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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal
year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the
transition period from . . . . . . . . . . . . . . . . .
to . . . . . . . . . . . . . . . . .
Commission file number 0-7949
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FIRST HAWAIIAN, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 99-0156159
(State of incorporation) (I.R.S. Employer
Identification No.)
1132 BISHOP STREET, HONOLULU, HAWAII 96813
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (808) 525-7000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange on
Title of each class which registered
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None Not Applicable
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, $5.00 Par Value
(Title of class)
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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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of February 22, 1994 was $486,635,000.
The number of shares outstanding of each of the registrant's classes of common
stock as of February 22, 1994 was:
Title of Class Number of Shares Outstanding
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Common Stock, $5.00 Par Value 32,411,797 Shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated
by reference in this Form 10-K:
DOCUMENTS FORM 10-K REFERENCE
First Hawaiian, Inc. Annual Report 1993 Parts I and II
First Hawaiian, Inc. Proxy Statement dated
March 1, 1994 for the Annual Meeting
of Stockholders Part III
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INDEX
PART I
<TABLE>
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PAGE
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Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . 15
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . 16
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . 17
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . 18
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . 18
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
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PART I
ITEM 1. BUSINESS
FIRST HAWAIIAN, INC. -
First Hawaiian, Inc. (the "Corporation"), a Delaware corporation, is a
registered bank holding company under the Bank Holding Company Act of 1956, as
amended, and a registered savings and loan holding company under section 10 of
the Homeowner's Loan Act, as amended. The Corporation, through its
subsidiaries, operates a general commercial banking business and other
businesses related to banking. Its principal assets are its investments in
First Hawaiian Bank (the "Bank"), a State of Hawaii chartered bank; First
Hawaiian Creditcorp, Inc. ("Creditcorp") and First Hawaiian Leasing, Inc.
("FHL"), each a financial services loan company; and Pioneer Federal Savings
Bank ("Pioneer"), a federally chartered savings bank. The Bank, Creditcorp,
FHL and Pioneer are wholly-owned subsidiaries of the Corporation. At December
31, 1993, the Corporation had consolidated total assets of $7.3 billion, total
deposits of $5.2 billion and total stockholders' equity of $608.4 million.
Based on assets as of June 30, 1993, the Corporation was the 76th largest bank
holding company in the United States as reported in the American Banker.
FIRST HAWAIIAN BANK -
The Bank, the oldest financial institution in Hawaii, was established as Bishop
& Co. in 1858 in Honolulu. After several corporate mergers and other changes,
the Bank is now a state-chartered bank. The Bank is not a member of the
Federal Reserve System. The deposits of the Bank are insured by the Federal
Deposit Insurance Corporation (the "FDIC") to the extent and subject to the
limitations set forth in the Federal Deposit Insurance Act, as amended.
The Bank is a full-service bank conducting a general commercial and consumer
banking business and offering trust services. Its banking activities include
receiving transaction, savings and time deposits for personal and commercial
accounts; making commercial, agricultural, real estate and consumer loans;
acting as a United States tax depository facility; providing money transfer and
cash management services; selling traveler's checks, bank money orders, mutual
funds and annuities; issuing letters of credit; handling domestic and foreign
collections; providing safe deposit and night depository facilities; lease
financing; and investing in U.S. Treasury securities and securities of other
U.S. government agencies and corporations and state and municipal securities.
As of December 31, 1993, the Bank had total deposits of $4.5 billion and total
assets of $6.1 billion, making it the second largest bank in Hawaii.
Domestic Services -
The domestic operations of the Bank are carried out through its main banking
office located in Honolulu, Hawaii and 58 other banking offices located
throughout the State of Hawaii. Fifty-one of the offices are equipped with
automatic teller machines which provide 24-hour service to customers wishing to
make withdrawals from and deposits to their personal checking accounts, to
transfer funds between checking and savings accounts, to make balance
inquiries, to obtain interim bank statements, and to make utility and loan
payments. Ten nonbranch locations provide balance inquiry and withdrawal
transaction services only. The Bank is a member of the CIRRUS(R)/MasterCard(R)
and Plus(R)/VISA(R) automatic teller machine networks, providing its customers
with access to their funds nationwide and in selected foreign countries.
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Lending Activities -
The Bank engages in a broad range of lending activities, including making real
estate, commercial and consumer loans and leases. At December 31, 1993, the
Bank's loans totalled $4.0 billion, representing 66.2% of total assets. At
that date, 53.0% of the loans were residential and commercial real estate
loans, 31.1% were commercial loans, 12.2% were consumer loans and 3.7% were
leases.
Real Estate Lending--Residential. The Bank makes residential real estate
loans, including home equity loans, to enable borrowers to purchase, refinance
or improve residential real property. The loans are secured by mortgage liens
on the related property substantially all of which is located in Hawaii. At
December 31, 1993, approximately 56% of the Bank's total real estate loans were
collateralized by single-family and multi-family residences.
Real Estate Lending--Commercial. In the commercial real estate area, the Bank
provides construction and permanent financing for a variety of commercial
developments, such as hotels, warehouses and small retail centers. In order to
diversify its portfolio, the Bank also selectively participates as a lender in
developments on the mainland United States, primarily on the west coast. At
December 31, 1993, approximately 44% of the Bank's total real estate loans were
collateralized by construction and commercial properties.
Commercial Lending. The Bank is a major lender to primarily small- and
medium-sized businesses (including local subsidiaries and operations of foreign
companies) in Hawaii and Hawaii companies doing business overseas with
particular emphasis on those companies in the Asia-Pacific region.
Consumer Lending. The Bank offers many types of loans and credits to
consumers. The Bank provides lines of credit, uncollateralized or
collateralized, and provides various types of personal and automobile loans.
The Bank also provides indirect consumer automobile financing on new and used
autos by purchasing finance contracts from dealers. The Bank's Dealer Center
is the largest commercial bank automobile lender in the State of Hawaii. The
Bank is the largest issuer of MasterCard(R) credit cards and the second largest
issuer of VISA(R) credit cards in Hawaii.
International Banking Services -
The Bank maintains an International Banking Division which provides
international banking products and services through the Bank's branch system,
international banking headquarters in Honolulu, a Grand Cayman branch, two Guam
branches and a representative office in Tokyo, Japan. The Bank maintains a
network of correspondent banking relationships throughout the world.
The Bank's international banking activities are primarily trade-related and are
concentrated in the Asia-Pacific area. The Bank has no loans to lesser
developed countries.
Trust Services -
The Bank's Asset Management Division offers a full range of trust and
investment management services. The Division provides asset management,
advisory and administrative services for estates, trusts and individuals. It
also acts as trustee and custodian of pension and profit sharing plans. As of
December 31, 1993, the Asset Management Division had 5,913 accounts with a
market value of $7.1 billion. Of this total, $4.8 billion represented assets
in non-managed accounts and $2.3 billion were managed trust assets.
The Asset Management Division maintains custodial accounts under which it acts
as agent for customers in rendering a variety of services, including dividend
and interest collection, collection under installment obligations, rent
collection and property management.
The Asset Management Division also acts as corporate trustee or co-trustee for
bond issues totaling $2.2 billion in principal amount.
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FIRST HAWAIIAN CREDITCORP, INC. -
Creditcorp is a financial services loan company with 11 branch offices located
throughout the four major islands of the State (Oahu, Hawaii, Maui and Kauai)
and a branch office in Guam. Creditcorp also has a commercial loan production
office in Honolulu.
The lending activities of Creditcorp are concentrated in consumer and
commercial financing which are primarily collateralized by real estate.
Creditcorp's primary source of funds is time and savings deposits which are
insured by the FDIC to the extent and subject to the limitations set forth in
the Federal Deposit Insurance Act, as amended.
Creditcorp also utilizes borrowings as an additional source of funding for its
loan portfolio. In that regard, Creditcorp is a member of the Federal Home
Loan Bank of Seattle (the "FHLB of Seattle") which provides a central credit
facility for member institutions. As of December 31, 1993, Creditcorp was
required, in accordance with the rules and regulations of the FHLB of Seattle,
to maintain a minimum level of capital stock ownership of $3.5 million in this
regional facility. As of December 31, 1993, Creditcorp's investment in the
capital stock of FHLB of Seattle totalled $6.4 million and advances from the
FHLB of Seattle aggregated $35.7 million.
At December 31, 1993, Creditcorp had total deposits of $350.0 million, total
loans and leases of $415.0 million and total assets of $433.0 million.
FIRST HAWAIIAN LEASING, INC. -
FHL, a financial services loan company, finances and leases personal property
and equipment and acts as an agent, broker or advisor in the leasing or
financing of such property for affiliates as well as third parties.
As of December 31, 1993, FHL's net investment in leases amounted to $49.3
million and total assets were $51.5 million. FHL's primary source of funds is
borrowings from the Corporation and the Bank.
PIONEER FEDERAL SAVINGS BANK -
On August 6, 1993, the Corporation acquired for cash all of the outstanding
stock of Pioneer Fed BanCorp, Inc. ("Pioneer Holdings") at a purchase price of
$87 million through the merger of Pioneer Holdings with and into the
Corporation ("Merger"). As a result of the Merger, Pioneer became a
wholly-owned subsidiary of the Corporation (see "Note 1. Business
Combinations" (page 41) in the Financial Review section of the Corporation's
Annual Report 1993, which is incorporated herein by reference thereto).
Pioneer is a federally chartered savings bank operating in the state of Hawaii.
Pioneer, the oldest savings bank in Hawaii, was chartered in 1890 by King David
Kalakaua. Presently, Pioneer maintains 19 branch offices located on the four
major islands of Hawaii. At December 31, 1993, Pioneer had total assets of
$650.3 million. Based on total assets at December 31, 1993, Pioneer was the
fourth largest of six Savings Association Insurance Fund (the "SAIF") - insured
institutions operating in Hawaii.
Pioneer is primarily engaged in attracting deposits from the general public
through a variety of deposit products. Together with borrowings, principally
from the FHLB of Seattle, and funds from ongoing operations, these resources
are invested in the origination of conventional adjustable and fixed rate,
one-to-four family residential mortgages. Pioneer is also engaged in other
types of mortgage lending, including home equity loans, loans on smaller
multi-family projects and, to a lesser extent, in other consumer lending
activities. Mortgage lending activity, both origination and purchases, has
been limited to loans secured by property in the State of Hawaii. As
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of December 31, 1993, Pioneer was required, in accordance with the rules and
regulations of the FHLB of Seattle, to maintain a minimum level of capital
stock ownership of $7.2 million in this regional facility. As of December 31,
1993, Pioneer's investment in the capital stock of the FHLB of Seattle totalled
$25.2 million and advances from the FHLB of Seattle aggregated $143.0 million.
At December 31, 1993, Pioneer had total deposits of $399.4 million, total loans
of $544.0 million and total assets of $650.3 million.
HAWAII COMMUNITY REINVESTMENT CORPORATION -
In an effort to support affordable housing and as part of the Bank's,
Creditcorp's and Pioneer's community reinvestment program, the Bank, Creditcorp
and Pioneer are members of the Hawaii Community Reinvestment Corporation (the
"HCRC"). The HCRC is a consortium of local financial institutions and provides
$50 million in permanent long-term financing for affordable housing projects
throughout Hawaii for low and moderate income residents.
The $50 million loan pool is funded by the member financial institutions who
also participate pro rata in each HCRC loan. The Bank's, Creditcorp's and
Pioneer's participations in these HCRC loans are included in each of these
companies' loan portfolio.
HURRICANE INIKI -
On September 11, 1992, Hurricane Iniki struck the Island of Kauai and, to a
lesser extent, the west side of the Island of Oahu, causing extensive property
damage. At December 31, 1993, the Bank, Creditcorp and Pioneer held mortgages
collateralizing loans of $92.2 million, $11.8 million and $37.9 million,
respectively, on commercial and residential properties on Kauai that were
damaged by the hurricane. All of the properties were covered by casualty
insurance policies which covered not only the owner of the property, but also
the lender. The Corporation does not anticipate material losses resulting from
damage caused by Hurricane Iniki.
As a result of Hurricane Iniki, several casualty insurers failed or refused to
renew and write new homeowners' casualty insurance in Hawaii. The Bank,
Creditcorp and Pioneer all require and rely upon the existence of adequate
homeowners' casualty insurance on all residential properties which serve as
primary collateral for loans. If homeowners' casualty insurance became
generally unavailable in Hawaii, the subsidiaries of the Corporation would
either be required to discontinue residential real property lending or be
exposed to risk of loss if uninsured collateral were destroyed in the event of
fire or other casualties. In addition, such loans would not be salable in the
secondary market.
However, at this time alternate homeowners' casualty insurance is available to
homeowners in Hawaii, but at greater costs than before the hurricane. The
Legislature of the State of Hawaii has created the Hawaii Hurricane Relief Fund
to offer homeowners' insurance coverage in order to stabilize the casualty
insurance market in Hawaii and to increase the availability of reasonably
priced homeowners' casualty insurance.
As an alternative to customer-provided insurance, the Bank, Creditcorp and
Pioneer have been able to obtain "forced place" homeowners' casualty coverage
through insurance policies obtained by the Bank, Creditcorp or Pioneer at the
borrower's expense to cover the uninsured mortgage loan.
EMPLOYEES -
As of December 31, 1993, the Corporation had 3,116 full-time equivalent
employees. The Bank employed 2,766 persons and nonbank subsidiaries employed
350 persons. None are represented by any collective bargaining agents
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and relations with employees are considered excellent.
MONETARY POLICY AND ECONOMIC CONDITIONS -
The earnings and growth of the Corporation are affected not only by general
economic conditions, but also by the monetary policies of various governmental
regulatory authorities, particularly the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"). The Federal Reserve Board
implements national monetary policy by its open market operations in United
States Government securities, control of the discount rate, and establishment
of reserve requirements against both member and nonmember financial
institutions' deposits. These actions have a significant effect on the overall
growth and distribution of loans, investments and deposits as well as the rates
earned on loans, or paid on deposits.
It is not possible to predict the effect of future changes in monetary policies
upon the operating results of the Corporation.
COMPETITION -
Although the laws of Hawaii generally prohibit interstate banking, competition
in the financial services industry is intense. Hawaii-based commercial banks,
savings institutions, financial services loan companies and credit unions
compete against one another. Based upon the latest available figures, total
deposits of all financial institutions in Hawaii as of June 30, 1993 amounted
to approximately $21 billion. The two largest bank holding companies, Bancorp
Hawaii, Inc. and the Corporation accounted for 26% and 23% of total deposits,
respectively. The Corporation's share of deposits includes Pioneer which was
acquired on August 6, 1993. The next largest competitors were Bank of America,
F.S.B. and American Savings Bank, F.S.B., with 10% and 7%, respectively, of
total deposits. In addition, out-of-state mutual funds, insurance companies,
brokerage firms and other financial services providers also compete for
consumer and commercial business in Hawaii.
Foreign (non-Hawaii) banks and other financial institutions are able to make
loans in Hawaii through Edge Act facilities, finance and mortgage company
subsidiaries and by loan participations with local banks. United States
domestic banks and other financial institutions may make loans directly in
Hawaii by qualifying as "foreign lenders" in Hawaii. Foreign banks currently
conduct various banking activities in Hawaii, except for retail deposit-taking.
Banks and bank holding companies organized under the laws of Pacific Ocean
jurisdictions with United States dollar-based economies may acquire Hawaii
banks or establish branches in Hawaii, although none has done so to date.
Banks and similar financial institutions of countries other than the United
States may and do have representative offices or agencies in Hawaii. Under the
rules of the Office of Thrift Supervision ("OTS"), federally-chartered savings
associations may open branches in, or merge with another savings association
located in, any state (including Hawaii), subject to certain conditions.
Hawaii has no law permitting interstate bank acquisitions or branching in
Hawaii by foreign (non-Hawaii) banks. The Hawaii Legislature has previously
considered and rejected broad interstate banking legislation. However,
legislation has been enacted which permits the acquisition of failing
state-chartered financial institutions by out-of-state financial institutions
in certain limited circumstances. A bill is presently under consideration in
the 1994 Hawaii State Legislature which would allow out-of-state bank holding
companies to acquire Hawaii banks. Further, both the United States Senate and
House of Representatives are considering proposed legislation which, if
enacted, could permit non-Hawaii bank holding companies to acquire Hawaii banks
or bank holding companies and, if Hawaii law permitted, to operate branches of
a non-Hawaii bank in Hawaii. Whether any of the proposed state or federal
legislation will be enacted, the form which such legislation may take, and its
effect on the Corporation cannot be predicted at this time.
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SUPERVISION AND REGULATION -
As a bank holding company, the Corporation is subject to the Bank Holding
Company Act of 1956 and is subject to supervision by the Federal Reserve Board.
In general, the Bank Holding Company Act of 1956 limits the business of bank
holding companies to owning or controlling banks and engaging in such other
activities as the Federal Reserve Board may determine to be so closely related
to banking or managing or controlling banks as to be a proper incident thereto.
The Corporation is also regulated and supervised by the OTS as a savings and
loan holding company by virtue of its ownership of Pioneer. The various
subsidiaries of the Corporation are subject to regulation and supervision by
the state banking authorities of Hawaii, the Federal Reserve Board, the FDIC,
the OTS and various other regulatory agencies.
Holding Company Structure. The Corporation must obtain the prior approval of
the Federal Reserve Board before acquiring direct or indirect ownership or
control of any voting shares of any bank if after such acquisition it would own
or control, directly or indirectly, more than 5% of the voting shares of such
bank; before merging or consolidating with another bank holding company; and
before acquiring substantially all of the assets of any additional bank. The
Bank Holding Company Act of 1956 also prohibits the acquisition by the
Corporation of any such interest in any bank or bank holding company located in
a state other than Hawaii unless the laws of the state in which such bank is
located expressly authorize such acquisition. With certain exceptions, the
Bank Holding Company Act of 1956 prohibits bank holding companies from
acquiring direct or indirect ownership or control of more than 5% of any class
of voting shares in any company which is not a bank or a bank holding company,
unless the Federal Reserve Board determines that the activities of such company
are so closely related to banking or managing or controlling banks as to be a
proper incident thereto. In making such determinations, the Federal Reserve
Board considers, among other things, whether the performance of such activities
by a bank holding company would offer benefits to the public that outweigh
possible adverse effects. In addition, all acquisitions are reviewed by the
Department of Justice for antitrust considerations.
The Corporation is required by the Bank Holding Company Act of 1956 to file
annual reports and such other reports as may be required from time to time with
the Federal Reserve Board. In addition, the Federal Reserve Board performs
periodic examinations of the Corporation and certain of its subsidiaries.
The principal source of the Corporation's cash revenue has been dividends and
interest received from the Bank and other subsidiaries of the Corporation. The
Bank, Pioneer and Creditcorp are subject to regulatory limitations on the
amount of dividends they may declare or pay. In addition, the payment of
dividends by the Corporation is limited to an amount not greater than 50% of
its consolidated net income as stipulated in the debt covenants of a certain
line of credit. There are also statutory limits on the transfer of funds to
the Corporation and certain of its nonbanking subsidiaries by the Bank, whether
in the form of loans or other extensions of credit, investments or asset
purchases. Such transfers by the Bank to the Corporation or any such
nonbanking subsidiary are limited in amount to 10% of the Bank's capital and
surplus, or 20% in the aggregate. Furthermore, such loans and extensions of
credit are required to be collateralized in specified amounts.
If, in the opinion of the applicable regulatory authority, a bank under its
jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice (which, depending on the financial condition of the bank, could
include the payment of dividends), such authority may require, after notice and
hearing, that such bank cease and desist from such practice. The Federal
Reserve Board and the FDIC have issued policy statements which provide that, as
a general matter, insured banks and bank holding companies may only pay
dividends out of current operating earnings. Under Hawaii law, the Bank is
prohibited from declaring or paying any dividends in excess of its retained
earnings.
Under Federal Reserve Board policy, a bank holding company is expected to act
as a source of financial strength
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to each subsidiary bank and to make capital injections into a troubled
subsidiary bank, and the Federal Reserve Board may charge the bank holding
company with engaging in unsafe and unsound practices for failure to commit
resources to a subsidiary bank. This capital injection may be required at
times when the Corporation may not have the resources to provide it. Any
capital loans by the Corporation to its subsidiary bank would be subordinate in
right of payment to deposits and to certain other indebtedness of such
subsidiary bank. In connection with its application to the Federal Reserve
Board for authority to acquire Pioneer, the Corporation committed that Pioneer
will meet all present and future minimum capital ratios adopted for savings
associations by OTS or the FDIC. In the event of the bankruptcy of the
Corporation, this commitment would be assumed by the bankruptcy trustee and be
entitled to a priority of payment.
In addition, depository institutions insured by the FDIC can be held liable for
any losses incurred by, or reasonably expected to be incurred by, the FDIC
after August 9, 1989 in connection with (i) the default of a commonly
controlled FDIC-insured depository institution or (ii) any assistance provided
by the FDIC to a commonly controlled FDIC-insured depository institution in
danger of default. "Default" is defined generally as the appointment of a
conservator or receiver and "in danger of default" is defined generally as the
existence of certain conditions indicating that a "default" is likely to occur
in the absence of regulatory assistance. Accordingly, in the event that any
insured subsidiary of the Corporation causes a loss to the FDIC, other insured
subsidiaries of the Corporation could be required to compensate the FDIC by
reimbursing it for the amount of such loss. Any such obligation by the
Corporation's insured subsidiaries to reimburse the FDIC would stand senior to
their obligations, if any, to the Corporation.
Federal Deposit Insurance Corporation Improvement Act of 1991. In December,
1991, Congress enacted the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA"), which substantially revises the bank regulatory and
funding provisions of the Federal Deposit Insurance Act and makes revisions to
several other federal banking statutes. FDICIA provides for, among other
things, (i) a recapitalization of the Bank Insurance Fund by increasing the
FDIC's borrowing authority; (ii) annual on-site examinations of
federally-insured depository institutions by banking regulators; (iii) publicly
available annual financial condition and management reports for financial
institutions, including audits by independent accountants; (iv) the
establishment of uniform accounting standards by federal banking agencies; (v)
the establishment of "prompt corrective action" standards for depository
institutions based on five levels of capitalization, with more scrutiny and
restrictions placed on institutions with lower levels of capital; (vi)
additional grounds for the appointment of a conservator or receiver for a
failed or failing depository institution; (vii) a requirement that the FDIC use
the least-cost method of resolving cases of troubled institutions in order to
keep the costs to insurance funds at a minimum; (viii) more comprehensive
regulation and examination of foreign banks; (ix) consumer protection
provisions including a Truth-in-Savings Act; (x) a requirement that the FDIC
establish a risk-based deposit insurance assessment system to be in effect no
later than January 1, 1994; (xi) restrictions or prohibitions on accepting
brokered deposits except for institutions which significantly exceed minimum
capital requirements; (xii) general restrictions on the activities as principal
and equity investments of state-chartered banks to those permissible for
national banks unless approved by the FDIC; and (xiii) certain limits on
deposit insurance coverage.
A central feature of FDICIA is the requirement that the federal banking
agencies take "prompt corrective action" with respect to insured depository
institutions that do not meet minimum capital requirements. FDICIA establishes
five capital levels applicable to such institutions (including the Bank):
"well capitalized,' "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically undercapitalized." Under the
regulations adopted by the federal banking agencies to implement these
provisions of FDICIA, a depository institution is "well capitalized" if it has
(i) a total risk-based capital ratio of 10% or greater, (ii) a Tier 1
risk-based capital ratio of 6% or greater, (iii) a leverage ratio of 5% or
greater and (iv) is not subject to any order or written directive to meet and
maintain a specific capital level for any capital measure. An "adequately
capitalized" institution is defined as one that has (i) a total risk-based
capital ratio of 8% or greater, (ii) a Tier 1 risk-based capital ratio of 4% or
greater and (iii) a leverage ratio of 4% or greater (or 3% or greater in the
case of a bank with a composite CAMEL rating
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of 1). A depository institution is considered (i) "undercapitalized" if it has
(A) a total risk-based capital ratio of less than 8%, (B) a Tier 1 risk-based
capital ratio of less than 4% or (C) a leverage ratio of less than 4% (or 3% in
the case of an institution with a CAMEL rating of 1), (ii) "significantly
undercapitalized" if it has (A) a total risk-based capital ratio of less than
6%, (B) a Tier 1 risk-based capital ratio of less than 3% or (C) a leverage
ratio of less than 3% and (iii) "critically undercapitalized" if it has a ratio
of tangible equity to total assets equal to or less than 2%. An institution
may be deemed by the regulators to be in a capitalization category that is
lower than is indicated by its actual capital position if, among other things,
it receives an unsatisfactory examination rating.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a cash dividend) or paying any management
fees to its holding company if the depository institution is, or would
thereafter be, undercapitalized. Undercapitalized depository institutions are
subject to growth limitations and are required to submit a capital restoration
plan. The federal banking agencies may not accept a capital plan without
determining, among other things, that the plan is based on realistic
assumptions and is likely to succeed in restoring the depository institution's
capital. In addition, for a capital restoration plan to be acceptable, the
depository institution's parent holding company must guarantee that the
institution will comply with such capital restoration plan. The aggregate
liability of the parent holding company under such guarantee is limited to the
lesser of (i) an amount equal to 5% of the depository institution's total
assets at the time it became undercapitalized, or (ii) the amount which is
necessary (or would have been necessary) to bring the institution into
compliance with all capital standards applicable to such institution as of the
time it fails to comply with the plan. If a depository institution fails to
submit an acceptable plan, it is treated as if it is significantly
undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of other requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, requirements to
reduce total assets and cessation of receipt of deposits from correspondent
banks. Critically undercapitalized institutions are subject to the appointment
of a receiver or conservator, generally within 90 days of the date such
institution becomes critically undercapitalized.
FDICIA also provides for increased funding of the FDIC insurance funds. In
addition, the FDIC has implemented a risk-based deposit insurance assessment
system under which the assessment rate for an insured institution may vary
according to the regulatory capital levels of the institution and other factors
(including supervisory evaluations). There is an eight basis point spread
between the highest and lowest assessment rates, so that banks classified as
strongest by the FDIC are subject to a rate of .23%, and banks classified as
weakest by the FDIC are subject to a rate of .31%.
FDICIA also requires the federal banking agencies to prescribe standards for
depository institutions and their holding companies relating to internal
controls, information systems, internal audit systems, loan documentation,
credit underwriting, interest rate exposure, asset growth, executive
compensation, a maximum ratio of classified assets to capital, minimum earnings
sufficient to absorb losses, a minimum ratio of market value to book value for
publicly traded shares and such other standards as the agencies deem
appropriate. In November, 1993 the federal banking agencies published proposed
regulations to implement these provisions of FDICIA. The proposed rules set
forth general standards to be observed but for the most part do not mandate
specific operating standards to be followed. At this time the Corporation
believes that such rules, if adopted in their proposed form, will not have a
material effect on the Corporation's operations or financial results.
Capital Requirements. The Corporation and certain of its subsidiaries are
subject to regulatory capital guidelines issued by the federal banking
agencies. Information with respect to the applicable capital requirements is
included in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" (Page 32) in the Financial Review section of the
Corporation's Annual Report 1993, and is incorporated herein by reference
thereto.
8
<PAGE> 11
FDICIA requires each federal banking agency to revise its risk-based capital
standards to ensure that those standards take adequate account of interest rate
risk, concentration of credit risk and the risk of nontraditional activities,
as well as reflect the actual performance and expected risk of loss on
multi-family mortgages. In September, 1993 the federal banking agencies issued
notices of proposed rulemaking soliciting comment on proposed revisions to the
risk-based capital rules to take account of interest rate risk. The notice
proposes alternative approaches for determining the additional amount of
capital, if any, that may be required to compensate for interest rate risk.
The first approach would reduce an institution's risk-based capital ratios by
an amount based on its measured exposure to interest rate risk in excess of a
specified threshold. The second approach would assess the need for additional
capital on a case-by-case basis, considering both the level of measured
exposure and qualitative risk factors. The Corporation cannot assess at this
point the impact that such proposals would have on its capital ratios.
In February, 1994 the federal banking agencies issued proposed rules to revise
the risk-based capital standards to take account of concentration of credit
risk and the risks of nontraditional activities. The proposed rules specify
that concentrations of credit risk will be considered as important factors in
assessing an institution's overall capital adequacy, but did not provide for
any specific adjustments to the risk-based capital standards for such risks or
for the risks of nontraditional activities.
9
<PAGE> 12
STATISTICAL DISCLOSURES -
Guide 3 of the "Guides for the Preparation and Filing of Reports and
Registration Statements" under the Securities Act of 1933 sets forth certain
statistical disclosures in the "Description of Business" section of bank
holding company filings with the Securities and Exchange Commission. The
statistical information requested is presented in the following tables and also
in the tables shown below in the Corporation's Annual Report 1993, which tables
are incorporated herein by reference thereto. The tables and information
contained therein have been prepared by the Corporation and have not been
audited or reported upon by the Corporation's independent accountants.
Information in response to the following sections of Guide 3 is included in the
Financial Review section of the Corporation's Annual Report 1993, and is
incorporated herein by reference thereto:
<TABLE>
<CAPTION>
PAGE NUMBERS IN
---------------------------
FIRST HAWAIIAN, INC.
ANNUAL REPORT 1993
DISCLOSURE REQUIREMENTS (EXHIBIT 13)
----------------------- ------------------------------
<S> <C> <C>
I. Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential -
A. Average balance sheets 20 - 21
B. Analysis of net interest earnings 20 - 21
C. Dollar amount of change in interest income and interest expense 22
II. Investment Portfolio -
C. Investment securities in excess of 10% of stockholders' equity 43
III. Loan and Lease Portfolio -
A. Types of loans and leases 27
C. Risk elements
1. Nonaccrual, past due and restructured loans and leases 28
4. Loan concentrations 27
IV. Summary of Loan and Lease Loss Experience
A. Analysis of loss experience 24
B. Breakdown of the allowance for loan and lease losses 25
V. Deposits
A. Average amount and average rate paid on deposits 29
D. Maturity distribution of domestic time certificates of deposits
of $100,000 or more 29
E. Time certificates of deposit in denominations of $100,000 or more
issued by foreign offices 44
VI. Return on Equity and Assets 16
VII. Short-Term Borrowings 44
</TABLE>
10
<PAGE> 13
I. Distribution of Assets, Liabilities and Stockholders' Equity; Interest
Rates and Interest Differential
Table I-C presents the percentages of total assets and total liabilities
attributable to foreign operations. For this purpose, assets attributable to
foreign operations are defined as assets in foreign offices and loans and
leases to and investments in customers domiciled outside the United States.
Deposits received and other liabilities are classified on the basis of domicile
of the creditor.
FIRST HAWAIIAN, INC. AND SUBSIDIARIES
TABLE I-C
PERCENTAGE OF TOTAL ASSETS AND TOTAL LIABILITIES
ATTRIBUTABLE TO FOREIGN OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1993 1992 1991
---------------------------------------
<S> <C> <C> <C>
Average foreign assets to average total assets 6.19% 6.51% 7.78%
Average foreign liabilities to average total liabilities 2.07% 2.68% 4.47%
</TABLE>
II. INVESTMENT SECURITIES PORTFOLIO
Table II-A presents the book value of investment securities by the following
major categories at year-end for the years indicated.
FIRST HAWAIIAN, INC. AND SUBSIDIARIES
TABLE II-A
SCHEDULE OF INVESTMENT SECURITIES BY BOOK VALUE
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1993 1992 1991
---------------------------------------
(in millions)
<S> <C> <C> <C>
U.S. Treasury and other U.S. Government agencies
and corporations $ 918 $ 685 $ 789
States and political subdivisions 204 196 197
Other 108 70 239
----- ----- -----
Total $1,230 $ 951 $1,225
====== ====== ======
</TABLE>
11
<PAGE> 14
Table II-B presents the maturities of investment securities, excluding
securities which have no stated maturity at December 31, 1993, and the weighted
average yields (for obligations exempt from Federal income taxes on a taxable
equivalent basis assuming a 35% tax rate) of such securities. The tax
equivalent adjustment is made for items exempt from Federal income taxes to
make them comparable with taxable items before any income taxes are applied.
FIRST HAWAIIAN, INC. AND SUBSIDIARIES
TABLE II-B
SCHEDULE OF INVESTMENT SECURITIES BY
MATURITIES AND AVERAGE YIELDS
DECEMBER 31, 1993
<TABLE>
<CAPTION>
MATURITY
-----------------------------------------------------------------
AFTER ONE AFTER FIVE
WITHIN BUT WITHIN BUT WITHIN
ONE YEAR FIVE YEARS TEN YEARS
------------------- -------------------- -------------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
------ ------- ------ ------- ------ -------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury and other U.S. Government
agencies and corporations $340 3.86% $351 4.08% $ 83 4.59%
States and political subdivisions 17 9.49 154 7.98 6 5.55
Other 3 3.35 12 3.82 17 3.54
---- ---- ----
Total $360 4.13% $517 5.24% $106 4.48%
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
MATURITY
-------------------
AFTER
TEN YEARS TOTAL
------------------- -------------------
AMOUNT YIELD AMOUNT YIELD
------ ------- ------ -------
(dollars in millions)
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S. Government
agencies and corporations $144 5.18% $918 4.22%
States and political subdivisions 26 7.21 203 7.56
Other 42 3.53 74 3.57
---- ------
Total $212 5.14% $1,195 4.76%
==== ======
</TABLE>
Notes:
(1) The weighted average yields were calculated on the basis of the cost and
effective yields weighted for the scheduled maturity of each security.
