to be performed by
_________
Seller and Purchaser will observe and inspect same. All other
Investigations shall be conducted by Purchaser. Seller has delivered to
Purchaser copies of the 1994 real estate tax bills, two (2) years of
utility bills, the Service Contracts (hereinafter defined), estimated 1995
operating expenses and plans and specifications of the Improvements.
All of the Investigations conducted under this Paragraph 7.1 by Purchaser
shall be at Purchaser's sole cost and expense and Purchaser and the agents,
architects, engineers, employees, contractors and surveyors retained by
Purchaser shall: (a) restore the Property to the condition immediately
existing prior to the performance of such Investigations by or on behalf of
Purchaser, except that Purchaser shall not be obligated to restore any Asbestos
in connection with the conduct of such Investigations; (b) maintain through
September 22, 1995 the comprehensive general public liability insurance
insuring the person, firm or entity performing such Investigations and
listing Seller and Purchaser as additional insureds thereunder, evidence of
which was previously delivered to Seller by Purchaser; (c) promptly pay when
due the costs of all Investigations done with regard to the Property;
(d) not permit any liens to attach to the Property by exercise of its rights
hereunder; (e) not materially or unreasonably interfere with the operation
of the Property; and (f) not, without the prior written consent of Seller
(which shall not be unreasonably withheld or delayed), reveal or disclose
any information obtained by Purchaser or its agents, representatives or
consultants concerning the Property to anyone outside of those persons
within Purchaser's organization responsible for the acquisition of the
Property including Purchaser's board of directors and officers, other than
(i) Purchaser's agents, attorneys, representatives and consultants utilized
in this transaction, and (ii) those employees, agents, representatives or
consultants of Seller who are involved in performing or observing the
Investigations or cooperating with Purchaser in connection therewith.
Notwithstanding anything contained herein to the contrary, Purchaser's
restoration obligation shall be limited to those items brought to
Purchaser's attention by Seller by notice delivered to Purchaser no later
than forty-five (45) days after the applicable Investigation. Seller waives
and shall be estopped from asserting all claims for restoration which are
not set forth in a notice to Purchaser in accordance with the preceding
sentence. Furthermore, Purchaser shall instruct Purchaser's agents,
attorneys, representatives and consultants utilized in this transaction not
to reveal or disclose any information obtained by said parties concerning
the Property. To the extent that any of the Investigations to be performed
by Purchaser would materially or unreasonably interfere with the operation
of the Property, Seller and Purchaser shall cooperate with each other so
that such Investigations may be performed at such times so as to minimize
such interference. Seller shall retain final approval over the time of day
during which such Investigations listed on Exhibit P may be conducted, which
approval shall not be unreasonably withheld or delayed. To the extent
Purchaser desires to conduct Investigations other than those listed on
Exhibit P, Seller shall have the right to deny Purchaser the right to
conduct such test until after vacation of the Property by Seller if Seller
determines, in its sole judgment, that such test would unreasonably
interfere with the operation of the Property if the test was conducted at
any time prior to the vacation of the Property by Seller. If, prior to
September 22, 1995, Purchaser is notified by Seller that it may not conduct
a test not listed on Exhibit P until after the vacation of the Property by
Seller (other than test numbers 29 and 30 in Exhibit P) then Purchaser
shall have the right to terminate this Agreement upon written notice to
Seller on or before September 29, 1995. If Purchaser terminates this
Agreement in accordance with the preceding sentence, this Agreement shall
terminate, the Earnest Money together with all interest earned thereon
shall be immediately returned to Purchaser and thereupon neither party shall
have any rights against the other or any further liability to the other,
except for Purchaser's obligations pursuant to Paragraph 7.1 and 7.2 hereof
and as otherwise specifically set forth in this Agreement to survive the
termination hereof.
7.2. Purchaser shall defend, indemnify and hold Seller and
any subsidiaries, employees or directors of Seller (hereinafter collectively
referred to as "Affiliates of Seller") harmless from any and all liability,
cost and expense (including without limitation, reasonable attorneys' fees,
court costs and costs of appeal) suffered or incurred by Seller or
Affiliates of Seller for injury to persons or property caused by Purchaser's
performance of the Investigations of the Property. Nothing contained in
this indemnity is intended to indemnify Seller against Seller's performance
of the Investigations, except that Purchaser shall be obligated to restore
any damage caused by Seller's performance of test number 27 on Exhibit P.
Purchaser shall undertake its obligation to defend set forth in the preceding
sentence using attorneys selected by Purchaser, subject to Seller's
reasonable approval. Notwithstanding any provision contained in this
Agreement to the contrary, in no event shall Purchaser be liable for
consequential damages as a result of the performance of the Investigations
or any of its obligations under Paragraphs 7.1 and 7.2, except that
Purchaser shall be liable for consequential damages for any Investigation
which is performed (i) beyond the scope of the Investigations provided in
Exhibit P, (ii) in violation of the time of day established for such test
pursuant to the last four sentences of Paragraph 7.1 or (iii) in a grossly
negligent manner from and after the date hereof.
7.3. If on or prior to the expiration of the Inspection
Period, Purchaser (a) delivers to Seller the Notice (hereinafter defined)
establishing, in accordance with Paragraph 7.5, either or both of the
following (individually, a "Defect"): (i) a Structural Material Defect
(hereinafter defined), or (ii) an Environmental Material Defect (hereinafter
defined), and (b) the Cost (hereinafter defined) of remedying each category
of Defect is less than or equal to $500,000.00, then, at Closing, Purchaser
shall receive a credit to the Purchase Price for the difference between the
Cost of each such category of Defect and $250,000.00 and Purchaser shall
purchase the Property subject to any and all defects. With respect to any
defects to the Property which do not rise to the level of a Defect,
Purchaser shall not be entitled to receive any credit to the Purchase Price
attributable thereto. For example, assuming for illustrative purposes only,
the amount of all Structural Material Defects is $400,000.00 and the amount
of all Environmental Material Defects is $300,000.00, then Purchaser would
only receive a $200,000.00 credit at Closing (i.e., $400,000.00 less
$250,000.00 equals $150,000.00, and $300,000.00 less $250,000.00 equals
$50,000.00).
7.4. If on or prior to the expiration of the Inspection
Period, Purchaser (a) delivers to Seller the Notice (as hereinafter defined)
establishing, in accordance with Paragraph 7.5, either or both of the
Defect(s) and (b) the Cost of remedying either category of Defect is greater
than $500,000.00 (a "Substantial Defect(s)" for either category of Defect
or "Structural Substantial Defect" or an "Environmental Substantial Defect",
as the case may be), then Seller shall have the right to elect, by written
notice within fifteen (15) business days after receipt of the Notice, to
either (i) terminate this Agreement (the "Termination Notice") in which
case the Earnest Money deposited by Purchaser shall be immediately returned
to Purchaser together with all interest earned thereon and thereupon neither
party shall have any rights against the other or any further liability to
the other, except for Purchaser's obligations pursuant to Paragraphs 7.1 and
7.2 hereof and as otherwise specifically set forth in this Agreement to
survive the termination hereof, or (ii) give Purchaser a credit, at Closing, to
the Purchase Price equal to the difference between the Costs for the
Structural Substantial Defect(s) or the Environmental Substantial Defect(s)
(as the case may be) and $250,000.00 (the "Credit Notice") and Purchaser
shall purchase the Property subject to all Defects and Substantial Defects.
Failure of Seller to deliver a Termination Notice to Purchaser within the
time period above provided shall be deemed delivery of a Credit Notice.
If Seller delivers the Termination Notice, then Purchaser shall have the right
to negate the Termination Notice (in which case the Termination Notice shall
be null and void and this Agreement shall remain in full force and effect),
by delivering to Seller, on or before ten (10) business days after receipt
of the Termination Notice, a statement agreeing to purchase the Property with
a $250,000.00 credit to the Purchase Price for each category of the
applicable Substantial Defect(s) and any credit Purchaser would have been
entitled to for any other non-Substantial Defect pursuant to Paragraph 7.3
(without duplication) and Purchaser shall purchase the Property subject to
all Defects and Substantial Defects. Notwithstanding the foregoing, if
Seller delivers the Credit Notice and any of the Substantial Defects
(i) is of such a nature that it cannot be remedied prior to September 30,
1996, or (ii) the Cost of either of the categories of Substantial Defects
exceeds $1,500,000.00, then Purchaser shall have the right to negate the
Credit Notice by written notice to Seller, on or before ten (10) business
days after receipt of the Credit Notice, in which case this Agreement shall
terminate, the Earnest Money together with all interest earned thereon shall be
immediately returned to Purchaser and thereupon neither party shall have any
rights against the other or any further liability to the other, except for
Purchaser's obligations pursuant to Paragraph 7.1 and 7.2 hereof and as
otherwise specifically set forth in this Agreement to survive the
termination hereof. For example, assuming for illustrative purposes only, the
amount of all Structural Substantial Defects is $700,000.00 and the amount
of all Environmental Substantial Defects is $800,000.00, and Seller elects not
to terminate this Agreement, Seller shall give Purchaser at the Closing a
credit equal to $1,000,000.00 (i.e., $800,000.00 less $250,000.00 equals
____
$550,000.00 and $700,000.00 less $250,000.00 equals $450,000.00). If instead
of a Structural Substantial Defect, there existed a Structural Material
Defect in the amount of $400,000.00, then Seller's credit would be
$700,000.00 (i.e., $800,000.00 less $250,000.00 equals $550,000.00 and
____
$400,000.00 less $250,000.00 equals $150,000.00).
If in the first example contained in the preceding Paragraph, Seller
delivered a Termination Notice and Purchaser elected to negate it, Purchaser's
credit at Closing would be $500,000.00 (i.e., a $250,000.00 credit for each
category of Substantial Defect). If in the second example contained in the
preceding Paragraph, Seller delivered a Termination Notice and Purchaser
elected to negate it, Purchaser's credit at Closing would be $400,000.00
(i.e., a $250,000.00 credit for the Environmental Substantial Defect and
____
$150,000.00 for the Structural Material Defect).
7.5. In order to establish a Structural Material Defect or
an Environmental Material Defect, Purchaser shall be required to deliver to
Seller prior to the expiration of the Inspection Period the following with
respect to each Defect: (a) a copy of the inspection report(s) reflecting
the particular Defect(s) (collectively, the "Inspection Report"), and (b) a
written proposal from a responsible licensed contractor selected by
Purchaser setting forth the approximate cost of remedying the particular
Defect (the "Cost") reflected in the Inspection Report (the "Purchaser
Estimate"). With respect to any defects which are within the scope of
Paragraph 7.6 herein (including, without limitation, defects which are
identified pursuant to test numbers 29 and 30 on Exhibit P), the Cost to
remedy such defects shall only include the cost to repair the defective
component or system to a good working order unless said defective component
or system cannot reasonably be repaired, in which case the Cost shall be the
amount required to replace the defective component or system with a new
component or system of comparable quality. The Inspection Report and the
Purchaser Estimate shall be referred to collectively hereinafter as the
"Notice". If Seller agrees with the Purchaser Estimate then the Cost shall
equal the amount of the Purchaser Estimate. If Seller does not agree with the
Purchaser Estimate, then Seller shall deliver to Purchaser, within ten (10)
business days after receipt of the Notice, a binding written proposal from
a responsible licensed contractor selected by Seller setting forth the costs
such Contractor will charge for remedying the applicable Defect(s)
(the "Seller Estimate"), and the Cost shall equal the average of the
Purchaser Estimate and the Seller Estimate.