(2) Includes $98 million of securities in the following maturity categories
with optional tender dates ($10 million within 1 to 5 years; $20 million
within 5 to 10 years; and $68 million after 10 years).
12
<PAGE> 15
III. Loan and Lease Portfolio
Table III-B presents maturity and interest rate sensitivity data for all loans
and leases except real estate - residential, real estate - commercial,
consumer, credit cards and lease financing at December 31, 1993.
FIRST HAWAIIAN, INC. AND SUBSIDIARIES
TABLE III-B
LOAN AND LEASE MATURITY AND
INTEREST RATE SENSITIVITY DATA
DECEMBER 31, 1993
<TABLE>
<CAPTION>
AFTER ONE OVER
ONE YEAR YEAR TO FIVE
OR LESS FIVE YEARS YEARS TOTAL
--------- ----------- ------ --------
(in millions)
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $1,118 $ 79 $ 12 $ 1,209
Real estate - construction 287 28 2 317
Foreign 116 81 14 211
------ ------ ----- -------
$1,521 $ 188 $ 28 1,737
====== ====== ======
Real estate:
Residential 1,786
Commercial 883
Consumer 312
Credit cards 148
Lease financing 201
--------
Total loans and leases $ 5,067
========
Loans with fixed or predetermined interest rates $ 108 $ 96 $ 13 $ 217
Loans with floating or adjustable interest rates 1,413 92 15 1,520
------ ------ ------ -------
$1,521 $ 188 $ 28 $ 1,737
====== ====== ====== ========
</TABLE>
13
<PAGE> 16
Table III-C (3) presents a summary of the Corporation's foreign outstandings to
each country which exceeded 1% of total assets for the years indicated.
Foreign outstandings are defined as the balances outstanding of cross-border
loans, acceptances, interest-bearing deposits with other banks, other
interest-bearing investments and any other monetary assets. At December 31,
1993, the Corporation's total foreign outstandings amounted to $256 million.
FIRST HAWAIIAN, INC. AND SUBSIDIARIES
TABLE III-C (3)
FOREIGN OUTSTANDINGS TO EACH COUNTRY WHICH EXCEEDS 1% OF TOTAL ASSETS
<TABLE>
<CAPTION>
BANKS AND COMMERCIAL
OTHER FINANCIAL AND
INSTITUTIONS INDUSTRIAL OTHER TOTAL
--------------- ------------ ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1993 $ - $ - $ - $ -
========== ========== ========= ==========
At December 31, 1992
$ - $ - $ - $ -
========== ========== ========= ==========
At December 31, 1991 -
Japan $ 121,621 $ - $ - $ 121,621
========== ========== ========= ==========
</TABLE>
ITEM 2. PROPERTIES
A subsidiary of the Bank is the sole general partner in a Hawaii limited
partnership which owns all of a city block in downtown Honolulu containing
55,775 square feet. The Bank's interest in the limited partnership is 99.25%.
The administrative headquarters of the Corporation and the main branch of the
Bank were formerly located on a portion of the city block. The buildings were
demolished and the Bank has begun construction of a modern banking center on
this city block. The new headquarters building will include 418,000 square
feet of gross office space, including the Bank's main branch and administrative
headquarters of the Corporation and the Bank. The new building is anticipated
to be completed in 1996. Commencing in March 1993, the Bank leased
approximately 119,000 square feet in another office building for use as an
interim administrative headquarters and main branch until completion of the new
structure. The interim office building is approximately a block and a half
from the old administrative headquarters and main branch.
Seventeen of the Bank's offices in Hawaii are located on land owned in fee
simple by the Bank. The other branches of the Bank, Pioneer and Creditcorp are
situated in leasehold premises or in buildings constructed by the Bank or
Creditcorp on leased land (see "Note 16. Lease Commitments" (page 50) in the
Financial Review section of the Corporation's Annual Report 1993, which is
incorporated herein by reference thereto).
14
<PAGE> 17
.
In early 1993, the Bank completed construction of an operations center located
on 125,919 square feet of land owned in fee simple by the Bank in an industrial
area near downtown Honolulu. The Bank occupies all of the four-story building
which is anticipated to enable the Bank to meet its projected technological
requirements into the twenty-first century.
The Bank is also constructing a new five-story, 75,000 square foot office
building, including a branch, on property owned in fee simple in Maite, Guam to
replace its Agana, Guam Branch. Completion of the building is anticipated for
late 1994.
ITEM 3. LEGAL PROCEEDINGS
The legal proceeding brought by MasterCard International, Inc. in the United
States District Court for the Southern District of New York against Dean
Witter, Discover & Co. and others, in which the Bank and others were named as
counterclaim defendants, which was described in the Corporation's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992, was settled and
dismissed without the Corporation or the Bank making any payment or assuming
any other obligation. The date of the dismissal of claims against the Bank was
January 21, 1994.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1993.
15
<PAGE> 18
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Required information is included in "Common Stock Information" (Page 15) in the
Financial Review section of the Corporation's Annual Report 1993, and is
incorporated herein by reference thereto.
ITEM 6. SELECTED FINANCIAL DATA
Required information is included in "Summary of Selected Consolidated Financial
Data" (Page 16) in the Financial Review section of the Corporation's Annual
Report 1993, and is incorporated herein by reference thereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Required information is included in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" (Pages 17 through 32) in the
Financial Review section of the Corporation's Annual Report 1993, and is
incorporated herein by reference thereto.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information is included in the Financial Review section of the
Corporation's Annual Report 1993, which is incorporated herein by reference
thereto as follows:
<TABLE>
<CAPTION>
PAGE NUMBER
---- ------
<S> <C>
Report of Independent Accountants 34
First Hawaiian, Inc. and Subsidiaries:
Consolidated Balance Sheets at December 31, 1993 and 1992 35
Consolidated Statements of Income for the years ended
December 31, 1993, 1992 and 1991 36
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1993, 1992 and 1991 37
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991 38
First Hawaiian, Inc. (Parent Company):
Balance Sheets at December 31, 1993 and 1992 49
Statements of Income for the years ended December 31, 1993,
1992 and 1991 49
Statements of Cash Flows for the years ended December 31, 1993,
1992 and 1991 50
Notes to Financial Statements 39 - 51
Summary of Quarterly Financial Data (Unaudited) 33
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
16
<PAGE> 19
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Required information relating to directors is included in "Election of
Directors" and "Directors Continuing in Office and Executive Officers" (Pages 3
through 9) of the Corporation's Proxy Statement, and is incorporated herein by
reference thereto.
EXECUTIVE OFFICERS OF THE REGISTRANT
Listed below are the executive officers of the Corporation with their
positions, age and business experience during the past five years:
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE DURING LAST 5 YEARS
(ALL WITH THE CORPORATION AND THE BANK
OFFICER AGE EXCEPT AS OTHERWISE INDICATED)
----------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Walter A. Dods, Jr. 52 Chairman of the Board and Chief Executive Officer of the
Chairman, Chief Executive Corporation since 1989; President of the Corporation from 1989
Officer and Director -1991; Executive Vice President of the Corporation from 1982 -
1989; Director of the Corporation since 1983; Chairman of the
Board and Chief Executive Officer of the Bank since 1989;
President of the Bank from 1984 - 1989; Director of the Bank
since 1979. Mr. Dods has been with the Bank since 1968.
John A. Hoag 61 President and Director of the Corporation since 1991;
President and Director Executive Vice President of the Corporation from 1982 - 1991;
Director and President of the Bank since 1989; Executive Vice
President of the Bank from 1979 - 1989. Mr. Hoag has been
with the Bank since 1960.
Philip H. Ching 63 Executive Vice President of the Corporation since 1989; Vice
Executive Vice President President of the Corporation from 1974 - 1989; Vice Chairman
of the Bank since 1991; Executive Vice President of the Bank
from 1989 - 1991; Senior Vice President and Administrative
Assistant to the Chairman and Chief Executive Officer of the
Bank from 1979 - 1989. Mr. Ching has been with the Bank and a
trust company acquired by the Bank since 1957.
Donald G. Horner 43 Executive Vice President of the Corporation since 1989; Vice
Executive Vice President President of the Corporation from 1987 - 1989; Chairman and
Chief Executive Officer of Creditcorp since 1992; President of
Creditcorp from 1985 - 1992; Executive Vice President of the
Bank since 1992; President of FHL since 1985. Mr. Horner has
been with the Bank since 1978.
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE DURING LAST 5 YEARS
(ALL WITH THE CORPORATION AND THE BANK
OFFICER AGE EXCEPT AS OTHERWISE INDICATED)
------------------------- ----- ---------------------------------------------------------------
<S> <C> <C>
Howard H. Karr 51 Executive Vice President and Treasurer of the Corporation
Executive Vice President and since 1989; Vice President and Treasurer of the Corporation
Treasurer from 1978 - 1989; Vice Chairman and Chief Financial Officer of
the Bank since 1991; Executive Vice President and Chief
Financial Officer of the Bank from 1989 - 1991; Senior Vice
President and Controller of the Bank from 1979 - 1989. Mr.
Karr has been with the Bank since 1973.
Herbert E. Wolff 68 Senior Vice President and Secretary of the Corporation since
Senior Vice President and 1993; Vice President and Secretary of the Corporation from
Secretary 1982 - 1993; Senior Vice President and Secretary of the Bank
since 1986. Mr. Wolff joined the Bank in 1981.
</TABLE>
There are no family relationships among any of the executive officers of the
Corporation. There is no arrangement or understanding between any such
executive officer and another person pursuant to which he was elected as an
officer. The term of office of each officer is at the pleasure of the Board of
Directors of the Corporation.
ITEM 11. EXECUTIVE COMPENSATION
Required information is included in "Remuneration of Directors" and "Executive
Compensation" (Pages 9 through 20) of the Corporation's Proxy Statement, and is
incorporated herein by reference thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Required information is included in "Outstanding Shares; Voting Rights,"
"Election of Directors" and "Directors Continuing in Office and Executive
Officers" (Pages 2 through 8) of the Corporation's Proxy Statement, and is
incorporated herein by reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Required information is included in "Certain Transactions" (Pages 20 and 21) of
the Corporation's Proxy Statement, and is incorporated herein by reference
thereto.
18
<PAGE> 21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE NUMBER IN
--------------------
FIRST HAWAIIAN,
INC. ANNUAL
REPORT 1993
(EXHIBIT 13)
------------------------
<S> <C> <C>
(a) 1. Financial Statements
The following financial statements are incorporated by reference in Part II
(Item 8) of this Form 10-K:
Report of Independent Accountants 34
First Hawaiian, Inc. and Subsidiaries:
Consolidated Balance Sheets at December 31, 1993 and 1992 35
Consolidated Statements of Income for the
years ended December 31, 1993, 1992 and 1991 36
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1993, 1992 and 1991 37
Consolidated Statements of Cash Flows for the
years ended December 31, 1993, 1992 and 1991 38
First Hawaiian, Inc. (Parent Company):
Balance Sheets at December 31, 1993 and 1992 49
Statements of Income for the years ended
December 31, 1993, 1992 and 1991 49
Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991 50
Notes to Financial Statements 39 - 51
</TABLE>
2. Financial Statement Schedules
Schedules to the consolidated financial statements required by Article
9 of Regulation S-X are not required under the related instructions, or
the information is included in the consolidated financial statements,
or are inapplicable, and therefore have been omitted.
3. Exhibits
Exhibit 3 (i) Certificate of Incorporation - Incorporated by
reference to Exhibit 3 to the Corporation's Annual
Report on Form 10-K for the fiscal year ended December
31, 1990 as filed with the Securities and Exchange
Commission.
(ii) Bylaws - Incorporated by reference to Exhibit 3 to the
Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1987 as filed with the
Securities and Exchange Commission.
19
<PAGE> 22
Exhibit 4 Instruments defining rights of security holders,
including indentures.
(i) Equity - Incorporated by reference to Exhibit 3(i)
hereto.
(ii) Debt - Indenture, dated as of August 9, 1993 between
First Hawaiian, Inc. and The First National Bank of
Chicago, Trustee.
Exhibit 10 Material contracts
(i) Lease dated September 13, 1967, as amended April 21,
1987, between the Trustees under the Will and of the
Estate of Samuel M. Damon, Deceased, and First
National Bank of Hawaii (predecessor of the Bank) is
incorporated by reference to Exhibit 10 to the
Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1987 as filed with the
Securities and Exchange Commission.
(ii) Lease dated May 20, 1982, as amended April 23, 1987,
between the Trustees under the Will and of the Estate
of Samuel M. Damon, Deceased, and First Hawaiian Bank
is incorporated by reference to Exhibit 10 to the
Corporation's Annual Report on Forms 10-K for the
fiscal years ended December 31, 1987, 1985 and 1980 as
filed with the Securities and Exchange Commission.
(iii) Lease Agreement dated as of December 1, 1993 between
REFIRST, Inc. and First Hawaiian Bank.
(iv) Construction Management, Escrow and Development
Agreement dated as of December 1, 1993 among REFIRST,
Inc., First Hawaiian Bank and First Fidelity Bank,
N.A., Pennsylvania.
(v) Ground Lease dated as of December 1, 1993 among First
Hawaiian Center Limited Partnership, FH Center, Inc.
and REFIRST, Inc.
(vi) Stock Incentive Plan of First Hawaiian, Inc. dated
November 22, 1991 is incorporated by reference to
Exhibit 10 to the Corporation's Annual Report on Form
10-K for the fiscal year ended December 31, 1991 as
filed with the Securities and Exchange Commission.
(vii) Long-Term Incentive Plan of First Hawaiian, Inc.
effective January 1, 1992 is incorporated by reference
to Exhibit 10 to the Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991
as filed with the Securities and Exchange Commission.
20
<PAGE> 23
(viii) First Hawaiian, Inc. Supplemental Executive Retirement
Plan, as amended August 18, 1988 is incorporated by
reference to Exhibit 10 to the Corporation's Annual
Report on Form 10-K for the fiscal year ended December
31, 1992 as filed with the Securities and Exchange
Commission.
(ix) Amendment One to First Hawaiian, Inc. Supplemental
Executive Retirement Plan, effective January 1, 1992
is incorporated by reference to Exhibit 10 to the
Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992 as filed with the
Securities and Exchange Commission.
(x) First Hawaiian, Inc. Incentive Plan for Key
Executives, as amended through December 13, 1989 is
incorporated by reference to Exhibit 10 to the
Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992 as filed with the
Securities and Exchange Commission.
(xi) Directors' Retirement Plan, effective as of January 1,
1992 is incorporated by reference to Exhibit 10 to the
Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992 as filed with the
Securities and Exchange Commission.
Exhibit 12 Statement re: computation of ratios.
Exhibit 13 Annual report to security holders - Corporation's
Annual Report 1993.
Exhibit 22 Subsidiaries of the registrant.
Exhibit 23 Consent of independent accountants.
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the last
quarter of the fiscal year ended December 31, 1993.
(c) Response to this item is the same as Item 14(a)3.
(d) Response to this item is the same as Item 14(a)2.
21
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FIRST HAWAIIAN, INC.
(Registrant)
By /s/ HOWARD H. KARR
-----------------------------------
HOWARD H. KARR
EXECUTIVE VICE PRESIDENT AND TREASURER
Date: March 17, 1994
22
<PAGE> 25
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<S> <C> <C>
/s/ WALTER A. DODS, JR. Chairman, March 17, 1994
- --------------------------------------------- Chief Executive Officer -------------------------
Walter A. Dods, Jr. & Director Date
/s/ JOHN C. COUCH Director March 17, 1994
- --------------------------------------------- -------------------------
John C. Couch Date
/s/ JULIA ANN FROHLICH Director March 17, 1994
- --------------------------------------------- -------------------------
Julia Ann Frohlich Date
/s/ PAUL MULLIN GANLEY Director March 17, 1994
- --------------------------------------------- -------------------------
Paul Mullin Ganley Date
/s/ DAVID M. HAIG Director March 17, 1994
- --------------------------------------------- -------------------------
David M. Haig Date
/s/ JOHN A. HOAG President March 17, 1994
- --------------------------------------------- & Director -------------------------
John A. Hoag Date
/s/ BERT T. KOBAYASHI, JR. Director March 17, 1994
- --------------------------------------------- -------------------------
Bert T. Kobayashi, Jr. Date
/s/ RICHARD T. MAMIYA Director March 17, 1994
- --------------------------------------------- -------------------------
Richard T. Mamiya Date
/s/ FUJIO MATSUDA Director March 17, 1994
- --------------------------------------------- -------------------------
Fujio Matsuda Date
/s/ RODERICK F. McPHEE Director March 17, 1994
- --------------------------------------------- -------------------------
Roderick F. McPhee Date
/s/ ROBERT J. PFEIFFER Director March 17, 1994
- --------------------------------------------- -------------------------
Robert J. Pfeiffer Date
/s/ GEORGE P. SHEA, JR. Director March 17, 1994
- --------------------------------------------- -------------------------
George P. Shea, Jr. Date
/s/ FRED C. WEYAND Director March 17, 1994
- --------------------------------------------- -------------------------
Fred C. Weyand Date
/s/ ROBERT C. WO Director March 17, 1994
- --------------------------------------------- -------------------------
Robert C. Wo Date
/s/ HOWARD H. KARR Executive Vice President March 17, 1994
- --------------------------------------------- & Treasurer -------------------------
Howard H. Karr (Principal financial and Date
accounting officer)
</TABLE>
23
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
-------------------------------------------------------------------------------------------------------- ------------
<S> <C> <C> <C>
3 (i) Certificate of Incorporation - Incorporated by reference to Exhibit
3 to the Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990 as filed with the Securities and -
Exchange Commission.
(ii) Bylaws - Incorporated by reference to Exhibit 3 to the
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1987 as filed with the Securities and Exchange -
Commission.
4 Instruments defining rights of security holders, including
indentures.
(i) Equity - Incorporated by reference to Exhibit 3(i) hereto. -
(ii) Debt - Indenture, dated as of August 9, 1993 between First
Hawaiian, Inc. and The First National Bank of Chicago, Trustee.
10 Material contracts
(i) Lease dated September 13, 1967, as amended April 21, 1987, between
the Trustees under the Will and of the Estate of Samuel M. Damon,
Deceased, and First National Bank of Hawaii (predecessor of the
Bank) is incorporated by reference to Exhibit 10 to the
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1987 as filed with the Securities and Exchange
Commission. -
(ii) Lease dated May 20, 1982, as amended April 23, 1987, between the
Trustees under the Will and of the Estate of Samuel M. Damon,
Deceased, and First Hawaiian Bank is incorporated by reference to
Exhibit 10 to the Corporation's Annual Report on Forms 10-K for the
fiscal years ended December 31, 1987, 1985 and 1980 as filed with
the Securities and Exchange Commission. -
(iii) Lease Agreement dated as of December 1, 1993 between REFIRST, Inc.
and First Hawaiian Bank.
(iv) Construction Management, Escrow and Development Agreement dated as
of December 1, 1993 among REFIRST, Inc., First Hawaiian Bank and
First Fidelity Bank, N.A., Pennsylvania.
(v) Ground Lease dated as of December 1, 1993 among First Hawaiian
Center Limited Partnership, FH Center, Inc. and REFIRST, Inc.
</TABLE>
24
<PAGE> 27
<TABLE>
<S> <C> <C> <C>
(vi) Stock Incentive Plan of First Hawaiian, Inc. dated November 22,
1991 is incorporated by reference to Exhibit 10 to the
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991 as filed with the Securities and Exchange -
Commission.
(vii) Long-Term Incentive Plan of First Hawaiian, Inc. effective
January 1, 1992 is incorporated by reference to Exhibit 10 to the
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991 as filed with the Securities and Exchange -
Commission.
(viii) First Hawaiian, Inc. Supplemental Executive Retirement Plan, as
amended August 18, 1988 is incorporated by reference to Exhibit 10
to the Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992 as filed with the Securities and Exchange
Commission. -
(ix) Amendment One to First Hawaiian, Inc. Supplemental Executive
Retirement Plan, effective January 1, 1992 is incorporated by
reference to Exhibit 10 to the Corporation's Annual Report on Form
10-K for the fiscal year ended December 31, 1992 as filed with the
Securities and Exchange Commission. -
(x) First Hawaiian, Inc. Incentive Plan for Key Executives, as amended
through December 13, 1989 is incorporated by reference to Exhibit
10 to the Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992 as filed with the Securities and
Exchange Commission. -
(xi) Directors' Retirement Plan, effective as of January 1, 1992 is
incorporated by reference to Exhibit 10 to the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992 as
filed with the Securities and Exchange Commission. -
12 Statement re: computation of ratios.
13 Annual report to security holders - Corporation's Annual Report
1993.
22 Subsidiaries of the registrant.
23 Consent of independent accountants.
</TABLE>
25
<PAGE> 1
EXHIBIT 4(ii)
DEBT - INDENTURE,
DATED AS OF AUGUST 9, 1993
BETWEEN FIRST HAWAIIAN, INC.
AND THE FIRST NATIONAL BANK OF CHICAGO
<PAGE> 2
CONFORMED COPY
-----------------------------------------------------------------
FIRST HAWAIIAN, INC.
TO
THE FIRST NATIONAL BANK OF CHICAGO,
Trustee
---------------
SUBORDINATED DEBT SECURITIES
---------------
INDENTURE
Dated as of August 9, 1993
---------------
-----------------------------------------------------------------
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
Definitions and Other Provisions
of General Application . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.3 Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.4 Acts of Holders; Record Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.5 Notices, Etc., to Trustee and Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1.6 Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.7 Conflict with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.8 Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.9 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.10 Separability Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.11 Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.12 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.13 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE II
Security Forms . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.1 Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.2 Form of Face of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.3 Form of Reverse of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.4 Form of Legend for Global Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.5 Form of Trustee's Certificate of
Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE III
The Securities . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.1 Amount Unlimited; Issuable in Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.2 Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.3 Execution, Authentication, Delivery
and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.4 Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.5 Registration, Registration of
Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.6 Mutilated, Destroyed, Lost and
Stolen Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.7 Payment of Interest; Interest
Rights Preserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
- -------------------
NOTE: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-i-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 3.8 Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.9 Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.10 Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE IV
Satisfaction and Discharge . . . . . . . . . . . . . . . . . . . 32
Section 4.1 Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.2 Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE V
Remedies . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.2 Acceleration of Maturity;
Rescission and Annulment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.3 Collection of Indebtedness and Suits
for Enforcement by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.4 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.5 Trustee May Enforce Claims Without
Possession of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.6 Application of Money Collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.7 Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.8 Unconditional Right of Holders to
Receive Principal, Premium and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.9 Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.10 Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.11 Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.12 Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.13 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.14 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.15 Waiver of Usury, Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VI
The Trustee . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.1 Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.2 Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.3 Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.4 Not Responsible for Recitals
or Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.5 May Hold Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.6 Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.7 Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.8 Disqualification; Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.9 Corporate Trustee Required;
Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.10 Resignation and Removal;
</TABLE>
- -------------------------
NOTE: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-ii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.11 Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.12 Merger, Conversion, Consolidation
or Succession to Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.13 Preferential Collection of Claims
Against Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.14 Appointment of Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VII
Holders' Lists and Reports by Trustee and Company . . . . . . . . . . . . . 51
Section 7.1 Company to Furnish Trustee Names
and Addresses of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.2 Preservation of Information;
Communications to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.3 Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.4 Reports by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VIII
Consolidation, Merger, Conveyance, Transfer or Lease . . . . . . . . . . . . . 52
Section 8.1 Company May Consolidate, Etc.,
Only on Certain Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 8.2 Successor Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE IX
Supplemental Indentures . . . . . . . . . . . . . . . . . . . . 54
Section 9.1 Supplemental Indentures Without
Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.2 Supplemental Indentures with
Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.3 Execution of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 9.4 Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 9.5 Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 9.6 Reference in Securities to
Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE X
Covenants . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.1 Payment of Principal, Premium
and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.2 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.3 Money for Securities Payments
to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.4 Statement by Officers as to Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 10.5 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
- -----------------------
NOTE: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-iii-
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 10.6 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 10.7 Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 10.8 Waiver of Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE XI
Redemption of Securities . . . . . . . . . . . . . . . . . . . . 61
Section 11.1 Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 11.2 Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 11.3 Selection by Trustee of Securities
to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 11.4 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 11.5 Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 11.6 Securities Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 11.7 Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE XII
Sinking Funds . . . . . . . . . . . . . . . . . . . . . . . 64
Section 12.1 Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 12.2 Satisfaction of Sinking Fund
Payments with Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 12.3 Redemption of Securities for
Sinking Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE XIII
Subordination of Securities . . . . . . . . . . . . . . . . . . . 65
Section 13.1 Securities Subordinate to
Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 13.2 Payment Over of Proceeds Upon
Dissolution, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 13.3 Prior Payment to Senior Indebtedness
Upon Acceleration of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 13.4 No Payment When Senior Indebtedness
Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 13.5 Payment Permitted If No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 13.6 Subrogation to Rights of Holders
of Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 13.7 Provisions Solely to Define
Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 13.8 Trustee to Effectuate Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 13.9 No Waiver of Subordination Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 13.10 Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 13.11 Reliance on Judicial Order or
Certificate of Liquidating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 13.12 Trustee Not Fiduciary for Holders
of Senior Indebtedness or
</TABLE>
- -----------------------
NOTE: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-iv-
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C>
Entitled Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 13.13 Rights of Trustee as Holder of
Senior Indebtedness or Entitled Person; Preservation of Trustee's Rights . . . . . . . . . . 72
Section 13.14 Article Applicable to
Paying Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 13.15 Payment of Proceeds in Certain Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE XIV
Defeasance and Covenant Defeasance . . . . . . . . . . . . . . . . . . 74
Section 14.1 Applicability of Article;
Company's Option to Effect
Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 14.2 Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 14.3 Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 14.4 Conditions to Defeasance or
Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 14.5 Deposited Money and U.S. Government
Obligations to be Held in Trust;
Other Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 14.6 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
Definitions and Other Provisions
of General Application . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.3 Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.4 Acts of Holders; Record Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.5 Notices, Etc., to Trustee and Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1.6 Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.7 Conflict with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.8 Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.9 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.10 Separability Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.11 Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.12 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.13 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE II
Security Forms . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.1 Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.2 Form of Face of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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Section 2.3 Form of Reverse of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.4 Form of Legend for Global Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.5 Form of Trustee's Certificate of
Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE III
The Securities . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.1 Amount Unlimited; Issuable in Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.2 Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.3 Execution, Authentication, Delivery
and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.4 Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.5 Registration, Registration of
Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.6 Mutilated, Destroyed, Lost and
Stolen Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.7 Payment of Interest; Interest
Rights Preserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 3.8 Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.9 Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.10 Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE IV
Satisfaction and Discharge . . . . . . . . . . . . . . . . . . . 32
Section 4.1 Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.2 Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE V
Remedies . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.2 Acceleration of Maturity;
Rescission and Annulment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.3 Collection of Indebtedness and Suits
for Enforcement by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.4 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.5 Trustee May Enforce Claims Without
Possession of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.6 Application of Money Collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.7 Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.8 Unconditional Right of Holders to
Receive Principal, Premium and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.9 Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.10 Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.11 Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.12 Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
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Section 5.13 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.14 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.15 Waiver of Usury, Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VI
The Trustee . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.1 Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.2 Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.3 Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.4 Not Responsible for Recitals
or Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.5 May Hold Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.6 Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.7 Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.8 Disqualification; Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.9 Corporate Trustee Required;
Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.10 Resignation and Removal;
Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.11 Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.12 Merger, Conversion, Consolidation
or Succession to Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.13 Preferential Collection of Claims
Against Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.14 Appointment of Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VII
Holders' Lists and Reports by Trustee and Company . . . . . . . . . . . . . . 51
Section 7.1 Company to Furnish Trustee Names
and Addresses of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.2 Preservation of Information;
Communications to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.3 Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.4 Reports by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VIII
Consolidation, Merger, Conveyance, Transfer or Lease . . . . . . . . . . . . . 53
Section 8.1 Company May Consolidate, Etc.,
Only on Certain Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 8.2 Successor Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE IX
Supplemental Indentures . . . . . . . . . . . . . . . . . . . . 54
Section 9.1 Supplemental Indentures Without
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Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.2 Supplemental Indentures with
Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.3 Execution of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 9.4 Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 9.5 Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 9.6 Reference in Securities to
Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE X
Covenants . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.1 Payment of Principal, Premium
and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.2 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.3 Money for Securities Payments
to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 10.4 Statement by Officers as to Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 10.5 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 10.6 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 10.7 Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 10.8 Waiver of Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE XI
Redemption of Securities . . . . . . . . . . . . . . . . . . . . 61
Section 11.1 Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 11.2 Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 11.3 Selection by Trustee of Securities
to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 11.4 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 11.5 Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 11.6 Securities Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 11.7 Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE XII
Sinking Funds . . . . . . . . . . . . . . . . . . . . . . . 64
Section 12.1 Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 12.2 Satisfaction of Sinking Fund
Payments with Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 12.3 Redemption of Securities for
Sinking Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE XIII
Subordination of Securities . . . . . . . . . . . . . . . . . . . 65
Section 13.1 Securities Subordinate to
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Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 13.2 Payment Over of Proceeds Upon
Dissolution, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 13.3 Prior Payment to Senior Indebtedness
Upon Acceleration of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 13.4 No Payment When Senior Indebtedness
Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 13.5 Payment Permitted If No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 13.6 Subrogation to Rights of Holders
of Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 13.7 Provisions Solely to Define
Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 13.8 Trustee to Effectuate Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 13.9 No Waiver of Subordination Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 13.10 Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 13.11 Reliance on Judicial Order or
Certificate of Liquidating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 13.12 Trustee Not Fiduciary for Holders
of Senior Indebtedness or
Entitled Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 13.13 Rights of Trustee as Holder of
Senior Indebtedness or Entitled Person; Preservation of Trustee's Rights. . . . . . . . . 72
Section 13.14 Article Applicable to
Paying Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 13.15 Payment of Proceeds in Certain Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE XIV
Defeasance and Covenant Defeasance . . . . . . . . . . . . . . . . . 74
Section 14.1 Applicability of Article;
Company's Option to Effect
Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 14.2 Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 14.3 Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 14.4 Conditions to Defeasance or
Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 14.5 Deposited Money and U.S. Government
Obligations to be Held in Trust;
Other Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 14.6 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
</TABLE>
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<PAGE> 12
First Hawaiian, Inc.
Certain Sections of this Indenture relating to
Sections 310 through 318, inclusive, of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
<S> <C> <C>
Section 310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8
6.10
6.13
Section 311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.13
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.13
Section 312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2(a)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2(b)
Section 313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3(a)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3(b)
Section 314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
10.4
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Section 315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
(d)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
(d)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
(d)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.14
Section 316 (a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2
5.12
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.13
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4(c)
Section 317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3
Section 318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7
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<PAGE> 13
INDENTURE, dated as of August 9, 1993, between FIRST HAWAIIAN,
INC., a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), having its principal office at 1132
Bishop Street, Honolulu, Hawaii 96813 and THE FIRST NATIONAL BANK OF CHICAGO, a
national banking association, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of
this Indenture to provide for the issuance from time to time of its unsecured
subordinated debentures, notes or other evidences of indebtedness (herein
called the "Securities"), to be issued in one or more series as in this
Indenture provided.
All things necessary to make this Indenture a valid agreement of
the Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof, as
follows:
ARTICLE I
Definitions and Other Provisions
of General Application
Section 1.1 Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles, and, except as otherwise herein expressly
provided, the term "generally accepted accounting principles" with
respect to any computation required or permitted hereunder shall mean
such accounting principles as are generally accepted at the date of such
computation; and
<PAGE> 14
2
(4) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning
specified in Section 1.4.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of
this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"Authorized Officer" means any officer of the Company designated
by a resolution of the Board of Directors to take certain actions as
specified in this Indenture.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors, or by action of an Authorized Officer
designated as such pursuant to a resolution of the Board of Directors,
and to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment,
means each Monday, Tuesday, Wednesday, Thursday and Friday which is not
a day on which banking institutions in that Place of Payment are
authorized or obligated by law or executive order to close.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act
of 1934, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it
under the Trust Indenture Act, then the body performing such duties at
such time.
<PAGE> 15
3
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its Chairman of the Board,
its Vice Chairman of the Board, its President, its Chief Financial
Officer or a Vice President, and by its Controller, an Assistant
Controller, its Secretary or an Assistant Secretary, and delivered to
the Trustee.
"Corporate Trust Office" means the office of the Trustee at which
at any particular time its corporate trust business shall be principally
administered, which office as of the date hereof is located at One
First National Plaza, Suite 0126, Chicago, Illinois, 60670-0126,
Attention Corporate Trust Services Division.
"Corporation" means a corporation, association, company,
joint-stock company or business trust.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Global
Securities, the Person designated as Depositary for such series by the
Company pursuant to Section 3.1, which Person shall be a clearing agency
registered under the Securities Exchange Act of 1934, as amended.
"Entitled Person" means any person entitled to payment pursuant
to the terms of Other Financial Obligations.
"Event of Default" has the meaning specified in Section 5.1.
"Excess Proceeds" has the meaning specified in Section 13.15.
"Exchange Act" means the Securities Exchange Act of 1934 as it
may be amended and any successor act thereto.
"Global Security" means a Security bearing the legend prescribed
in Section 2.4 evidencing all or part of a series of Securities,
authenticated and delivered to the Depositary for such series or its
nominee, and registered in the name of such Depositary or nominee.
<PAGE> 16
4
"Holder" means a Person in whose name a Security is registered in
the Security Register.
"Indenture" means this instrument as originally executed or as it
may from time to time be supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof, including, for all purposes of this instrument, and
any such supplemental indenture, the provisions of the Trust Indenture
Act that are deemed to be a part of and govern this instrument and any
such supplemental indenture, respectively. The term "Indenture" shall
also include the terms of particular series of Securities established as
contemplated by Section 3.1.
"Interest", when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means
interest payable after Maturity.
"Interest Payment Date", when used with respect to any Security,
means the Stated Maturity of an instalment of interest on such Security.
"Maturity", when used with respect to any Security, means the
date on which the principal of such Security or an installment of
principal becomes due and payable as therein or herein provided, whether
at the Stated Maturity or by declaration of acceleration, call for
redemption or otherwise.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, a Vice Chairman of the Board, the President, the
Chief Financial Officer or a Vice President, and by the Treasurer, an
Assistant Treasurer, the Controller, an Assistant Controller, the
Secretary or an Assistant Secretary, of the Company, and delivered to
the Trustee. One of the officers signing an Officers' Certificate given
pursuant to Section 10.4 shall be the principal executive, financial or
accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may
be counsel for the Company and who shall be acceptable to the Trustee.
"Original Issue Discount Security" means any Security which
provides for an amount less than the principal amount thereof to be due
and payable upon a declaration of acceleration of the Maturity thereof
pursuant to Section 5.2.
"Other Financial Obligations" means, unless otherwise determined
with respect to any series of Securities pursuant to Section 3.1, all
obligations of the Company to make payment pursuant to the terms of
financial instruments, such
<PAGE> 17
5
as (i) securities contracts and currency and foreign exchange contracts
and (ii) derivative instruments, such as swap agreements (including
interest rate and currency and foreign exchange rate swap agreements),
cap agreements, floor agreements, collar agreements, interest rate
agreements, foreign exchange agreements, options, commodity future
contracts and commodity options contracts, other than (x) obligations on
account of Senior Indebtedness and (y) obligations on account of
indebtedness for money borrowed ranking pari passu with or subordinate
to the Securities.
"Outstanding", when used with respect to Securities, means, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Securities; provided that,
if such Securities are to be redeemed, notice of such redemption has
been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;
(iii) Securities which have been paid pursuant to Section 3.6 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than
any such Securities in respect of which there shall have been
presented to the Trustee proof satisfactory to it that such
Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company; and
(iv) Securities which have been defeased pursuant to Section
14.2 hereof;
provided, however, that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any
request, demand, authorization, direction, notice, consent or waiver
hereunder, (i) the principal amount of an Original Issue Discount
Security that shall be deemed to be Outstanding shall be the amount of
the principal thereof that would be due and payable as of the date of
such determination upon acceleration of the Maturity thereof pursuant to
Section 5.2, (ii) the principal amount of a Security denominated in one
or more foreign currencies or currency units shall be the U.S. dollar
equivalent,
<PAGE> 18
6
determined in the manner provided as contemplated by Section 3.1 on the
date of original issuance of such Security, of the principal amount (or,
in the case of an Original Issue Discount Security, the U.S. dollar
equivalent on the date of original issuance of such Security of the
amount determined as provided in (i) above) of such Security, and (iii)
Securities owned by the Company or any other obligor upon the Securities
or any Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or
waiver, only Securities which the Trustee knows to be so owned shall be
so disregarded. Securities so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect
to such Securities and that the pledgee is not the Company or any other
obligor upon the Securities or any Affiliate of the Company or of such
other obligor.
"Paying Agent" means any Person authorized by the Company to pay
the principal of or any premium or interest on any Securities on behalf
of the Company.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency
or political subdivision thereof.
"Place of Payment", when used with respect to the Securities of
any series, means the place or places where the principal of and any
premium and interest on the Securities of that series are payable as
specified as contemplated by Section 3.1.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 3.6
in exchange for or in lieu of a mutilated, destroyed, lost or stolen
Security shall be deemed to evidence the same debt as the mutilated,
destroyed, lost or stolen Security.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to
this Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
<PAGE> 19
7
"Regular Record Date" for the interest payable on any Interest
Payment Date on the Securities of any series means the date specified
for that purpose as contemplated by Section 3.1.
"Responsible Officer", when used with respect to the Trustee,
means the chairman or any vice-chairman of the board of directors, the
chairman or any vice-chairman of the executive committee of the board of
directors, the chairman of the trust committee, the president, any vice
president, any assistant vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any senior trust officer, trust officer or assistant
trust officer, the controller or any assistant controller or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity
with the particular subject.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and
delivered under this Indenture.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Senior Indebtedness" means, unless otherwise determined with
respect to any series of Securities pursuant to Section 3.1, the
principal of (and premium, if any) and interest on (a) all indebtedness
of the Company for money borrowed or purchased (including indebtedness
of others for money borrowed or purchased guaranteed by the Company),
whether outstanding on the date of execution of this Indenture or
thereafter created, assumed or incurred other than (i) the Securities,
whether outstanding on the date of this Indenture or thereafter issued,
(ii) the Company's existing subordinated indebtedness, if any, and (iii)
such other indebtedness of the Company as by its terms is expressly
stated to be not superior in right of payment to the Securities or to
rank pari passu in right of payment with the Securities and (b)
amendments, renewals, extensions, modifications and refundings of any
such Senior Indebtedness. For the purposes of this definition,
"indebtedness for money borrowed" when used with respect to the Company
means (i) any obligation of, or any obligation guaranteed by, the
Company for the repayment of borrowed or purchased money, whether or not
evidenced by bonds, debentures, notes or other written instruments, and
direct credit substitutes (ii) any deferred payment obligation of, or
any such obligation guaranteed by, the Company for the payment of the
purchase price of property or assets evidenced by a note or similar
instrument, and (iii) any
<PAGE> 20
8
obligation of, or any such obligation guaranteed by, the Company for the
payment of rent or other amounts under a lease of property or assets
which obligation is required to be classified and accounted for as a
capitalized lease on the balance sheet of the Company under generally
accepted accounting principles.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity", when used with respect to any Security or any
instalment of principal thereof or interest thereon, means the date
specified in such Security as the fixed date on which the principal of
such Security or such instalment of principal or interest is due and
payable.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company
or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries. For the purposes of this definition, "voting stock"
means stock which ordinarily has voting power for the election of
directors, whether at all times or only so long as no senior class of
stock has such voting power by reason of any contingency.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "Trustee" shall mean or include each Person who is then a
Trustee hereunder, and if at any time there is more than one such
Person, "Trustee" as used with respect to the Securities of any series
shall mean the Trustee with respect to Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended
after such date, "Trust Indenture Act" means, to the extent required by
any such amendment, the Trust Indenture Act of 1939 as so amended.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president (but shall not include any assistant
vice president), whether or not designated by a number or a word or
words added before or after the title "vice president".
"Wholly-owned Subsidiary" means any Subsidiary all of whose
outstanding voting stock (other than directors' qualifying shares) shall
at the time be owned by the Company or one or more of its Wholly-owned
Subsidiaries.
<PAGE> 21
9
Section 1.2 Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to
take any action under any provision of this Indenture, the Company shall
furnish to the Trustee such certificates and opinions as may be required under
the Trust Indenture Act. Each such certificate or opinion shall be given in
the form of an Officers' Certificate, if to be given by an officer of the
Company, or an Opinion of Counsel, if to be given by counsel, and shall comply
with the requirements of the Trust Indenture Act and any other requirements set
forth in this Indenture.
Every certificate or opinion (other than the Officers'
Certificate delivered under Section 10.4 hereof) with respect to compliance
with a condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 1.3 Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is
<PAGE> 22
10
based are erroneous. Any such certificate or opinion of counsel may be based,
insofar as it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 1.4 Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or
of a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and (subject to Section 6.1) conclusive in favor of the Trustee
and the Company, if made in the manner provided in this Section.
Without limiting the generality of the foregoing, a Holder,
including a Depositary that is a Holder of a Global Security, may make, give or
take, by a proxy, or proxies, duly appointed in writing, any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted in this Indenture to be made, given or taken by Holders, and a
Depositary that is a Holder of a Global Security may provide its proxy or
proxies to the beneficial owners of interest in any such Global Security.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the
<PAGE> 23
11
authority of the Person executing the same, may also be proved in any other
manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the
Trust Indenture Act, fix any day as the record date for the purpose of
determining the Holders of Securities of any series entitled to give or take
any request, demand, authorization, direction, notice, consent, waiver or other
action, or to vote on any action, authorized or permitted to be given or taken
by Holders of Securities of such series. If not set by the Company prior to
the first solicitation of a Holder of Securities of such series made by any
Person in respect of any such action, or, in the case of any such vote, prior
to such vote, the record date for any such action or vote shall be the 30th day
(or, if later, the date of the most recent list of Holders required to be
provided pursuant to Section 7.1) prior to such first solicitation or vote, as
the case may be. With regard to any record date for action to be taken by the
Holders of one or more series of Securities, only the Holders of Securities of
such series on such date (or their duly designated proxies) shall be entitled
to give or take, or vote on, the relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
(f) Without limiting the foregoing, a Holder entitled hereunder
to give or take any action hereunder with regard to any particular Security may
do so with regard to all or any part of the principal amount of such Security
or by one or more duly appointed agents each of which may do so pursuant to
such appointment with regard to all or any different part of such principal
amount.
Section 1.5 Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
<PAGE> 24
12
Attention: Corporate Trustee Administration Department, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this instrument or at any
other address previously furnished in writing to the Trustee by the
Company, Attention: Chief Financial Officer.
Section 1.6 Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each Holder
affected by such event, at his address as it appears in the Security Register,
not later than the latest date (if any), and not earlier than the earliest date
(if any), prescribed for the giving of such notice. In any case where notice
to Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by
Holders shall be filed with the Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
Section 1.7 Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall
be deemed to apply to this Indenture as so modified or to be excluded, as the
case may be.
<PAGE> 25
13
Section 1.8 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
Section 1.9 Successors and Assigns.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
Section 1.10 Separability Clause.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 1.11 Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than (a) the parties hereto and their
successors hereunder, (b) the holders of Senior Indebtedness (c) the Holders,
and (d) subject to Section 13.15, Entitled Persons in respect of Other
Financial Obligations, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
Section 1.12 Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICTS OF LAW RULES OF SUCH STATE.
Section 1.13 Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or
Stated Maturity of any Security shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of this Indenture or of the
Securities (other than a provision of the Securities of any series which
specifically states that such provision shall apply in lieu of this Section))
payment of interest or principal (and premium, if any) need not be made at such
Place of Payment on such date, but may be made on the next succeeding Business
Day at such Place of Payment with the same force and effect as if made on the
Interest Payment Date or Redemption Date, or at the Stated Maturity, provided
that no interest shall accrue for the period from and after such Interest
Payment Date, Redemption Date or Stated Maturity, as the case may be.
<PAGE> 26
14
ARTICLE II
Security Forms
Section 2.1 Forms Generally.
The Securities of each series shall be in substantially the form
set forth in this Article, or in such other form as shall be established by or
pursuant to a Board Resolution or in one or more indentures supplemental
hereto, in each case with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by this Indenture, and may
have such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution of the
Securities. If the form of Securities of any series is established by action
taken pursuant to a Board Resolution, a copy of an appropriate record of such
action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the Company
Order contemplated by Section 3.3 for the authentication and delivery of such
Securities.
The definitive Securities shall be printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner, all
as determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
Section 2.2 Form of Face of Security.
THIS SECURITY IS NOT A DEPOSIT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY FEDERAL OR OTHER GOVERNMENTAL AGENCY.
[Insert any legend required by the Internal Revenue Code of 1986,
as amended, and the regulations thereunder.]
FIRST HAWAIIAN, INC.
.................................................
No........... $ ........
First Hawaiian, Inc. a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company", which
term includes any successor Person under the Indenture hereinafter referred
to), for value received, hereby promises to pay to......................... ,
or registered assigns, the principal sum of................................
............................... Dollars on ................................
[if the Security is to bear interest prior to Maturity, insert --
<PAGE> 27
15
, and to pay interest thereon from ............. or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semi-annually on ............ and ............ in each year, commencing
.........., at the rate of ....% per annum, until the principal hereof is paid
or made available for payment [if applicable, insert -- , and (to the extent
that the payment of such interest shall be legally enforceable) at the rate of
....% per annum on any overdue principal and premium and on any overdue
instalment of interest]. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the ....... or ....... (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said
Indenture].
[If the Security is not to bear interest prior to Maturity,
insert -- The principal of this Security shall not bear interest except in the
case of a default in payment of principal upon acceleration, upon redemption or
at Stated Maturity and in such case the overdue principal of this Security
shall bear interest at the rate of ....% per annum (to the extent that the
payment of such interest shall be legally enforceable), which shall accrue from
the date of such default in payment to the date payment of such principal has
been made or duly provided for. Interest on any overdue principal shall be
payable on demand. Any interest on any overdue principal shall bear interest
at the rate of .....% per annum (to the extent that the payment of such
interest shall be legally enforceable), which shall accrue from the date of
such default in payment to the date payment of such interest has been made or
duly provided for, and such interest shall also be payable on demand.]
Payment of the principal of (and premium, if any) and [if
applicable, insert -- any such] interest on this Security will be made at the
office or agency of the Company maintained for that purpose in [the Borough of
Manhattan, the City of New York], in such coin or currency of [the United
States of America] [insert other currency, if applicable] as at the time of
payment is legal tender for payment of public and private debts [if applicable,
insert -- ; provided, however, that at the option of
<PAGE> 28
16
the Company payment of interest may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register].
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed
by the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.
Dated:
FIRST HAWAIIAN, INC.
By...................................
Attest:
...........................
Section 2.3 Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of
the Company (herein called the "Securities"), issued and to be issued in one or
more series under an Indenture, dated as of August 9, 1993 (herein called the
"Indenture"), between the Company and The First National Bank of Chicago, as
Trustee (herein called the "Trustee", which term includes any successor trustee
under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Trustee, the holders of Senior Indebtedness, Entitled Persons and the Holders
of the Securities and of the terms upon which the Securities are, and are to
be, authenticated and delivered. This Security is one of the series designated
on the face hereof[, limited in aggregate principal amount to $ ...........].
[If applicable, insert -- The Securities of this series are
subject to redemption upon not less than 30 days' notice by mail, [if
applicable, insert -- (1) on ........... in any year commencing with the year
...... and ending with the year ......
<PAGE> 29
17
through operation of the sinking fund for this series at a Redemption Price
equal to 100% of the principal amount, and (2)] at any time [on or after
..........., 19..], as a whole or in part, at the election of the Company, at
the following Redemption Prices (expressed as percentages of the principal
amount): If redeemed [on or before ................, ___%, and if redeemed]
during the 12-month period beginning ............. of the years indicated,
<TABLE>
<S> <C> <C> <C>
Redemption Redemption
Year Price Year Price
- ---- ----- ---- -----
</TABLE>
and thereafter at a Redemption Price equal to ....% of the principal amount,
together in the case of any such redemption [if applicable, insert -- (whether
through operation of the sinking fund or otherwise)] with accrued interest to
the Redemption Date, but interest installments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at the close of
business on the relevant Record Dates referred to on the face hereof, all as
provided in the Indenture.]
[If applicable, insert -- The Securities of this series are
subject to redemption upon not less than 30 days' notice by mail, (1) on
............ in any year commencing with the year .... and ending with the year
.... through operation of the sinking fund for this series at the Redemption
Prices for redemption through operation of the sinking fund (expressed as
percentages of the principal amount) set forth in the table below, and (2) at
any time [on or after ............], as a whole or in part, at the election of
the Company, at the Redemption Prices for redemption otherwise than through
operation of the sinking fund (expressed as percentages of the principal
amount) set forth in the table below: If redeemed during the 12-month period
beginning ............ of the years indicated,
<TABLE>
<S> <C> <C>
Redemption Price Redemption Price For
For Redemption Redemption Otherwise
Through Operation Than Through Operation
Year of the Sinking Fund of the Sinking Fund
- ---- ------------------- ----------------------
</TABLE>
and thereafter at a Redemption Price equal to .....% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at
<PAGE> 30
18
the close of business on the relevant Record Dates referred to on the face
hereof, all as provided in the Indenture.]
[Notwithstanding the foregoing, the Company may not, prior to
.............., redeem any Securities of this series as contemplated by [Clause
(2) of] the preceding paragraph as a part of, or in anticipation of, any
refunding operation by the application, directly or indirectly, of moneys
borrowed having an interest cost to the Company (calculated in accordance with
generally accepted financial practice) of less than .....% per annum.]
[The sinking fund for this series provides for the redemption on
........... in each year beginning with the year ....... and ending with the
year ...... of [not less than $.......... ("mandatory sinking fund") and not
more than] $......... aggregate principal amount of Securities of this series.
Securities of this series acquired or redeemed by the Company otherwise than
through [mandatory] sinking fund payments may be credited against subsequent
[mandatory] sinking fund payments otherwise required to be made [in the inverse
order in which they become due].]
[If the Security is subject to redemption, insert -- In the event
of redemption of this Security in part only, a new Security or Securities of
this series and of like tenor for the unredeemed portion hereof will be issued
in the name of the Holder hereof upon the cancellation hereof.]
[If applicable, insert -- The Indenture contains provisions for
defeasance at any time of [(a)] [the entire indebtedness evidenced by this
Security] [and (b)] [certain restrictive covenants,] [in each case] upon
compliance by the Company with certain conditions set forth therein, which
provisions apply to this Security.]
The indebtedness evidenced by this Security is, to the extent
provided in the Indenture, subordinate and subject in right of payment to the
prior payment in full of all Senior Indebtedness, and this Security is issued
subject to the provisions of the Indenture with respect thereto. This Security
is also issued subordinate and subject to the provisions of the Indenture
regarding prior payment in full to Entitled Persons in respect of Other
Financial Obligations. The Indenture also provides that if, upon the
occurrence of certain events of bankruptcy or insolvency relating to the
Company, there remains, after giving effect to such subordination provisions,
any amount of cash, property or securities available for payment or
distribution in respect of Securities of this series (as defined in the
Indenture, "Excess Proceeds"), and if, at such time, any Entitled Person (as
defined in the Indenture) has not received payment in full of all amounts due
or to become due on or in respect of Other Financial Obligations (as defined in
the Indenture), then such Excess Proceeds shall first be applied to
<PAGE> 31
19
pay or provide for the payment in full of such Other Financial Obligations
before any payment or distribution may be made in respect of Securities of this
series. Each Holder of this Security, by accepting the same, (a) agrees to and
shall be bound by such provisions, (b) authorizes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to effectuate
the subordination and payment of Excess Proceeds as provided in the Indenture
and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes.
[If the Security is not an Original Issue Discount Security,
insert -- The principal of this Security may not be declared due and payable
upon the occurrence of an Event of Default, except an Event of Default relating
to certain events involving the bankruptcy, insolvency or reorganization of the
Company. If an Event of Default with respect to Securities of this series
relating to certain events involving the bankruptcy, insolvency or
reorganization of the Company shall occur and be continuing, the principal of
the Securities of this series may be declared due and payable in the manner and
with the effect provided in the Indenture.]
[If the Security is an Original Issue Discount Security, insert
- -- The principal of this Security may not be declared due and payable upon the
occurrence of an Event of Default, except an Event of Default relating to
certain events involving the bankruptcy, insolvency or reorganization of the
Company. If an Event of Default with respect to Securities of this series
relating to certain events involving the bankruptcy, insolvency or
reorganization of the Company shall occur and be continuing, an amount of
principal of the Securities of this series may be declared due and payable in
the manner and with the effect provided in the Indenture. Such amount shall be
equal to -- insert formula for determining the amount. Upon payment [if
applicable, insert -- (i)] of the amount of principal so declared due and
payable [if applicable, insert -- and (ii) of interest on any overdue principal
and overdue interest (in each case to the extent that the payment of such
interest shall be legally enforceable)], all of the Company's obligations in
respect of the payment of the principal of and interest, if any, on the
Securities of this series shall terminate.]
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
each series to be affected under the Indenture at any time by the Company and
the Trustee with the consent of the Holders of a majority in principal amount
of the Securities at the time Outstanding of each series to be affected. The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series, to
waive certain past defaults under the Indenture and their consequences. Any
such consent or
<PAGE> 32
20
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and any
premium and interest on this Security at the times, place and rate, and in the
coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registerable in the
Security Register, upon surrender of this Security for registration of transfer
at the office or agency of the Company in any place where the principal of and
any premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities
of this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered
form without coupons in denominations of $....... and any integral multiple
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Securities of this series are exchangeable for a like
aggregate principal amount of Securities of this series and of like tenor of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
<PAGE> 33
21
Section 2.4 Form of Legend for Global Securities.
Any Global Security authenticated and delivered
hereunder shall bear a legend in substantially the following form:
"This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of a
Depositary or a nominee thereof. This Security may not be transferred
to, or registered or exchanged for Securities registered in the name of,
any Person other than the Depositary or a nominee thereof or a successor
of such Depositary or a nominee of such successor and no such transfer
may be registered, except in the limited circumstances described in the
Indenture. Every Security authenticated and delivered upon registration
of transfer of, or in exchange for or in lieu of, this Security shall be
a Global Security subject to the foregoing, except in such limited
circumstances."
Section 2.5 Form of Trustee's Certificate of
Authentication.
The Trustee's certificates of authentication shall be in
substantially the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF
CHICAGO,
As Trustee
By...........................
Authorized Officer
ARTICLE III
The Securities
Section 3.1 Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall
be established in or pursuant to a Board Resolution and, subject to Section
3.3, set forth, or determined in the manner provided, in an Officers'
Certificate, or established in
<PAGE> 34
22
one or more indentures supplemental hereto, prior to the issuance of Securities
of any series,
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of any other
series);
(2) any limit upon the aggregate principal amount of the
Securities of the series which may be authenticated and delivered under
this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 3.4, 3.5, 3,6, 9.6 or 11.7
and except for any Securities which, pursuant to Section 3.3, are deemed
never to have been authenticated and delivered hereunder);
(3) the Person to whom any interest on a Security of the series
shall be payable, if other than the Person in whose name that Security
(or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest;
(4) the date or dates on which the principal of the Securities
of the series is payable;
(5) the rate or rates at which the Securities of the series
shall bear interest, if any, the date or dates from which such interest
shall accrue, the Interest Payment Dates on which any such interest
shall be payable and the Regular Record Date for any interest payable on
any Interest Payment Date;
(6) the place or places in addition to the Borough of Manhattan,
the City of New York, where the principal of and any premium and
interest on Securities of the series shall be payable;
(7) the period or periods within which, the price or prices at
which and the terms and conditions upon which Securities of the series
may be redeemed, in whole or in part, at the option of the Company;
(8) the obligation, if any, of the Company to redeem or purchase
Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and the period or
periods within which, the price or prices at which and the terms and
conditions upon which Securities of the series shall be redeemed or
purchased, in whole or in part, pursuant to such obligation;
(9) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which Securities of the series
shall be issuable;
<PAGE> 35
23
(10) the currency, currencies or currency units in which payment
of the principal of and any premium and interest on any Securities of
the series shall be payable if other than the currency of the United
States of America and the manner of determining the equivalent thereof
in the currency of the United States of America for purposes of the
definition of "Outstanding" in Section 1.1;
(11) if the amount of payments of principal of or any premium or
interest on any Securities of the series may be determined with
reference to an index or formula, the manner in which such amounts shall
be determined;
(12) if the principal of or any premium or interest on any
Securities of the series is to be payable, at the election of the
Company or a Holder thereof, in one or more currencies or currency units
other than that or those in which the Securities are stated to be
payable, the currency, currencies or currency units in which payment of
the principal of and any premium and interest on Securities of such
series as to which such election is made shall be payable, and the
periods within which and the terms and conditions upon which such
election is to be made;
(13) if other than the principal amount thereof, the portion of
the principal amount of Securities of the series which shall be payable
upon declaration of acceleration of the Maturity thereof pursuant to
Section 5.2;
(14) the application, if any, of either or both of Section 14.2
and Section 14.3 to the Securities of the series;
(15) whether the Securities of the series shall be issuable in
whole or in part in the form of one or more Global Securities and, in
such case, the Depositary or Depositaries for such Global Security or
Global Securities and any circumstances other than those set forth in
Section 3.5 in which any such Global Security may be transferred to, and
registered and exchanged for Securities registered in the name of, a
Person other than the Depositary for such Global Security or a nominee
thereof and in which any such transfer may be registered;
(16) if other than as specified in Section 5.1, the Events of
Default applicable with respect to the Securities of the series;
(17) the Events of Default set forth in Section 5.1 applicable
with respect to the Securities of the series, if fewer than all of the
Events of Default set forth in Section 5.1;
<PAGE> 36
24
(18) if other than as specified in Section 5.2, the Events of
Default the occurrence of which would permit the declaration of the
acceleration of Maturity pursuant to Section 5.2;
(19) the Events of Default the occurrence of which would permit
the declaration of Maturity pursuant to Section 5.2, if fewer than all
of the Events of Default set forth in Section 5.2;
(20) any other covenant or warranty included for the benefit of
Securities of the series in addition to (and not inconsistent with)
those included in this Indenture for the benefit of Securities of all
series, or any other covenant or warranty included for the benefit of
Securities of the series in lieu of any covenant or warranty included in
this Indenture for the benefit of Securities of all series, or any
provision that any covenant or warranty included in this Indenture for
the benefit of Securities of all series shall not be for the benefit of
Securities of such series, or any combination of such covenants,
warranties or provisions;
(21) if other than as specified on Article XIII, the
subordination provisions applicable with respect to the Securities of
the series, including a different definition of the terms "Senior
Indebtedness," "Entitled Persons" or "Other Financial Obligations"; and
(22) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture, except as permitted
by Section 9.1(5)).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or
pursuant to the Board Resolution referred to above and (subject to Section 3.3)
set forth, or determined in the manner provided, in the Officers' Certificate
referred to above or in any such indenture supplemental hereto.
Unless otherwise provided with respect to the Securities of any
series, at the option of the Company, interest on the Securities of any series
that bears interest may be paid by mailing a check to the address of the person
entitled thereto as such address shall appear in the Security Register.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company
and delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
<PAGE> 37
25
Section 3.2 Denominations.
The Securities of each series shall be issuable in registered
form without coupons in such denominations as shall be specified as
contemplated by Section 3.1. In the absence of any such provisions with
respect to the Securities of any series, the Securities of such series shall be
issuable in denominations of $1,000 and any integral multiple thereof.
Section 3.3 Execution, Authentication, Delivery
and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by
its Secretary or one of its Assistant Secretaries. The signature of any of
these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of such
Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities of any series
executed by the Company to the Trustee for authentication, together with a
Company Order for the authentication and delivery of such Securities, and the
Trustee in accordance with the Company Order shall authenticate and deliver
such Securities. If the form or terms of the Securities of the series have
been established in or pursuant to one or more Board Resolutions as permitted
by Sections 2.1 and 3.1, in authenticating such Securities, and accepting the
additional responsibilities under this Indenture in relation to such
Securities, the Trustee shall be entitled to receive, and (subject to Section
6.1) shall be fully protected in relying upon, an Opinion of Counsel stating,
(a) if the form of such Securities has been established by or
pursuant to Board Resolution as permitted by Section 2.1, that such form
has been established in conformity with the provisions of this
Indenture;
(b) if the terms of such Securities (or the manner of
determining such terms) have been established by or pursuant to Board
Resolution as permitted by Section 3.1, that such terms (or the manner
of determining such terms) have been established in conformity with the
provisions of this Indenture; and
<PAGE> 38
26
(c) that such Securities, when authenticated and delivered by
the Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid
and legally binding obligations of the Company enforceable in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 3.1 and of the
preceding paragraph, if all Securities of a series are not to be originally
issued at one time, it shall not be necessary to deliver the Officers'
Certificate otherwise required pursuant to Section 3.1 or the Company Order and
Opinion of Counsel otherwise required pursuant to such preceding paragraph at
or prior to the time of authentication of each Security of such series if such
documents are delivered at or prior to the authentication upon original
issuance of the first Security of such series to be issued.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such Security
a certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature of an Authorized Officer, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder. Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 3.9, for all purposes of this Indenture such Security shall
be deemed never to have been authenticated and delivered hereunder and shall
never be entitled to the benefits of this Indenture.
Section 3.4 Temporary Securities.
Pending the preparation of definitive Securities of any series,
the Company may execute, and upon Company Order the Trustee shall authenticate
and deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or
<PAGE> 39
27
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Securities in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities of any series are issued, the Company
will cause definitive Securities of that series to be prepared without
unreasonable delay. After the preparation of definitive Securities of such
series, the temporary Securities of such series shall be exchangeable for
definitive Securities of such series upon surrender of the temporary Securities
of such series at the office or agency of the Company in a Place of Payment for
that series, without charge to the Holder. Upon surrender for cancellation of
any one or more temporary Securities of any series the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor one or more
definitive Securities of the same series, of any authorized denominations and
of a like aggregate principal amount and tenor. Until so exchanged the
temporary Securities of any series shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities of such series and
tenor.
Section 3.5 Registration, Registration of
Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office
of the Trustee a register (the register maintained in such office being herein
sometimes collectively referred to as the "Security Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Securities and of transfers of Securities. The
Trustee is hereby appointed "Security Registrar" for the purpose of registering
Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security of
any series at the office or agency in a Place of Payment for that series, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
the same series, of any authorized denominations and of a like aggregate
principal amount and tenor.
At the option of the Holder, Securities of any series may be
exchanged for other Securities of the same series, of any authorized
denominations and of a like aggregate principal amount and tenor, upon
surrender of the Securities to be exchanged at such office or agency. Whenever
any Securities are so surrendered for exchange, the Company shall execute, and
the Trustee shall authenticate and deliver, the Securities which the Holder
making the exchange is entitled to receive.
<PAGE> 40
28
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of transfer or
exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee)
be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer
or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 3.4, 9.6 or 11.7 not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange Securities of any series during a period beginning at
the opening of business 15 days before the day of the mailing of a notice of
redemption of Securities of that series selected for redemption under Section
11.3 and ending at the close of business on the day of such mailing, or (ii) to
register the transfer of or exchange any Security so selected for redemption in
whole or in part, except the unredeemed portion of any Security being redeemed
in part.
Notwithstanding the foregoing and except as otherwise specified
or contemplated by Section 3.1, if at any time the Depositary for the
Securities of a series notifies the Company that it is unwilling or unable to
continue as a Depositary for the Securities of such series or if at any time
the Depositary for Securities of a series shall no longer be registered or in
good standing under the Securities Exchange Act of 1934, as amended, or other
applicable statute or regulation, the Company shall appoint a successor
Depositary with respect to the Securities of such series. If a successor
Depositary for the Securities of such series is not appointed by the Company
within 90 days after the Company receives such notice or becomes aware of such
condition, the Company will execute, and the Trustee, upon Company Request,
will authenticate and deliver Securities of such series in definitive form in
an aggregate principal amount equal to the principal amount of the Global
Security or Global Securities representing Securities of such series in
exchange for such Global Security or Global Securities.
In the event that (i) the Company at any time and in its sole
discretion determines that the Securities of any series issued in the form of
one or more Global Securities shall no longer be represented by such Global
Security or Global
<PAGE> 41
29
Securities or (ii) there shall have occurred and be continuing an Event of
Default or an event which, with the giving of notice or lapse of time or both,
would constitute an Event of Default with respect to the Securities of any
series, the Company will execute, and the Trustee, upon Company Request, will
authenticate and deliver Securities of such series in definitive form and in an
aggregate principal amount equal to the principal amount of the Global Security
or Global Securities representing such series in exchange for such Global
Security or Global Securities.
Upon the occurrence in respect of any Global Security of any
series of any one or more of the conditions specified in the preceding two
paragraphs or such other conditions as may be specified as contemplated by
Section 3.1 for such series, such Global Security may be exchanged for
Securities registered in the names of, and the transfer of such Global Security
may be registered to, such Persons (including Persons other than the Depositary
with respect to such series and its nominees) as such Depositary shall direct.
Notwithstanding any other provision of this Indenture, any Security
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, any Global Security shall also be a Global Security and
shall bear the legend specified in Section 2.4 except for any Security
authenticated and delivered in exchange for, or upon registration of transfer
of, a Global Security pursuant to the preceding sentence.
Section 3.6 Mutilated, Destroyed, Lost and
Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor a new Security of the same series and of like tenor and
principal amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute and the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
<PAGE> 42
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Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section
in lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Indenture equally and proportionately
with any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 3.7 Payment of Interest; Interest
Rights Preserved.