7.6. The term "Structural Material Defect" shall mean
defects in the roof, structure, electrical, site drainage, mechanical or
plumbing system of the Improvements with a collective Cost of more than
$250,000.00 to remedy. The word "defect" in the preceding sentence shall
mean the system's or component's failure to be in good working order, but
shall not take into account the scope of the design specifications or
capacity of the system or component. The parties acknowledge that certain
of the structural components and systems are in excess of twenty (20) years
old. Notwithstanding anything to the contrary contained herein, the
Property's failure to comply with The Americans With Disabilities Act shall
not by itself count toward or constitute a Structural Material Defect.
7.7. The term "Environmental Material Defect" shall mean
"Hazardous Materials" (hereinafter defined) located in, on or under the Fee
Parcel or the Ground Lease Parcel or in the Improvements in violation of any
Environmental Laws (hereinafter defined), with a collective Cost of more
than $250,000.00. Notwithstanding anything to the contrary contained
herein, nothing contained in the Existing Reports (hereinafter defined)
relating to the Asbestos Abatement shall count toward or constitute an
Environmental Material Defect, but the cost to remedy all conditions
disclosed in the Existing Reports (excluding the cost of the Asbestos
Abatement) shall count toward and constitute an Environmental Material
Defect.
7.8. If this Agreement is terminated in accordance with this
Paragraph 7, the Earnest Money together with all interest earned thereon shall
be immediately returned to Purchaser and thereupon neither party shall have any
rights against the other or any further liability to the other, except for
Purchaser's obligations pursuant to Paragraphs 7.1 and 7.2 hereof and except as
otherwise specifically set forth in this Agreement to survive the
termination hereof. Subject to Paragraph 7.10, Purchaser's obligation to
indemnify Seller and restore the Property, as more fully set forth in
Paragraphs and, shall survive the termination of this Agreement and
Purchaser's obligation to indemnify Seller under Paragraph 7.2 shall survive
the Closing and the delivery of the Deed.
7.9. To the extent there exists an Environmental Material
Defect or Environmental Substantial Defect for which a third party (other
than Purchaser or Seller) is liable, Purchaser and Seller shall jointly
pursue a claim against such liable third party to receive compensation for
any damages suffered by each party hereto as a result thereof. In the event
either party hereto declines by notice to the other to participate in the
joint claim, then the non-declining party shall have the right to pursue a
separate claim against the liable third party to receive compensation
suffered by the non-declining party.
7.10. Notwithstanding anything contained herein to the
contrary, promptly after Seller vacates the Improvements, Seller shall
perform the tests set forth in Exhibit P as numbers 29 and 30 on a date
determined by Seller and Purchaser and in the presence of Purchaser within
ten (10) days after Purchaser shall have received written notice from Seller
that Seller has vacated the Property. [Insert from Page 31A here.] Within
ten (10) days after the performance of such tests, Purchaser may establish
that the components which are the subject of such tests contain defects
(as said term is described in the second sentence of Paragraph 7.6 herein)
by delivering a Notice to Seller. If Seller agrees with the Purchaser
Estimate as to such defects then the "Cost" with respect to said defects shall
equal the amount of the Purchaser Estimate for said defects. If Seller does
not agree with the Purchaser Estimate for said defects, then Seller shall
deliver to Purchaser, within ten (10) business days after receipt of the
Notice, the Seller Estimate, and the Cost for such defect shall equal the
average of the Purchaser Estimate and the Seller Estimate for such defect.
(See Page 31A attached hereto)
The parties agree to allocate the Cost to remedy such defect as
follows: (a) Purchaser shall be responsible for up to the first $250,000.00
in the aggregate of the Cost to remedy such defects less the amount of the
Cost to remedy defects identified by Purchaser prior to September 22, 1995
to the roof, structure, electrical, site drainage, mechanical or plumbing
systems of the Improvements (other than for test numbers 29 and 30 in
Exhibit P); (b) Seller shall be responsible for up to the next $250,000.00
in the aggregate of the Cost to remedy such defects less the amount Seller
is obligated to credit Purchaser for Structural Material Defects;
(c) Purchaser and Seller shall share equally an amount up to the next
$750,000.00 of the Cost to remedy such defects and (d) Purchaser shall be
responsible for any Cost to remedy such defects in excess of the amount set
forth in clause (a), (b) and (c) of this sentence. Seller shall deliver to
Purchaser a credit at Closing against the Purchase Price in an amount equal
to that portion of the Cost for which Seller is responsible in the preceding
sentence. Notwithstanding anything contained herein to the contrary,
Purchaser and Seller shall establish the Cost to remedy any defect within
the scope of Paragraph 7.6 herein even if said Costs do not equal or exceed
$250,000.00 with Purchaser being required to deliver the Purchaser Estimate
for the same prior to September 22, 1995 (other than for test numbers 29
and 30 in Exhibit P). Notwithstanding the provisions of Paragraph 7.1 to
the contrary, if this Agreement shall be terminated for any reason
(including, without limitation, Purchaser's default), Purchaser shall not
be obligated to restore or remedy the defects found or restore any damage
caused to the electrical system as a result of the tests referred to in test
numbers 29 and 30 of Exhibit P.
8. AS-IS CONDITION.
_______________
8.1. Seller has made no representations or warranties
relating to the condition of the Property, except as specifically set forth in
this Agreement. Purchaser acknowledges and agrees that except for the
representations and warranties of Seller contained in this Agreement it will
be purchasing the Property based upon its inspections and investigations of
the Property and the matters contained in this Agreement, and that except
for Seller's obligations contained in this Agreement, Purchaser will be
purchasing the Property "AS-IS" and "WITH ALL FAULTS", based upon the
condition of the Property as of the date of this Agreement, ordinary wear
and tear and loss by fire or other casualty or condemnation excepted
(except as Seller may be required to repair the Property after such casualty
or condemnation pursuant to the terms of this Agreement). Seller shall pay
to Purchaser the cost to repair any damage caused to the Property (using the
condition of the Property as of the date hereof, ordinary wear and tear
excepted, as the standard as to whether damage has occurred) as a result of
Seller's vacation of the Property and removal of equipment and personal
property and as a result of the Asbestos Abatement, provided, however,
Seller shall not be responsible under this Paragraph 8 for the cost to
repair the work attributable to the Asbestos Abatement which is the subject of
the credit contained in Paragraph 11 herein. Furthermore Purchaser agrees
that with respect to any damage to paint as a result of said vacation, or
Asbestos Abatement in accordance with the terms hereof, Seller will only be
required to pay for the repainting of the immediately affected area. With
respect to any damage to the carpet or floor tile as a result of the
vacation or Asbestos Abatement in accordance with the terms hereof Seller
will only be required to pay for the replacing of the affected carpet tile
or floor tile. Seller shall not be responsible for the inability to match
the repainting, replacement carpet tile or replacement floor tile to
existing paint, carpet tiles and floor tiles, respectively, by reason of age
or unavailability. Purchaser agrees to accept any latent defects in the
existing carpet, flooring and painting revealed by the removal of the
personal property. Within thirty (30) days after the Closing Date,
Purchaser shall deliver to Seller a copy of a report prepared by a
responsible licensed contractor selected by Purchaser setting forth the
scope and approximate cost of remedying the damage to the Property resulting
from Seller's vacation of the Property and removal of the equipment and
personal property and as a result of the Asbestos Abatement (excluding the
items for which a credit is given in Paragraph 11). If Seller agrees with
the estimate prepared by Purchaser, then Seller shall pay to Purchaser an
amount equal to said estimate (which estimate shall not include the cost of
a performance bond) within thirty (30) days after Seller's receipt of the
estimate from Purchaser. If Seller does not agree with the estimate
prepared by Purchaser, then Seller shall deliver to Purchaser, within
thirty (30) days after receipt of the estimate from Purchaser, a binding
written proposal in favor of Seller and Purchaser, from a responsible
licensed contractor selected by Seller setting forth the cost such
contractor will charge for remedying the applicable damage and providing a
performance bond and Seller shall pay to Purchaser on the date thereof an
amount equal to the cost set forth in the proposal delivered by Seller.
Purchaser shall grant Seller's contractor access to the Property upon
reasonable notice and at reasonable times of the day to inspect the
applicable damage. Seller agrees not to remove any carpet except as
specified in the "Asbestos Abatement Plan" (hereinafter defined). Purchaser
acknowledges that, except as may otherwise be specifically set forth
elsewhere in this Agreement, neither Seller nor its consultants, brokers or
agents have made any representations or warranties of any kind upon which
Purchaser is relying as to any matters concerning the Property, including,
but not limited to, the condition of the land or any improvements comprising
the Property, zoning, availability of access, ingress or egress, valuation,
the existence or non-existence of toxic waste and/or any Hazardous
Materials, economic projections or market studies concerning the Property, any
development rights, taxes, bonds, covenants, conditions and restrictions
affecting the Property, water or water rights, topography, drainage, soil,
subsoil of the Property, the utilities serving the Property or any zoning,
environmental or building laws, rules or regulations affecting the Property.
Except as may be otherwise specifically set forth in this Agreement, Seller
makes no representation or warranty that the Property complies with
Title III of The Americans with Disabilities Act or any fire code or
building code. Except (i) in connection with a breach of a representation
or warranty or covenant by Seller hereunder, (ii) Seller's obligations
under Paragraph 7, and (iii) Seller's obligations under Paragraph 11
hereunder, Purchaser hereby releases Seller and the Affiliates of Seller
from any and all liability in connection with any claims which Purchaser may
have against Seller or the Affiliates of Seller, and Purchaser hereby agrees
not to assert any claims for contribution, cost recovery or otherwise,
against Seller or the Affiliates of Seller, relating directly or indirectly
to the existence of asbestos or Hazardous Materials, on the Property,
whether known or unknown. As used herein, "Environmental Laws" means all
federal, state and local statutes, codes, regulations, rules, ordinances,
orders, standards, permits, licenses, policies and requirements (including
consent decrees, judicial decisions and administrative orders) relating to the
protection, preservation, remediation or conservation of the environment or
worker health or safety, all as amended or reauthorized, or as hereafter
amended or reauthorized, including without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act
of 1976 ("RCRA"), 42 U.S.C. Section 6901 et seq., the Emergency Planning and
Community Right-to-Know Act ("Right-to-Know Act"), 42 U.S.C. Section 11001
et seq., the Clean Air Act ("CAA"), 42 U.S.C. Section 7401 et seq., the
Federal Water Pollution Control Act ("Clean Water Act"), 33 U.S.C. Section
1251 et seq., the Toxic Substances Control Act ("TSCA"), 15 U.S.C. Section
2601 et seq., the Safe Drinking Water Act ("Safe Drinking Water Act"),
42 U.S.C. Section 300f et seq., the Atomic Energy Act ("AEA"), 42 U.S.C.
Section 2011 et seq.; and the Occupational Safety and Health Act ("OSHA"),
29 U.S.C. Section 651 et seq. As used herein, "Hazardous Materials" means:
(1) "hazardous substances," as defined by CERCLA; (2) "hazardous wastes,"
as defined by RCRA; (3) any radioactive material including, without
limitation, any source, special nuclear or by-product material, as defined
by AEA; (4) asbestos in any form or condition; (5) polychlorinated
biphenyls; and (6) any other material, substance or waste to which liability
or standards of conduct may be imposed under any Environmental Laws.
8.2. Seller has provided to Purchaser certain unaudited
historical financial information regarding the Property relating to certain
periods of time during which Seller owned the Property. However, Seller
makes no representation or warranty that Purchaser will achieve similar
financial or other results with respect to the operations of the Property,
it being acknowledged by Purchaser that Seller's operation of the Property
and expenses thereof may be vastly different than Purchaser may be able to
attain. Purchaser acknowledges that it has relied upon its own
investigation and inquiry with respect to the operation of the Property and
the representations and warranties contained in this Agreement.
8.3. Seller has provided to Purchaser the following existing
reports: (a) that certain Phase I Environmental Site Assessment, dated
June 27, 1995, prepared by Western Technologies Inc., designated as Job
No. 2185JC091; (b) that certain Asbestos Survey, dated July 5, 1995, prepared
by Western Technologies Inc., designated as Job No. 2185JC091; and (c) the
"Asbestos Abatement Plan" (as hereinafter defined) (together, the "Existing
Reports"). Seller makes no representation or warranty concerning the
accuracy or completeness of the Existing Reports, except that the copies
thereof provided to Purchaser are true, correct and complete copies of the
Existing Reports delivered to Seller. Furthermore, Purchaser acknowledges
that it will be purchasing the Property with all faults disclosed in the
Existing Reports, except as otherwise provided in this Agreement.
9. CONDITIONS TO CLOSING; COVENANTS OF SELLER.
__________________________________________
9.1. Assumption of Ground Lease. Each of Purchaser's and
__________________________
Seller's obligation to consummate the transactions set forth herein is
contingent upon Seller procuring the following on or before thirty (30) days
after the date of this Agreement (the "Initial Date"): (i) the City's
consent, in writing, to the assignment and assumption of the Ground Lease
to Purchaser (the "Consent to Assignment"), and (ii) an estoppel certificate
from the City regarding the Ground Lease, reasonably satisfactory to
Purchaser, substantially in the form attached hereto as Exhibit H (the
_________
"Estoppel"), and (iii) a fully executed amendment to the Ground Lease
substituting the legal description of the Ground Lease Parcel contained in
Exhibit R for the legal description contained in Exhibit B ("Ground Lease
_________
Amendment"). The Consent to Assignment, the Estoppel and the Ground Lease
Amendment are referred to collectively hereinafter as the "City Consent".
The parties hereby acknowledge that the City has executed and delivered to
Seller and Seller has delivered to Purchaser a photocopy of the Consent to
Assignment and Estoppel in form acceptable to Purchaser and Seller, except
that the City Consent shall not be effective until the City acknowledges in
writing that the Consent to Assignment and the Estoppel previously executed
by the City pertain to and are effective with respect to the Ground Lease as
amended by the Ground Lease Amendment. Upon obtaining the effective City
Consent, all references herein to the Ground Lease and Ground Lease Parcel
shall refer to the Ground Lease and Ground Lease Parcel as amended by the
Ground Lease Amendment. Seller shall use its reasonable efforts to obtain
the City Consent by the Initial Date. Purchaser agrees to cooperate with
Seller in obtaining the City Consent, including, without limitation,
providing to the City Purchaser's financial information if requested by the
City.
If the City does not deliver the City Consent on or before the Initial
Date, either Purchaser or Seller shall have the right to extend the outside
date for obtaining the City Consent to the date that is seventy-five (75)
days after the date of this Agreement (the "Extension Date") by delivering
written notice thereof to the other party on or before five (5) business
days after the Initial Date. If (a) the City does not deliver the City
Consent on or before the Initial Date and neither Purchaser nor Seller
exercise their right to extend the Initial Date on or before five (5)
business days after the Initial Date, or (b) if either Purchaser or Seller
exercises its right to extend the Initial Date in accordance herewith and
the City does not deliver the City Consent on or before the Extension Date,
then this Agreement shall terminate, in which case the Earnest Money
together with all interest earned thereon shall be immediately returned to
Purchaser and thereupon neither party shall have any rights against the other
or any further liability to the other, except for Purchaser's obligations
pursuant to Paragraphs 7.1 and 7.2 hereof and as otherwise specifically set
forth in this Agreement to survive the termination hereof.
Notwithstanding anything contained herein to the contrary, if the City
delivers the City Consent on or before the Initial Date or the Extension Date,
whichever is applicable, but said consent requires conditions which are
unacceptable to Seller in its reasonable discretion, Seller shall have the
right to terminate this Agreement on notice given to Purchaser, along with a
statement identifying those of such conditions that are unacceptable to
Seller (the "Unacceptable Conditions") within five (5) business days after
receipt of the City Consent, in which case, the Earnest Money together with
all interest earned thereon shall be immediately returned to Purchaser and
thereupon neither party shall have any rights against the other or any
further liability to the other, except for Purchaser's obligations pursuant to
Paragraphs 7.1 and 7.2 hereof and except as otherwise specifically set forth in
this Agreement to survive the termination hereof. Notwithstanding the
foregoing, Purchaser shall have the right, in its sole discretion, to negate
Seller's termination notice by giving Seller notice, within ten (10) business
days after receipt of Seller's termination notice and the Unacceptable
Conditions, that Purchaser will fulfill or perform the Unacceptable Conditions,
in which case the termination notice shall be null and void and this Agreement
shall remain in full force and effect.
9.2. No Breach; Building Documents. Seller's obligations
_____________________________
hereunder shall be subject to the condition that as of the Closing Date, there
shall be no breach of any of the Purchaser's covenants, representations or
warranties hereunder. Purchaser's obligations hereunder shall be subject to
the condition that as of the Closing Date, there shall be no breach of any
of Seller's covenants, representations or warranties hereunder and to the
satisfaction of the following additional conditions precedent (any of which
Purchaser may waive in its sole discretion):
9.2.1. Seller has furnished to Purchaser the
following documents:
(a) copies of all unrecorded agreements, easements, leases and
restrictions affecting title to or possession of the Property; and
(b) copies of all certificates of occupancy, licenses, permits,
authorizations and approvals (other than any such certificates, licenses,
permits, authorizations and approvals which are no longer in effect) issued
with respect to the Property by any governmental authorities having
jurisdiction over the Property (the "Governmental Approvals"), which are in
Seller's possession relating to the operation or occupancy of the Property.
9.3. Seller's Covenants. Seller agrees that between the
__________________
date of this Agreement and the Closing Date, Seller shall:
(a) At its sole cost and expense, maintain the Property in its
present condition and make all necessary repairs to it not caused by
ordinary wear and tear or a casualty, subject to the terms contained
in Paragraphs 6 and 11.
(b) Not settle any existing real estate tax protests, claims or
proceedings without Purchaser's prior written consent in each instance,
which shall not be unreasonably withheld.
(c) Not enter into any leases, subleases, licenses to occupy,
options, occupancy agreements, occupancy arrangements with respect to the
Property which shall survive Closing or enter into any amendment to any
agreement relating to the Property which shall survive Closing except with
Purchaser's prior written consent in each instance, which Purchaser may
withhold in its sole discretion. Seller hereby discloses that the Biltmore
Arizona Resort has utilized a portion of the parking located at the Property
on an occasional overflow basis and that Seller shall terminate any rights,
if any, of the Biltmore Arizona Resort to utilize the parking on the Property
after the Closing.
(d) Not dispose of any Personal Property included in the sale or
encumber any of it, except that Seller may dispose of any such Personal
Property in the ordinary course of the operation of the Property if such
Personal Property is simultaneously replaced with like Personal Property of
similar quality and utility.
(e) Promptly notify Purchaser of any casualty or change in
valuation, eminent domain or other proceeding affecting the Property or to
Seller's knowledge threatened with respect to the Property.
(f) Deliver the Property to Purchaser, vacant and free and clear of
all leases, tenancies and occupants and all Personal Property not included in
this sale and clear of debris.
(g) Comply with all federal, state and local laws affecting the
Property on a going forward basis but Seller shall not be obligated to cure any
existing violations of federal, state and local laws affecting the Property.
(h) Seller agrees to comply with the terms of the Ground Lease and
not to enter into any amendments to the Ground Lease other than the Ground
Lease Amendment without Purchaser's prior written consent which may be
withheld in Purchaser's sole discretion.
10. CLOSING.
_______
10.1. Closing Date. The closing of the transactions
____________
contemplated by this Agreement (the "Closing") shall be on the date which is
five (5) business days following the date on which the Asbestos Abatement
has been deemed completed in accordance with Paragraph 11 herein (the
"Closing Date"). Notwithstanding the foregoing, if the Asbestos Abatement
has not been deemed completed in accordance with Paragraph 11 by April 1,
1996 (the "Outside Date") as a result of an event of "force majeure"
(hereinafter defined in Paragraph 28) or an unforseen condition in
connection with the Asbestos Abatement, then Seller shall have the right to
extend the Outside Date by written notice to Purchaser before the then
effective Outside Date for the number of days the Asbestos Abatement was
delayed as a result of (i) the force majeure event or (ii) the unforseen
condition or both, but in no event later then June 3, 1996. Seller
agrees to give to Purchaser written notice of any event arising to the level
of a force majeure event or the discovery of an unforeseen condition setting
forth the amount of the delay arising out of a force majeure event or the
unforeseen condition within ten (10) days after the force majeure event or the
discovery of the unforeseen condition, as applicable. Seller shall have the
right to continue to extend the Outside Date in accordance herewith as long
as the Outside Date is not extended past June 3, 1996. If the Asbestos
Abatement is not completed by the then effective Outside Date, then Seller
shall notify Purchaser that the Asbestos Abatement has not been completed by
such date and at Purchaser's option evidenced by written notice to Seller on
or before seven (7) business days after receipt of Seller's notice, this
Agreement shall terminate, in which case the Earnest Money together with all
interest earned thereon shall be immediately returned to Purchaser, and
thereupon neither party shall have any rights against the other or any
further liability to the other, except for Purchaser's obligations pursuant
to Paragraphs 7.1 and 7.2 hereof and as otherwise specifically set forth in
this Agreement to survive the termination hereof. If Purchaser fails to
deliver notice of termination in accordance with the preceding sentence,
then Purchaser shall be deemed to have waived its right to terminate this
Agreement pursuant to Paragraph 10.1, Seller shall continue to use
reasonable efforts to complete the Asbestos Abatement and the Closing shall
occur five (5) business days following the completion of the Asbestos
Abatement.
10.2. Timing/Type. The Closing shall be at the office of
___________
the Escrow Agent in Phoenix, Arizona. This transaction shall be closed through
an escrow with the Title Insurer, in accordance with the usual and customary
form of escrow closing instructions for similar transactions in Arizona, or
at the option of either party, the Closing shall be a "New York style"
closing at which the Purchaser shall wire the balance of the Purchase Price
to the Escrow Agent on the Closing Date and prior to the release of the
Purchase Price to Seller, Purchaser shall receive the marked up Title
Commitments and/or Title Policies redated the date of the Closing.
Regardless of the style of closing, Seller shall deliver to the Title Insurer
any affidavits required for the Title Insurer to be able to issue the Title
Policies. All closing and escrow fees shall be paid by the Seller.