Except as otherwise provided as contemplated by Section 3.1 with
respect to any series of Securities, interest on any Security which is payable,
and is punctually paid or duly provided for, on any Interest Payment Date shall
be paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest.
Any interest on any Security of any series which is payable, but
is not punctually paid or duly provided for, on any Interest Payment Date
(herein called "Defaulted Interest") shall forthwith cease to be payable to the
Holder on the relevant Regular Record Date by virtue of having been such
Holder, and such Defaulted Interest may be paid by the Company, at its election
in each case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities of such series (or
their respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security of such series and the date of the
proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed to
be paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such
<PAGE> 43
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money when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as in this Clause provided.
Thereupon the Trustee shall fix a Special Record Date for the payment of
such Defaulted Interest which shall be not more than 15 days and not
less than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be mailed, first-class postage
prepaid, to each Holder of Securities of such series at his address as
it appears in the Security Register, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed,
such Defaulted Interest shall be paid to the Persons in whose names the
Securities of such series (or their respective Predecessor Securities)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on
the Securities of any series in any other lawful manner not inconsistent
with the requirements of any securities exchange on which such
Securities may be listed, and upon such notice as may be required by
such exchange, if, after notice given by the Company to the Trustee of
the proposed payment pursuant to this Clause, such manner of payment
shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
Section 3.8 Persons Deemed Owners.
Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of and any
premium and (subject to Section 3.7) any interest on such Security and for all
other purposes whatsoever, whether or not such Security be overdue, and neither
the Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
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No holder of any beneficial interest in any Global Security held
on its behalf by a Depositary shall have any rights under this Indenture with
respect to such Global Security, and such Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the owner
of such Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent
of the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by a Depositary or impair, as between a
Depositary and such holders of beneficial interests, the operation of customary
practices governing the exercise of the rights of the Depositary (or its
nominee) as Holder of any Security.
Section 3.9 Cancellation.
All Securities surrendered for payment, redemption, registration
of transfer or exchange or for credit against any sinking fund payment shall,
if surrendered to any Person other than the Trustee, be delivered to the
Trustee and shall be promptly cancelled by it. The Company may at any time
deliver to the Trustee for cancellation any Securities previously authenticated
and delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Securities previously authenticated
hereunder which the Company has not issued and sold, and all Securities so
delivered shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as
provided in this Section, except as expressly permitted by this Indenture. All
cancelled Securities held by the Trustee shall be disposed of as directed by a
Company Order.
Section 3.10 Computation of Interest.
Except as otherwise specified as contemplated by Section 3.1 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.
ARTICLE IV
Satisfaction and Discharge
Section 4.1 Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further
effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for), and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
<PAGE> 45
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(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen and
which have been replaced or paid as provided in Section 3.6 and (ii)
Securities for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 10.3) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited
or caused to be deposited with the Trustee as trust funds in trust for
the purpose an amount sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the Trustee
for cancellation, for principal and any premium and interest to the date
of such deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may
be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee under Section 6.7, the
obligations (if any) of the Trustee to any Authenticating Agent under Section
6.14 and, if money shall have been deposited with the Trustee pursuant to
subclause (B) of Clause (1) of this Section, the obligations of the Trustee
under Section 4.2 and the last paragraph of Section 10.3 shall survive.
<PAGE> 46
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In the event there are Securities of two or more series
hereunder, the Trustee shall be required to execute an instrument acknowledging
satisfaction and discharge of this Indenture only if requested to do so with
respect to Securities of all series as to which it is Trustee and if the other
conditions thereto are met. In the event there are two or more Trustees
hereunder, then the effectiveness of any such instrument shall be conditioned
upon receipt of such instruments from all Trustees hereunder.
Section 4.2 Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3,
all money deposited with the Trustee pursuant to Section 4.1 shall be held in
trust and applied by it, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium
and interest for whose payment such money has been deposited with the Trustee.
Money deposited and held in trust pursuant to this Section shall not be subject
to claims of the holders of Senior Indebtedness or of Entitled Persons under
Article XIII.
ARTICLE V
Remedies
Section 5.1 Events of Default.
"Event of Default", wherever used herein with respect to
Securities of any series, means any one of the following events (whatever the
reason for such Event of Default, whether it shall be occasioned by the
provisions of Article XIII and whether it shall be voluntary or involuntary or
be effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(1) default in the payment of any interest upon any Security of
that series when it becomes due and payable, and continuance of such
default for a period of 30 days; or
(2) default in the payment of the principal of (or premium, if
any, on) any Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when and
as due by the terms of a Security of that series; or
<PAGE> 47
35
(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with or which has expressly been
included in this Indenture solely for the benefit of series of
Securities other than that series), and continuance of such default or
breach for a period of 60 days after there has been given, by registered
or certified mail, to the Company by the Trustee or to the Company and
the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities of that series a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; or
(5) the entry by a court or a governmental authority having
jurisdiction in the premises of (A) a decree or order for relief in
respect of the Company in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law or (B) a decree or order adjudging the Company a
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of the Company under any applicable Federal or State law, or appointing
a custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or substantially all of its assets
or ordering the winding up or liquidation of the affairs of the Company,
and the continuance of any such decree or order for relief or any such
other decree or order unstayed and in effect for a period of 60
consecutive days; or
(6) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding
to be adjudicated a bankrupt or insolvent, or the consent by it to the
entry of a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State law, or
the consent by it to the filing of such petition or to the appointment
of or taking possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or
substantially all of its assets; or
<PAGE> 48
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(7) any other Event of Default provided with respect to
Securities of that series.
Section 5.2 Acceleration of Maturity;
Rescission and Annulment.
If an Event of Default specified in Sections 5.1(6) or 5.1(7)
with respect to Securities of any series at the time Outstanding occurs and is
continuing, then in every such case the Trustee or the Holders of not less than
25% in principal amount of the Outstanding Securities of that series may
declare the principal amount (or, if any of the Securities of that series are
Original Issue Discount Securities, such portion of the principal amount of
such Securities as may be specified in the terms thereof) of all of the
Securities of that series to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), and upon any
such declaration such principal amount (or specified amount) shall become
immediately due and payable.
At any time after such a declaration of acceleration with respect
to Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in
this Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities of that series,
(B) the principal of (and premium, if any, on) any
Securities of that series which have become due otherwise than by
such declaration of acceleration and any interest thereon at the
rate or rates prescribed therefor in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed
therefor in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel;
and
<PAGE> 49
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(2) all Events of Default with respect to Securities of that
series, other than the non-payment of the principal of Securities of
that series which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Section 5.3 Collection of Indebtedness and Suits
for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof, or
(3) default is made in the making or satisfaction of any sinking
fund payment or analogous obligation when the same becomes due pursuant
to the terms of any Security,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If an Event of Default with respect to Securities of any series
occurs and is continuing, the Trustee may in its discretion proceed to protect
and enforce its rights and the rights of the Holders of Securities of such
series by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
Section 5.4 Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or
any other obligor upon the Securities), its property or its creditors, the
Trustee shall be entitled and empowered, by
<PAGE> 50
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intervention in such proceeding or otherwise, to take any and all actions
authorized under the Trust Indenture Act in order to have claims of the Holders
and the Trustee allowed in any such proceeding. In particular, the Trustee
shall be authorized to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 6.7.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting
the Securities or the rights of any Holder thereof or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding; provided,
however, the Trustee may vote on behalf of the Holders for the election of a
trustee in bankruptcy or similar official and may be a member of a creditors'
or other similar committee.
Section 5.5 Trustee May Enforce Claims Without
Possession of Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.
Section 5.6 Application of Money Collected.
Subject to Article XIII, any money collected by the Trustee
pursuant to this Article shall be applied in the following order, at the date
or dates fixed by the Trustee and, in case of the distribution of such money on
account of principal or any premium or interest, upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 6.7; and
<PAGE> 51
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SECOND: To the payment of the amounts then due and unpaid for
principal of and any premium and interest on the Securities in respect
of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal and any premium
and interest, respectively.
Section 5.7 Limitation on Suits.
No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities
of that series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities of that
series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
Section 5.8 Unconditional Right of Holders to
Receive Principal, Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder
of any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal
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of and any premium and (subject to Section 3.7) any interest on such Security
on the Stated Maturity or Maturities expressed in such Security (or, in the
case of redemption, on the Redemption Date), and to institute suit for the
enforcement of any such payment, and such rights shall not be impaired without
the consent of such Holder.
Section 5.9 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
Section 5.10 Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 3.6, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
Section 5.11 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Securities to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time
to time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
Section 5.12 Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series, provided that
<PAGE> 53
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(1) such direction shall not be in conflict with any rule of law
or with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) subject to the provisions of Section 6.1, the Trustee shall
have the right to decline to follow any such direction if the Trustee in
good faith shall, by a Responsible Officer or Officers of the Trustee,
determine that the proceeding so directed would involve the Trustee in
personal liability.
Section 5.13 Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of
the Outstanding Securities of any series may on behalf of the Holders of all
the Securities of such series waive any past default hereunder with respect to
such series and its consequences, except a default
(1) in the payment of the principal of or any premium or
interest on any Security of such series, or
(2) in respect of a covenant or provision hereof which under
Article IX cannot be modified or amended without the consent of the
Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
Section 5.14 Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any
Securities by his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for
any action taken, suffered or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section 5.14 shall not apply to any suit
instituted by the Company, to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in principal amount of the Outstanding Securities of any series, or to
any suit instituted
<PAGE> 54
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by any Holder for the enforcement of the payment of the principal of (or
premium, if any) or interest on any Securities on or after the Stated Maturity
or Maturities expressed in such Securities (or, in the case of redemption, on
or after the Redemption Date).
Section 5.15 Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any usury, stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
ARTICLE VI
The Trustee
Section 6.1 Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as
provided by the Trust Indenture Act. Notwithstanding the foregoing, no
provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
Section 6.2 Notice of Defaults.
If a default occurs hereunder with respect to Securities of any
series, the Trustee shall give the Holders of Securities of such series notice
of such default as and to the extent provided by the Trust Indenture Act;
provided, however, that in the case of any default of the character specified
in Section 5.1(4) with respect to Securities of such series, no such notice to
Holders shall be given until at least 30 days after the occurrence thereof.
For the purpose of this Section, the term "default" means any event which is,
or after notice or lapse of time or both would become, an Event of Default with
respect to Securities of such series.
<PAGE> 55
43
Section 6.3 Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document, but the Trustee, in its discretion, may make
such further inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney;
and
<PAGE> 56
44
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder.
Section 6.4 Not Responsible for Recitals
or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee or any Authenticating Agent assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities. The
Trustee or any Authenticating Agent shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
Section 6.5 May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 6.8 and 6.13, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.
Section 6.6 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed with the Company.
Section 6.7 Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Trustee in accordance with any
provision of this Indenture (including the reasonable compensation and
the expenses and disbursements of its
<PAGE> 57
45
agents and counsel), except any such expense, disbursement or advance as
may be attributable to its negligence or bad faith;
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder, including
the reasonable costs and expenses of defending itself against any claim
or liability in connection with the exercise or performance of any of
its powers or duties hereunder;
(4) to secure the Company's obligations under this Section, the
Trustee shall have a lien prior to the Securities upon all money or
property held or collected by the Trustee in its capacity as Trustee,
except for such money and property which is held in trust to pay
principal (and premium, if any) or interest on particular Securities;
and
(5) when the Trustee incurs any expenses or renders any
services after the occurrence of an Event of Default specified in
Section 5.1(6) or (7), such expenses and the compensation for such
services are intended to constitute expenses of administration under the
United States Bankruptcy Code (Title 11 of the United States Code) or
any similar federal or state law for the relief of debtors.
Section 6.8 Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within
the meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
Section 6.9 Corporate Trustee Required;
Eligibility.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Person shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
<PAGE> 58
46
Section 6.10 Resignation and Removal;
Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article shall become effective until
the acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.11.
(b) The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice thereof to the
Company. If the instrument of acceptance by a successor Trustee required by
Section 6.11 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal
amount of the Outstanding Securities of such series, delivered to the Trustee
and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.9 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to all securities, or (ii) subject to Section 5.14, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Trustee for any cause,
with respect to the Securities of one or
<PAGE> 59
47
more series, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee or Trustees with respect to the Securities of that or those
series (it being understood that any such successor Trustee may be appointed
with respect to the Securities of one or more or all of such series and that at
any time there shall be only one Trustee with respect to the Securities of any
particular series) and shall comply with the applicable requirements of Section
6.11. If, within one year after such resignation, removal or incapability, or
the occurrence of such vacancy, a successor Trustee with respect to the
Securities of any Series shall be appointed by Act of the Holders of a majority
in principal amount of the Outstanding Securities of such series delivered to
the Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment in accordance with the
applicable requirements of Section 6.11, become the successor Trustee with
respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee with
respect to the Securities of any Series shall have been so appointed by the
Company or the Holders and accepted appointment in the manner required by
Section 6.11, any Holder who has been a bona fide Holder of a Security of such
series for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(f) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any series
to all Holders of Securities of such series in the manner provided in Section
1.6. Each notice shall include the name of the successor Trustee with respect
to the Securities of such series and the address of its Corporate Trust Office.
Section 6.11 Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee
with respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
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48
(b) In case of the appointment hereunder of a successor Trustee
with respect to the Securities of one or more (but not all) series, the
Company, the retiring Trustee and each successor Trustee with respect to the
Securities of one or more series shall execute and deliver an indenture
supplemental hereto wherein each successor Trustee shall accept such
appointment and which (1) shall contain such provisions as shall be necessary
or desirable to transfer and confirm to, and to vest in, each successor Trustee
all the rights, powers, trusts and duties of the retiring Trustee with respect
to the Securities of that or those series to which the appointment of such
successor Trustee relates, (2) if the retiring Trustee is not retiring with
respect to all Securities, shall contain such provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers, trusts and
duties of the retiring Trustee with respect to the Securities of that or those
series as to which the retiring Trustee is not retiring shall continue to be
vested in the retiring Trustee, and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees cotrustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Trustee; and upon
the execution and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
to which the appointment of such successor Trustee relates; but, on request of
the Company or any successor Trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Trustee all such rights, powers and trusts
referred to in paragraph (a) and (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
Section 6.12 Merger, Conversion, Consolidation
or Succession to Business.
Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any
<PAGE> 61
49
corporation resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or substantially
all the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be otherwise qualified and
eligible under this Article, without the execution or filing of any paper or
any further act on the part of any of the parties hereto. In case any
Securities shall have been authenticated, but not delivered, by the Trustee
then in office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Securities
so authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities.
Section 6.13 Preferential Collection of Claims
Against Company.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Securities), the Trustee shall be
subject to the provisions of the Trust Indenture Act regarding the collection
of claims against the Company (or any such other obligor).
Section 6.14 Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents (which
may be an affiliate of the Company) with respect to one or more series of
Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities of such series issued upon original issue and upon
exchange, registration of transfer or partial redemption thereof or pursuant to
Section 3.6, and Securities so authenticated shall be entitled to the benefits
of this Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Securities by the Trustee or
the Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State
thereof or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less than
$50,000,000 and subject to supervision or examination by Federal or State
authority. If such Authenticating Agent publishes reports of condition at
least annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined
capital and surplus of such Authenticating Agent shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent
<PAGE> 62
50
shall cease to be eligible in accordance with the provisions of this Section,
such Authenticating Agent shall resign immediately in the manner and with the
effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged
or converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders of
Securities of the series with respect to which such Authenticating Agent will
serve, as their names and addresses appear in the Security Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
Unless the Authenticating Agent has been appointed by the Trustee
at the request of the Company, the Trustee agrees to pay to each Authenticating
Agent from time to time reasonable compensation for its services under this
Section, and the Trustee shall be entitled to be reimbursed for such payments,
subject to the provisions of Section 6.7.
If an appointment with respect to one or more series is made
pursuant to this Section, the Securities of such series may have endorsed
thereon, in addition to the Trustee's certificate of authentication, an
alternative certificate of authentication in the following form:
<PAGE> 63
51
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF
CHICAGO,
As Trustee
By
------------------------------
As Authenticating Agent
By
------------------------------
Authorized Officer
ARTICLE VII
Holders' Lists and Reports by Trustee and Company
Section 7.1 Company to Furnish Trustee Names
and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not later than June 30 and December 31 in
each year, a list for each series, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders of
Securities of such series as of the preceding June 15 or December 15, as
the case may be, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
Section 7.2 Preservation of Information;
Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section 7.1 and the
names and addresses of Holders received by the Trustee in its capacity as
Security Registrar. The Trustee may destroy any list furnished to it as
provided in Section 7.1 upon receipt of a new list so furnished.
<PAGE> 64
52
(b) The rights of the Holders to communicate with other Holders
with respect to their rights under this Indenture or under the Securities, and
the corresponding rights and privileges of the Trustee, shall be as provided by
the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to names and addresses of Holders made
pursuant to the Trust Indenture Act.
Section 7.3 Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto. To the extent that any such report is required by the Trust
Indenture Act with respect to any 12-month period, such report shall cover the
12-month period ending March 15 and shall be transmitted by the next succeeding
March 15.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which any Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when any Securities are listed on any stock
exchange.
Section 7.4 Reports by Company.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at
the times and in the manner provided pursuant to such Act; provided that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 shall be
filed with the Trustee within 15 days after the same is so required to be filed
with the Commission.
ARTICLE VIII
Consolidation, Merger, Conveyance, Transfer or Lease
Section 8.1 Company May Consolidate, Etc.,
Only on Certain Terms.
The Company shall not consolidate with or merge into any other
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, and the
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53
Company shall not permit any Person to consolidate with or merge into the
Company or convey, transfer or lease its properties and assets substantially as
an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into
another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety shall be a
corporation, shall be organized and validly existing under the laws of
the United States of America, any State thereof or the District of
Columbia and shall expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee, in form satisfactory to
the Trustee, the due and punctual payment of the principal of and any
premium and interest on all the Securities and the performance or
observance of every covenant of this Indenture on the part of the
Company to be performed or observed;
(2) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Company or
a Subsidiary as a result of such transaction as having been incurred by
the Company or such Subsidiary at the time of such transaction, no Event
of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have happened and be continuing;
and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such transaction,
such supplemental indenture comply with this Article and that all
conditions precedent herein provided for relating to such transaction
have been complied with;
provided, however, the Company may, without the consent of the Holder or
Holders of any series of Securities, convey or transfer its assets
substantially as an entirety to any Person in connection with a transfer that
is assisted or sponsored by a Federal bank regulatory authority, and in such
case the Company's obligations under the Indenture need not be assumed by the
entity acquiring such assets.
Section 8.2 Successor Substituted.
Upon any consolidation of the Company with, or merger of the
Company into, any other Person or any conveyance, transfer or lease of the
properties and assets of the Company
<PAGE> 66
54
substantially as an entirety in accordance with Section 8.1, the successor
Person formed by such consolidation or into which the Company is merged or to
which such conveyance, transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein, and thereafter, except in the case of a lease, the
predecessor Person shall be relieved of all obligations and covenants under
this Indenture and the Securities.
ARTICLE IX
Supplemental Indentures
Section 9.1 Supplemental Indentures Without
Consent of Holders.
Without the consent of any Holders, the Company, when authorized
by a Board Resolution, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in form satisfactory to
the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the Company
herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of
the Holders of all or any series of Securities (and if such covenants
are to be for the benefit of less than all series of Securities, stating
that such covenants are expressly being included solely for the benefit
of such series) or to surrender any right or power herein conferred upon
the Company; or
(3) to add any additional Events of Default; or
(4) to add to or change any of the provisions of this Indenture
to such extent as shall be necessary to permit or facilitate the
issuance of Securities in bearer form, registrable or not registrable as
to principal, and with or without interest coupons, or to permit or
facilitate the issuance of Securities in uncertificated form; or
(5) to add to, change or eliminate any of the provisions of
this Indenture in respect of one or more series of Securities, provided
that any such addition, change or elimination (i) shall neither (A)
apply to any Security of any series created prior to the execution of
such supplemental indenture and entitled to the benefit of such
provision nor (B) modify the
<PAGE> 67
55
rights of the Holder of any such Security with respect to such provision
or (ii) shall become effective only when there is no such Security
Outstanding; or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities of any series
as permitted by Sections 2.1 and 3.1; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 6.11(b); or
(9) to add to, change or eliminate any of the provisions of
Article XIII in respect of any series of Securities, including
Outstanding Securities, provided that any such action pursuant to this
clause (9) shall not adversely affect the interests of the Holders of
Securities of any series in any material respect; or
(10) to provide that Securities of any Series may be convertible
into other securities or other property and to set forth the terms and
conditions of conversion of any such convertible Securities;
(11) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture, provided that such action
pursuant to this clause (11) shall not adversely affect the interests of
the Holders of Securities of any series in any material respect.
Notwithstanding any provision in this Indenture or otherwise, the
rights of creditors in respect of Other Financial Obligations under this
Indenture and otherwise in respect of the Securities may, at any time and from
time to time, be reduced or eliminated by a supplemental indenture entered into
by the Company and the Trustee, which supplemental indenture will not require
the consent of Holders of Securities or any creditor in respect of Other
Financial Obligations.
<PAGE> 68
56
Section 9.2 Supplemental Indentures with
Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee
may enter into an indenture or indentures supplemental hereto for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities of such series under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
instalment of principal of or interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of the
principal of an Original Issue Discount Security that would be due and
payable upon a declaration of acceleration of the Maturity thereof
pursuant to Section 5.2, or adversely affect any right of repayment at
the option of the Holder of any Security, or reduce the amount of, or
postpone the date fixed for, the payment of any sinking fund payment or
analogous obligation, or change the coin or currency in which, any
Security or any premium or interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment on or
after the Stated Maturity thereof (or, in the case of redemption, on or
after the Redemption Date) or modify the provisions of this Indenture
with respect to the subordination of the Securities of any series in a
manner adverse to the Holders, or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is
required for any waiver of certain defaults hereunder and their
consequences provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 5.13
or Section 10.8, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security
affected thereby, provided, however, that this clause shall not be
deemed to require the consent of any Holder with respect to changes in
the references to "the Trustee" and
<PAGE> 69
57
concomitant changes in this Section, or the deletion of this proviso, in
accordance with the requirements of Sections 6.11(b) and 9.1(8).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
Section 9.3 Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 6.1) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Section 9.4 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
Section 9.5 Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act.
Section 9.6 Reference in Securities to
Supplemental Indentures.
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company
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shall so determine, new Securities of any series so modified as to conform, in
the opinion of the Trustee and the Company, to any such supplemental indenture
may be prepared and executed by the Company and authenticated and delivered by
the Trustee in exchange for Outstanding Securities of such series.
ARTICLE X
Covenants
Section 10.1 Payment of Principal, Premium
and Interest.
The Company covenants and agrees for the benefit of each series
of Securities that it will duly and punctually pay the principal of and any
premium and interest on the Securities of that series in accordance with the
terms of the Securities and this Indenture.
Section 10.2 Maintenance of Office or Agency.
The Company will maintain in each Place of Payment for any series
of Securities an office or agency where Securities of that series may be
presented or surrendered for payment, where Securities of that series may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities of that series and
this Indenture may be served. The Company will give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at
the Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more
other offices or agencies where the Securities of one or more series may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to
maintain an office or agency in each Place of Payment for Securities of any
series for such purposes. The Company will give prompt written notice to the
Trustee of any such designation or rescission and of any change in the location
of any such other office or agency.
Section 10.3 Money for Securities Payments
to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or
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before each due date of the principal of or any premium or interest on any of
the Securities of that series, segregate and hold in trust for the benefit of
the Persons entitled thereto a sum sufficient to pay the principal and any
premium and interest so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and will promptly notify
the Trustee of its action or failure to act.
Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, prior to each due date of the principal of or
any premium or interest on any Securities of that series, deposit with a Paying
Agent a sum sufficient to pay such amount, such sum to be held as provided by
the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure to act.
The Company will cause each Paying Agent for any series of
Securities other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee, subject to
the provisions of this Section, that such Paying Agent will (i) comply with the
provisions of the Trust Indenture Act applicable to it as a Paying Agent and
(ii) during the continuance of any default by the Company (or any other obligor
upon the Securities of that series) in the making of any payment in respect of
the Securities of that series, and upon the written request of the Trustee,
forthwith pay to the Trustee all sums held in trust by such Paying Agent for
payment in respect of the Securities of that series.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of or any
premium or interest on any Security of any series and remaining unclaimed for
two years after such principal, premium or interest has become due and payable
shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company
for payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be
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published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, the City of New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
Section 10.4 Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after
the end of each fiscal year of the Company ending after the date hereof, an
Officers' Certificate (one of the signers of which shall be the principal
executive officer, principal financial officer or principal accounting officer
of the Company), stating whether or not to the best knowledge of the signers
thereof the Company is in default in the performance and observance of any of
the terms, provisions and conditions of this Indenture (without regard to any
period of grace or requirement of notice provided hereunder) and, if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.
Section 10.5 Existence.
Subject to Article VIII, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect its
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and that the
loss thereof is not and is not reasonably likely to be disadvantageous in any
material respect to the Holders.
Section 10.6 Maintenance of Properties.
The Company will cause all properties used or useful in the
conduct of its business or the business of any Subsidiary to be maintained and
kept in good condition, repair and working order and supplied with all
necessary equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders.
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Section 10.7 Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (1) all taxes, assessments
and governmental charges levied or imposed upon the Company or any Subsidiary
or upon the income, profits or property of the Company or any Subsidiary, and
(2) all lawful claims for labor, materials and supplies which, if unpaid, might
by law become a lien upon the property of the Company or any Subsidiary;
provided, however, that the Company shall not be required to pay or discharge
or cause to be paid or discharged any such tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which adequate provision is made.
Section 10.8 Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with
any term, provision or condition set forth in Sections 10.5 to 10.7, inclusive,
with respect to the Securities of any series if before the time for such
compliance the Holders of a majority in principal amount of the Outstanding
Securities of such series shall, by act of such Holders, either waive such
compliance in such instance or generally waive compliance with such term,
provision or condition, but no such waiver shall extend to or affect such term,
provision or condition except to the extent so expressly waived, and, until
such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such term, provision or condition shall
remain in full force and effect.
ARTICLE XI
Redemption of Securities
Section 11.1 Applicability of Article.
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 3.1 for Securities of any
series) in accordance with this Article.
Section 11.2 Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution. In case of any redemption at the election of
the Company of less than all the Securities of any series, the Company shall,
at least 60 days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee of
such Redemption Date, of the principal amount of Securities of such series to
be redeemed and, if applicable, of
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the tenor of the Securities to be redeemed. In the case of any redemption of
Securities prior to the expiration of any restriction on such redemption
provided in the terms of such Securities or elsewhere in this Indenture, the
Company shall furnish the Trustee with an Officers' Certificate evidencing
compliance with such restriction.
Section 11.3 Selection by Trustee of Securities
to Be Redeemed.
If less than all the Securities of any series are to be redeemed
(unless all of the Securities of such series and of a specified tenor are to be
redeemed), the particular Securities to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Trustee, from the Outstanding
Securities of such series not previously called for redemption, by such method
as the Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to the minimum authorized
denomination for Securities of that series or any integral multiple thereof) of
the principal amount of Securities of such series of a denomination larger than
the minimum authorized denomination for Securities of that series. If less
than all of the Securities of such series and of a specified tenor are to be
redeemed, the particular Securities to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Trustee, from the Outstanding
Securities of such series and specified tenor not previously called for
redemption in accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
Section 11.4 Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and accrued
interest, if any,
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(3) if less than all the Outstanding Securities of any series
are to be redeemed, the identification (and, in the case of partial
redemption of any Securities, the principal amounts) of the particular
Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price and accrued
interest, if any, will become due and payable upon each such Security to
be redeemed and, if applicable, that interest thereon will cease to
accrue on and after said date,
(5) the place or places where such Securities are to be
surrendered for payment of the Redemption Price and accrued interest, if
any,
(6) that the redemption is for a sinking fund, if such is the
case, and
(7) the CUSIP numbers, if any, of the Securities to be redeemed.
Notice of redemption of Securities to be redeemed at the election
of the Company shall be given by the Company or, at the Company's request, by
the Trustee in the name and at the expense of the Company and shall be
irrevocable.
Section 11.5 Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 10.3) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date.
Section 11.6 Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified, and from and after such date
(unless the Company shall default in the payment of the Redemption Price and
accrued interest) such Securities shall cease to bear interest. Upon surrender
of any such Security for redemption in accordance with said notice, such
Security shall be paid by the Company at the Redemption Price, together with
accrued interest to the Redemption Date; provided, however, that, unless
otherwise specified as contemplated by Section 3.1, installments of interest
whose Stated Maturity is on or prior to the Redemption Date shall be payable to
the Holders of such Securities, or one or more Predecessor Securities,
registered as such at the close of business on the relevant
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Record Dates according to their terms and the provisions of Section 3.7.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security.
Section 11.7 Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be
surrendered at a Place of Payment therefor (with, if the Company or the Trustee
so requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Security or Securities of the same
series and of like tenor, of any authorized denomination as requested by such
Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
ARTICLE XII
Sinking Funds
Section 12.1 Applicability of Article.
The provisions of this Article shall be applicable to any sinking
fund for the retirement of Securities of a series except as otherwise specified
as contemplated by Section 3.1 for Securities of such series.
The minimum amount of any sinking fund payment provided for by
the terms of Securities of any series is herein referred to as a "mandatory
sinking fund payment", and any payment in excess of such minimum amount
provided for by the terms of Securities of any series is herein referred to as
an "optional sinking fund payment". If provided for by the terms of Securities
of any series, the cash amount of any sinking fund payment may be subject to
reduction as provided in Section 12.2. Each sinking fund payment shall be
applied to the redemption of Securities of any series as provided for by the
terms of Securities of such series.
Section 12.2 Satisfaction of Sinking Fund
Payments with Securities.
The Company (1) may deliver Securities of a series (other than
any previously called for redemption) and (2) may apply as a credit Securities
of a series which theretofore have been redeemed or otherwise acquired by the
Company either at the
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election of the Company pursuant to the terms of such Securities or through the
application of permitted optional sinking fund payments pursuant to the terms
of such Securities, in each case in satisfaction of all or any part of any
sinking fund payment with respect to the Securities of such series required to
be made pursuant to the terms of such Securities as provided for by the terms
of such series; provided that such Securities have not been previously so
credited. Such Securities shall be received and credited for such purpose by
the Trustee at the Redemption Price specified in such Securities for redemption
through operation of the sinking fund and the amount of such sinking fund
payment shall be reduced accordingly.
Section 12.3 Redemption of Securities for
Sinking Fund.
Not less than 90 days prior to each sinking fund payment date for
any series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
that series pursuant to the terms of that series, the portion thereof, if any,
which is to be satisfied by payment of cash and the portion thereof, if any,
which is to be satisfied by delivering and crediting Securities of that series
pursuant to Section 12.2 and the basis for such credit and will also deliver to
the Trustee any Securities to be so delivered. Not less than 30 days before
each such sinking fund payment date the Trustee shall select the Securities to
be redeemed upon such sinking fund payment date in the manner specified in
Section 11.3 and cause notice of the redemption thereof to be given in the name
of and at the expense of the Company in the manner provided in Section 11.4.
Such notice having been duly given, the redemption of such Securities shall be
made upon the terms and in the manner stated in Sections 11.6 and 11.7.
ARTICLE XIII
Subordination of Securities
Section 13.1 Securities Subordinate to
Senior Indebtedness.
The Company covenants and agrees, and each Holder of a Security
of any series, by his acceptance thereof, likewise covenants and agrees, that,
to the extent and in the manner hereinafter set forth in this Article (subject
to the provisions of Article XIV), the indebtedness represented by the
Securities of such series and the payment of the principal of (and premium, if
any) and interest on each of all of the Securities of such series are hereby
expressly made subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness and, as provided in Section 13.15, of all
Other Financial Obligations.
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Section 13.2 Payment Over of Proceeds Upon
Dissolution, Etc.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to the Company or to its
creditors, as such, or to its assets, or (b) any liquidation, dissolution or
other winding up of the Company, whether voluntary or involuntary and whether
or not involving insolvency or bankruptcy, or (c) any assignment for the
benefit of creditors or any other marshalling of assets and liabilities of the
Company, then and in any such event the holders of Senior Indebtedness shall be
entitled to receive payment in full of all amounts due or to become due on or
in respect of all Senior Indebtedness, or provision shall be made for such
payment in money or money's worth, before the Holders of the Securities of any
series are entitled to receive any payment on account of principal of (or
premium, if any) or interest on the Securities of such series, and to that end
the holders of Senior Indebtedness shall be entitled to receive, for
application to the payment hereof, any payment or distribution of any kind or
character, whether in cash, property or securities, which may be payable or
deliverable in respect of the Securities of any series in any such case,
proceeding, dissolution, liquidation or other winding up or event.