11. ASBESTOS ABATEMENT.
__________________
11.1. Purchaser acknowledges that it has been informed
of the existence of asbestos at the Property pursuant to the Existing
Reports. Seller has procured an asbestos abatement report prepared by
Western Technologies, Inc. (the "Asbestos Engineer") dated July 12, 1995
and titled Asbestos Abatement Project Specifications ("Asbestos Abatement
Plan"). Upon obtaining the prior written approval of Purchaser, which
approval shall not be unreasonably withheld or delayed, Seller shall have
the right to increase the breadth of the scope of the Asbestos Abatement
Plan or alter the manner of performing the Asbestos Abatement so long as
(a) the new manner complies with all regulatory requirements, (b) the
standard of completion is not altered, and (c) encapsulation is
not substituted for the removal of asbestos. In addition, Seller shall
amend the Asbestos Abatement Plan to cause the plan to be consistent with the
certificate contained in Exhibit N and to cause the contractor to inspect
all light ballasts in the area within the Improvements which is the subject of
the Asbestos Abatement Plan and dispose of those containing PCBs and to
re-install the light bulbs in the fixtures. Provided that the City Consent
shall have been obtained, Seller shall vacate its employees from the
Property no later than January 15, 1996. Promptly thereafter, and for so
long as this Agreement shall be in effect and for so long as Purchaser is not
then in breach of its obligations under this Paragraph 11.1, Seller, at
Seller's sole cost and expense, will remove and/or dispose of
asbestos-containing material at the Property in accordance with the Asbestos
Abatement Plan (the "Asbestos Abatement"). Promptly after execution and
delivery by Seller of each agreement relating to the performance of the
Asbestos Abatement, Seller shall deliver a fully-executed counterpart of
same to Purchaser. Seller shall use its reasonable efforts to cause the
Asbestos Abatement to be completed prior to April 1, 1996, as such date
may be extended by reason of force majeure and unforseen conditions in
connection with the Asbestos Abatement. Prior to conducting any testing of
air cleanliness, Seller shall notify Purchaser and Purchaser shall have the
right to observe the aforesaid testing while it is being conducted. Seller
shall be deemed to have completed the Asbestos Abatement upon the delivery
to Purchaser of a certificate (in the form attached hereto as Exhibit N)
issued by the Asbestos Engineer stating that the Asbestos Abatement has been
completed. Seller agrees to cause the performance of the Asbestos Abatement
in a good and workmanlike, lien-free manner and to deliver all lien waivers
requested by Purchaser or the Title Insurer in connection with the Asbestos
Abatement to the Title Insurer prior to the Closing. On the date Seller
commences the Asbestos Abatement, Seller shall notify Purchaser that Seller
has commenced the Asbestos Abatement. Thereafter, from time to time, at the
request of Purchaser, Seller shall keep Purchaser informed as to the
progress of the Asbestos Abatement and anticipated completion date.
Commencing on the date that is fourteen (14) days after Seller has commenced
the Asbestos Abatement and every fourteen (14) days thereafter until the
Asbestos Abatement is completed (or this Agreement is terminated), Seller shall
deliver to Purchaser copies of the invoices evidencing the costs which Seller
has incurred in connection with the Asbestos Abatement (each, hereinafter an
"Invoice"), together with Asbestos Engineer's certificate stating that the
work for which payment is required has been performed in accordance with the
Asbestos Abatement Plan and Seller's certification that the payment shown to be
due on the Invoice is due, and that no liens have attached against the
Property as a result of the Asbestos Abatement. Within five (5) business days
after receipt of each Invoice, Purchaser shall deposit into the Escrow, as
additional Earnest Money, the amount set forth in each such Invoice.
11.2. Notwithstanding any provision contained in this
Agreement to the contrary, the existence of Asbestos in the Improvements
shall not constitute a Defect for purposes of Paragraph 7 and no liens or
other defects in title that may result from any such work shall constitute
a basis for Purchaser to share in the cost of remedying same nor shall same
constitute Title Costs.
11.3. Seller agrees to grant Purchaser a credit at the
Closing as compensation for the following items which relate to the
disturbance of various portions of the Improvements during the Seller's
performance of the Asbestos Abatement to the extent such restoration work
shall not have been completed prior to the Closing Date: (a) cost of labor of
installing all ceiling tiles removed and cost of material for estimated 20%
breakage of the ceiling tiles removed during Asbestos Abatement; (b) labor and
material costs in connection with installing a new ceiling tile grid to
replace the grid removed in connection with the Asbestos Abatement;
(c) material and labor cost of installing replacement light ballasts for
those light ballasts disposed of during the Asbestos Abatement; (d) material
and labor costs for replacing all light bulbs broken during the Asbestos
Abatement; (e) material and labor costs of installing all replacement
flexible ducts removed or disposed of during the Asbestos Abatement;
(f) labor of installing all diffusers removed and material and labor costs of
installing all diffusers disposed of during the Asbestos Abatement; and
(g) labor of installing all light fixtures removed and labor and material of
installing all replacement light fixtures disposed of in connection with the
Asbestos Abatement. The amount of the material costs in this Paragraph 11.3
shall be based on replacing the disposed of component with a component of
comparable quality. All of the aforesaid credits shall be based on a unit
price, where applicable, for purchasing such material and performing such
labor. On or before September 22, 1995, Seller shall deliver to Purchaser a
binding contract based on unit prices, where applicable, effective through
June 30, 1996 in favor of Purchaser and Seller to perform the work set forth in
this Paragraph 11.3 from a licensed, reputable contractor. Promptly after
the completion of the Asbestos Abatement and prior to the Closing,
Purchaser, Seller and Seller's contractor shall determine the amount of the
credit by conducting a walk-through of the Property and identifying the
magnitude of the corrective work to be performed which is the subject
of the credit in this Paragraph 11. Seller shall grant Purchaser at Closing
a credit equal to the aggregate cost to perform all work required in this
Paragraph 11.3 based on the unit prices contained in such contract, which
aggregate cost shall be reflected in an amended contract in favor of
Purchaser to perform such work through June 30, 1996.
12. CLOSING DOCUMENTS.
_________________
12.1. On the Closing Date, Seller and Purchaser shall
execute and deliver to one another a joint closing statement. In addition,
Purchaser shall deliver to Seller the balance of the Purchase Price, an
affidavit of Real Property Value, an assumption of the post-closing
obligations contained in the documents set forth in Paragraphs 12.2.2 and
12.2.4 and such other documents as may be reasonably required by the Title
Insurer (and reasonably acceptable to Purchaser) in order to consummate the
transaction as set forth in this Agreement.
12.2. On the Closing Date, Seller shall deliver to Purchaser
the following:
12.2.1. the duly authorized and executed Deed (in
the form of Exhibit I attached hereto), conveying good and marketable fee
_________
simple title to the Fee Parcel and the Improvements on the Fee Parcel
subject only to Permitted Exceptions and those Unpermitted Exceptions
relating to the Fee Parcel and the Improvements on the Fee Parcel waived by
Purchaser;
12.2.2. the Assignment and Assumption of Lease and
Conveyance of Improvements, conveying good and marketable title to Seller's
leasehold estate in the Ground Lease Parcel and the Improvements on the Ground
Lease Parcel subject only to Permitted Exceptions and those Unpermitted
Exceptions relating to the Ground Lease Parcel and the Improvements on the
Ground Lease Parcel waived by Purchaser;
12.2.3. a bill of sale conveying the Personal
Property (in the form of Exhibit J attached hereto) with the Personal
_________
Property schedule attached to the bill of sale to be completed prior to the
Closing with respect to the insertion equipment, if any;
12.2.4. assignment and assumption of intangible
property (in the form attached hereto as Exhibit K) (the "Assignment and
_________
Assumption of Intangible Property");
12.2.5. an affidavit of Real Property Value, a
non-foreign affidavit (in the form of Exhibit M attached hereto) and
_________
otherwise to comply with Section 1445 of the Internal Revenue Code of 1959
(as amended, the "Code");
12.2.6. the City Consent;
12.2.7. subject to the terms of Paragraphs 5 and
11 herein, all affidavits, indemnities and other documents and instruments
reasonably required by the Title Insurer to issue the Title Policies;
12.2.8. actual and exclusive possession of the
Property (and all keys thereto) to Purchaser free and clear of debris and
of the rights of any other party to possession thereof. Upon delivery of
possession to Purchaser, the Property shall be in the same condition as it
is on the date of this Agreement, ordinary wear and tear and damage by
casualty and condemnation excepted and except as otherwise set forth herein;
12.2.9. any lien waivers required by Paragraph 11
herein;
12.2.10. Form 1099-S regarding proceeds of real
estate transactions; and
12.2.11. such other documents relating to Seller's
authorization, existence, and organization as Purchaser or the Title Insurer
may reasonably require and such other documents as are contemplated by this
Agreement.
12.3. All of the documents and instruments required
pursuant to this Paragraph or otherwise in connection with the consummation
of this Agreement shall be in a form and manner reasonably satisfactory
to Purchaser and its counsel to the extent not attached to this Agreement.
12.4. The provisions of this Paragraph 12 shall survive the
Closing.
13. SERVICE CONTRACTS. Attached hereto as Exhibit L is a list of
_________________ _________
all service contracts affecting the Property (the "Service Contracts"). To the
extent Seller has not already done so, promptly after the date of this
Agreement, Seller shall deliver to Purchaser true, correct and complete
copies of all Service Contracts. Seller shall terminate as of the Closing
all of the Service Contracts and pay all sums due thereunder on a prompt
basis.
14. DEFAULT BY PURCHASER. IF THE SALE CONTEMPLATED UNDER THIS
____________________
AGREEMENT IS NOT CONSUMMATED DUE TO THE BREACH OF THIS AGREEMENT BY PURCHASER
OR A DEFAULT BY PURCHASER UNDER THE PROVISIONS OF THIS AGREEMENT, THEN, AS
SELLER'S SOLE AND EXCLUSIVE REMEDIES, SELLER SHALL BE ENTITLED TO RECEIVE
(A) ALL OF THE EARNEST MONEY DEPOSITED BY PURCHASER IN ESCROW PURSUANT TO
PARAGRAPHS 2.2.1, 2.2.2 AND 11 AND ALL INTEREST EARNED THEREON AND (B) THE
RIGHT TO ENFORCE THE OBLIGATION OF PURCHASER TO INDEMNIFY SELLER AND AFFILIATES
OF SELLER AND RESTORE THE PROPERTY PURSUANT TO PARAGRAPHS 7.1 AND 7.2 HEREOF
AND PURCHASER SHALL HAVE NO OBLIGATIONS UNDER THIS AGREEMENT EXCEPT AS SET
FORTH IN THIS SENTENCE. THE PARTIES HAVE AGREED THAT SELLER'S ACTUAL DAMAGES,
IN THE EVENT OF A DEFAULT BY PURCHASER, WOULD BE EXTREMELY DIFFICULT OR
IMPRACTICAL TO DETERMINE. THEREFORE, BY SIGNING THIS AGREEMENT, THE PARTIES
ACKNOWLEDGE THAT THE EARNEST MONEY HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS
THE PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES.
15. DEFAULT BY SELLER. IF THE PURCHASE AND SALE CONTEMPLATED BY
_________________
THIS AGREEMENT IS NOT CONSUMMATED DUE TO THE BREACH OF THIS AGREEMENT BY
SELLER OR A DEFAULT BY SELLER UNDER THE PROVISIONS OF THIS AGREEMENT AFTER
SELLER HAS BEEN AFFORDED AN OPPORTUNITY TO CURE SAID BREACH OF DEFAULT FOR
A PERIOD OF THIRTY (30) DAYS AFTER NOTICE FROM PURCHASER, PURCHASER'S SOLE
REMEDIES SHALL BE (A) THE IMMEDIATE RETURN OF ALL EARNEST MONEY (INCLUDING
ALL SUMS DEPOSITED PURSUANT TO PARAGRAPHS 2.2.1, 2.2.2. AND 11) TOGETHER
WITH ALL INTEREST ACCRUED THEREON, AND (B) THE RIGHT TO RECEIVE FROM SELLER
ITS ACTUAL, DOCUMENTED THIRD PARTY EXPENSES INCURRED IN THE PERFORMANCE OF
ITS DUE DILIGENCE HEREUNDER AND THE PREPARATION OF THIS AGREEMENT, NOT TO
EXCEED $750,000.00 IN THE AGGREGATE. NOTWITHSTANDING ANYTHING CONTAINED
HEREIN TO THE CONTRARY, IF SELLER'S DEFAULT IS ITS WILLFUL REFUSAL TO DELIVER
THE DEED (FOR WHICH SELLER SHALL BE AFFORDED NO NOTICE OR CURE PERIOD), THEN
PURCHASER'S SOLE REMEDIES SHALL BE (X) THE RIGHT TO SUE FOR SPECIFIC
PERFORMANCE AND A MAXIMUM OF $100,000 IN LEGAL FEES INCURRED BY PURCHASER IN
ENFORCING ITS REMEDY OF SPECIFIC PERFORMANCE OR (Y) THE RIGHT TO THE
IMMEDIATE RETURN OF ALL THE EARNEST MONEY (INCLUDING ALL SUMS DEPOSITED
PURSUANT TO PARAGRAPHS 2.2.1, 2.2.2 AND 11) TOGETHER WITH ALL INTEREST
ACCRUED THEREON AND THE RIGHT TO SUE FOR DAMAGES SUFFERED BY PURCHASER AS A
RESULT OF SELLER'S WILLFUL REFUSAL TO DELIVER THE DEED UP TO A MAXIMUM
AGGREGATE AMOUNT OF $3,237,500. PURCHASER SHALL WAIVE ITS RIGHT TO SUE FOR
SPECIFIC PERFORMANCE UNLESS PURCHASER FILES A CLAIM FOR SUCH REMEDY WITHIN
NINETY (90) DAYS AFTER THE WILLFUL REFUSAL TO DELIVER THE DEED BY SELLER.