In the event that, notwithstanding the foregoing provisions of
this Section, the Trustee or the holder of any Security of any series shall
have received any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, before all Senior
Indebtedness is paid in full or payment thereof provided for, and if such fact
shall, at or prior to the time of such payment or distribution have been made
known to the Trustee or, as the case may be, such Holder, then and in such
event such payment or distribution shall be paid over or delivered forthwith to
the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee,
agent or other Person making payment or distribution of assets of the Company
for application to the payment of all Senior Indebtedness remaining unpaid, to
the extent necessary to pay all Senior Indebtedness in full, after giving
effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness.
For purposes of this Article only, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment which are
subordinated in right of payment to all Senior Indebtedness which may at the
time be outstanding to the same extent as, or to a greater extent than, the
Securities are so subordinated as provided in this Article. The consolidation
of the Company with, or the merger of the Company into, another Person or the
liquidation or dissolution of
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the Company following the conveyance or transfer of its properties and assets
substantially as an entirety to another Person upon the terms and conditions
set forth in Article VIII shall not be deemed a dissolution, winding up,
liquidation, reorganization, assignment for the benefit of creditors or
marshalling of assets and liabilities of the Company for the purposes of this
Section if the Person formed by such consolidation or into which the Company is
merged or the Person which acquires by conveyance, transfer or lease such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance, transfer or lease, comply
with the conditions set forth in Article VIII.
Section 13.3 Prior Payment to Senior Indebtedness
Upon Acceleration of Securities.
In the event that any Securities of any series are declared due
and payable before their Stated Maturity, then and in such event the holders of
Senior Indebtedness shall be entitled to receive payment in full of all amounts
due or to become due on or in respect of all Senior Indebtedness, or provision
shall be made for such payment in cash, before the Holders of the Securities of
such series are entitled to receive any payment of the principal of, premium,
if any, or interest on the Securities of such series or on account of the
purchase or other acquisition of Securities of such series.
In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Trustee or the Holder of any Security of any
series prohibited by the foregoing provisions of this Section, and if such fact
shall, at or prior to the time of such payment, have been made known to the
Trustee or, as the case may be, such Holder, then and in such event such
payment shall be paid over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment
with respect to which Section 13.2 would be applicable.
Section 13.4 No Payment When Senior Indebtedness
Default.
(a) In the event and during the continuation of any default in
the payment of principal of (or premium, if any) or interest on any Senior
Indebtedness beyond any applicable grace period with respect thereto, or in the
event that any event of default with respect to any Senior Indebtedness shall
have occurred and be continuing permitting the holders of such Senior
Indebtedness (or a trustee on behalf of the holders thereof) to declare such
Senior Indebtedness due and payable prior to the date on which it would
otherwise have become due and payable, unless and until such event of default
shall have been cured or waived or shall have ceased to exist and such
acceleration shall have been rescinded or annulled, or (b) in the event any
judicial
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proceeding shall be pending with respect to any such default in payment, or
event of default, then no payment shall be made by the Company on account of
principal of (or premium, if any) or interest on the Securities of any series
or on account of the purchase or other acquisition of Securities of any series.
In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Trustee or the Holder of any Security of any
series prohibited by the foregoing provisions of this Section, and if such fact
shall, at or prior to the time of such payment, have been made known to the
Trustee or, as the case may be, such Holder, then and in such event such
payment shall be paid over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment
with respect to which Section 13.2 would be applicable.
Section 13.5 Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this Indenture
or in any of the Securities of any series shall prevent (a) the Company, at any
time except during the pendency of any case, proceeding, dissolution,
liquidation or other winding up, assignment for the benefit of creditors or
other marshalling of assets and liabilities of the Company referred to in
Section 13.2 or under the conditions described in Section 13.3 or 13.4, from
making payments at any time of principal of (and premium, if any) or interest
on the Securities of any series, or (b) the application by the Trustee of any
money deposited with it hereunder to the payment of or on account of the
principal of (and premium, if any) or interest on the Securities of any series
or the retention of such payment by the Holder, if, at the time of such
application by the Trustee, it did not have actual knowledge that such payment
would have been prohibited by the provisions of this Article.
Section 13.6 Subrogation to Rights of Holders
of Senior Indebtedness.
Subject to the payment in full of all Senior Indebtedness, the
Holders of the Securities of a series shall be subrogated to the extent of the
payments or distributions made to the holders of such Senior Indebtedness
pursuant to the provisions of this Article to the rights of the holders of such
Senior Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of (and
premium, if any) and interest on the Securities of such series shall be paid in
full. For purposes of such subrogation, no payments or distributions to the
holders of the Senior Indebtedness of any cash, property or securities to which
the Holders of the Securities of a series or the Trustee would be entitled
except for the provisions of this Article, and no payments over pursuant to the
provisions of this Article to the holders of Senior Indebtedness by Holders of
the
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Securities of a series or the Trustee, shall, as among the Company, its
creditors other than holders of Senior Indebtedness and the Holders of the
Securities of such series, be deemed to be a payment or distribution by the
Company to or on account of the Senior Indebtedness.
Section 13.7 Provisions Solely to Define
Relative Rights.
The provisions of this Article are and are intended solely for
the purpose of defining the relative rights of the Holders of the Securities of
a series on the one hand and the holders of Senior Indebtedness (and, in the
case of Section 13.15, Entitled Persons in respect of Other Financial
Obligations) on the other hand. Nothing contained in this Article or elsewhere
in this Indenture or in the Securities of any series is intended to or shall
(a) impair, as among the Company, its creditors other than holders of Senior
Indebtedness and the Holders of the Securities of any series, the obligation of
the Company, which is absolute and unconditional (and which, subject to the
rights under this Article of the holders of Senior Indebtedness and the rights
under Section 13.15 of Entitled Persons in respect of Other Financial
Obligations, is intended to rank equally with all other obligations of the
Company), to pay to the Holders of the Securities of a series the principal of
(and premium, if any) and interest on the Securities of such series as and when
the same shall become due and payable in accordance with their terms; or (b)
affect the relative rights against the Company of the Holders of the Securities
of a series and creditors of the Company other than the holders of Senior
Indebtedness or Entitled Persons in respect of Other Financial Obligations; or
(c) prevent the Trustee or the Holder of any Security of any series from
exercising all remedies otherwise permitted by applicable law upon default
under this Indenture, subject to the rights, if any, under this Article of the
holders of Senior Indebtedness, and under Section 13.15 of Entitled Persons in
respect of Other Financial Obligations, to receive cash, property and
securities otherwise payable or deliverable to the Trustee or such Holder.
Section 13.8 Trustee to Effectuate Subordination.
Each holder of a Security of any series by his acceptance thereof
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article and appoints the Trustee his attorney-in-fact for any and all such
purposes.
Section 13.9 No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior
Indebtedness or an Entitled Person in respect of Other Financial Obligations to
enforce subordination as herein provided shall at
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any time in any way be prejudiced or impaired by any act or failure to act on
the part of the Company or by any failure to act, in good faith, by any such
holder, or by any non-compliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof any such
holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness or an Entitled Person in respect
of Other Financial Obligations may, at any time and from time to time, without
the consent of or notice to the Trustee or the Holders of the Securities of any
series, without incurring responsibility to the Holders of the Securities of
any series and without impairing or releasing the subordination provided in
this Article or the obligations hereunder of the Holders of the Securities to
the holders of Senior Indebtedness or an Entitled Person in respect of Other
Financial Obligations, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Indebtedness or Other Financial Obligations, or otherwise amend
or supplement in any manner Senior Indebtedness or Other Financial Obligations
or any instrument evidencing the same or any agreement under which Senior
Indebtedness or Other Financial Obligations is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Indebtedness or Other Financial Obligations; (iii)
release any Person liable in any manner for the collection of Senior
Indebtedness or Other Financial Obligations; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
Section 13.10 Notice to Trustee.
The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Securities of any series. Notwithstanding
the provisions of this Article or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts which
would prohibit the making of any payment to or by the Trustee in respect of the
Securities of a series, unless and until the Trustee shall have received
written notice thereof from the Company or a holder of Senior Indebtedness or
from any trustee therefor or from any Entitled Persons in respect of Other
Financial Obligations; and, prior to the receipt of any such written notice,
the Trustee, subject to the provisions of Section 6.1, shall be entitled in all
respects to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section at
least two Business Days prior to the date upon which by the terms hereof any
money may become payable for any purpose (including, without limitation, the
payment of the principal (and premium, if any) or interest on any Security),
then, anything herein
<PAGE> 83
71
contained to the contrary notwithstanding, the Trustee shall have full power
and authority to receive such money and to apply the same to the purpose for
which such money was received and shall not be affected by any notice to the
contrary which may be received by it within two Business Days prior to such
date.
Subject to the provisions of Section 6.1, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee
therefor) or an Entitled Person in respect of Other Financial Obligations to
establish that such notice has been given by a holder of Senior Indebtedness
(or a trustee therefor) or an Entitled Person in respect of Other Financial
Obligations. In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness or an Entitled Person in respect of Other
Financial Obligations to participate in any payment or distribution pursuant to
this Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
or Other Financial Obligations held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
Section 13.11 Reliance on Judicial Order or
Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company
referred to in this Article, the Trustee, subject to the provisions of Section
6.1, and the Holders of the Securities of any series shall be entitled to rely
upon any order or decree entered by any court of competent jurisdiction in
which such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to the Trustee or to the Holders of
Securities of such series, for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company and the Entitled Persons in
respect of Other Financial Obligations, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article.
<PAGE> 84
72
Section 13.12 Trustee Not Fiduciary for Holders
of Senior Indebtedness or
Entitled Persons.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness or Entitled Persons with respect to Other
Financial Obligations and shall not be liable to any such holders or creditors
if it shall in good faith mistakenly pay over or distribute to Holders of
Securities of any series or to the Company or to any other Person cash,
property or securities to which any holders of Senior Indebtedness or Entitled
Persons with respect to Other Financial Obligations shall be entitled by virtue
of this Article or otherwise.
Section 13.13 Rights of Trustee as Holder of
Senior Indebtedness or Entitled Person;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all
the rights set forth in this Article with respect to any Senior Indebtedness
which may at any time be held by it and with respect to any Other Financial
Obligations owed to the Trustee as the Entitled Person, to the same extent as
any other holder of Senior Indebtedness or Entitled Person in respect of Other
Financial Obligations, as the case may be, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder or Entitled Person.
Nothing in this Article shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 6.7.
Section 13.14 Article Applicable to
Paying Agents.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying
Agent within its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article in addition to or in place of the
Trustee; provided, however, that Section 13.13 shall not apply to the Company
or any Affiliate of the Company if it or such Affiliate acts as Paying Agent.
Section 13.15 Payment of Proceeds in Certain Cases.
(a) Upon the occurrence of any of the events specified in
clauses (a), (b) and (c) of the first paragraph of Section 13.2, the provisions
of that Section shall be given effect to determine the amount of cash, property
or securities which may be payable or deliverable as between the holders of
Senior Indebtedness, on the one hand, and the Holders of Securities, on the
other hand.
<PAGE> 85
73
(b) If, after giving effect to the provisions of Section 13.2
and Section 13.6, any amount of cash, property or securities shall be available
for payment or distribution in respect of the Securities ("Excess Proceeds"),
and any Entitled Persons in respect of Other Financial Obligations shall not
have received payment in full of all amounts due or to become due on or in
respect of such Other Financial Obligations (and provision shall not have been
made for such payment in money or money's worth), then such Excess Proceeds
shall first be applied (ratably with any amount of cash, property or securities
available for payment or distribution in respect of any other indebtedness of
the Company that by its express terms provides for the payment over of amounts
corresponding to Excess Proceeds to Entitled Persons in respect of Other
Financial Obligations) to pay or provide for the payment of the Other Financial
Obligations remaining unpaid, to the extent necessary to pay all Other
Financial Obligations in full, after giving effect to any concurrent payment or
distribution to or for Entitled Persons in respect of Other Financial
Obligations. Any Excess Proceeds remaining after the payment (or provisions
for payment) in full of all Other Financial Obligations shall be available for
payment or distribution in respect of the Securities.
(c) In the event that, notwithstanding the foregoing provisions
of subsection (b) of this Section, the Trustee or Holder of any Security shall
have received any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, before all Other
Financial Obligations are paid in full or payment thereof duly provided for,
and if such fact shall, at or prior to the time of such payment or distribution
have been made known to the Trustee or, as the case may be, such Holder, then
and in such event, subject to any obligation that the Trustee or such Holder
may have pursuant to Section 13.2, such payment or distribution shall be paid
over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for payment in accordance with subsection
(b).
(d) Subject to the payment in full of all Other Financial
Obligations, the Holders of the Securities shall be subrogated (equally and
ratably with the holders of all indebtedness of the Company that by its express
terms provides for the payment over of amounts corresponding to Excess Proceeds
to Entitled Persons in respect of Other Financial Obligations and is entitled
to like rights of subrogation) to the rights of the Entitled Persons in respect
of Other Financial Obligations to receive payments and distributions of cash,
property and securities applicable to the Other Financial Obligations until the
principal of and interest on the Securities shall be paid in full. For
purposes of such subrogation, no payments or distributions to Entitled Persons
in respect of Other Financial Obligations of any cash, property or securities
to which Holders of the Securities or the Trustee would be entitled except for
the
<PAGE> 86
74
provisions of this Section, and no payments over pursuant to the provisions of
this Section to Entitled Persons in respect of Other Financial Obligations by
Holders of Securities or the Trustee, shall, as among the Company, its
creditors other than Entitled Persons in respect of Other Financial Obligations
and the Holders of Securities, be deemed to be a payment or distribution by the
Company to or on account of the Other Financial Obligations.
(e) The provisions of subsections (b), (c) and (d) of this
Section are and are intended solely for the purpose of defining the relative
rights of the Holders of the Securities, on the one hand, and the Entitled
Persons in respect of Other Financial Obligations, on the other hand, after
giving effect to the rights of the holders of Senior Indebtedness, as provided
in this Article. Nothing contained in subsections (b), (c) and (d) of this
Section is intended to or shall affect the relative rights against the Company
of the Holders of the Securities and (1) the holders of Senior Indebtedness or
(2) other creditors of the Company other than Entitled Persons in respect of
Other Financial Obligations.
ARTICLE XIV
Defeasance and Covenant Defeasance
Section 14.1 Applicability of Article;
Company's Option to Effect
Defeasance or Covenant Defeasance.
If pursuant to Section 3.1 provision is made for either or both
of (a) defeasance of the Securities of a series under Section 14.2 or (b)
covenant defeasance of the Securities of a series under Section 14.3, then the
provisions of such Section or Sections, as the case may be, together with the
other provisions of this Article XIV, shall be applicable to the Securities of
such series, and the Company may at its option by Board Resolution, at any
time, with respect to the Securities of such series, elect to have either
Section 14.2 (if applicable) or Section 14.3 (if applicable) be applied to the
Outstanding Securities of such series upon compliance with the conditions set
forth below in this Article XIV.
Section 14.2 Defeasance and Discharge.
Upon the Company's exercise of the above option applicable to
this Section, the Company shall be deemed to have been discharged from its
obligations with respect to the Outstanding Securities of such series on and
after the date the conditions precedent set forth below are satisfied
(hereinafter, "defeasance"). For this purpose, such defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the Outstanding Securities of such
<PAGE> 87
75
series and to have satisfied all its other obligations under such Securities
and this Indenture, including the provisions of Article XIII hereof, insofar as
such Securities are concerned (and the Trustee, at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of outstanding Securities of such series
to receive, solely from the trust fund described in Section 14.4 as more fully
set forth in such Section, payments of the principal of (and premium, if any)
and interest on such Securities when such payments are due, (B) the Company's
obligations with respect to such Securities under Sections 3.4, 3.5, 3.6, 10.2
and 10.3 and such obligations as shall be ancillary thereto, (C) the rights,
powers, trusts, duties, immunities and other provisions in respect of the
Trustee hereunder and (D) this Article XIV. Subject to compliance with this
Article XIV, the Company may exercise its option under this Section 14.2
notwithstanding the prior exercise of its option under Section 14.3 with
respect to the Securities of such series. Following a defeasance, payment of
the Securities of such series may not be accelerated because of an Event of
Default.
Section 14.3 Covenant Defeasance.
Upon the Company's exercise of the above option applicable to
this Section and after the date the conditions set forth below are satisfied
(hereinafter, "covenant defeasance"), the Company shall be released from its
obligations under any covenant applicable to such Securities that is determined
pursuant to Section 3.1 to be subject to this provision, and the occurrence of
an event specified in Section 5.1(4) (with respect to any Section applicable to
such Securities that are determined pursuant to Section 3.1 to be subject to
this provision) or Section 5.1(5) shall not be deemed to be an Event of Default
with respect to the outstanding Securities of such series. For this purpose,
such covenant defeasance means that, with respect to the Outstanding Securities
of such series, the Company may omit to comply with and shall have no liability
in respect of any term, condition or limitation set forth in any such Section
whether directly or indirectly by reason of any reference elsewhere herein to
any such Section or by reason of any reference in any such Section to any other
provision herein or in any other document, but the remainder of this Indenture
and such Securities shall be unaffected thereby.
Section 14.4 Conditions to Defeasance or
Covenant Defeasance.
The following shall be the conditions precedent to application of
either Section 14.2 or Section 14.3 to the Outstanding Securities of such
series:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee as trust
<PAGE> 88
76
funds in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of such Securities, (A) money in an amount, or
(B) U.S. Government Obligations which through the scheduled payment of
principal and interest in respect thereof in accordance with their terms
will provide, not later than one day before the due date of any payment,
money in an amount, or (C) a combination thereof, sufficient, without
reinvestment, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee to pay and discharge, the principal of (and
premium, if any) and interest on the Outstanding Securities of such
series on the Maturity of such principal, premium, if any, or interest
and any mandatory sinking fund payments or analogous payments applicable
to the Outstanding Securities of such series on the due dates thereof.
Before such a deposit the Company may make arrangements satisfactory to
the Trustee for the redemption of Securities at a future date or dates
in accordance with Article XI, which shall be given effect in applying
the foregoing. For this purpose, "U.S. Government Obligations" means
securities that are (x) direct obligations of the United States of
America for the payment of which its full faith and credit is pledged or
(y) obligations of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the payment of
which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian
with respect to any such U.S. Government Obligation or a specific
payment of principal of or interest on any such U.S. Government
Obligation held by such custodian for the account of the holder of such
depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount
received by the custodian in respect of the U.S. Government Obligation
or the specific payment of principal of or interest on the U.S.
Government Obligation evidenced by such depository receipt.
(2) No Event of Default or event which with notice or lapse of
time or both would become an Event of Default with respect to the
Securities of such series shall have occurred and be continuing (A) on
the
<PAGE> 89
77
date of such deposit or (B) insofar as subsections 5.1(6) and (7) are
concerned, at any time during the period ending on the 123rd day after
the date of such deposit or, if longer, ending on the day following the
expiration of the longest preference period applicable to the Company in
respect of such deposit (it being understood that the condition in this
Clause (B) shall not be deemed satisfied until the expiration of such
period).
(3) Such defeasance or covenant defeasance shall not (A) cause
the Trustee for the Securities of such series to have a conflicting
interest as defined in Section 6.8 or for purposes of the Trust
Indenture Act with respect to any securities of the Company or (B)
result in the trust arising from such deposit to constitute, unless it
is qualified as, a regulated investment company under the Investment
Company Act of 1940, as amended.
(4) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or
any other agreement or instrument to which the Company is a party or by
which it is bound.
(5) Such defeasance or covenant defeasance shall not cause any
Securities of such series then listed on any registered national
securities exchange under the Securities Exchange Act of 1934, as
amended, to be delisted.
(6) In the case of an election under Section 14.2, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(x) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (y) since the date of this
Indenture there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such opinion
shall confirm that, the Holders of the Outstanding Securities of such
series will not recognize income, gain or loss for Federal income tax
purposes as a result of such defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times
as would have been the case if such defeasance had not occurred.
(7) In the case of an election under Section 14.3, the Company
shall have delivered to the Trustee an opinion of Counsel to the effect
that the Holders of the Outstanding Securities of such series will not
recognize income, gain or loss for Federal income tax purposes as a
result of such covenant defeasance and
<PAGE> 90
78
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
covenant defeasance had not occurred.
(8) At the time of such deposit; (A) no default in the payment
of all or a portion of principal of (or premium, if any) or interest on
any Senior Indebtedness shall have occurred and be continuing, and no
event of default with respect to any Senior Indebtedness shall have
occurred and be continuing and shall have resulted in such Senior
Indebtedness becoming or being declared due and payable prior to the
date on which it would otherwise have become due and payable and (B) no
other event of default with respect to any Senior Indebtedness shall
have occurred and be continuing permitting (after notice or the lapse of
time, or both) the holders of such Senior Indebtedness (or a trustee on
behalf of the holders thereof) to declare such Senior Indebtedness due
and payable prior to the date on which it would otherwise have become
due and payable, or, in the case of either Clause (A) or Clause (B)
above, each such default or event of default shall have been cured or
waived or shall have ceased to exist.
(9) Such defeasance or covenant defeasance shall be effected in
compliance with any additional terms, conditions or limitations which
may be imposed on the Company in connection therewith pursuant to
Section 3.1.
(10) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance
under Section 14.2 or the covenant defeasance under Section 14.3 (as the
case may be) have been complied with.
Section 14.5 Deposited Money and U.S. Government
Obligations to be Held in Trust;
Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 10.3,
all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee pursuant to Section 14.4 in respect of the
Outstanding Securities of such series shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent (but not
including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities, of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent
<PAGE> 91
79
required by law. Money so held in trust shall not be subject to the provisions
of Article XIII.
The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the money or U.S. Government
Obligations deposited pursuant to Section 14.4 or the principal and interest
received in respect thereof.
Anything herein to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 14.4
which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect an equivalent defeasance or covenant defeasance.
Section 14.6 Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money
in accordance with Section 14.5 by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under the Securities of such series
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article XIV until such time as the Trustee or Paying Agent is permitted to
apply all such money in accordance with Section 14.5; provided, however, that
if the Company makes any payment of principal of (and premium, if any) or
interest on any such Security following the reinstatement of its obligations,
the Company shall be subrogated to the rights of the Holders of such Securities
to receive such payment from the money held by the Trustee or the Paying Agent.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
<PAGE> 92
80
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed, and their respective corporate seals to be hereunto
affixed and attested, all as of the day and year first above written.
FIRST HAWAIIAN, INC.
<TABLE>
<S> <C>
By /s/ Howard H. Karr
-----------------------------
Title: Executive Vice President
and Treasurer
Attest:
By /s/ Herbert E. Wolff
----------------------
Title: Secretary
THE FIRST NATIONAL BANK OF CHICAGO,
As Trustee
By /s/ Lawrence Dillard
-----------------------------
Attest: Title: Vice President
By /s/ T. Marshall
----------------------
Title: Trust Officer and
Assistant Secretary
</TABLE>
<PAGE> 93
81
STATE OF HAWAII )
) ss.:
CITY AND COUNTY OF HONOLULU )
On the 9th day of August 9, 1993 before me personally came Howard
H. Karr, to me known, who, being by me duly sworn, did depose and say that he
is Executive Vice President of First Hawaiian, Inc., one of the corporations
described in and which executed the foregoing instrument; that he knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the Board of Directors
of said corporation, and that he signed his name thereto by like authority.
/s/ Linda L. Uchida
--------------------------------
Notary Public, First Judicial
Circuit, State of Hawaii
Commission expires: February 11, 1996
<PAGE> 1
EXHIBIT 10(iii)
LEASE AGREEMENT
DATED AS OF DECEMBER 1, 1993 BETWEEN
REFIRST, INC. AND FIRST HAWAIIAN BANK
<PAGE> 2
---------------------------------------------------------
LEASE AGREEMENT
between
REFIRST, INC.,
as Lessor
and
FIRST HAWAIIAN BANK,
as Lessee
---------------------------------------------------------
Dated as of December 1, 1993
---------------------------------------------------------
Premises:
First Hawaiian Center
Honolulu, Hawaii
---------------------------------------------------------
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
1.1 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
2.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE III
3.1 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.2 Payment of Base Rent and Renewal Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.3 Additional Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.4 Construction Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.5 Payments at the Overdue Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.6 Performance on a Non-Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IV
4.1 General Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.2 Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.3 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.4 Reports and Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.5 Utility Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.6 Income Inclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.7 Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE V
5.1 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VI
6.1 Net Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.2 No Termination or Abatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.3 Right of Offset Against Lessor Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VII
7.1 Ownership of the Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VIII
8.1 Condition of the Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.2 Possession and Use of the Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE IX
9.1 Compliance with Legal Requirements and Insurance
Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE X
10.1 Maintenance and Repair; Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.2 Environmental Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
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ARTICLE XI
11.1 Modifications, Substitutions and Replacements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XII
12.1 Warranty of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.2 Grants and Releases of Easements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE XIII
13.1 Permitted Contests Other than in Respect
of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
13.2 Contests of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XIV
14.1 Public Liability and Workers' Compensation
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
14.2 Hazard and Other Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
14.3 Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE XV
15.1 Casualty and Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
15.2 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15.3 Notice of Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE XVI
16.1 Termination Upon Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
16.2 Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE XVII
17.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
17.2 Surrender of Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
17.3 Reletting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
17.4 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
17.5 Acceleration of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
17.6 Final Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
17.7 Waiver of Certain Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
17.8 Assignment of Rights under Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
17.9 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE XVIII
18.1 Lessor's Right to Cure Lessee's Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE XIX
19.1 Provisions Relating to Lessee's Termination of
this Lease or Exercise of Purchase Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE XX
20.1 Lessee's Purchase Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
20.2 Exercise of Purchase Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
20.3 Purchase Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
20.4 Transfer of the Property Upon Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
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ARTICLE XXI
21.1 Extended Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
21.2 Permitted Refinancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE XXII
22.1 Residual Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE XXIII
23.1 Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE XXIV
24.1 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE XXV
25.1 Indemnification by Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE XXVI
26.1 Subletting and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
26.2 Attornment and Nondisturbance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
26.3 Subleases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE XXVII
27.1 Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE XXVIII
28.1 Right to Inspect During any Extended Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
28.2 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE XXIX
29.1 Acceptance of Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE XXX
30.1 No Merger of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE XXXI
31.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE XXXII
32.1 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
32.2 Amendments and Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
32.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
32.4 Conclusive Reliance on Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
32.5 Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
32.6 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
32.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
32.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
32.9 Memorandum of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
32.10 Limitations on Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
</TABLE>
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ARTICLE XXXIII
33.1 Ground Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
</TABLE>
SCHEDULES
Schedule A: Description of Land
Schedule B: Permitted Exceptions
Schedule C: Payment Dates and Lessor Base Rent
Schedule D: Default Amount and Termination Amount
Schedule E: Form of Non-disturbance and Attornment Agreement
<PAGE> 7
LEASE AGREEMENT (this "Lease"), dated as of December 1, 1993,
between REFIRST, INC., a Delaware corporation having its principal office at
1900 Indian Wood Circle, Maumee, Ohio 43537, as lessor, and FIRST HAWAIIAN
BANK, a Hawaii banking corporation having its principal office at 1132 Bishop
Street, Suite 2500, Honolulu, Hawaii 96813, as lessee.
W I T N E S S E T H :
A. WHEREAS, Lessor (such term, and all other capitalized terms not
defined in these Recitals or in Article I, are as defined in Article II) has,
pursuant to that certain Ground Lease, dated as of even date herewith (the
"Ground Lease"), between First Hawaiian Center Limited Partnership and FH
Center, Inc., collectively as ground lessors (collectively, the "Ground
Lessors"), and Lessor, as ground lessee, (i) ground leased from the Ground
Lessors those certain parcels comprising the Land, as described on Schedules
A-1 and A-2 hereto, and (ii) received from the Ground Lessors all of the Ground
Lessors' respective right, title and interest in and to the Appurtenant Rights
relating to the Land described on Schedule A;
B. WHEREAS, the Ground Lessors, Lessee and Lessor have executed and
delivered that certain Participation Agreement, dated as of November 19, 1993
(the "Participation Agreement"), among Lessor, Lessee, the Ground Lessors and
First Fidelity Bank, N.A., Pennsylvania, a national association (together with
any replacement trustee appointed pursuant to the terms of the Indenture, the
"Trustee"), pursuant to which, inter alia, (i) the Ground Lessors and Lessor
agreed to enter into the Ground Lease and (ii) Lessor and Lessee agreed to
enter into this Lease;
C. WHEREAS, pursuant to that certain Leased Improvements
Construction Agreement, dated as of even date herewith (the "Leased
Improvements Construction Agreement"), between Lessee and Lessor, Lessor has
agreed to cause to be demolished the Existing Improvements and to cause to be
constructed in their place the Building (as defined below);
D. WHEREAS, pursuant to that certain Construction Management,
Escrow and Development Agreement, dated as of even date herewith (the
"Construction Management Agreement"), among Lessor, Lessee and the Trustee,
Lessee has in turn agreed for the benefit of Lessor and the Trustee to cause to
be demolished the Existing Improvements and to cause to be constructed in their
place the Building and to fulfill all other obligations, if any, of Lessor
under the Leased Improvements Construction Agreement;
E. WHEREAS, pursuant to (i) that certain Construction Agreement,
dated November 2, 1993 (the "Construction Contract"), between Lessee and
Fletcher Pacific Construction Co., Ltd. (the "General Contractor"), as general
contractor, (ii) that certain
<PAGE> 8
2
Abatement and Demolition Agreement, dated June 3, 1993 (the "Demolition
Contract"), between Lessee and Cleveland Wrecking Company (the "Demolition
Contractor"), as demolition contractor, and (iii) that certain Development
Management Agreement, dated as of December 28, 1992 (the "Development
Agreement"), between Lessee and The Myers Corporation (the "Developer"), as
developer, Lessee has further provided for the demolition of the Existing
Improvements and construction of the Building in order to satisfy its
obligations under the Construction Management Agreement;
F. WHEREAS, Lessor desires to lease to Lessee, and Lessee desires
to lease from Lessor, all of Lessor's right, title and interest in and to the
Land, the Improvements, the Appurtenant Rights and the Fixtures referred to
herein as the "Property", and defined more particularly in Section 1.1;
G. WHEREAS, in order to provide funds for the demolition of the
Existing Improvements and the construction of the Building, Lessor has issued
$161,990,000 of its 6.93% Class A Secured Notes Due 2003 (the "Class A Notes")
and $25,885,000 of its 6.98% Class B Secured Notes Due 2003 (the "Class B
Notes" and, together with the Class A Notes, the "Notes"), pursuant to that
certain Indenture, dated as of even date herewith (the "Indenture"), between
Lessor and the Trustee, as trustee for the benefit of the holders from time to
time of the Notes (collectively, the "Holders");
H. WHEREAS, Lessor's obligations under the Notes are secured by (i)
a Real Property Mortgage, Security Agreement and Financing Statement, dated as
of even date herewith (the "Mortgage"), made by Lessor and the Ground Lessors
in favor of the Trustee for the benefit of the Holders, on the Property, and
(ii) an Assignment of Leases and Rents, dated as of even date herewith (the
"Assignment of Lease"), made by Lessor in favor of the Trustee for the benefit
of the Holders, and with respect to which Lessee has executed and delivered
Lessee's Consent (the "Consent to Assignment"), dated as of even date herewith;
and
I. WHEREAS, this Lease is to be subordinated to the Mortgage but
only during the Preliminary Term pursuant to that certain Subordination,
Non-Disturbance and Attornment Agreement, dated as of even date herewith (the
"Non-Disturbance Agreement"), among the Trustee, Lessee and Lessor, and shall
at all times after the Primary Term Commencement Date, subject to the terms of
the Non-Disturbance Agreement, be superior to the Mortgage.
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
<PAGE> 9
3
ARTICLE I
1.1 Property. Subject to the terms and conditions hereinafter set
forth, Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor,
the following (collectively, the "Property"):
(a) all of Lessor's right, title and interest in and to the parcels
of land described on Schedules A-1 and A-2 hereto (the "Land") pursuant
to the terms and provisions of the Ground Lease;
(b) all of Lessor's right, title and interest in and to the
Improvements;
(c) all of Lessor's right, title and interest in and to all
easements, rights and appurtenances relating to the Land or the
Improvements (collectively, the "Appurtenant Rights"); and
(d) all of Lessor's right, title and interest in and to all
fixtures to the Improvements, including all components thereof, located
in or on the Improvements, together with all replacements,
modifications, alterations and additions thereto (collectively, the
"Fixtures").
1.2 Term. The Property is leased for the Preliminary Term, the
Primary Term and any Extended Term, if applicable.
1.3 Title. The Property is leased to Lessee without any
representation or warranty, express or implied, by Lessor and subject to the
rights of parties in possession, the existing state of title (including,
without limitation, the Permitted Exceptions) and all applicable Legal
Requirements now or hereafter in effect. To obtain assurance as to the title
to the Property as between Lessee and Lessor, Lessee is relying solely upon a
policy of title insurance. Lessee shall in no event have any recourse against
Lessor for any defect in title to the Property.
ARTICLE II
2.1 Definitions. As used in this Lease, terms defined in the
caption or in the Recitals shall have the meanings set forth therein, and the
following terms shall have the following meanings:
Additional Charges. As defined in Section 3.3.
Administrative Agent. As defined in the Participation Agreement.