EXCEPT AS SET FORTH HEREIN, PURCHASER SHALL HAVE NO OTHER REMEDIES
AGAINST SELLER AT LAW OR IN EQUITY AND NOTHING CONTAINED IN THIS
PARAGRAPH 15 SHALL RELEASE PURCHASER FROM ITS OBLIGATIONS CONTAINED IN
PARAGRAPHS 7.1 AND 7.2. IN NO EVENT SHALL PURCHASER HAVE THE RIGHT TO
RECEIVE AN AWARD AGGREGATING DAMAGES UNDER BOTH CLAUSE (B) AND (Y) OF THIS
PARAGRAPH 15.
16. PRORATIONS.
__________
16.1. The following prorations shall apply at Closing:
(a) Taxes and Assessments. All real estate and personal property
_____________________
taxes assessed against the Property for the year prior to the year of the
Closing and all penalties and interest thereon shall be paid by Seller. All
real estate and personal property taxes assessed against the Property for the
year of the Closing shall be prorated between Seller and Purchaser as of the
Closing Date on the basis of the exact number of days each will own the
Property during the year of the Closing. If the amount of such real estate
and personal property taxes is not known at the Closing, closing adjustments
will be made on the basis of the most recent tax bill and, if the Property
has been taxed as part of a tax parcel including other real estate, a
reasonable estimate as to the allocation of taxes between the Property and
such other real estate. To the extent the deadline for contesting or
appealing tax or assessments for tax fiscal year 1997 occurs prior to the
Closing Date, Seller shall contest or appeal such tax or assessment for the
1997 tax fiscal year prior to the deadline date in a manner consistent with
Seller's previous contests or appeals and in a manner so as to not prejudice
the rights of Purchaser. Any taxes and assessments in respect of the
Property for the year of Closing shall be paid by Purchaser and Purchaser
hereby assumes the same. Purchaser shall be allowed as a credit against the
Purchase Price at the Closing, an amount equal to Seller's pro-rata share of
the taxes and assessments in respect of the Property for the year of
Closing, as calculated in accordance herewith.
(b) Utilities. Water, electricity, sewer, gas, and other utility
_________
charges shall be dealt with as follows. At the Closing, Seller and
Purchaser shall execute a joint notice to the utility companies serving the
Property requesting such companies to change their accounts at the Property
to Purchaser's name. Seller shall request each of the utility companies
serving the Property to read the relevant utility meters in the Property not
more than two (2) days prior to the Closing. Seller shall pay for all
utilities consumption, as shown on such meters with respect to the period
prior to Closing, and Purchaser shall pay for all utilities consumption, as
shown on such meters, with respect to the period after the Closing.
(c) Fuel. Fuel, at cost price based on the supplier's statement
____
of fuel on hand (including taxes), shall be prorated in favor of Seller as of
a date not more than two (2) days prior to the Closing Date.
(d) Additional Items. Such other items that are customarily
________________
prorated in transactions of this nature shall be ratably prorated.
For purposes of calculating prorations under this Agreement,
adjustments shall be made as of 11:59 p.m. on the Closing Date. All credits
to Purchaser from the closing adjustments and prorations described above
or elsewhere in this Agreement shall reduce the cash portion of the Purchase
Price payable at the Closing and all credits to Seller from the closing
adjustments and prorations described above or elsewhere in this Agreement
shall increase the cash portion of the Purchase Price payable at the
Closing. All costs, expenses and bills relating to the operation of the
Property which are incurred or accrued through the Closing Date (whether
received before or after the Closing Date) shall be the obligation of Seller.
The provisions of this Paragraph 16.1 shall survive the Closing.
16.2. Post Closing Correction of Apportionments. If the
_________________________________________
amount of any of the items to be prorated is not then ascertainable, the
adjustments thereof shall be on the basis of the most recent ascertainable
data. Any apportionments not ascertainable at Closing (including, without
limitation, real estate taxes, including any tax refunds and the costs of any
contest or appeal) or made in error at the Closing will be adjusted or
updated between Seller and Purchaser, as of the Closing Date, at the
earliest date subsequent to Closing, but no later than twelve (12) months
after the Closing, as such apportionable items become ascertainable or errors
are discovered. Any net amount owing from Purchaser to Seller (or from
Seller to Purchaser) as a result of the post-closing calculations shall be paid
directly within ten (10) business days after receipt of written demand
therefor and, if not so paid, shall accrue interest at the rate of 10% per
annum from the date of demand until paid. Any errors or omissions in computing
adjustments or apportionments shall be promptly corrected following written
request therefor. This obligation shall survive the Closing.
17. RECORDING. Neither this Agreement nor a memorandum thereof
_________
shall be recorded against the Property and such a recording by Purchaser shall
be an act of default hereunder by Purchaser and subject to the provisions of
Paragraph 14 hereof.
18. ASSIGNMENT. Purchaser shall not have the right to assign its
__________
interest in this Agreement without the prior written consent of the Seller.
Any assignment or transfer of, Purchaser's interest in this Agreement shall
be an act of default hereunder by Purchaser and subject to the provisions of
Paragraph 14 hereof. Notwithstanding the foregoing, Purchaser may assign
its interest in this Agreement without the consent of Seller to any
affiliate of Purchaser provided that Purchaser remains liable for and the
assignee assumes the obligations of Purchaser hereunder. An affiliate of
Purchaser for purposes of this Paragraph 18 shall mean an entity that is
controlled by, controls, or is under common control, with Purchaser.
19. BROKER. Seller represents and warrants to Purchaser that no
______
brokerage commission or finder's fee is due and payable in connection with this
transaction other than to Kennedy-Wilson International, (to be paid by
Seller pursuant to the listing agreement), Marvin Chudnoff of Edward S.
Gordon Company, Inc. (to be paid by Seller pursuant to a separate agreement),
to Handler Enterprises, Inc. (to be paid by Seller pursuant to a separate
agreement) and to Insignia Commercial Group (to be paid by Kennedy-Wilson
International). Purchaser represents and warrants to Seller that Purchaser
has dealt with no broker in connection with the transaction contemplated by
this Agreement, other than The Balcor Company, Kennedy-Wilson International,
Handler Enterprises, Inc., Marvin Chudnoff of Edward S. Gordon Company, Inc.
and Insignia Commercial Group. Seller represents that The Balcor Company is a
subsidiary of Seller and is not working in a capacity as a broker in this
transaction and no commission will be due The Balcor Company. Purchaser and
Seller shall indemnify, defend and hold the other party hereto harmless from
any claim whatsoever (including without limitation, reasonable attorneys'
fees, court costs and costs of appeal and reasonable attorneys' fees, court
costs and costs of appeal incurred in enforcing this indemnity provision and
in collecting any amount payable hereunder) suffered or incurred by the
indemnitee arising from the breach or alleged breach by the indemnifying party
of its representations and warranties contained in this Paragraph 19. The
indemnifying party shall undertake its obligations set forth in this
Paragraph 19 using attorneys selected by the indemnifying party and reasonably
acceptable to the indemnified party. The provisions of this Paragraph 19 will
survive the Closing and delivery of the Deed and the Assignment and
Assumption of Leases and Conveyance of Improvements.
20. REPRESENTATIONS AND WARRANTIES.
______________________________
20.1. Any reference herein to Seller's knowledge or notice
of any matter or thing shall only mean such knowledge or notice that has
actually been received by Sidney Rothstein (Vice-President of Field Real
Estate, United States), Donald Parrish (Director of Administrative Services for
Western Operations Regional Center), engineering employees of Seller
responsible for the Property reporting directly to Donald Parrish as of the
date hereof (including Paul Greer) or Edwin Wistrand, Esq. (Managing
Attorney) (collectively referred to as the "Seller's Representative"). Any
knowledge or notice given, had or received by any of Seller's agents,
servants or employees (other than Seller's Representative) shall not be
imputed to Seller or Seller's Representative.
20.2. Subject to the limitations set forth in
Paragraph 20.1, Seller represents and warrants to Purchaser as follows:
20.2.1. There are no leases, subleases, licenses,
agreement or arrangements (written or oral), affecting the occupancy of the
Property other than the Ground Lease and an oral revocable license to the
Biltmore Arizona Resort regarding the parking at the Property which Seller
shall terminate prior to Closing. No one has any right to possess any
portion of the Property (except for Seller, as owner of the Property and the
Biltmore Arizona Resort as aforesaid) or an option, right of first refusal or
other right to purchase the Property or any part thereof.
20.2.2. To Seller's knowledge, (i) there are no
service or maintenance contracts affecting the Property other than those
described in Exhibit L annexed; and (ii) there are no building employees at
_________
the Property required to be employed by Purchaser after the Closing.
20.2.3. Except as set forth in Exhibit T attached
hereto, there is no pending litigation or proceeding (condemnation, tax
certiorari or otherwise) which would in any way prevent or delay the sale
and transfer of the Property contemplated herein or which could affect the
Property after Closing. To Seller's knowledge, there is no such threatened
litigation, claim, cause of action or proceeding.
20.2.4. Seller has the full right, power and
authority to convey the Property to Purchaser and carry out its obligations
under this Agreement and no corporate approvals or consents by Seller are
necessary to permit Seller to convey the Property to Purchaser.
20.2.5. To Seller's knowledge, no other approvals
or consents other than the City Consent are necessary to permit Seller to
convey the Property to Purchaser.
20.2.6. Except as to the conditions disclosed in
the Existing Reports and except as to the conditions disclosed in the other
environmental reports set forth in Exhibit U attached hereto, Seller has not
received any notice from any governmental authority having jurisdiction over
the Property of any uncured violation of any Environmental Law with respect to
the Property.
20.2.7. To Seller's knowledge there are no
legislative, administrative or judicial proceedings of any kind, pending or
threatened, against the Seller or the Property which would in any way
prevent or delay the sale and transfer of the Property contemplated herein.
Except as to the conditions disclosed in the Existing Reports and except as
to the conditions disclosed in the other environmental reports set forth in
Exhibit U attached hereto, Seller has received no notice from any
governmental authority having jurisdiction over the Property of any uncured
violations of any laws, regulations, codes, ordinances, orders or
requirements affecting the Property. Notwithstanding anything contained
herein to the contrary, Seller shall have no liability hereunder to
Purchaser arising out of any violations of The Americans With Disabilities
Act.
20.2.8. Seller is a corporation duly organized and
validly existing in good standing under the laws of the State of New York,
and is duly qualified to transact business in the State of Arizona.
20.2.9. Seller has not received any notice from
any governmental authority having jurisdiction over the Property of the
imposition of any taxes or assessments that are or will be a lien on the
Property other than real estate taxes that are not yet due and payable and
the possessory interest tax with respect to the Ground Lease.
20.2.10 Except as to the conditions set forth in
the Existing Reports, Seller has received no written notice from any
insurance carrier of defects or inadequacies in the Property which if not
corrected would result in termination of insurance coverage or an increase
in the cost thereof.
20.2.11 To Seller's knowledge, the real estate
tax bills and utility bills delivered by Seller to Purchaser as referenced in
Paragraph 7 herein are true, correct and complete copies of said bills. To
Seller's knowledge, the Seller does not possess, in connection with the
ownership of the Property, any water rights certificates or well registrations
pertaining to, or used in connection with the operation of, all or any
portion of the Property.
20.2.12. No other person or entity has any
interest in, or a claim to Seller's interest under, the Ground Lease.
20.3. Purchaser hereby represents and warrants to Seller
that Purchaser has the full right, power and authority to execute this
Agreement and consummate the transactions contemplated herein.
The representations and warranties contained in this Agreement made by
Seller and Purchaser shall be deemed repeated as of the Closing Date and
shall survive the Closing and the delivery of the Deed for a period of one
(1) year (i.e., the claiming party shall have no right to make any claims
____
against the other party for a breach of a representation or warranty
after the first (1st) anniversary of the Closing).
20.4. If at any time after the execution of this
Agreement, either Purchaser or Seller shall become aware of information
which makes a representation and warranty contained in this Agreement untrue
in any material respect and provided the representation or warranty in
question was true at the time it was made, said party shall promptly
disclose said information to the other party hereto. Provided the party
making the representation or warranty did not take any deliberate actions to
cause the aforesaid representation or warranty in question to become untrue in
any material respect, said party shall not be in default under this
Agreement and the sole remedy of the other party shall be to terminate this
Agreement and the Earnest Money together with all interest earned thereon shall
be immediately returned to Purchaser and thereupon neither party shall have any
rights against the other or any further liability to the other, except for
Purchaser's obligations pursuant to Paragraph 7.1 and 7.2 hereof and as
otherwise specifically set forth in this Agreement to survive the
termination hereof. Purchaser and Seller are prohibited from making any
claims against the other party hereto after the Closing with respect to any
breaches of the other party's representations and warranties contained in
this Agreement that the claiming party has actual knowledge of prior to the
Closing. For the purposes of the preceding sentence, the knowledge of
Purchaser shall mean the actual knowledge of Parkash Ahuja, Norman Vaughan,
Matt Pearson or David Pottruck.
20.5. None of Seller's or Seller's subsidiaries' respective
shareholders, officers, directors, agents or employees shall have any personal
liability of any kind or nature for or by reason of any matter or thing
whatsoever under, in connection with, arising out of or in any way related
to this Agreement or the transactions contemplated herein, and Purchaser hereby
waives for itself and anyone who may claim by, through or under Purchaser
any and all rights to sue or recover on account of any such alleged personal
liability. None of Purchaser's or Purchaser's subsidiaries' respective
shareholders, officers, directors, agents or employees shall have any personal
liability of any kind or nature for by reason of any matter or thing
whatsoever under, in connection, arising out of or in any way related to
this Agreement or the transactions contemplated herein, and Seller hereby
waives for itself and anyone who may claim by, through or under Seller any
and all rights to sue or recover on account of any such alleged personal
liability.
20.6. Purchaser hereby agrees that the maximum aggregate
liability of Seller, in connection with, arising out of or in any way
related to a breach by Seller under this Agreement or any document or
conveyance agreement in connection with the transaction set forth herein
after the Closing shall be $750,000.00 ("Initial Liability Cap"); provided,
however, that (a) Purchaser shall have the right to make separate claims
against Seller after the Closing as a result of a breach by Seller of the
representations and warranties contained in Paragraphs 20.2.1, 20.2.3 and
20.2.12 and the maximum aggregate liability of Seller (in addition to the
Initial Liability Cap but not exceeding the cap provided in Paragraph 20.7)
arising out of any such breach by Seller shall be $3,237,500 for a breach of
each of the representations and warranties contained in Paragraphs 20.2.1,
20.2.3 and 20.2.12 (the parties agreeing that for purposes of determining the
liability of Seller hereunder each of the aforesaid paragraphs shall only
be treated as one representation or warranty), (b) Purchaser shall have the
right to make separate claims against Seller after the Closing as a result of a
breach by Seller of the representations and warranties contained in
Paragraphs 20.2.4 and 20.2.8 and the maximum aggregate liability of Seller
(in addition to the Initial Liability Cap but not exceeding the cap provided
in Paragraph 20.7) arising out of any such breach by Seller shall be the
amount of the Purchase Price for a breach of each of the representations and
warranties contained in Paragraphs 20.2.4 and 20.2.8 (the parties agreeing
that for purposes of determining the liability of Seller hereunder each of
the aforesaid paragraphs shall only be treated as one representation or
warranty) and (c) Purchaser shall have the right to make separate claims
against Seller after the Closing as a result of any liability arising out of
Seller's obligations under the Assignment and Assumption of Lease and
Conveyance of Improvements and the Assignment and Assumption of Intangible
Property and the Deed and the maximum aggregate liability of Seller (in
addition to the Initial Liability Cap but not exceeding the cap provided in
Paragraph 20.7) arising under such obligations of Seller shall be $3,237,500
for each of the Assignment and Assumption of Lease and Conveyance of
Improvements and the Assignment and Assumption of Intangible Property and
the Deed. Purchaser hereby waives any and all rights to sue or recover from
Seller any amount greater than said limits.
20.7. Notwithstanding anything contained herein to the
contrary, in no event shall Purchaser have the right to aggregate claims under
this Agreement or any document or any conveyance agreement in connection
with this transaction set forth herein after the Closing in excess of the
amount of the Purchase Price. Purchaser hereby waives any and all rights to
sue or recover from Seller any amount greater than the amount of the
Purchase Price.
TIME OF ESSENCE. Time is of the essence of this Agreement.
_______________
NOTICES. Any notice or demand which either party hereto is required or
_______
may desire to give or deliver to or make upon the other party shall be in
writing and may be personally delivered or given or made by overnight
courier such as Federal Express or made by United States registered or
certified mail, return receipt requested, addressed as follows:
Purchaser:
_________
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, California 94104
ATTN: Mr. Parkash Ahuja
Vice President Corporate
Real Estate and Facilities
(415) 627-7000
(415) 627-7147 - FAX
with copy to:
Corbin Silverman & Sanseverino
805 Third Avenue/11th Floor
New York, New York 10022
ATTN: Raymond A. Sanseverino, Esq.
(212) 308-5000
(212) 308-7189 - FAX
Seller:
______
American Express Company
World Financial Center #3
TRS Real Estate
200 Vesey Street/43rd Floor
New York, New York 10285-4305
ATTN: Mr. Sidney Rothstein
(212) 640-4362
(212) 640-4078 - FAX
with copies to:
American Express Company
c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
ATTN: Mr. Alan Lieberman
(708) 317-4360
(708) 317-4462 - FAX
and:
American Express Financial Advisors
IDS Tower 10, T27/52
Minneapolis, Minnesota 55440
ATTN: Edwin Wistrand, Esq.
(612) 671-3525
(612) 671-3676 - FAX
and:
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60606
ATTN: Daniel J. Perlman, Esq.
(312) 902-5532
(312) 902-1061 - FAX
subject to the right of either party to designate a different address for
itself by notice similarly given. Any notice or demand so given shall be
deemed to be delivered or made on the next business day if sent for next day
delivery by overnight courier, or on the fourth (4th) business day after the
same is deposited in the United States Mail as registered or certified
matter, return receipt requested, addressed as above provided, with postage
thereon fully prepaid. Any such notice, demand or document not given,
delivered or made by registered or certified mail, return receipt requested,
or by overnight courier as aforesaid shall be deemed to be given, delivered
or made upon receipt of the same by the party to whom the same is to be given,
delivered or made. Copies of all notices to Purchaser or Seller shall be
served in like fashion upon the Escrow Agent and copies of all notices given
to Escrow Agent shall be served in like fashion to the other party.
23. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will
___________________________________________
execute five (5) counterparts of this Agreement and five (5) counterparts of
the Escrow Agreement and forward them to Seller for execution, accompanied
by the Earnest Money payable to the Escrow Agent set forth in the
Escrow Agreement on or before September 20, 1995. Seller will execute each
such counterpart and forward two (2) counterparts of the executed Agreement
to Purchaser on or before September 22, 1995 and will forward the following
to the Escrow Agent concurrently therewith:
(A) The Earnest Money;
(B) One (1) fully executed counterpart of this Agreement; and
(C) Five (5) counterparts of the Escrow Agreement signed by the parties
with a direction to execute five (5) counterparts of the Escrow Agreement
and deliver two (2) fully executed counterparts to each of the Purchaser and
the Seller.
24. GOVERNING LAW. The provisions of this Agreement shall be
_____________
governed by the laws of the State of Arizona, without regard to conflict of
laws rules.
25. ENTIRE AGREEMENT. This Agreement and the Escrow Agreement and
________________
all other exhibits attached hereto constitute the entire agreement between
the parties with respect to the subject matter hereof and supersede all other
negotiations, understandings and representations and agreements made by and
between the parties and their respective agents, servants and employees.
26. COUNTERPARTS. This Agreement may be executed in multiple
____________
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one original instrument.
27. CAPTIONS. Paragraph titles or captions contained herein are
________
inserted as a matter of convenience and for reference, and in no way define,
limit, extend or describe the scope of this Agreement or any provision hereof.
28. FORCE MAJEURE. A "force majeure" event shall mean acts of God,
_____________
strikes, lock outs, labor difficulties, delays on account of adverse weather
conditions, explosions, sabotage, accidents, riots, civil commotions, acts
of war, results of any warfare or any war like condition in this or any
foreign country, fire, casualty, condemnation or causes beyond the
reasonable control of Seller and delays caused by Purchaser.
29. WAIVER OF CONDITIONS. No failure or delay of either party in
____________________
the exercise of any right given to such party hereunder or the waiver by any
party of any condition hereunder for its benefit (unless the time specified
herein for exercise of such right, or satisfaction of such condition, has
expired) shall constitute a waiver of any other or further right nor shall
any single or partial exercise of any right preclude other or further exercise
thereof of any other right. The waiver of any breach hereunder shall not be
deemed to be a waiver of any other or any subsequent breach hereof.
30. FURTHER ACTS. Each party hereto shall from time to time exercise,
____________
acknowledge and deliver such further instruments and perform such additional
acts as the other party may reasonably request to effectuate the intent of
this Agreement.
31. MODIFICATION. This Agreement shall not be altered, amended,
____________
changed, waived, terminated or otherwise modified in any respect unless the
same shall be in writing and signed by or on behalf of the party to be
charged therewith.
32. TIME. Unless provided to the contrary in any particular
____
provision, all time periods refer to calendar days and shall expire at
5:30 p.m., Arizona time, on the last of such days; provided, however, that
if the time for the performance of any obligation expires on a Saturday,
Sunday or legal holiday in the State of Arizona, the time for performance shall
be extended to the next succeeding day which is a Business Day.
33. AUTHORITY OF SIGNERS. Each individual executing this Agreement
____________________
on behalf of a party represents that he or she has been duly authorized to
do so.
34. BINDING EFFECT. This Agreement shall be binding upon and shall
______________
inure to the benefit of the parties hereto and to their respective heirs,
executors, administrators, successors and assigns.