<PAGE> 10
4
Affiliate. When used with respect to any Person (as hereinafter
defined), shall mean any other Person who, directly or indirectly,
controls, is controlled by or is under common control with such Person.
For the purposes of this definition, "control" (including the
correlative meanings of the terms "controlled by" and "under common
control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person.
After Tax Basis. With respect to any payment to be received, the
amount of such payment increased so that, after deduction of the amount
of all taxes required to be paid by the recipient (less any tax savings
realized and the present value of any tax savings projected to be
realized by the recipient as a result of the payment of the indemnified
amount) with respect to the receipt by the recipient of such amounts,
such increased payment (as so reduced) is equal to the payment
otherwise required to be made.
Appraiser's Certificate. A certificate of an independent Person who
is either (a) a licensed real estate broker which does not have a
direct financial interest in the sublease in question or (b) a member
of the Appraisal Institute, in each case having at least five years'
experience in the downtown Honolulu commercial office market, stating
that the rents payable under any sublease represent the fair rental
value for the space sublet thereunder and that the other terms of such
sublease, taken together with all of the terms of such sublease, are
commercially reasonable.
Appurtenant Rights. As defined in Section 1.1(c).
Assignment of Lease. As defined in Recital H.
Base Rent. As defined in Section 3.1(a).
Beneficial Owner. As defined in the Participation Agreement.
Building. As defined in the Construction Management Agreement.
Business Day. Each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which national and/or state banks in the City of
Philadelphia, Pennsylvania, or the City and County of Honolulu, Hawaii,
are generally authorized or obligated, by law or executive order, to
close.
Casualty. As defined in Section 15.1(a)(i).
<PAGE> 11
5
CERCLA. The Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, 42 U.S.C. # # 9601 et seq., as amended by the
Superfund Amendments and Reauthorization Act of 1986.
Certifying Party. As defined in Section 27.1.
Class A Base Rent. As defined in Section 3.1(a).
Class A Notes. The Class A Notes described in Recital G.
Class A Office Building. An office building generally consistent
with other "Class A" office facilities located in the downtown Honolulu
office market.
Class B Base Rent. As defined in Section 3.1(a).
Class B Notes. The Class B Notes described in Recital G.
Closing Expenses. All of those costs and expenses which are
required to be paid by Lessee and referred to in Section 9.1 through
9.4 of the Participation Agreement.
Closing Tax Opinion. As defined in Section 4.4(a).
Code. The Internal Revenue Code of 1986, as amended from time to
time, or any successor statute thereto.
Condemnation. As defined in Section 15.1(a)(ii).
Consent to Assignment. As defined in Recital H.
Construction Account. As defined in the Construction Management
Agreement.
Construction Contract. As defined in Recital E.
Construction Management Agreement. As defined in Recital D.
Debt Overdue Rate. 8.94%, but in no event shall such rate exceed
the maximum rate permitted by law.
Default. An Event of Default or an event, condition or failure
which, with the giving of notice or the lapse of time or both, would
become an Event of Default.
Default Amount. For any Payment Date occurring during the Primary
Term, the amount set forth on Schedule D with respect to such Payment
Date.
<PAGE> 12
6
Demolition Contract. As defined in Recital E.
Demolition Contractor. As defined in Recital E.
Developer. As defined in Recital E.
Development Agreement. As defined in Recital E.
Election Notice. As defined in Section 20.2.
Environmental Law. Whenever enacted or promulgated, any federal,
state, county or local law, statute, ordinance, rule, regulation,
license, permit, authorization, approval, covenant, criteria,
guideline, administrative or court order, judgment, decree, injunction,
code or requirement or any agreement with a Governmental Authority:
(x) relating to pollution (or the cleanup, removal,
remediation or encapsulation thereof, or any other response
thereto), or the regulation or protection of human health, safety or
the environment, including air, water vapor, surface water,
groundwater, drinking water, land (including surface or subsurface),
plant, aquatic and animal life, or
(y) concerning exposure to, or the use, containment, storage,
recycling, treatment, generation, discharge, emission, Release or
threatened Release, transportation, processing, handling, labeling,
containment, production, disposal or remediation of any Hazardous
Substance, Hazardous Condition or Hazardous Activity,
in each case as amended and as now or hereafter in effect, and any
common law or equitable doctrine (including, without limitation,
injunctive relief and tort doctrines such as negligence, nuisance,
trespass and strict liability) that may impose liability or obligations
for injuries (whether personal or property) or damages due to or
threatened as a result of the presence of, exposure to, or ingestion
of, any Hazardous Substance, whether such common law or equitable
doctrine is now or hereafter recognized or developed. Applicable laws
include, but are not limited to, CERCLA; the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. # 6901 et seq.; the Federal Water
Pollution Control Act, 33 U.S.C. # 1251 et seq.; the Clean Air Act, 42
U.S.C ## 7401 et seq.; the National Environmental Policy Act, 42 U.S.C.
# 4321; the Refuse Act, 33 U.S.C. ## 401 et seq.; the Hazardous
Materials Transportation Act of 1975, 49 U.S.C. ## 1801-1812; the
Toxic Substances Control Act, 15 U.S.C. ## 2601 et seq.; the Federal
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. ## 136 et seq.;
the Safe Drinking Water Act, 42 U.S.C. ## 300 f et seq.; and the
Occupational
<PAGE> 13
7
Safety and Health Act of 1970, each as amended and as now or hereafter
in effect, and their state and local counterparts or equivalents,
including the Hawaii Hazardous Waste Law, Haw. Rev. Stat. Ch. 342 J,
and any regulations promulgated thereunder.
Environmental Violation. Any activity, occurrence or condition that
violates or threatens to violate or results in or threatens to result
in non-compliance with any Environmental Law.
ERISA. The Employee Retirement Income Security Act of 1974, as
amended from time to time.
Escrowee. The Trustee, any subsequent trustee appointed in
accordance with Sections 608 and 609 of the Indenture and acting as
trustee on behalf of the Holders or, if no mortgage then encumbers the
Property, a bank or trust company experienced in administering
construction loans and having a combined capital and surplus of at
least $50,000,000 as selected by Lessee in its sole discretion,
reasonably exercised.
Event of Default. As defined in Section 17.1.
Excepted Liens. Any Liens on the Property which may arise as a
result of a judgment rendered by a court of competent jurisdiction in
favor of Lessee against Lessor resulting from a breach by Lessor of any
of the provisions of the Operative Agreements; provided that Lessee
agrees in writing with the Trustee that (i) such Liens will be
subordinate to the Lien of the Mortgage and (ii) it will not take any
action to foreclose, execute, garnish, levy, attach or otherwise
enforce the Lien of such judgment until all obligations of Lessor under
the Notes, the Indenture, the Mortgage and each of the other Operative
Agreements have been paid in full, other than to garnish, levy, attach
or offset with respect to amounts payable to Lessor solely on account
of Lessor Base Rent.
Existing Improvements. As defined in the Participation Agreement.
Expiration Date. As defined in Section 20.2.
Extended Term. As defined in Section 21.1(b).
Extension Notice. As defined in Section 21.1(b).
Facility. A facility used for the treatment, storage or disposal of
Hazardous Substances.
<PAGE> 14
8
Final Substantial Completion Date. The date on which both the
Substantial Completion Date for Core and Shell and each Substantial
Completion Date for Lessee Installations have occurred.
Fixtures. As defined in Section 1.1(d).
General Contractor. As defined in Recital E.
Governmental Authority. Any federal, state, county, regional,
municipal or other governmental or regulatory authority, agency, board,
body, commission, instrumentality, court or quasi-governmental
authority.
Ground Lease. As defined in Recital A.
Ground Lessors. As defined in Recital A.
Guarantee. As defined in the Participation Agreement.
Hawaii General Excise Tax. The tax imposed pursuant to Chapter 237,
Hawaii Revised Statutes (or any corresponding provisions of any
successor Hawaii tax statute) and any related surtaxes and surcharges,
and any of the foregoing imposed by or on behalf of the State of Hawaii
or any political subdivision or taxing authority thereof.
Hawaii Taxpayer. As defined in the Participation Agreement.
Hazardous Activity. Any activity, process, procedure or undertaking
that directly or indirectly (i) produces, generates or creates any
Hazardous Substance; (ii) causes or results in (or threatens to cause
or result in) the Release of any Hazardous Substance into the
environment (including air, water vapor, surface water, groundwater,
drinking water, land (including surface or subsurface), plant, aquatic
and animal life); (iii) involves the containment or storage of any
Hazardous Substance; or (iv) would be regulated as hazardous waste
treatment, storage or disposal within the meaning of any Environmental
Law.
Hazardous Condition. Any condition that violates or threatens to
violate, or that results in or threatens non- compliance with, any
Environmental Law.
Hazardous Substance. Any of the following: (i) any petroleum or
petroleum product, explosives, radioactive materials, asbestos,
formaldehyde, polychlorinated biphenyls, lead and radon gas; (ii) any
substance, material, product, derivative, compound or mixture, mineral,
chemical, waste, gas, medical waste, or pollutant, in each case whether
naturally occurring, man-made or the by-product of
<PAGE> 15
9
any process, that is toxic, harmful, hazardous or acutely hazardous to
the environment or human health or safety; or (iii) any substance,
material, product, derivative, compound or mixture, mineral, chemical,
waste, gas, medical waste or pollutant that would support the assertion
of any claim under any Environmental Law, whether or not defined as
hazardous as such under any Environmental Law.
Holders. As defined in Recital G, together with any holder of a
Renewal Note.
H.15. "Statistical Release H.15(519), Selected Interest Rates", as
published by the Board of Governors of the Federal Reserve System, or
any successor publication.
Impositions. Except to the extent described in the following
sentence, any and all liabilities, losses, expenses and costs of any
kind whatsoever for fees, taxes, levies, imposts, duties, charges,
assessments or withholdings ("Taxes") (including (i) real and personal
property taxes, including personal property taxes on any property
covered by this Lease that is classified by Governmental Authorities as
personal property, and real estate or ad valorem taxes in the nature of
property taxes; (ii) sales taxes, use taxes and other similar taxes
(including rent taxes and intangibles taxes); (iii) the Hawaii General
Excise Tax and any other excise taxes; (iv) real estate transfer taxes,
conveyance taxes, stamp taxes and documentary recording taxes and fees;
(v) taxes that are or are in the nature of franchise, income, value
added, privilege and doing business taxes, license and registration
fees; and (vi) assessments on the Property, including all assessments
for public improvements or benefits, whether or not such improvements
are commenced or completed within the Term), and in each case all
interest, additions to tax and penalties thereon, which at any time
prior to, during or with respect to the Term or in respect of any
period for which Lessee shall be obligated to pay Additional Charges,
may be levied, assessed or imposed by any Federal, state, city, county
or local authority upon or with respect to (a) the Property or any part
thereof or interest therein; (b) the financing, refinancing,
demolition, construction, substitution, subleasing, assignment,
control, condition, occupancy, servicing, maintenance, repair,
ownership, possession, activity conducted on, delivery, insuring, use,
operation, improvement, transfer of title, return or other disposition
of the Property or any part thereof or interest therein; (c) the Notes
or other indebtedness with respect to the Property or any part thereof
or interest therein; (d) the rentals, receipts or earnings arising from
the Property or any part thereof or interest therein; (e) the Operative
Agreements or any payment made or accrued pursuant thereto; (f) the
income or other proceeds received with respect to
<PAGE> 16
10
the Property or any part thereof or interest therein upon the sale or
disposition thereof; (g) any contract (including the Construction
Management Agreement) relating to the demolition, construction,
acquisition or delivery of the Existing Improvements or the Property or
any part thereof or interest therein; (h) the issuance of the Notes; or
(i) otherwise in connection with the transactions contemplated by the
Operative Agreements.
The term "Imposition" shall not mean or include:
(i) Taxes and impositions (other than Taxes that are, or are
in the nature of, sales, use, rental, value added, transfer or
property taxes) that are imposed on Lessor or the Trustee by the
United States federal government that are based on or measured by
the net income (including taxes based on capital gains and minimum
taxes) of such Person; provided that this clause (i) shall not be
interpreted to prevent a payment from being made on an After Tax
Basis if such payment is otherwise required to be so made;
(ii) Taxes and impositions (other than Taxes that are, or are
in the nature of, sales, use, rental, transfer or property taxes and
other than the Hawaii General Excise Tax) that are imposed by any
state or local jurisdiction or taxing authority within any state or
local jurisdiction and that are based upon or measured by the gross
or net income or gross or net receipts (including any minimum taxes,
withholding taxes or taxes on or measured by capital, net worth,
excess profits or items of tax preference or taxes that are capital
stock, franchise or doing business taxes) except that this clause
(ii) shall not apply to any such taxes imposed on Lessor (or its
Affiliates, to the extent such tax is imposed upon the Affiliate as
a result of either (x) the filing of any return on any form of
combined basis or (y) any theory of secondary liability) by the
State of Hawaii (or any local taxing authority thereof or therein)
or any jurisdiction into which any of the Property is moved, except
in the case of net income taxes imposed by the State of Hawaii to
the extent such taxes for such year (but not the amount of any
interest, penalties or additions to tax) exceed $80,000 for any
calendar year; provided that this clause (ii) shall not be
interpreted to prevent a payment from being made on an After Tax
Basis if such payment is otherwise required to be so made;
(iii) any Tax or imposition to the extent, but only to such
extent, it relates to any act, event or omission that occurs after
the termination of this
<PAGE> 17
11
Lease (but not any tax or imposition that relates to any period
prior to the termination of this Lease);
(iv) any Tax or imposition for so long as, but only for so long
as, it is being contested in accordance with the provisions of
Article XIII;
(v) any interest or penalties imposed on Lessor as a result
of the failure of Lessor to file any return or report timely and in
the form prescribed by law or to pay any Tax or imposition, except
to the extent such failure is a result of a breach by Lessee of its
obligations under Article IV; provided that this clause (v) shall
not apply (x) if such interest or penalties arise as a result of a
position taken (or requested to be taken) by Lessee in a contest
controlled by Lessee under Article XIII or (y) to any such interest
or penalties that result from Lessor's complying with the reporting
procedures set forth in Section 4.4(a);
(vi) any Taxes or impositions imposed on Lessor that are a
result of Lessor not being considered a "United States person" as
defined in Section 7701(a)(30) of the Code;
(vii) any Taxes or impositions that are enacted or adopted by
their express terms as a substitute for any tax that would not have
been indemnified against pursuant to the terms of this Lease;
(viii) any Taxes which are imposed as a result of a breach of a
covenant or representation by Lessor in any Operative Agreement
(unless caused by Lessee's breach of its representations, warranties
and covenants) or as a result of the gross negligence or wilful
misconduct of Lessor itself (as opposed to gross negligence or
willful misconduct imputed to Lessor) or any of its Affiliates, but
not Taxes imposed as a result of ordinary negligence of Lessor or
any of its Affiliates;
(ix) any Taxes or impositions to the extent that such taxes are
actually reimbursed to Lessor by another Person other than an
Affiliate of Lessor;
(x) any Taxes or impositions imposed upon Lessor with respect
to any voluntary transfer, sale, financing or other voluntary
disposition (other than a transfer contemplated and permitted by the
Operative Agreements, including any transfer in connection with (1)
the exercise by Lessee of its Purchase Option, (2) the occurrence of
an Event of Default under this Lease or an Indenture Event of
Default, or (3) a Casualty or Condemnation affecting the Property)
of any interest in
<PAGE> 18
12
the Property or any interest in, or created pursuant to, the
Operative Agreements or any voluntary transfer of any interest in
Lessor (other than in accordance with the terms of the Guarantee and
other than in connection with the existence of an Event of Default
or an Indenture Event of Default) or any involuntary transfer of any
of the foregoing interests resulting from the bankruptcy or
insolvency of Lessor (other than in connection with the existence of
an Event of Default or an Indenture Event of Default);
(xi) any gift or inheritance Taxes;
(xii) any Taxes or impositions, to the extent Lessor or its
Affiliates actually receives a credit (or otherwise has a reduction
in a liability for taxes) in respect thereof against taxes that are
not indemnified hereunder (but only to the extent such credit is not
taken into account in calculating the indemnity payment on an After
Tax Basis);
(xiii) any Tax or imposition to the extent that such Tax or
imposition is imposed on the Lessor or any of its Affiliates in
respect of a transaction or business in the jurisdiction imposing
such Tax other than the transactions arising out of the Operative
Agreements; or
(xiv) any Tax or imposition imposed on a direct or indirect
transferee, successor or assign of Lessor to the extent of the
excess of such Taxes over the amount of such taxes that would have
been imposed had there not been a transfer by the original Lessor of
an interest arising under the Operative Agreements; provided that
there shall not be excluded under this clause (xiv) any such Tax or
imposition if such direct or indirect transferee, successor or
assign of Lessor acquired its interest as a result of a transfer in
connection with an Event of Default or an Indenture Event of
Default; provided, further, that there shall not be excluded under
this clause (xiv) any amount necessary to make any payment on an
After Tax Basis.
Any Tax or imposition excluded from the defined term "Imposition" in
any one of the foregoing clauses (i) through (xiv) shall not be
construed as constituting an Imposition by any provision of any other
of the aforementioned clauses.
Impositions Indemnitee. As defined in Section 13.2(a).
Improvements. As defined in the Mortgage.
Indemnified Parties. As defined in Section 25.1.
<PAGE> 19
13
Independent Investment Banker. As defined in the Construction
Management Agreement.
Indenture. As defined in Recital G.
Indenture Event of Default. Any event or condition defined as an
"Event of Default" in Section 501(a) of the Indenture.
Insurance Requirements. All terms and conditions of any insurance
policy required by this Lease to be maintained by Lessee and all
requirements of the issuer of any such policy.
Land. As defined in Section 1.1(a).
Lease. This Lease Agreement.
Leased Improvements Construction Agreement. As defined in Recital C.
Legal Requirements. All federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting the Property, the Existing
Improvements, the Improvements or the demolition, construction, use or
alteration thereof, whether now or hereafter enacted and in force,
including any that require repairs, modifications or alterations in or
to the Property or in any way limit the use and enjoyment thereof
(including all building, zoning and fire codes and the Americans with
Disabilities Act of 1990, 42 U.S.C. # 12101 et. seq. and any other
similar federal, state or local laws or ordinances and the regulations
promulgated thereunder) and any that may relate to environmental
requirements (including all Environmental Laws), and all permits,
certificates of occupancy, licenses, authorizations and regulations
relating thereto, and all covenants, agreements, restrictions and
encumbrances contained in any instruments which are either of record
or known to Lessee (other than those hereafter created by Lessor
without the consent of Lessee) affecting the Property, the Appurtenant
Rights and any easements, licenses or other agreements entered into
pursuant to Section 12.2.
Lessee. First Hawaiian Bank, and its successors and assigns
expressly permitted hereunder.
Lessee's Hawaii Tax Counsel. As defined in Section 4.4(a).
Lessor. REFIRST, Inc., and its successors and assigns expressly
permitted hereunder.
<PAGE> 20
14
Lessor Base Rent. As defined in Section 3.1(a).
Lessor Contribution. As defined in the Participation Agreement.
Lessor Make-Whole Premium. The amount, determined by an Independent
Investment Banker as of the third Business Day prior to the day the
payment is required to be made to Lessor, which equals the excess, if
any, of (i) the sum of the present values of all remaining scheduled
payments due to Lessor prior to December 1, 2003, if any, and all
remaining scheduled payments of Lessor Base Rent as of the day payment
is required to be made to Lessor, discounted semi-annually on each
payment date at a rate equal to the Treasury Yield, based on a 360-day
year of twelve 30-day months, over (ii) the Lessor Contribution.
Lessor Return Payment. An amount, as of the date of calculation,
sufficient to provide Lessor with a pre-tax internal rate of return of
11.68%, and as adjusted during any Renewal Term in accordance with
Section 21.1, on the Lessor Contribution from December 1, 1993 to the
date of payment, which if calculated as of the expiration date of the
Primary Term will be $6,219,053.52.
Lessor's Hawaii Tax Counsel. As defined in Section 4.4(a).
Lessor's Margin. If thirty (30) days prior to the commencement of
the first Extended Term the rating on the Class A Notes from S&P and
Moody's is at least "A-" and "A3", respectively, then Lessor's Margin
shall be an amount sufficient (i) to return the balance of the Lessor
Contribution ratably over ten (10) years in equal installments on each
six-month anniversary of the commencement of the first Extended Term,
and (ii) to provide an annualized return on the outstanding balance of
the Lessor Contribution equal to 6.85% plus the yield on the ten-year
Constant Maturity Treasury as shown in H.15; otherwise, Lessor's Margin
shall be an amount sufficient (x) to return the balance of the Lessor
Contribution over five (5) years and (y) to provide an annualized
return on the outstanding balance of the Lessor Contribution equal to
6.85% plus the yield on the five-year Constant Maturity Treasury as
shown in H.15. Lessor's Margin shall be determined as of the
commencement of the first Extended Term and such return to be provided
ratably in equal installments on each six-month anniversary of the
commencement of the first Extended Term.
Lessor Overdue Rate. 13.68%, but in no event shall such rate exceed
the maximum rate permitted by law.
<PAGE> 21
15
Lien. As defined in the Indenture.
Make-Whole Premium. As defined in the Indenture.
Maximum Residual Guarantee Amount. An amount equal to $161,990,000,
subject to reduction as provided in Section 21.2(a)(v).
Modifications. As defined in Section 11.1.
Moody's. As defined in the Participation Agreement.
Mortgage. As defined in Recital H.
Net Proceeds. All amounts paid in connection with any Casualty or
Condemnation, and all interest earned thereon, less the expense of
claiming and collecting such amounts, including all costs and expenses
in connection therewith for which the Trustee, Lessor or the Holders
are entitled to be reimbursed pursuant to this Lease.
Non-Disturbance Agreement. As defined in Recital I.
Notes. As defined in Recital G, together with any Renewal Notes.
Officer's Certificate. A certificate of Lessee signed by any
individual holding the office of vice president or higher, which
certificate shall certify as true and correct the subject matter being
certified to in the certificate.
Operative Agreements. As defined in the Participation Agreement.
Outstanding. As defined in the Indenture.
Participation Agreement. As defined in Recital B.
Payment Date. As set forth on Schedule C or, during any Extended
Term, as determined in accordance with Section 21.1.
Permitted Exceptions. The following:
(a) those easements, rights-of-way, servitudes, reservations,
rights, restrictions, liens, encumbrances, adverse claims and other
defects and irregularities in title set forth on Schedule B hereto;
(b) the right reserved to or vested in any municipality or public
authority to condemn, appropriate, recapture or designate a purchaser
of the Property;
<PAGE> 22
16
(c) (i) any Liens for taxes, assessments and other governmental
charges and any Liens in favor of mechanics, materialmen and laborers
for work or services performed or materials furnished in connection
with the Property, provided that the terms of Section 12.1(a)(iv) or
Article XIII dealing with any such tax, assessment, other governmental
charge or Lien shall have been complied with by Lessee or (ii) any
Liens for taxes, assessments or other governmental charges which are
not yet due and payable;
(d) the rights of Lessee hereunder and of Lessor under the Ground
Lease;
(e) the Lien of the Mortgage and any rights granted thereby;
(f) the Assignment of Lease;
(g) any non-disturbance and attornment agreements entered into with
any sublessee in accordance with the terms of Article XXVI and any
subleases which are entitled to the benefits of such non-disturbance
and attornment agreements; and
(h) any Excepted Liens.
Permitted Refinancing. As defined in Section 21.2(a).
Person. An individual, corporation, partnership, trust,
association, Governmental Authority or other entity.
Plans and Specifications. As defined in the Construction Management
Agreement.
Post Completion Escrow. As defined in Section 15.1(a).
Preliminary Term. The term commencing on the date hereof and
expiring on the Final Substantial Completion Date.
Primary Term. The term commencing on the Final Substantial
Completion Date and expiring on December 1, 2003.
Project Contracts. As defined in the Construction Management
Agreement.
Property. As defined in Section 1.1.
Purchase Option. As defined in Section 20.1.
Purchase Option Price. As defined in Section 20.3.
<PAGE> 23
17
Reasonable Basis. Reasonable Basis for a position shall exist if
tax counsel may properly advise reporting such position on a tax return
in accordance with formal opinion 85-352 issued by the Standing
Committee on Ethics and Professional Responsibility of the American Bar
Association.
Release. Any release, pumping, pouring, emptying, injecting,
escaping, leaching, dumping, seepage, spill, leak, flow, discharge,
disposal or emission of a Hazardous Substance.
Renewal Notes. Any note or notes issued by Lessor in connection
with any Permitted Refinancing.
Renewal Rent. As defined in Section 3.1(b).
Rent. Collectively, the Base Rent or the Renewal Rent, as
applicable, and the Additional Charges.
Rent Commencement Date. June 1, 1997.
Requesting Party. As defined in Section 27.1.
Residual Guarantee Amount. An amount equal to the excess, if any,
of (i) the Purchase Option Price over (ii) the sale proceeds actually
received, or deemed to have been received, by Lessor from a sale of the
Property (net of any reasonable brokerage commissions and any other
sales expenses).
S&P. As defined in the Participation Agreement.
Significant Casualty. As defined in Section 15.1(f).
Significant Condemnation. As defined in Section 15.1(f).
Substantial Completion Date for Core and Shell. As defined in the
Construction Management Agreement.
Substantial Completion Date for Lessee Installations. As defined in
the Construction Management Agreement.
Taxes. As defined in the definition of Impositions.
Term. Collectively, the Preliminary Term, the Primary Term, and, if
exercised, any Extended Term or Extended Terms.
Termination Amount. As of any Payment Date, the amount set forth in
Schedule D with respect to such Payment Date.
<PAGE> 24
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Termination Date. As defined in Section 16.2(a).
Termination Notice. As defined in Section 16.1(a).
Title Defects. As defined in Section 12.1(a).
Total Condemnation. As defined in Section 15.1(f).
Trustee. As defined in Recital B.
Withheld Amounts. As defined in Section 3.1(a).
2.2 Other Definitional Provisions. (a) Words and phrases used in
the singular shall be deemed to include the plural and vice versa, and nouns
and pronouns used in any particular gender shall be deemed to include any other
gender, as the context may permit.
(b) Unless otherwise specified, all references herein to designated
"Articles", "Sections", "Schedules" and other subdivisions shall be to the
designated Articles, Sections, Schedules and other subdivisions of this Lease.
(c) The words "including" and "include", and words of similar
import, shall be deemed to be followed by "without limitation".
(d) The words "herein", "hereof" and "hereunder", and words of
similar import, shall refer to this Lease as a whole and not to any particular
Article, Section, Schedule or other subdivision of this Lease.
ARTICLE III
3.1 Rent. (a) From and after the Rent Commencement Date, Lessee
shall pay to Lessor on each Payment Date, by delivering not later than 12:00
noon New York City time (to such account or accounts at such bank or banks or
to such other Person or in such other manner as Lessor shall from time to time
direct in writing), a net rental (the "Base Rent") equal to the sum of (i)
interest due on such date to the Holders of the Class A Notes ("Class A Base
Rent"), (ii) interest due on such date to the Holders of the Class B Notes
("Class B Base Rent") and (iii) all amounts due on such date to Lessor as set
forth in Schedule C attached hereto (such amounts, the "Lessor Base Rent").
Lessee shall have no obligation to pay any amounts hereunder on account of Base
Rent prior to the Rent Commencement Date. Notwithstanding anything to the
contrary contained herein, Lessee acknowledges and agrees that it shall at all
times make payments on each Payment Date to the Trustee such that the Trustee
receives an amount equal to the Class A Base Rent and Class B Base Rent due on
such Payment Date, except to the extent Lessee
<PAGE> 25
19
is required by Hawaii state taxing authorities to pay any amounts on account of
Hawaii state taxes due and payable by a Holder or Beneficial Owner which is a
Hawaii Taxpayer (any such amounts, "Withheld Amounts"). Lessee will provide to
the affected Holder or Beneficial Owner, Lessor and the Trustee, upon request,
such information as any such party shall reasonably require to substantiate the
withholding of any Withheld Amounts. Lessee has consented to Lessor's
assignment of its rights to receive rents hereunder pursuant to the Assignment
of Lease and acknowledges that the respective rights of the Persons entitled to
receive amounts calculated by reference to Class A Base Rent, Class B Base Rent
and Lessor Base Rent are as set forth in the Indenture. Notwithstanding the
provisions of the Indenture and the Assignment of Lease, Lessee shall insure
that Lessor will receive the Lessor Base Rent by 3:00 p.m., New York City time,
on each Payment Date.
(b) During each Extended Term, if any, on each Payment Date Lessee
shall pay to Lessor, by delivering not later than 3:00 p.m. New York City time
(to such account or accounts at such bank or banks or to such other Person or
in such other manner as Lessor shall from time to time direct in writing), a
net rental (the "Renewal Rent") in an amount calculated in the manner described
in Article XXI. Lessee shall insure that Lessor will receive the portion of
the Renewal Rent payable solely to Lessor by 3:00 p.m., New York City time, on
each Payment Date.
(c) The Base Rent and Renewal Rent shall be due and payable on the
applicable Payment Date, in lawful money of the United States and shall be made
by wire transfer of immediately available funds.
(d) Neither Lessee's inability or failure to take possession of
all or any portion of the Property when delivered by Lessor, nor Lessor's
inability or failure to deliver all or any portion of the Property to Lessee on
or before the Rent Commencement Date, whether or not attributable to any act or
omission of Lessee or any act or omission of Lessor, or for any other reason
whatsoever, shall delay or otherwise affect Lessee's obligation to pay Rent
commencing on the Rent Commencement Date.
3.2 Payment of Base Rent and Renewal Rent. The Base Rent and
Renewal Rent shall be paid absolutely net to Lessor, so that this Lease shall
yield to Lessor the full amount thereof, without setoff, deduction or
reduction.
3.3 Additional Charges. During the Term, in addition to any Base
Rent and Renewal Rent payable under this Lease, Lessee shall pay and discharge,
at the times specified in this Lease, all other amounts, liabilities,
obligations and Impositions which Lessee assumes or agrees to pay under this
Lease or under the other Operative Agreements to or for the benefit of Lessor,
including those obligations provided for in
<PAGE> 26
20
Section 18.1. Lessee shall also pay, before the due date thereof, the costs
and expenses incurred in the performance of Lessor's obligations under (a) the
following sections of the Indenture: Section 102 (Compliance Certificate and
Opinions); Section 401 (Satisfaction and Discharge of Indenture); Section 503
(Collection of Indebtedness and Suits for Enforcement by Trustee)(but only to
the extent Lessor is obligated to pay any further amount to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and counsel, and only
to the extent such obligations arise as a result of the occurrence of an Event
of Default or an event of default under the Construction Management Agreement);
Section 606 (Compensation and Reimbursement); Section 907 (Recording); Section
914 (Further Instruments); Section 915 (Right of the Trustee to Prevent or
Remedy Default); Section 916 (Right of the Trustee to Participate in Action
Affecting Security); and Section 917 (Trustee's Expenses for Protection of
Security) (unless caused by a default by Lessor of its obligations contained in
any of the Operative Agreements which does not result from the default by
Lessee of its obligations under any of such documents); (b) Sections 403
(unless caused by a default by Lessor of its obligations contained in any of
the Operative Agreements which does not result from the default by Lessee of
its obligations under any of such documents) of the Mortgage; and Section 501
of the Mortgage; and (c) Section 15 of the Assignment of Lease. Unless
expressly provided otherwise in this Lease, in the event of any failure on the
part of Lessee to pay and discharge any of such items, Lessee shall also
promptly pay and discharge any fine, penalty, interest or cost which may be
assessed or added for nonpayment or late payment of such items pursuant to the
terms of the Indenture or otherwise. All of the items referred to above in the
first three sentences of this Section 3.3 are referred to hereinafter
collectively as the "Additional Charges". Base Rent, Renewal Rent and
Additional Charges all constitute rent, and Lessor shall have all legal,
equitable and contractual rights, powers and remedies provided either in this
Lease, by statute or otherwise in the case of nonpayment of the Additional
Charges as in the case of nonpayment of the Base Rent or Renewal Rent.
3.4 Construction Management Agreement. (a) Pursuant to the terms
and conditions of the Construction Management Agreement, Lessee shall cause the
Improvements to be constructed in the manner more fully described therein.
(b) Notwithstanding any covenants contained in this Lease to the
contrary, all of Lessee's obligations with respect to Additional Charges, and
any other costs or expenses required to be paid by Lessee pursuant to the terms
of this Lease shall first be paid from the Construction Account to the extent
funds in the Construction Account are available for payment of such obligation,
cost or expense pursuant to Article IV of the Construction Management
Agreement. Nothing contained in the
<PAGE> 27
21
preceding sentence shall be construed or interpreted to limit or impair the
obligation of Lessee to pay Rent hereunder.
3.5 Payments at the Overdue Rate. (a) Lessee shall pay to Lessor
interest at the Debt Overdue Rate on any portion of Class A Base Rent and the
Class B Base Rent or any portion of the Additional Charges, the Default Amount,
the Residual Guarantee Amount, the Termination Amount, the Purchase Option
Price or the Make-Whole Premium that is required to be paid to the Trustee and
applied to the payment of principal, premium (if any) and interest due under
the Notes or to the payment of any other amount due to the Trustee hereunder,
under the Indenture or under any other Operative Agreement, in each case not
paid when due from the due date to the date of actual payment; provided, that
the Debt Overdue Rate shall not apply to an overdue payment to the extent that
the application of the Debt Overdue Rate would render unenforceable the payment
of Make-Whole Premium due hereunder (but only if such payment of Make-Whole
Premium would otherwise exceed the payment resulting from such application of
the Debt Overdue Rate).
(b) Lessee shall pay to Lessor interest at the Lessor Overdue Rate
on any portion of Lessor Base Rent or any portion of the Additional Charges,
the Default Amount, the Residual Guarantee Amount, Termination Amount, the
Purchase Option Price or the Lessor Make-Whole Premium that is required to be
paid to the Trustee on account of the Lessor Contribution, in each case not
paid when due from the due date to the date of actual payment.
3.6 Performance on a Non-Business Day. If any payment or
performance is required hereunder on a day that is not a Business Day, then
such payment or performance shall be due on the next succeeding Business Day.
ARTICLE IV
4.1 General Taxes. Lessee shall pay and assume liability for, and
does hereby agree to indemnify, protect and defend the Property, Lessor (and
any Affiliate, successor, transferee and assignee (to the extent permitted
under Sections 7(a) through (f) of the Guarantee and Sections 701 and 921(b) of
the Indenture)) and the Trustee (exclusively with respect to the Trustee's own
Impositions, but not with respect to Impositions payable by the Holders which
shall be governed exclusively by the provisions of Section 14.12 of the
Participation Agreement), and hold them harmless against, all Impositions on an
After Tax Basis. Lessor agrees and agrees to cause the Guarantor to use
good-faith efforts (but not including increasing its liability for Taxes not
indemnifiable hereunder) to minimize the amount of Taxes indemnifiable by
Lessee during any taxable year; provided that this sentence shall not be
<PAGE> 28
22
construed to limit or impair any right of Lessor set forth in the Operative
Agreements. Lessor further agrees, and agrees to cause the Guarantor, to
comply with recommendations made by Lessee regarding techniques to minimize
Taxes indemnifiable hereunder, provided that (i) Lessee agrees to make payments
to (or otherwise indemnify) Lessor and the Guarantor against any cost or
expense arising from instituting Lessee's recommendations and (ii) Lessor
determines in its sole discretion that such recommendations will not have an
adverse impact on Lessor or its Affiliates.
4.2 Refunds. Provided that no payment or bankruptcy Default or any
Event of Default has occurred and is continuing, if Lessor or the Trustee, as
the case may be, obtains a refund or a reduction in a liability (but only if
such reduction relates to a Tax not otherwise indemnifiable hereunder and has
not been taken into account in determining the amount of a payment on an After
Tax Basis) as a result of any Imposition paid or reimbursed by Lessee (in whole
or in part), Lessor or the Trustee, as the case may be, shall promptly pay to
Lessee the lesser of (x) the amount of such refund or reduction in liability
and (y) the amount previously so paid or advanced by Lessee, in each case net
of reasonable expenses not already paid or reimbursed by Lessee.
4.3 Payments. (a) Subject to the terms of Section 13.2, Lessee
shall pay or cause to be paid all Impositions directly to the taxing
authorities where feasible and otherwise to Lessor or the Trustee, as
appropriate, and Lessee shall at its own expense, upon Lessor's reasonable
request, furnish to Lessor copies of official receipts or other satisfactory
proof evidencing such payment.
(b) In the case of Impositions for which no contest is conducted
pursuant to Section 13.2 and which Lessee pays directly to the taxing
authorities, Lessee shall pay such Impositions prior to the latest time
permitted by the relevant taxing authority for timely payment. In the case of
Impositions for which Lessee reimburses Lessor or the Trustee, Lessee shall do
so within twenty (20) days after receipt by Lessee of demand by such Person
describing in reasonable detail the nature of the Imposition and the basis for
the demand (including the computation of the amount payable), but in no event
shall Lessee be required to pay such reimbursement prior to thirty (30) days
before the latest time permitted by the relevant taxing authority for timely
payment. In the case of Impositions for which a contest is conducted pursuant
to Section 13.2, Lessee shall pay such Impositions or reimburse Lessor or the
Trustee, as the case may be, for such Impositions, to the extent not previously
paid or reimbursed pursuant to Section 4.1, prior to the latest time permitted
by the relevant taxing authority for timely payment after conclusion of all
contests under Section 13.2.
(c) Impositions imposed with respect to the Property for a billing
period during which this Lease expires or
<PAGE> 29
23
terminates (unless Lessee has exercised the Renewal Option or the Purchase
Option) shall be adjusted and prorated on a daily basis between Lessee and
Lessor, whether or not such Imposition is imposed before or after such
expiration or termination and each party shall pay or reimburse the other for
each party's pro rata share thereof.
(d) At Lessee's request, the amount of any indemnification payment
by Lessee pursuant to Section 4.1 shall be verified and certified by an
independent public accounting firm mutually acceptable to Lessee, Lessor or the
Trustee, as the case may be. The fees and expenses of such independent public
accounting firm shall be paid by Lessee unless such verification shall result
in an adjustment in Lessee's favor of 5% or more of the payment as computed by
the indemnitee, in which case such fee shall be paid by the indemnitee.
4.4 Reports and Returns. (a) Lessor shall only file any reports
and tax returns required in Hawaii to the extent required by, and in a manner
consistent with, the opinion rendered on the Closing Date of Lessor's special
Hawaii tax counsel (the "Closing Tax Opinion"). Lessor may seek a new opinion
from Carlsmith Ball Wichman Murray Case Mukai & Ichiki or other Hawaii tax
counsel selected by Lessor and reasonably acceptable to Lessee ("Lessor's
Hawaii Tax Counsel"), if Lessor believes, in its reasonable opinion, that as a
result of (i) a change in law (including any administrative or judicial
pronouncement), (ii) the institution or increase of activities in Hawaii by
Lessor or any Affiliate thereof, (iii) the registration by Lessor as a foreign
corporation in the State of Hawaii (to the extent permitted by Section 14.8(a)
of the Participation Agreement), (iv) the Trustee's failure to comply with its
representation and covenant set forth in Sections 7.5(h) and 14.8(b) of the
Participation Agreement, (v) Lessor's knowledge that Lessee is claiming rent
deductions for Hawaii income tax purposes in respect of amounts paid by Lessee
under this Lease (in a manner inconsistent with the intention of the parties as
set forth in Section 7.1) or (vi) an audit of Lessor which results in the
payment of any Hawaii tax by Lessor, the validity or applicability of the
Closing Tax Opinion (or any subsequent opinion then in effect pursuant to this
Section 4.4) would be affected. Lessor's Hawaii Tax Counsel shall be requested
to opine that any reports and tax returns required to be filed in Hawaii should
be filed to the extent required by, and in a manner consistent with, the
positions expressed in the Closing Tax Opinion (or any subsequent opinion then
in effect pursuant to this Section 4.4) unless there is no Reasonable Basis to
assert such positions. Prior to rendering an opinion that is inconsistent with
the Closing Tax Opinion (or any subsequent opinion then in effect pursuant to
this Section 4.4), Lessor's Hawaii Tax Counsel shall consult with a law firm
designated by Lessee as to whether any changes to the filing of such reports or
tax returns is warranted. If Lessor's Hawaii Tax Counsel cannot
<PAGE> 30
24
render an opinion that is consistent with the Closing Tax Opinion (or any
subsequent opinion then in effect pursuant to this Section 4.4), Lessor shall
so notify Lessee and Lessee may request, within 30 days of such notice, that an
opinion be rendered by Cades Schutte Fleming & Wright or other Hawaii tax
counsel selected by Lessee and reasonably acceptable to Lessor ("Lessee's
Hawaii Tax Counsel"). Lessor agrees to fully cooperate (subject to receipt of
appropriate confidentiality undertakings by such counsel) with Lessee's Hawaii
Tax Counsel in order that Lessee's Hawaii Tax Counsel will be able to deliver
such opinion. If Lessee requests that Lessee's Hawaii Tax Counsel render an
opinion, no opinion shall be rendered by Lessor's Hawaii Tax Counsel. If
Lessee does not request that Lessee's Hawaii Tax Counsel render an opinion,
then Lessor's Hawaii Tax Counsel shall render an opinion. After completion of
the procedure described in this Section 4.4(a), Lessor shall only file any and
all reports and tax returns to the extent required by, and in the manner
consistent with, such new opinion, whether issued by Lessor's Hawaii Tax
Counsel or Lessee's Hawaii Tax Counsel. Lessee shall bear all reasonable costs
and expenses in connection with the issuing of any such opinions.
(b) Lessee shall be responsible for preparing and filing any real
and personal property or ad valorem tax returns in respect of the Property. In
case any other report or tax return shall be required to be made with respect
to any obligations of Lessee under or arising out of Section 4.1 and of which
Lessee has knowledge or should have knowledge, Lessee, at its sole cost and
expense, shall notify Lessor and/or the Trustee, as appropriate, of such
requirement and (except if Lessor or the Trustee, as the case may be, notifies
Lessee that such Person intends to file such report or return) (a) to the
extent required or permitted by and consistent with applicable laws and
regulations, make and file in its own name such return, statement or report;
and (b) in the case of any other such return, statement or report required to
be made in the name of Lessor or the Trustee, advise Lessor or the Trustee of
such fact and prepare such return, statement or report for filing by Lessor or
the Trustee or, where such return, statement or report shall be required to
reflect items in addition to any obligations of Lessee under or arising out of
Section 4.1, provide Lessor or the Trustee at Lessee's expense with information
sufficient to permit such return, statement or report to be properly made with
respect to any obligations of Lessee under or arising out of Section 4.1.
Lessor and the Trustee shall, upon Lessee's request and at Lessee's expense,
provide any data maintained by Lessor or the Trustee (and not otherwise within
the control of Lessee) with respect to the Property which Lessee may reasonably
require to prepare any required tax returns or reports.
4.5 Utility Charges. Lessee shall pay or cause to be paid all
charges for electricity, power, gas, oil, water, telephone, sanitary sewer
service and all other rents and
<PAGE> 31
25
utilities used in or on the Property during the Term. Lessee shall be entitled
to receive any credit or refund with respect to any utility charge paid by
Lessee and the amount of any credit or refund received by Lessor on account of
any utility charges paid by Lessee, net of the costs and expenses incurred by
Lessor in obtaining such credit or refund, shall be promptly paid over to
Lessee. All charges for utilities imposed with respect to the Property for a
billing period during which this Lease expires or terminates shall be adjusted
and prorated on a daily basis between Lessor and Lessee, and each party shall
pay or reimburse the other for each party's pro rata share thereof.
4.6 Income Inclusions. If as a result of the payment or
reimbursement by Lessee of any expenses of Lessor or the payment of any Closing
Expenses incurred in connection with the transactions contemplated by the
Operative Agreements or as a result of earnings generated on amounts on deposit
in the Construction Account, Lessor or any of its Affiliates shall suffer a net
increase in any federal, state or local income tax liability, Lessee shall
indemnify Lessor (without duplication of any indemnification required by
Section 4.1) on an After Tax Basis for the amount of such increase. The
calculation of any such net increase shall take into account any current or
future tax savings realized or reasonably expected to be realized by Lessor or
such Affiliate in respect thereof, as well as any interest, penalties and
additions to tax payable by Lessor or such Affiliate in respect thereof.
4.7 Withholding Taxes. As between Lessee and Lessor, Lessee shall
be responsible for, and Lessee shall indemnify and hold harmless Lessor
(without duplication of any indemnification required by Section 4.1) on an
After Tax Basis against, any obligation for United States withholding taxes
imposed in respect of the interest payable on the Notes to the extent, but only
to the extent, Lessor has actually paid funds to a taxing authority with
respect to such withholding taxes (and, if Lessor receives a demand for such
payment from any taxing authority, Lessee shall discharge such demand on behalf
of Lessor).
ARTICLE V
5.1 Quiet Enjoyment. Subject to the rights of Lessor contained in
Sections 17.2 and 17.3, Lessee shall peaceably and quietly have, hold and enjoy
the Property for the Term, subject to the terms of this Lease, free of any
claim or other action by Lessor or anyone rightfully claiming by, through or
under Lessor (other than Lessee) with respect to any matters arising from and
after the date hereof. Without the prior written consent of Lessee (such
consent not to be unreasonably withheld), Lessor shall not create or consent to
any Lien, encumbrance, defect, attachment, title retention agreement or claim
upon the Property (other than the Permitted Exceptions) or any Modifications
and
<PAGE> 32
26
Lessor shall not take any affirmative act constituting an Environmental
Violation. No failure by Lessor to comply with any of the foregoing covenants
shall give Lessee any right to cancel or terminate this Lease or abate, reduce
or make a deduction from or offset against the Rent or any other sum payable
under this Lease, or to fail to perform any other obligation of Lessee
hereunder, but such failure shall give rise to a separate claim by Lessee which
it may assert in any legal proceeding; provided, however, the sole recourse
against such claim shall be exclusively to the Lessor Base Rent or such
portions of the Renewal Rent as are not required to be applied to the payment
of principal and interest due under the Notes, as applicable.
ARTICLE VI
6.1 Net Lease. Subject to the terms of Section 7.1 (without
limiting the obligations of Lessee under this Section 6.1 or Section 6.2), it
is the intention of the parties that this Lease shall be treated as a triple
net lease. Any present or future law to the contrary notwithstanding, this
Lease shall not terminate, nor shall Lessee be entitled to any abatement,
suspension, deferment, reduction, setoff, counterclaim, or defense with respect
to the Rent, nor shall the obligations of Lessee hereunder be affected (except
as expressly herein permitted and by performance of the obligations in
connection therewith) by reason of: (i) any damage to or destruction of the
Property or any part thereof; (ii) any taking of the Property or any part
thereof or interest therein by Condemnation or otherwise; (iii) any
prohibition, limitation, restriction or prevention of Lessee's use, occupancy
or enjoyment of the Property or any part thereof, or any interference with such
use, occupancy or enjoyment by any Person or for any other reason; (iv) any
title defect or encumbrance or any matter affecting title to the Property; (v)
any eviction by paramount title or otherwise; (vi) any default by Lessor
hereunder; (vii) any delayed delivery of the Property; (viii) any action for
bankruptcy, insolvency, reorganization, liquidation, dissolution or other
proceeding relating to or affecting Lessor; (ix) the impossibility or
illegality of performance by Lessor, Lessee or both; (x) any action of any
Governmental Authority; (xi) Lessee's acquisition of ownership of all or part
of the Property; (xii) any breach of warranty or misrepresentation; (xiii) any
defect in the condition, quality or fitness for use of the Property or any part
thereof; or (xiv) any other cause or circumstances whether similar or
dissimilar to the foregoing and whether or not Lessee shall have notice or
knowledge of any of the foregoing. The parties intend that the obligations of
Lessee hereunder shall be covenants and agreements that are separate and
independent from any obligations of Lessor hereunder and shall continue
unaffected unless such obligations shall have been modified or terminated in
accordance with an express provision of this Lease.
<PAGE> 33
27
6.2 No Termination or Abatement. Lessee shall remain obligated
under this Lease in accordance with its terms and shall not take any action to
terminate, rescind or avoid this Lease, notwithstanding any action for
bankruptcy, insolvency, reorganization, liquidation, dissolution or other
proceeding affecting Lessor, or any action with respect to this Lease which may
be taken by any trustee, receiver or liquidator of Lessor or by any court with
respect to Lessor. Lessee hereby waives all right (i) to terminate or
surrender this Lease or (ii) to avail itself of any abatement, suspension,
deferment, reduction, setoff, counterclaim or defense with respect to any Rent.
Lessee shall remain obligated under this Lease in accordance with its terms and
Lessee hereby waives any and all rights now or hereafter conferred by statute
or otherwise to modify or to avoid strict compliance with its obligations under
this Lease. Notwithstanding any such statute or otherwise, Lessee shall be
bound by all of the terms and conditions contained in this Lease.
6.3 Right of Offset Against Lessor Base Rent. Notwithstanding
anything to the contrary contained in this Lease, in the event that Lessee
shall have paid any amounts for the purpose of (a) discharging any Lien on the
Property or (b) preventing any Lien on the Property from attaching, in each
case only to the extent caused solely by a breach by Lessor of its obligations
under an Operative Agreement (but only if Lessee has given Lessor notice of
such Lien and Lessor has had a reasonable opportunity to discharge the Lien or
prevent if from attaching), then Lessee shall have the right to offset against
amounts owed to Lessor solely on account of Lessor Base Rent, or such portions
of the Renewal Rent as are not required to be applied to the payment of
principal and interest due under the Notes, in an amount sufficient to
reimburse Lessee for such payments plus interest on such amount at the Lessor
Overdue Rate to the date of actual payment, but in no event shall the Base Rent
paid on any Payment Date be less than the sum of the Class A Base Rent and the
Class B Base Rent. Further, notwithstanding anything to the contrary contained
in this Lease, in the event that Lessee shall have obtained a judgment against
Lessor in any court of competent jurisdiction and such judgment remains
unsatisfied for a period of thirty (30) days, then Lessee shall have the right
to offset against amounts owed to Lessor solely on account of Lessor Base Rent,
or such portions of the Renewal Rent as are not required to be applied to the
payment of principal and interest due under the Notes, in an amount sufficient
to pay such judgment plus interest on such amount at the Lessor Overdue Rate to
the date of actual payment, but in no event shall the Base Rent paid on any
Payment Date be less than the sum of the Class A Base Rent and the Class B Base
Rent.
<PAGE> 34
28
ARTICLE VII
7.1 Ownership of the Property. (a) Lessor and Lessee intend that
(i) for financial accounting and regulatory accounting purposes only, (A) this
Lease will be treated as an "operating lease" pursuant to Statement of
Financial Accounting Standards No. 13, as amended, (B) Lessor will be treated
as the owner and lessor of the Property and (C) Lessee will be treated as the
lessee of the Property, (ii) for federal income tax purposes (A) this Lease
will be treated as a financing arrangement, (B) Lessor will be treated as a
subordinated lender making a loan to Lessee in an amount equal to the Lessor
Contribution, which loan is secured by the Property and (C) Lessee will be
treated as the owner of the Property and will be entitled to all tax benefits
ordinarily available to an owner of property like the Property for such tax
purposes, and (iii) for all other purposes, (A) this Lease will be treated as a
financing arrangement, (B) Lessor will be treated as a lender making loans to
Lessee in amounts equal to the principal amount of the Class A Notes, the
principal amount of the Class B Notes and the Lessor Contribution, which loans
are secured by the Property, and (C) Lessee will be treated as the owner of the
Property.
(b) Lessor and Lessee further intend and agree that, for the
purpose of securing Lessee's obligations for the repayment of the
above-described loans, (i) this Lease shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the Uniform Commercial Code
as in effect in New York and Hawaii and a real property mortgage within the
meaning of Section 506-1(a) of the Hawaii Revised Statutes, as amended, and
also a security agreement and financing statement within the meaning of the
Hawaii Uniform Commercial Code and for purposes of all applicable laws of the
State of Hawaii; (ii) the conveyance provided for in Article I shall be deemed
to be a grant by Lessee to Lessor of a mortgage lien and security interest in
all of Lessee's right, title and interest in and to the Property and all
proceeds of the conversion, voluntary or involuntary, of the foregoing into
cash, investments, securities or other property, whether in the form of cash,
investments, securities or other property; (iii) the possession by Lessor or
its agent of notes and such other items of property as constitute instruments,
money, negotiable documents or chattel paper shall be deemed to be "possession
by the secured party" for purposes of perfecting the security interest pursuant
to Section 9-305 of the Uniform Commercial Code as in effect in New York and
Hawaii; and (iv) notifications to Persons holding such property, and
acknowledgements, receipts or confirmations from financial intermediaries,
bankers or agents (as applicable) of Lessee shall be deemed to have been given
for the purpose of perfecting such security interest under applicable law.
Lessor and Lessee shall, to the extent consistent with this Lease, take such
actions as may be necessary to ensure that, if this Lease were deemed to
<PAGE> 35
29
create a security interest in the Property in accordance with this Section,
such security interest would be deemed to be a perfected security interest of
first priority under applicable law and will be maintained as such throughout
the Term.
(c) Lessor and Lessee further intend and agree that in the event of
any insolvency or receivership proceedings or a petition under the United
States bankruptcy laws or any other applicable insolvency laws or statute of
the United States of America or any State or Commonwealth thereof affecting
Lessee or Lessor, the transactions evidenced by this Lease shall be regarded as
loans made by an unrelated third party lender to Lessee.
ARTICLE VIII
8.1 Condition of the Property. LESSEE IS RENTING THE PROPERTY AS
IS WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY LESSOR
AND SUBJECT TO (A) THE EXISTING STATE OF TITLE, (B) THE RIGHTS OF ANY PARTIES
IN POSSESSION THEREOF, (C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR
PHYSICAL INSPECTION MIGHT SHOW AND (D) VIOLATIONS OF LEGAL REQUIREMENTS WHICH
MAY EXIST ON THE DATE HEREOF. NEITHER LESSOR NOR THE TRUSTEE NOR ANY HOLDER
HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR
COVENANT (EXPRESS OR IMPLIED) OR SHALL BE DEEMED TO HAVE ANY LIABILITY
WHATSOEVER AS TO THE TITLE, VALUE, HABITABILITY, USE, CONDITION, DESIGN,
OPERATION, OR FITNESS FOR USE OF THE PROPERTY (OR ANY PART THEREOF), OR ANY
OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE PROPERTY (OR ANY PART THEREOF) AND NEITHER LESSOR NOR THE
TRUSTEE NOR ANY HOLDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT
THEREIN OR THE FAILURE OF THE PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY
LEGAL REQUIREMENT.
8.2 Possession and Use of the Property. The Property shall be used
in a manner consistent with the Construction Management Agreement and, after
the Final Substantial Completion Date, as a Class A Office Building including,
without limitation, retail and commercial uses consistent with other Class A
Office Buildings of similar design, construction and quality (including a
parking garage and related automobile servicing); provided that such retail and
commercial uses do not increase the liability, directly or indirectly, of
Lessor or adversely affect the value of the Property. Lessee shall pay, or
cause to be paid, all charges and costs required in connection with the use of
the Property as contemplated by this Lease and the Construction Management
Agreement, including, without limitation, all charges and costs in connection
with providing the Property with security, maintenance, cleaning and parking
garage services. Subject to Lessee's right to make Modifications to the
Property in accordance with Article XI, Lessee shall not commit or permit any
waste of the Property or any part thereof.
<PAGE> 36
30
ARTICLE IX
9.1 Compliance with Legal Requirements and Insurance Requirements.
Subject to the terms of Article XIII relating to permitted contests, Lessee, at
its sole cost and expense, shall (a) comply with all Legal Requirements
(including all Environmental Laws) and Insurance Requirements relating to the
Property, including the use, construction, operation, maintenance, repair and
restoration thereof, whether or not compliance therewith shall require
structural or extraordinary changes in the Improvements or interfere with the
use and enjoyment of the Property, and (b) procure, maintain and comply with
all licenses, permits, orders, approvals, consents and other authorizations
required for the construction, use, maintenance and operation of the Property
and for the use, operation, maintenance, repair and restoration of the
Improvements.
ARTICLE X
10.1 Maintenance and Repair; Return. (a) Lessee, at its sole cost
and expense, shall maintain the Property and make all necessary repairs
thereto, of every kind and nature whatsoever, whether interior or exterior,
ordinary or extraordinary, structural or nonstructural or foreseen or
unforeseen, in each case as required by all Legal Requirements and Insurance
Requirements and on a basis consistent with the operation and maintenance of
Class A Office Buildings comparable in type and location to the Property
subject, however, to the provisions of Article XV with respect to Condemnation
and Casualty.
(b) Lessor shall under no circumstances be required to build any
improvements on the Property, make any repairs, replacements, alterations or
renewals of any nature or description to the Property, make any expenditure
whatsoever in connection with this Lease or maintain the Property in any way,
except in accordance with and to the extent provided in the Leased Improvements
Construction Agreement. Lessor shall not be required to maintain, repair or
rebuild all or any part of the Property, and Lessee waives the right to (i)
require Lessor to maintain, repair, or rebuild all or any part of the Property,
or (ii) make repairs at the expense of Lessor pursuant to the Ground Lease, any
Legal Requirement, contract, agreement, covenants, condition or restriction at
any time in effect.
(c) Lessee shall, upon the expiration or earlier termination of
this Lease with respect to the Property, vacate and surrender the Property to
Lessor in its then-current, "AS IS" condition, subject to Lessee's obligations
under Sections 9.1, 10.1(a), 10.2, 11.1 and 12.1.
<PAGE> 37
31
10.2 Environmental Inspection. Upon surrender of possession of the
Property, or not more than 120 days nor less than 30 days prior to the
Expiration Date, Lessee shall, at its sole cost and expense, provide to Lessor
a report by an environmental consultant selected by Lessee and satisfactory to
Lessor certifying that Hazardous Substances have not at any time been
generated, used, treated or stored on, transported to or from, Released at, on
or from or deposited at or on the Property, and no portion of the Property has
been used for such purposes other than (i) as necessary to use, operate,
maintain, repair and restore the Property in accordance with this Lease and
(ii) in full compliance with all Environmental Laws. If such is not the case,
the report shall set forth a remedial response plan relating to the Property
(which remedial response plan, if required by any Environmental Law or
Governmental Authority, shall be approved by the appropriate Governmental
Authority). Such remedial response plan shall include, but shall not be
limited to, plans for full response, remediation, removal, or other corrective
action, and the protection, or mitigative action associated with the
protection, of natural resources including wildlife, aquatic species, and
vegetation associated with the Property, as required by all applicable
Environmental Laws. If such report includes a remedial response plan, Lessee
shall promptly deposit funds in escrow sufficient to ensure the full execution
of such plan.
ARTICLE XI
11.1 Modifications, Substitutions and Replacements. (a) So long as
no Event of Default has occurred and is continuing, Lessee, at its sole cost
and expense, may at any time and from time to time make alterations,
renovations, improvements and additions to the Property or any part thereof and
substitutions and replacements therefor (collectively, "Modifications");
provided, that: (i) except for any Modification required to be made pursuant to
a Legal Requirement or an Insurance Requirement, no Modification shall cause a
reduction in the value of the Property from that which existed immediately
prior to such Modification and Lessee shall deliver an Officer's Certificate to
such effect; (ii) the Modification shall be done expeditiously and in a good
and workmanlike manner, using materials appropriate for a Class A Office
Building; (iii) Lessee shall comply with all Legal Requirements (including all
Environmental Laws) and Insurance Requirements applicable to the Modification,
including the obtaining of all permits and certificates of occupancy, and the
structural integrity of the Property shall not be adversely affected; (iv) to
the extent required by Section 14.2(b), Lessee shall maintain builders' risk
insurance at all times when a Modification is in progress; (v) subject to the
terms of Article XIII relating to permitted contests, Lessee shall pay all
costs and expenses and discharge any Liens arising with respect to the
Modification; (vi) such
<PAGE> 38
32
Modifications shall not change the primary character of the Property as a Class
A Office Building; and (vii) no Improvements shall be demolished (except
improvements made by subtenants pursuant to the terms of their subleases and
the demolition contemplated by the Demolition Contract and the Construction
Management Agreement), unless Lessee shall have first provided Lessor and the
Trustee with appropriate financial and other assurances as to the rebuilding of
such Improvements. All Modifications shall remain part of the realty and shall
be subject to this Lease, and any such Modifications shall be subject to the
Lien of the Mortgage. So long as no Event of Default has occurred and is
continuing, Lessee may place upon the Property any inventory, trade fixtures,
machinery, equipment or other property belonging to Lessee or third parties and
may remove the same at any time during the term of this Lease, subject,
however, to the terms of Section 10.1(a); provided that such inventory, trade
fixtures, machinery, equipment or other property do not cause a reduction in
the value of the Property.
(b) Following the Final Substantial Completion Date, and other than
with respect to work performed under Project Contracts (subject to the
provisions of the Construction Management Agreement), Lessee shall notify
Lessor and the Trustee of the undertaking of any construction, repairs or
alterations to the Property the cost of which is anticipated to exceed FIVE
MILLION DOLLARS ($5,000,000) without regard to tenant installation and related
costs. Prior to undertaking any such construction, repairs or alterations,
Lessee shall deliver to Lessor and the Trustee (i) a brief narrative of the
work to be done and a copy of the plans and specifications relating to such
work; (ii) a letter from a member of the Appraisal Institute, having at least
five years' experience in the downtown Honolulu commercial office market,
stating (without regard to the value of the underlying leases and subleases
affecting the Property) that such work when completed will not impair the value
of the Property; and (iii) an Officer's Certificate stating that such work when
completed will not impair the value of the Property. Lessor, by itself or its
agents, shall have the right, but not the obligation, from time to time to
inspect such construction to ensure that the same is completed consistent with
such approved plans and specifications.
(c) The demolition and construction provided for in the
Construction Management Agreement and the Project Contracts are acknowledged by
Lessor and the Trustee to be consistent with and in compliance with the terms
and provisions of this Article XI.
<PAGE> 39
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ARTICLE XII
12.1 Warranty of Title. (a) Lessee agrees that except as otherwise
provided herein and subject to the terms of Article XIII relating to permitted
contests, Lessee shall not directly or indirectly create or allow to remain,
and shall promptly discharge at its sole cost and expense, any Lien, defect,
attachment, levy, title retention agreement or claim upon the Property or any
Modifications or any Lien, attachment, levy or claim with respect to the Rent
or with respect to any amounts held by the Trustee pursuant to the Indenture
(such matters, excepting those referred to in clauses (i) through (v) below,
being collectively referred to as "Title Defects"), other than:
(i) Permitted Exceptions (other than clause (c) thereof, which
shall be governed by clauses (ii), (iii) and (iv) of this Section
12.1(a));
(ii) such encumbrances as are created by Lessor (as opposed to any
Affiliate of Lessor) without the consent of Lessee, except for Liens
with respect to Impositions and except for any Liens arising from
nonpayment of any taxes or impositions that do not constitute
Impositions pursuant to clauses (ii) through (xiv) of the last sentence
of the definition of "Impositions" in Section 2.1;
(iii) Liens for Impositions or for sums resulting from
noncompliance with Legal Requirements which are not yet due and payable
or are due and payable subsequently without the addition of any fine or
penalty;
(iv) Liens of mechanics, laborers, materialmen, suppliers or
vendors for sums either disputed or not yet due, provided that, subject
to Lessee's right otherwise to proceed in accordance with Article XIII
relating to permitted contests, such Liens shall be discharged, by
bonding or otherwise, within thirty (30) days after receipt of notice
that the same have attached to the Property; and
(v) subleases with respect to the Property permitted by the terms
of Article XXVI.
Lessee shall notify Lessor in the event it receives actual knowledge that a
Title Defect has occurred with respect to the Property.
(b) Nothing contained in this Lease shall be construed as
constituting the consent or request of Lessor, expressed or implied, to or for
the performance by any contractor, mechanic, laborer, materialman, supplier or
vendor of any labor or services or for the furnishing of any materials for any
construction, alteration, addition, repair or demolition of or to the Property
or any part thereof. NOTICE IS HEREBY GIVEN THAT LESSOR IS NOT
<PAGE> 40
34
AND SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE
FURNISHED TO LESSEE, OR TO ANYONE HOLDING THE PROPERTY OR ANY PART THEREOF
THROUGH OR UNDER LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH
LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR
IN AND TO THE PROPERTY.
(c) Notwithstanding anything to the contrary in this Lease, Lessee
may in the name of Lessor and at Lessee's sole cost and expense enforce any
rights Lessor may have with respect to any Title Defects.
12.2 Grants and Releases of Easements. Provided that no Default of
the type described in Section 17.1(e) or Section 17.1(f) shall have occurred
and be continuing and subject to the provisions of Articles VIII, IX, X and XI
hereof, Lessor hereby consents in each instance to the following actions by
Lessee, in the name and stead of Lessor, but at Lessee's sole cost and expense:
(a) the granting (prior to the lien of the Mortgage) of easements, licenses,
rights-of-way and other rights and privileges in the nature of easements
reasonably necessary or desirable for the use, repair, or maintenance of the
Property as herein provided, whether or not such grants are reciprocal to
Lessee; (b) the release (free and clear of the lien of the Mortgage) of
existing easements or other rights in the nature of easements which are for the
benefit of the Property; (c) the dedication or transfer (prior to the lien of
the Mortgage) of unimproved portions of the Property for road, highway or other
public purposes; (d) the execution of petitions to have the Property annexed to
any municipal corporation or utility district; and (e) the execution of
amendments to any covenants and restrictions affecting the Property; provided,
however, in each case Lessee shall have delivered to Lessor an Officer's
Certificate stating that (i) such grant, release, dedication or transfer does
not materially impair the use of the Property or materially reduce its value,
(ii) such grant, release, dedication or transfer is reasonably necessary in
connection with the use, maintenance, alteration or improvement of the
Property, (iii) Lessee shall remain obligated under this Lease and under any
instrument executed by Lessee consenting to the assignment of Lessor's interest
in this Lease as security for indebtedness, including the Consent to
Assignment, in each such case in accordance with their terms, as though such
grant, release, dedication or transfer, had not been effected and (iv) Lessee
shall pay and perform any obligations of Lessor under such grant, release,
dedication or transfer. Without limiting the effectiveness of the foregoing,
provided that no Default of the type described in Section 17.1(e) or Section
17.1(f) shall have occurred and be continuing, Lessor shall, upon the request
of Lessee, and at Lessee's sole cost and expense, execute and deliver any
instruments necessary or appropriate to confirm any such grant, release,
dedication or transfer to any Person permitted under this Section 12.2.