35. INCORPORATION BY REFERENCE. Each of the exhibits referred to
__________________________
herein and attached hereto is incorporated herein by reference.
36. PERSONAL INJURY. Seller agrees to name Purchaser as an
_______________
additional insured on its general liability insurance policy from and after
the date hereof insuring Purchaser against such covered personal injury
claims occurring prior to the date of Closing and which are pursued against
Purchaser after the date of Closing.
37. SELLER AUTHORITY. Seller shall deliver to Purchaser on or
________________
before September 22, 1995 evidence of Thomas E. Meador's authority to
execute this Agreement on behalf of Seller.
IN WITNESS WHEREOF, the parties hereto have put their hand and seal
as of the date first set forth above.
PURCHASER:
_________
CHARLES SCHWAB & CO., INC.,
a California corporation
By: /s/ John Gambs
Name: John Gambs
Its: Executive Vice President and
Chief Financial Officer
and
By: /s/ L. E. Valencia
Name: L. E. Valencia
Its: Executive Vice President of Human
Resources and Administrative Services
SELLER:
AMERICAN EXPRESS COMPANY,
a New York corporation
By: /s/ Thomas E. Meador
Name: Thomas E. Meador
Its: Senior Vice-President
Dave Doupe of (Kennedy-Wilson International ("Seller's Broker") executed
this Agreement in its capacity as a real estate broker and acknowledges that
the fee or commission due it from Seller as a result of the transaction
described in this Agreement is as set forth in that certain Listing
Agreement, dated ___________, 19____ between Seller and Seller's Broker
(the "Listing Agreement"). Seller's Broker also acknowledges that payment
of the aforesaid fee or commission is conditioned upon the Closing and the
receipt of the Purchase Price by the Seller. Seller's Broker agrees to
deliver a receipt to the Seller at the Closing for the fee or commission due
Seller's Broker and a release stating that no other fees or commissions are
due to it from Seller or Purchaser.
KENNEDY-WILSON INTERNATIONAL
By:
Dave Doupe
Its:
________________________ of Insignia Commercial Group ("Sub Broker")
executed this Agreement in its capacity as a real estate broker and
acknowledges that the only fee or commission due it as a result of the
transaction described in this Agreement is from Kennedy Wilson
International. Sub Broker also acknowledges that payment of the aforesaid
fee or commission is conditioned upon the Closing and the receipt of the
Purchase Price by the Seller. Sub Broker agrees to deliver a receipt to the
Seller at the Closing for the fee or commission due Sub Broker and a release
stating that no other fees or commissions are due to it from Seller or
Purchaser or Kennedy-Wilson.
INSIGNIA COMMERCIAL GROUP
By:
Name:
Its:
Paul Spiegel of Handler Enterprises, Inc. ("Additional Broker") executed
this Agreement in its capacity as a real estate broker and acknowledges that
the fee or commission due it from Seller as a result of the transaction
described in this Agreement is as set forth in that certain separate written
agreement dated __, 199_ between Seller and Additional Broker (the "Second
Separate Agreement"). Additional Broker also acknowledges that payment of
the aforesaid fee or commission is conditioned upon the Closing and the
receipt of the Purchase Price by the Seller. Additional Broker agrees to
deliver a receipt to the Seller at the Closing for the fee or commission due
Second Cooperating Broker and a release stating that no other fees or
commissions are due to it from Seller or Purchaser.
HANDLER ENTERPRISES, INC.
By:
Paul Spiegel
Executive Vice-President
<PAGE>
INDEX OF EXHIBITS
A - Fee Parcel
B - Ground Lease Parcel
C - Personal Property
D - Escrow Agreement
E - Title Commitment for Fee Parcel
F - Title Commitment for Ground Lease Parcel
G - Assignment of Lease and Conveyance of Improvements
H - City Estoppel
I - Deed
J - Bill of Sale
K - Assignment and Assumption of Intangible Property
L - Service Contracts
M - Non-Foreign Affidavit
N - Asbestos Engineer Certificate
O - List of Insurance
P - List of Investigations
Q - Video Equipment
R - Amended Ground Lease Parcel Legal Description
S - Industry Standards
T - Litigation
<PAGE>
September 21, 1995
VIA FACSIMILE AND FEDERAL EXPRESS
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, California 94104
Attn: Mr. Parkash Ahuja
Vice President Corporate
Real Estate and Facilities
VIA FACSIMILE AND FEDERAL EXPRESS
Corbin, Silverman & Sanseverino
805 Third Avenue/11th Floor
New York, New York 10022
Attn: Raymond A. Sanseverino, Esq.
VIA FACSIMILE AND FEDERAL EXPRESS
Chicago Title Insurance Company
2020 North Central Avenue, Suite 300
Phoenix, Arizona 85004
Attn: Valerie Schueler
Re: Letter Agreement - Sale of American Express Regional
Operations Center -Phoenix, Arizona
Ladies and Gentlemen:
Reference is made to that certain Agreement of Sale, dated
September 18, 1995, by and between American Express Company, a New York
Corporation, and Charles Schwab & Co., Inc., a California corporation (the
"Agreement").
The Agreement is hereby amended as follows:
1. The following is added to the end of Section 22 of the
Agreement: "Notwithstanding anything to the contrary contained in this
Section 22, any notice or demand which either party hereto is required to or
may desire to give or deliver to or make upon the other party may be sent
by facsimile. Any notice or demand given by facsimile on or before
5:00 p.m. Chicago time shall be deemed to be delivered or made on the day
on which is was sent. If such notice or demand given by facsimile is sent
on a date which falls on a Saturday, Sunday or Federal or State holiday,
said date shall be extended to the next business day following such
Saturday, Sunday or Federal or State holiday.
2. Except as set forth in this letter, all terms of the Agreement
are affirmed, ratified, adopted and confirmed. If there is a conflict
between the terms of this letter and the Agreement, the terms of this letter
shall prevail.
PURCHASER
CHARLES SCHWAB & CO., INC., a
California corporation
By: /s/ Raymond A. Sanseverino
Name: Raymond A. Sanseverino
Its: Attorney
SELLER
AMERICAN EXPRESS COMPANY, a
New York corporation
By: /s/ Daniel J. Perlman
Name: Daniel J. Perlman
Its: Attorney
<PAGE>
SECOND AMENDMENT TO AGREEMENT OF SALE
This Second Amendment to Agreement of Sale (this "Second Amendment") is
entered into as of this 22nd day of September, 1995, by and between Charles
Schwab & Co., Inc., a California corporation ("Purchaser") and American
Express Company, a New York corporation ("Seller").
WHEREAS, Purchaser and Seller entered into that certain Agreement of
Sale dated September 18, 1995, as amended by letter agreement dated
September 21, 1995 (as amended, the "Agreement") for the purchase and sale
of the American Express Western Regional Operations Center, 2423 East
Lincoln Drive, Phoenix, Arizona (as more particularly described in the
Agreement and defined in the Agreement as the "Property"); and
WHEREAS, Purchaser and Seller desire to amend the Agreement as more
fully set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Any and all capitalized terms not defined herein shall have the
meanings ascribed to them in the Agreement.
2. Pursuant to Paragraph 7.1 of the Agreement, Purchaser desires to
conduct an Emergency Power System test (the "EPS Test"), which test is not
one of the Investigations listed on Exhibit P of the Agreement. Pursuant to
Paragraph 7.1 of the Agreement, Seller is denying Purchaser the right to
conduct the EPS Test until after the vacation of the Property by Seller. As
a result, the parties have agreed that Seller shall perform the EPS Test at
the same time as Seller performs the tests set forth in Exhibit P as
numbers 29 and 30 as provided for in Paragraph 7.10 of the Agreement.
Notwithstanding anything contained herein to the contrary, any reference in
Paragraph 7.10 to "tests" or to "tests set forth in Exhibit P as numbers 29 and
30" shall include the EPS Test. Furthermore, any reference to "defects" in
Paragraph 7.10 of the Agreement shall also include defects to the components
which are the subject of the EPS Test. In addition, any reference to "Cost"
in Section 7.10 of the Agreement shall also refer to the "Costs" associated
with the defects to the components which are the subject of the EPS Test.
3. Purchaser and Seller shall use diligent efforts to agree upon
the standards to be used for the EPS Test on or before September 29, 1995.
In addition, the parties agree to extend the period for using diligent
efforts to agree upon the standards to be used for the tests set forth in
Exhibit P as numbers 29 and 30 through September 29, 1995. The parties agree
that all references to September 22, 1995 contained in Paragraph 7.10 shall be
deleted and September 29, 1995 shall be inserted in lieu thereof and the
reference to September 29, 1995 shall be deleted and October 13, 1995 shall
be inserted in lieu thereof. The parties' rights to terminate the Agreement
in accordance with Paragraph 7.10 shall also pertain to the parties' failure to
agree upon the standards to be used for the EPS Test.
4. Purchaser shall not have the right to terminate the Agreement as a
result of Purchaser being denied the right to conduct an Investigation until
after Seller vacates the Property.
5. The following is added to the end of Section 22 of the Agreement
ratifying the letter between the parties dated September 21, 1995:
"Notwithstanding anything to the contrary contained in this Section 22,
any notice or demand which either party hereto is required to or may desire
to give or deliver to or make upon the other party may be sent by facsimile.
Any notice or demand given by facsimile on or before 5:00 p.m. Chicago time
shall be deemed to be delivered or made on the day on which it was sent or if
sent after 5:00 p.m. Chicago time, such notice or demand shall be deemed
given on the following day. If such notice or demand given by facsimile is
sent on a date which falls on a Saturday, Sunday or Federal or State
holiday, said date shall be extended to the next business day following such
Saturday, Sunday or Federal or State holiday.
6. Except as set forth herein, the Agreement remains unmodified and in
full force and effect.
[SIGNATURE PAGE ON NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as
of the date first set forth above.
PURCHASER:
CHARLES SCHWAB & CO., INC.,
a California corporation
By: /s/ L. E. Valencia
Name: Ed Valencia
Its: Executive Vice President
and
By: /s/ E. Dilsaver
Name: Evelyn Dilsaver
Its: Senior Vice President
SELLER:
AMERICAN EXPRESS COMPANY,
a New York corporation
By: /s/ Thomas E. Meador
Name: Thomas E. Meador
Its: Senior Vice-President
<PAGE>
THIRD AMENDMENT TO AGREEMENT OF SALE
This Third Amendment to Agreement of Sale (this "Third Amendment") is
entered into as of this 29th day of September, 1995, by and between Charles
Schwab & Co., Inc., a California corporation ("Purchaser") and American
Express Company, a New York corporation ("Seller").
WHEREAS, Purchaser and Seller entered into that certain Agreement of
Sale dated September 18, 1995 (the "Original Agreement") for the purchase
and sale of the American Express Western Regional Operations Center,
2423 East Lincoln Drive, Phoenix, Arizona (as more particularly described
in the Agreement and defined in the Agreement as the "Property"); and
WHEREAS, the Original Agreement has been amended by (1) that certain
letter dated September 21, 1995 (the "Letter Agreement") and (2) by that
certain Second Amendment to Agreement of Sale dated September 22, 1995
(the "Second Amendment"). The Original Agreement, the Letter Agreement and the
Second Amendment are referred to collectively hereinafter as the "Agreement".
WHEREAS, Purchaser and Seller desire to amend the Agreement as more fully
set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Any and all capitalized terms not defined herein shall have the
meanings ascribed to them in the Agreement.
2. The parties agree to extend the period for using diligent
efforts to agree upon the standards to be used for the EPS Test and the
tests set forth in Exhibit P of the Agreement as numbers 29 and 30 through
October 3, 1995. The parties agree that all references to September 29,
1995 contained in Paragraph 7.10 shall be deleted and October 3, 1995 shall
be inserted in lieu thereof.
3. Except as set forth herein, the Agreement remains unmodified
and in full force and effect.
[EXECUTION PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have put their hand and seal
as of the date first set forth above.
PURCHASER:
CHARLES SCHWAB & CO., INC.,
a California corporation
By: /s/ Raymond A. Sanseverino
Name: Raymond A. Sanseverino
Its: Attorney
SELLER:
AMERICAN EXPRESS COMPANY,
a New York corporation
By: /s/ Daniel J. Perlman
Name: Daniel J. Perlman
Its: Attorney
<PAGE>
FOURTH AMENDMENT TO AGREEMENT OF SALE
This Fourth Amendment to Agreement of Sale (this "Fourth Amendment") is
entered into as of this 6th day of October, 1995, by and between Charles
Schwab & Co., Inc., a California corporation ("Purchaser") and American
Express Company, a New York corporation ("Seller").
WHEREAS, Purchaser and Seller entered into that certain Agreement of
Sale dated September 18, 1995 (the "Original Agreement") for the purchase
and sale of the American Express Western Regional Operations Center,
2423 East Lincoln Drive, Phoenix, Arizona (as more particularly described
in the Agreement and defined in the Agreement as the "Property"); and
WHEREAS, the Original Agreement has been amended by (1) that certain
letter dated September 21, 1995 (the "Letter Agreement") (2) by that
certain Second Amendment to Agreement of Sale dated September 22, 1995 (the
"Second Amendment"), and (3) by that certain Third Amendment to Agreement of
Sale dated September 29, 1995 (the "Third Amendment"). The Original
Agreement, the Letter Agreement, the Second Amendment and the Third
Amendment are referred to collectively hereinafter as the "Agreement".
WHEREAS, Purchaser and Seller desire to amend the Agreement as more
fully set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Any and all capitalized terms not defined herein shall have the
meanings ascribed to them in the Agreement.
2. Notwithstanding anything to the contrary contained in the Notice
which Purchaser delivered to Seller on September 22, 1995, and
notwithstanding that Seller did not deliver the Seller Estimate, the parties
agree that the Cost to remedy all defects set forth in the Notice (other
than for the tests set forth in Exhibit P as numbers 29 and 30 and the EPS
Test) is $160,000.00.
3. Except as set forth herein, the Agreement remains unmodified and
in full force and effect.
[EXECUTION PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as
of the date first set forth above.
PURCHASER:
CHARLES SCHWAB & CO., INC.,
a California corporation
By: /s/ Parkash Ahuja
Name: Parkash Ahuja
Its: Vice President, Corporate Real
Estate & Facilities
and
By: /s/ L. E. Valencia
Name: Ed Valencia
Its: Executive Vice President
SELLER:
AMERICAN EXPRESS COMPANY,
a New York corporation
By: /s/ Thomas E. Meador
Name: Thomas E. Meador
Its: Senior Vice President
<PAGE>
FIFTH AMENDMENT TO AGREEMENT OF SALE
This Fifth Amendment to Agreement of Sale (this "Fifth Amendment") is
entered into as of this 17th day of October, 1995, by and between Charles
Schwab & Co., Inc., a California corporation ("Purchaser") and American
Express Company, a New York corporation ("Seller").
WHEREAS, Purchaser and Seller entered into that certain Agreement of
Sale dated September 18, 1995 (the "Original Agreement") for the purchase
and sale of the American Express Western Regional Operations Center,
2423 East Lincoln Drive, Phoenix, Arizona (as more particularly described
in the Agreement and defined in the Agreement as the "Property"); and
WHEREAS, the Original Agreement has been amended by (1) that certain
letter dated September 21, 1995 (the "Letter Agreement") (2) by that certain
Second Amendment to Agreement of Sale dated September 22, 1995 (the "Second
Amendment"), (3) by that certain Third Amendment to Agreement of Sale dated
September 29, 1995, and (4) by that certain Fourth Amendment to Agreement of
Sale dated October 6, 1995 (the "Fourth Amendment"). The Original
Agreement, the Letter Agreement, the Second Amendment, the Third Amendment
and the Fourth Amendment are referred to collectively hereinafter as the
"Agreement".
WHEREAS, Purchaser and Seller desire to amend the Agreement as more
fully set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. The legal description contained in Exhibit R of the Agreement
is hereby deleted in its entirety and replaced with the legal description
set forth in Exhibit A attached hereto.
2. Except as set forth herein, the Agreement remains unmodified
and in full force and effect.
[EXECUTION PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as
of the date first set forth above.
PURCHASER:
CHARLES SCHWAB & CO., INC.,
a California corporation
By: /s/ Matthew D. Pearson
Name: MATTHEW D. PEARSON
Its: Vice President
and
By: /s/ Parkash Ahuja
Name: PARKASH AHUJA
Its: VICE PRESIDENT
SELLER:
AMERICAN EXPRESS COMPANY,
a New York corporation
By: /s/ Thomas E. Meador
Name: THOMAS MEADOR
Its: SVP
<PAGE>
EXHIBIT A
Parcel No. 1:
____________
That portion of Section 10, Township 2 North, Range 3 East of the Gila and Salt
River Base and Meridian, Maricopa County, Arizona, described as follows:
Beginning at the East quarter corner of said Section 10; thence North 00
degrees 00 minutes 48 seconds East, along the East line of said Section 10, a
distance of 114.97 feet; thence South 28 degrees 49 minutes 10 seconds West,
501.83 feet; thence South 86 degrees 29 minutes 9 seconds West, 21.92 feet;
thence South 22 degrees 49 minutes 26 seconds West, 385.16 feet; thence South
12 degrees 19 minutes 24 seconds East, 68.85 feet; thence East 398.82 feet to
a point on the East line of said Section 10; thence North 00 degrees 01 minutes
37 seconds West, along the East line of said Section 10, a distance of 748.32
feet to the Point of Beginning.
Parcel No. 2:
____________
That part of the East half of Section 10, Township 2 North, Range 3 East of the
Gila and Salt River Base and Meridian, Maricopa County, Arizona, described as
follows: Beginning at a point in the East line of said Section 10 from which
the Southeast corner of said Section bears South (assumed bearing) a distance
of 2,815.27 feet; thence North 82 degrees 40 minutes 25 seconds West a distance
of 52.64 feet; thence South 22 degrees 44 minutes 25 seconds West a distance
of 547.37 feet; thence North 86 degrees 29 minutes 09 seconds East 21.92 feet
to a corner of the existing American Express parking lot as leased to American
Express by City of Phoenix Lease No. 21319; thence North 28 degrees 49 minutes
10 seconds East, along the boundary of said parking lot as leased by said
Lease, 501.83 feet to the East line of said Section 10; thence North 00 degrees
00 minute 48 seconds East, along said section line 57.09 feet to the Point
of Beginning.
Parcel No. 3:
____________
That part of the Southeast quarter of Section 10, Township 2 North, Range 3
East of the Gila and Salt River Base and Meridian, Maricopa County, Arizona,
described as follows: Beginning at a point in the East line of said Southeast
quarter from which the Southeast corner of said Section bears South 00 degrees
01 minute 37 seconds East (assumed bearing) a distance of 1,800.97 feet; thence
North 00 degrees 01 minute 37 seconds West, along said East line, a distance
of 93.93 feet to the Southeast corner of the existing American Express parking
lot as leased to American Express by City of Phoenix Lease No. 21319; thence
South 90 degrees 00 minutes 00 seconds West along the South boundary of said
parking lot as leased by said Lease, 398.82 feet to a chain link fence; thence
South 01 degree 34 minutes 30 seconds East 4.76 feet; thence South 12 degrees
27 minutes 20 seconds East 45.35 feet; thence South 58 degrees 21 minutes 19
seconds East 17.56 feet; thence North 75 degrees 24 minutes 34 seconds East
24.53 feet; thence South 63 degrees 35 minutes 57 seconds East 87.77 feet;
thence South 89 degrees 36 minutes 57 seconds East 117.73 feet; thence North 00
degrees 48 minutes 55 seconds East 20.51 feet; thence South 89 degrees 11
minutes 05 seconds East 73.60 feet; thence South 00 degrees 48 minutes 55
seconds West 21.00 feet; thence South 89 degrees 38 minutes 30 seconds East
80.34 feet to the Point of Beginning.
<TABLE>
EXHIBIT 11.1
THE CHARLES SCHWAB CORPORATION
Computation of Earnings per Common Equivalent Share
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $ 47,221 $ 31,195 $130,016 $101,544
==================================================================================================
Shares*
Weighted average number of common
shares outstanding 173,332 169,223 171,721 169,976
Common stock equivalent shares
related to option plans 6,356 4,992 6,280 5,245
- --------------------------------------------------------------------------------------------------
Weighted average number of common and
common equivalent shares outstanding 179,688 174,215 178,001 175,221
==================================================================================================
Earnings per Common Equivalent Share* $ .26 $ .18 $ .73 $ .58
==================================================================================================
* Reflects the March 1995 three-for-two common stock split and the September
1995 two-for-one common stock split.
</TABLE>
EXHIBIT 12.1
<TABLE>
THE CHARLES SCHWAB CORPORATION
Computation of Ratio of Earnings to Fixed Charges
(Dollar amounts in thousands, unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Earnings before taxes on income $ 78,058 $ 51,594 $214,726 $168,357
- --------------------------------------------------------------------------------------------------------------------
Fixed charges
Interest expense - customer 84,162 48,843 234,878 118,177
Interest expense - other 9,877 5,755 26,030 14,751
Interest portion of rental expense 5,023 4,353 15,430 12,578
- --------------------------------------------------------------------------------------------------------------------
Total fixed charges (a) 99,062 58,951 276,338 145,506
- --------------------------------------------------------------------------------------------------------------------
Earnings before taxes on income and fixed charges (b) $177,120 $110,545 $491,064 $313,863
====================================================================================================================
Ratio of earnings to fixed charges (b) divided by (a)* 1.8 1.9 1.8 2.2
====================================================================================================================
Ratio of earnings to fixed charges as adjusted** 6.2 6.1 6.2 7.2
====================================================================================================================
* The ratio of earnings to fixed charges is calculated in a manner consistent with SEC
requirements. For such purposes, "earnings" consist of earnings before taxes
on income and fixed charges. "Fixed charges" consist of interest expense incurred on
payables to customers, term debt and one-third of rental expense, which is estimated to be
representative of the interest factor.
** Because interest expense incurred in connection with payables to customers is
completely offset by interest revenue on related investments and margin loans,
the Company considers such interest to be an operating expense. Accordingly,
the ratio of earnings to fixed charges as adjusted reflects the elimination of such interest
expense as a fixed charge.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Statement of Income and Condensed Consolidated Balance
Sheet of the Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1995, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 692088
<RECEIVABLES> 3698057
<SECURITIES-RESALE> 4725625
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 0
<PP&E> 189984
<TOTAL-ASSETS> 9583839
<SHORT-TERM> 159940
<PAYABLES> 8329985
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 216162
<COMMON> 1785
0
0
<OTHER-SE> 619594
<TOTAL-LIABILITY-AND-EQUITY> 9583839
<TRADING-REVENUE> 148020
<INTEREST-DIVIDENDS> 411775
<COMMISSIONS> 537023
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 156585
<INTEREST-EXPENSE> 260908
<COMPENSATION> 423801
<INCOME-PRETAX> 214726
<INCOME-PRE-EXTRAORDINARY> 130016
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 130016
<EPS-PRIMARY> .73
<EPS-DILUTED> .73
</TABLE>