<PAGE> 41
35
ARTICLE XIII
13.1 Permitted Contests Other than in Respect of Impositions.
Except to the extent otherwise provided for in Article XXV, Lessee, on its own
or on Lessor's behalf but at Lessee's sole cost and expense, may contest, by
appropriate administrative or judicial proceedings conducted in good faith and
with due diligence, the amount, validity or application, in whole or in part,
of any Legal Requirement, Insurance Requirement, or utility charges payable
pursuant to Section 4.5 or any Lien, attachment, levy, encumbrance or
encroachment, including those of the type described in Article XII, in any case
other than in respect of Impositions, and Lessor agrees not to pay, settle or
otherwise compromise any such item, provided that (a) the commencement and
continuation of such proceedings shall suspend the collection thereof from, and
suspend the enforcement thereof against the Property, Lessor, the Trustee and
the Holders; (b) there shall be no risk of the imposition of a material Lien
(other than Permitted Exceptions) on the Property and no part of the Property
nor any Rent would be in any danger of being sold, forfeited, lost or deferred;
(c) at no time during the permitted contest shall there be a risk of the
imposition of criminal liability or material civil liability on Lessor, the
Trustee or any Holder for failure to comply therewith; and (d) in the event
that, at any time, (i)(x) prior to the Final Substantial Completion Date, any
such contest shall involve a sum of money that is then due and payable or a
potential loss (which shall include, for purposes of this Section 13.1, any
potential fines or similar charges for failure to comply with a Legal
Requirement) in excess of the sum of TEN MILLION DOLLARS ($10,000,000) plus any
security theretofore provided to and then held by Lessor pursuant to this
Article XIII, or all of such contests at any one time pending shall involve a
sum of money that is then due and payable or a potential loss in excess of the
sum of FIFTEEN MILLION DOLLARS ($15,000,000) plus any security theretofore
provided to and then held by Lessor pursuant to this Article XIII, or (y) on or
after the Final Substantial Completion Date, all such contests at any one time
pending shall involve a sum of money that is then due and payable or a
potential loss (which shall include, for purposes of this Section 13.1, any
potential fines or similar charges for failure to comply with a Legal
Requirement) in excess of the sum of TEN MILLION DOLLARS ($10,000,000) plus any
security theretofore provided to and then held by Lessor pursuant to this
Article XIII; or (ii) there shall be a material risk of extending the
application of such item beyond the end of the then current Primary Term or
Extended Term, as the case may be, then Lessee shall (A) deliver to Lessor an
Officer's Certificate certifying as to the matters set forth in clauses (a),
(b) and (c) of this Section 13.1, and (B) provide such security as may be
reasonably requested by Lessor to ensure the ultimate payment of the contest in
question and prevent any sale or forfeiture of the affected Property. Lessor,
at Lessee's
<PAGE> 42
36
sole cost and expense, shall execute and deliver to Lessee such authorizations
and other documents as may reasonably be required in connection with any such
contest and, if reasonably requested by Lessee, shall join as a party therein
at Lessee's sole cost and expense.
13.2 Contests of Impositions. (a) If a written claim is made
against any party entitled to indemnification by Lessee under Section 4.1, 4.6
or 4.7 or Section 14.11 of the Participation Agreement (each such party, an
"Impositions Indemnitee") or if any proceeding shall be commenced against any
such Impositions Indemnitee (including a written notice of such proceeding),
for any Impositions, such Impositions Indemnitee shall promptly notify Lessee
in writing and shall not take any action with respect to such claim or
proceeding without the consent of Lessee for thirty (30) days after the receipt
of such notice by Lessee; provided, however, that, in the case of any such
claim or proceeding, if action shall be required by law or regulation to be
taken prior to the end of such 30-day period, such Impositions Indemnitee
shall, in such notice to Lessee, so inform Lessee, and no action shall be taken
with respect to such claim or proceeding without the consent of Lessee before
the end of such shorter period; provided, further, that the failure of such
Impositions Indemnitee to give the notices referred to in this sentence shall
not diminish Lessee's obligation hereunder except to the extent such failure
precludes Lessee from contesting all or part of such claim.
(b) If, within thirty (30) days of receipt of such notice from the
Impositions Indemnitee (or such shorter period as the Impositions Indemnitee
has notified Lessee is required by law or regulation for the Impositions
Indemnitee to commence such contest), Lessee shall request in writing that such
Impositions Indemnitee contest such Imposition, the Impositions Indemnitee
shall, at the expense of Lessee, in good faith conduct and control such contest
(including, without limitation, by pursuit of appeals) relating to the
validity, applicability or amount of such Impositions (provided, however, that
(x) if such contest can be pursued independently from any other proceeding
involving a tax liability of such Impositions Indemnitee, the Impositions
Indemnitee, at Lessee's request, shall allow Lessee to conduct and control such
contest and (y) in the case of any contest, the Impositions Indemnitee may
request Lessee to conduct and control such contest) by, in the sole discretion
of the Person conducting and controlling such contest, (1) resisting payment
thereof, (2) not paying the same except under protest, if protest is necessary
and proper, (3) if the payment be made, using reasonable efforts to obtain a
refund thereof in appropriate administrative and judicial proceedings, or (4)
taking such other action as is reasonably requested by Lessee from time to
time.
(c) The party controlling any contest shall consult in good faith
with the non-controlling party and shall keep the non-
<PAGE> 43
37
controlling party reasonably informed as to the conduct of such contest;
provided that all decisions ultimately shall be made in the sole discretion of
the controlling party. The parties agree that an Impositions Indemnitee may at
any time decline to take further action with respect to the contest of any
Imposition and may settle such contest if such Impositions Indemnitee shall
waive its rights to any indemnity from Lessee that otherwise would be payable
in respect of such claim (and any future claim by any taxing authority with
respect to other taxable periods that are based, in whole or in part, upon the
resolution of such claim) and shall pay to Lessee any amount previously paid or
advanced by Lessee pursuant to this Section 13.2 or Section 4.1, 4.6 or 4.7 by
way of indemnification or advance for the payment of an Imposition.
(d) Notwithstanding the foregoing provisions of this Section 13.2,
an Impositions Indemnitee shall not be required to take any action and Lessee
shall not be permitted to contest any Impositions in its own name or that of
the Impositions Indemnitee unless (i) Lessee shall have agreed to pay and shall
pay to such Impositions Indemnitee on demand and on an After Tax Basis all
reasonable costs, losses and expenses that such Impositions Indemnitee actually
incurs in connection with contesting such Impositions, including, without
limitation, all reasonable legal, accounting and investigatory fees and
disbursements, (ii) in the case of a claim that must be pursued in the name of
an Impositions Indemnitee (or an Affiliate thereof), the amount of the
potential indemnity (taking into account all similar or logically related
claims that have been or could be raised in any audit involving such
Impositions Indemnitee for which Lessee may be liable to pay an indemnity under
this Section 13.2 or Section 4.1, 4.6 or 4.7) exceeds $50,000, (iii) the
Impositions Indemnitee shall have reasonably determined that the action to be
taken will not result in any material danger of sale, forfeiture or loss of the
Property, or any part thereof or interest therein, will not interfere with the
payment of Rent, and will not result in risk of criminal liability, (iv) if
such contest shall involve the payment of the Imposition prior to the contest,
Lessee shall provide to the Impositions Indemnitee an interest-free advance in
an amount equal to the Imposition that the Impositions Indemnitee is required
to pay (with no additional net after-tax cost to such Impositions Indemnitee),
(v) in the case of a claim that must be pursued in the name of an Impositions
Indemnitee (or an Affiliate thereof), Lessee shall have provided to such
Impositions Indemnitee an opinion of independent tax counsel selected by the
Impositions Indemnitee and reasonably satisfactory to Lessee stating that a
reasonable basis exists to contest such claim (or, in the case of an appeal of
an adverse determination, an opinion of such counsel to the effect that there
is substantial authority for the position asserted in such appeal) and (vi) no
Event of Default hereunder shall have occurred and be continuing. In no event
shall an Impositions Indemnitee be required to appeal an adverse judicial
determination to the United States Supreme
<PAGE> 44
38
Court. In addition, an Impositions Indemnitee shall not be required to contest
any claim in its name (or that of an Affiliate) if the subject matter thereof
shall be of a continuing nature and shall have previously been decided
adversely by a court of competent jurisdiction pursuant to the contest
provisions of this Section 13.2, unless there shall have been a change in law
(or interpretation thereof) and the Impositions Indemnitee shall have received,
at Lessee's expense, an opinion of independent tax counsel selected by the
Impositions Indemnitee and reasonably acceptable to Lessee stating that as a
result of such change in law (or interpretation thereof), it is more likely
than not that the Impositions Indemnitee will prevail in such contest.
ARTICLE XIV
14.1 Public Liability and Workers' Compensation Insurance. During
the Preliminary Term, the Primary Term and any Extended Term, Lessee shall
procure and carry, at Lessee's sole cost and expense, commercial general
liability insurance for claims for injuries or death sustained by persons or
damage to property while on the Property and such other public liability
coverages as are ordinarily procured by Persons who own or operate similar
Class A Office Buildings; provided, however, Lessor shall have the right from
time to time to require such higher limits as may be reasonable and customary
for properties of the type comparable to the Property. The commercial general
liability insurance policy shall include coverage for premises and operations,
independent contractors, products and completed operations, blanket contractual
liability, personal and advertising injury, liquor liability (but only during
the Primary Term and any Extended Term), employees as additional insureds and
severability of interest. The combined single limit of liability for bodily
injury and property damage shall be at least $1,000,000 per occurrence,
$2,000,000 general aggregate and $2,000,000 products -- completed operations
aggregate. The limit for personal injury shall be at least $1,000,000 per
person/organization subject to $2,000,000 general aggregate with umbrella
(excess liability) coverage of $50,000,000. The policy shall either
exclusively cover the Property or be endorsed to state that the general
aggregate of the primary policy applies exclusively to the Property. The
policy shall be endorsed to name Lessor, the Trustee and the Ground Lessors as
additional insureds. The policy shall also specifically provide that the
policy shall be considered primary insurance which shall apply to any loss or
claim before any contribution by any insurance which Lessor, the Trustee or the
Ground Lessors may have in force. The insurance required to be obtained
pursuant to this Section may have a deductible or self-insured retention
provided that such deductible or self-insured retention shall not exceed
$2,000,000, if (i) during the Primary Term, the rating of the Class A Notes
from S&P or Moody's is lower than "A" or "A1", respectively, and
<PAGE> 45
39
(ii) during any Extended Term, Lessee's certificate of deposit rating from S&P
or Moody's is lower than "A-1" or "P-1", respectively. Lessee shall, in the
operation of the Property, comply with the applicable workers' compensation
laws and protect Lessor against any liability under such laws.
14.2 Hazard and Other Insurance. (a) During the Primary Term or
any Extended Term, Lessee shall keep, or cause to keep, the Improvements,
Fixtures and boiler and machinery, and personal property on the Property owned
by Lessee, continuously insured against loss or damage by fire and all other
risks covered by an I.S.O., standard "broad" causes of loss form as filed with
the Hawaii Insurance Commissioner or equivalent coverage (however, Lessee will
not be required to maintain insurance covering the perils of wind if at any
time such coverage is not maintained with respect to similar properties or is
prohibitively expensive) in amounts equal to actual replacement cost (but in no
event less than the outstanding principal balance of the Class B Notes, if such
amount is greater than actual replacement cost) so long as the rating of the
Class A Notes from S&P or Moody's is "A" or "A1" or higher, respectively, and
otherwise in an amount at least equal to the Termination Amount (if such amount
is greater than actual replacement cost and is commercially obtainable), but in
either case, in no event less than the amount customarily maintained for
properties similar to the Property. The insurance coverage required to be
obtained pursuant to the immediately preceding sentence may have a deductible
or self-insured retention, provided that (i) such deductible or self-insured
retention shall not exceed $2,000,000 and, in the case of windstorm coverage,
may exceed $2,000,000 but shall not exceed 5% of total insured values, if (x)
during the Primary Term, the rating of the Class A Notes from S&P or Moody's is
lower than "A" or "A1", respectively, or (y) during any Extended Term, Lessee's
certificate of deposit rating from S&P or Moody's is lower than "A-1" or "P-1",
respectively, and (ii) such deductible or retention shall not result in the
limitation of coverage by reason of any co-insurance clause or rule applicable
with respect to such coverage. Such policies shall contain an "agreed amount"
endorsement and shall not contain any "causation" exclusion which would have
the effect of deleting the coverage for fire damage. So long as no Event of
Default exists, any loss payable under the insurance policy required by this
Section will be paid to and adjusted solely by Lessee; provided, however, that
any loss, the estimated cost of restoration of which is in excess of FIVE
MILLION DOLLARS ($5,000,000), shall be subject to the final approval of Lessor,
and the proceeds of insurance on account of such a loss shall be delivered to
Escrowee for deposit and shall be disbursed in accordance with Article XV. If,
notwithstanding such provision, any such insurance proceeds are paid to Lessor,
the Trustee or Lessee rather than to Escrowee, Lessor, the Trustee and Lessee,
as the case may be, hereby agree to transfer any such payment to Escrowee.
<PAGE> 46
40
(b) During the Primary Term or any Extended Term and during any
period in which Modifications costing in excess of FIVE MILLION DOLLARS
($5,000,000) at the Property are being undertaken, Lessee shall obtain or cause
the contractor performing such Modifications to obtain builder's risk, general
liability, worker's compensation and automobile liability insurance with
respect to the Improvements. Further, Lessee shall cause the contractor which
is performing such Modifications to procure and maintain at all times a
performance and payment bond issued by an appropriate surety company, in light
of customary local standards, guaranteeing the faithful performance and payment
of the obligations arising under the contract relating to such Modifications or
the payment of an amount equal to the contract sum; provided if during the
Primary Term and any Extended Term Modifications costing in excess of TWENTY
MILLION DOLLARS ($20,000,000) at the Property are being undertaken, such
performance and payment bond shall be issued by a surety company meeting the
requirements of Section 2.4(c) of the Construction Management Agreement.
(c) If at any time during the Term the area in which the Property
is located is designated a "flood-prone" area pursuant to the Flood Disaster
Protection Act of 1973, or any amendments or supplements thereto, then Lessee
shall comply with the National Flood Insurance Program as set forth in the
Flood Disaster Protection Act of 1973. In addition, Lessee will fully comply
with the requirements of the National Flood Insurance Act of 1968 and the Flood
Disaster Protection Act of 1973, as each may be amended from time to time, and
with any other Legal Requirement, concerning flood insurance to the extent that
it may apply to the Property.
(d) During the Primary Term or any Extended Term, Lessee shall
obtain and maintain for the Property a Difference-in- Conditions policy which
includes at a minimum the perils of collapse, earthquake, volcanic activity and
flood (unless in each case such coverage is at any time generally not
maintained with respect to similar properties or is prohibitively expensive).
The policy may be written on a loss limit basis and shall be for an amount not
less than TWENTY-FIVE MILLION DOLLARS ($25,000,000) which amount shall be
determined in accordance with periodic maximum probable loss studies.
(e) During the Primary Term or any Extended Term, Lessee shall
maintain such other insurance on or in connection with the Property as Lessor
may reasonably require, which at the time is commonly obtained in connection
with properties similar to the Property.
14.3 Coverage. (a) All of the insurance coverages described in
Sections 14.1 and 14.2 shall be with insurance companies that may lawfully
conduct an insurance business in the State of Hawaii and that have a "Best's"
rating of not less than
<PAGE> 47
41
A-/X. If the Best's rating system is changed or terminated, the above stated
rating of A-/X shall be adjusted to a comparable rating, as established by an
Officer's Certificate of Lessee. Further, in the event that the rating of the
Notes from S&P or Moody's is at any time less than "BBB" or "Baa2",
respectively, then Lessee will be required to either (i) maintain the property
insurance covering the Property with an insurer which has, or whose parent
corporation has, a "claims paying ability" rating from S&P and Moody's of at
least "BBB" and "Baa2", respectively, or (ii) provide additional credit support
for the obligations of the insurer which provides the property insurance for
the Property in order to ensure that such obligations are equivalent to the
obligations of an entity whose "claims paying ability" ratings from S&P and
Moody's are at least "BBB" and "Baa2", respectively.
(b) Lessee shall furnish Lessor with certificates showing the
insurance required under Sections 14.1 and 14.2 to be in effect and naming
Lessor and each of the Ground Lessors as additional insureds and showing the
mortgagee endorsement required by Section 14.3(d). All such insurance shall
be at the cost and expense of Lessee. Such certificates shall include a
provision for thirty (30) days' advance written notice by the insurer to Lessor
and the Trustee in the event of cancellation of such insurance. If an Event of
Default has occurred and is continuing and Lessor so requests, Lessee shall
deliver to Lessor copies of all insurance policies required by Sections 14.1
and 14.2.
(c) Lessee agrees that the insurance policy or policies required by
Sections 14.2(a), 14.2(c), 14.2(d) and, with respect to property insurance,
Section 14.2(b), shall include an appropriate clause pursuant to which such
policy shall provide that it will not be invalidated should Lessee waive, in
writing, prior to a loss, any or all rights of recovery against any party for
losses covered by such policy. Lessee hereby waives any and all such rights
against the Ground Lessors, Lessor and the Trustee to the extent of payments
made under such policies.
(d) All insurance policies required by Section 14.2 shall include a
"New York" or standard form mortgagee endorsement in favor of the Trustee.
(e) Neither Lessor nor Lessee shall carry separate insurance
concurrent in kind or form or contributing in the event of loss with any
insurance required under this Article XIV except that Lessee and Lessor may
carry separate liability insurance so long as (i) Lessee's insurance is
designated as primary and in no event excess or contributory to any insurance
Lessor may have in force which would apply to a loss covered under Lessee's
policy and (ii) each such insurance policy will not cause Lessee's insurance
required under this Article XIV to be subject to a co-insurance exception of
any kind.
<PAGE> 48
42
(f) Lessee shall pay as they become due all premiums for the
insurance required by Section 14.1 and Section 14.2, shall renew or replace
each policy prior to the expiration date thereof and shall promptly deliver to
Lessor and the Trustee certificates for renewal and replacement policies.
(g) Anything in this Section 14.3 to the contrary notwithstanding,
any insurance which Lessee is required to obtain pursuant to Sections 14.1 and
14.2 may be carried under "blanket" and umbrella policies governing other
properties and liabilities of Lessee, provided that if during any year there
are claims under any umbrella policy covering the Property in an aggregate
amount of $25,000,000 or more, Lessee will reinstate the coverage under such
umbrella policy for the remainder of the year to the amount of $50,000,000.
(h) So long as the insurance required by Section 14.2 is carried
under a "blanket" insurance policy, Lessee shall provide Lessor annually with an
Officer's Certificate containing an estimate of the replacement cost and
insurable value of the Improvements, Fixtures, the personal property on the
Property owned by Lessee and all other property covered by such "blanket"
insurance policy. Should Lessee elect to cover the Improvements under a
specific policy rather than a "blanket" policy, it shall have the amount of the
replacement cost of the property covered by such specific policy determined at
least once every three years by an independent qualified appraiser or such
other person reasonably satisfactory to Lessor, and shall deliver to Lessor and
the Trustee such determination promptly upon receipt.
(i) LESSEE IS HEREBY NOTIFIED THAT LESSEE MAY ACQUIRE INSURANCE
RELATED TO THIS LEASE FROM AN INSURER OR AGENT OF ITS CHOICE, SUBJECT ONLY TO
THE STANDARDS STATED HEREIN. This Section 14.3(i) is intended to comply with
the requirements of Section 431:13-104, Hawaii Revised Statutes, to the extent
applicable, and shall be construed in a manner consistent therewith.
ARTICLE XV
15.1 Casualty and Condemnation. (a) From and after the Substantial
Completion Date for Core and Shell and subject to the provisions of this
Article XV and Article XVI (in the event Lessee delivers, or is obligated to
deliver, a Termination Notice) and subject at all times to the provisions of
Section 15.1(i), and prior to the occurrence and continuation of an Event of
Default, Lessee shall be entitled to receive (and Lessor hereby irrevocably
assigns to Lessee all of Lessor's right, title and interest in) any award,
compensation or insurance proceeds to which Lessee or Lessor may become
entitled by reason of their respective interests in the Property (i) if all or
a portion of the Property is damaged or destroyed in whole or in part by fire
<PAGE> 49
43
or other casualty (a "Casualty") or (ii) if the use, access, occupancy,
easement rights or title to the Property or any part thereof is wholly or
partially (temporarily or permanently) taken or sold in, by or on account of
any actual or threatened eminent domain proceeding or other taking of action by
any Person having the power of eminent domain, including an action by a
Governmental Authority to change the grade of, or widen the streets adjacent
to, the Property or alter the pedestrian or vehicular traffic flow to the
Property so as to result in a change in access to the Property, or by or on
account of an eviction by paramount title or any transfer made in lieu of any
such proceeding or action (in each instance, a "Condemnation"); provided,
however, if an Event of Default shall have occurred and be continuing such
award, compensation or insurance proceeds shall be paid directly to Lessor or,
if received by Lessee, shall be held in trust for Lessor, and shall be paid
over by Lessee to Lessor and held in accordance with the terms of paragraph (b)
below; provided further, however, in the event of any Casualty or Condemnation,
the estimated cost of restoration of which is in excess of FIVE MILLION DOLLARS
($5,000,000), any such award, compensation or insurance proceeds shall be
delivered in escrow (the "Post Completion Escrow") to the Escrowee, and any
such award, compensation or insurance proceeds received by Escrowee shall be
applied by Escrowee (1) first, to reimburse Lessor, the Trustee and the Holders
for any expenses (including, without limitation, any reasonable attorneys' and
consultants' fees and expenses) incurred by any of the foregoing in connection
with the collection of any such award, compensation or insurance proceeds, or
the determination of the amount of the loss, and, except as provided to the
contrary below, (2) second, to Lessee to pay the cost of the restoration of the
Property pursuant to the terms of an escrow agreement which shall be entered
into by Lessee and Escrowee and which shall contain the provisions of Sections
11.1, 15.1(c) and 15.1(g) herein as well as the terms set forth in this Section
15.1(a), and (3) the balance, if any, shall be paid as provided in the last
sentence of Section 15.1(g). If, notwithstanding such provision, any such
award, compensation or insurance proceeds are paid to Lessor, the Trustee or
Lessee rather than to Escrowee, Lessor, the Trustee and Lessee, as the case may
be, hereby agree to transfer any such payment to Escrowee. All amounts held by
Lessor hereunder on account of any award, compensation or insurance proceeds
either paid directly to Lessor or turned over to Lessor shall be held as
security for the performance of Lessee's obligations hereunder. Funds
deposited in the Post Completion Escrow shall be invested at the written
direction of Lessee, and all interest earned thereon shall be the property of
Lessee and added to the sums deposited in the Post Completion Escrow.
(b) Any provision of this Lease to the contrary notwithstanding,
Lessor shall not be obligated to deposit any award, compensation or insurance
proceeds payable on account of a Casualty and Condemnation and received by
Lessor with Escrowee in
<PAGE> 50
44
the Post Completion Escrow, including any rental insurance proceeds, and
Escrowee shall not make any amounts in the Post Completion Escrow available to
Lessee for restoration or otherwise in accordance with the terms and conditions
more particularly set forth herein if (i) an Event of Default has occurred and
is continuing or (ii) the estimated cost to restore is in excess of the Net
Proceeds available for such purpose and Lessee shall have failed to deposit
with Escrowee a sum (by way of cash, letter of credit, guaranty or other
similar liquid collateral reasonably satisfactory to Lessor and the Trustee)
equal to the amount by which the estimated cost to restore shall exceed the Net
Proceeds available for such purpose (and Lessee hereby covenants to make such
deposit). In the event Lessor is entitled to hold the Net Proceeds and elects
to do so, Lessor shall release the funds to Escrowee upon Lessor's acceptance
of a cure for any Event of Default (in the case of clause (i) above) or
Escrowee's receipt of the excess funds necessary to complete the restoration of
the Property (in the case of clause (ii) above).
(c) With respect to all amounts held in the Post Completion
Escrow, not more than once each month, Lessee shall submit to Escrowee for
payment a cost breakdown of work completed to date, together with a requisition
which shall be certified by Lessee and its architect and shall state that (i)
such work has been completed substantially in accordance with the plans and
specifications conforming to Section 15.1(g) and approved by Lessor (such
approval not to be unreasonably withheld or delayed), (ii) the requested amount
has been paid in full or has actually been incurred and is payable and a
requisition therefor has not previously been submitted or if submitted, the
requisitioned amount has not been paid in full to Lessee, and (iii) the then
estimated cost of completing the restoration does not exceed the amount that
Escrowee will hold pursuant to this Section 15.1 following the requested
payment to Lessee. Lessee shall be obligated to deposit additional amounts (in
cash or other forms described above in Section 15.1(b)) as shall be necessary
to complete construction, based on Lessee's then estimated cost of completion
and taking into account the remaining amount in the Post Completion Escrow.
Disbursements by Escrowee with respect to costs of restoration (x) shall be
subject to retainages equal to the amount actually withheld or to be withheld
by Lessee with respect to any payment made or to be made to any contractors,
laborers, subcontractors, mechanics, materialmen, vendors or any other Persons
with respect to such restoration; (y) shall be conditioned upon receipt by
Escrowee of such evidence of the absence of Liens as Lessor shall reasonably
require; and (z) may be conditioned upon such independent inspections by Lessor
or its agents of the restoration as Lessor may reasonably elect to make or
cause to be made at Lessee's expense.
<PAGE> 51
45
(d) Lessee may appear in any proceeding or action to negotiate,
prosecute, adjust or appeal any claim for any award, compensation or insurance
payment on account of any such Casualty or Condemnation and shall pay all
expenses thereof. At Lessee's reasonable request, and at Lessee's sole cost
and expense, Lessor and the Trustee shall participate in any such proceeding,
action, negotiation, prosecution or adjustment. Lessor and Lessee agree that
from and after the Substantial Completion Date for Core and Shell this Lease
shall control the rights of Lessor and Lessee in and to any such award,
compensation or insurance payment, and any right under present or future law to
the contrary is hereby waived.
(e) If Lessor or Lessee shall receive notice of a Casualty or a
possible Condemnation of the Property or any interest therein, Lessor or
Lessee, as the case may be, shall give notice thereof to the other and to the
Trustee promptly after the receipt of such notice.
(f) In the event of a Casualty or receipt of notice by Lessee or
Lessor of a Condemnation after the Substantial Completion Date for Core and
Shell, Lessee shall, not later than forty-five (45) days after such occurrence
or such longer time as may reasonably be required (as specified by notice from
Lessee to Lessor from time to time delivered prior to the termination of such
forty-five (45) days, as the same may be extended) to determine the full extent
of loss, the probable expense and time of restoration and the probable amount
of the award or insurance payment, deliver to Lessor and the Trustee a notice
stating that either (i) this Lease shall remain in full force and effect and,
at Lessee's sole cost and expense, Lessee shall promptly and diligently restore
the Property in accordance with the terms of Section 15.1(g) or (ii) this Lease
shall terminate in accordance with Section 16.1. However, this Lease shall
terminate under clause (ii) of the preceding sentence in the event of (1) a
Condemnation that either (I) involves a taking of Lessor's entire leasehold
title to the Land (a "Total Condemnation") or (II) in the reasonable, good
faith judgment of Lessee (as evidenced by an Officer's Certificate), either (x)
renders the Property unsuitable for continued use as a Class A Office Building
or (y) is such that restoration of the Property to substantially its condition
as existed immediately prior to such Condemnation would be impracticable or
impossible (either (x) or (y), a "Significant Condemnation") or (2) a Casualty
that in the reasonable, good faith judgment of Lessee (as evidenced by an
Officer's Certificate) either (I) renders the Property unsuitable for continued
use as a Class A Office Building or (II) is so substantial in nature such that
restoration of the Property to substantially its condition as existed
immediately prior to such Casualty would be impracticable or impossible (either
(I) or (II), a Significant Casualty"). Notwithstanding the foregoing, this
Lease shall not stay in full force and effect under the preceding clause (i)
unless Lessee shall deliver to Lessor and
<PAGE> 52
46
the Trustee an Officer's Certificate stating that either (x) such Condemnation
is neither a Total Condemnation nor a Significant Condemnation or (y) such
Casualty is not a Significant Casualty.
(g) If pursuant to Section 15.1(f)(i) this Lease shall continue in
full force and effect, Lessee shall, at its sole cost and expense, promptly and
diligently repair any damage to the Property caused by such Casualty or
Condemnation in conformity with the requirements of Section 11.1 using the
as-built plans and specifications for the Building (as modified to give effect
to any subsequent Modifications, any Condemnation affecting the Property and
all applicable Legal Requirements) so as to restore the Property to the same
condition, operation, function and value as existed immediately prior to such
Casualty or Condemnation. In such event, title to the Property shall remain
with Lessor. If the cost of such restoration shall exceed the Net Proceeds
with respect to such Casualty or Condemnation, the excess shall be paid by
Lessee. Any Net Proceeds remaining after final payment has been made for
restoration shall belong to Lessee.
(h) In no event shall a Casualty or Condemnation with respect to
which this Lease remains in full force and effect under Section 15.1(f)(i)
affect Lessee's obligations to pay Rent pursuant to Section 3.1.
(i) Notwithstanding anything to the contrary set forth in Section
15.1(a) or Section 15.1(g), if during the Primary Term (i) a Casualty occurs or
Lessee receives notice of a Condemnation, (ii) the estimated cost of restoring
such Casualty or Condemnation is in excess of $1,000,000 and (iii) following
such Casualty or Condemnation, the Property cannot reasonably be restored on or
before the 540th day prior to the Expiration Date to the same condition as
existed immediately prior to such Casualty or Condemnation, then (x) any award,
compensation or insurance proceeds to which Lessor or Lessee may be entitled to
by reason of their respective interests in the Property on account of such
Casualty or Condemnation shall be paid to the Trustee, (y) if any such award,
compensation or insurance proceeds shall not in fact be paid to the Trustee on
or prior to the Expiration Date, then Lessee shall pay to the Trustee on the
Expiration Date an amount which in the reasonable good-faith judgment of Lessee
(as evidenced by an Officer's Certificate) is equal to the award, compensation
or insurance proceeds that will be payable in connection with such Casualty or
Condemnation and any such award, compensation or insurance proceeds actually
paid on or after such date shall be payable to Lessee, and (z) following any
such Casualty, Lessee shall also deliver to the Trustee the full amount of the
deductible or self-insured retention in effect with respect to the insurance
coverage required pursuant to Section 14.2. The amount set forth in the
preceding clause (z) shall be paid to the Trustee regardless of whether the
estimated cost of restoring the Casualty is in excess of $1,000,000. The
amounts referred to in the preceding clauses
<PAGE> 53
47
(x), (y) and (z) shall be applied by the Trustee at the expiration of the
Primary Term to the outstanding principal amount of, and accrued and unpaid
interest on, the Notes in accordance with the terms of the Indenture; provided,
however, that if Lessee at any time delivers to Lessor an Election Notice
pursuant to Section 20.2 or an Extension Notice pursuant to Section 21.1(b),
then such amounts shall be promptly paid or repaid, as the case may be, by the
Trustee to Lessee; provided, further that in the event Lessee delivers an
Extension Notice pursuant to Section 21.1(b), Lessee shall thereafter be
obligated to comply with the provisions of Sections 15.1(a) and (c) and to
repair and restore the Property pursuant to Section 15.1(g).
15.2 Environmental Matters. Promptly upon Lessee's actual knowledge
of the presence of Hazardous Substances in any portion of the Property in
concentrations and conditions that constitute an Environmental Violation,
Lessee shall notify Lessor in writing of such condition. In the event of such
Environmental Violation, Lessee shall, not later than forty-five (45) days
after Lessee has actual knowledge of such Environmental Violation or such
longer time as may reasonably be required (as specified by written notice from
Lessee to Lessor from time to time delivered prior to the termination of such
forty-five (45) days, as the same may be extended) to determine the full extent
of the Environmental Violation and the probable expense and time of remediation
and either deliver to Lessor and the Trustee an Officer's Certificate and a
Termination Notice pursuant to Section 16.1(b), if applicable, or, at Lessee's
sole cost and expense, promptly and diligently undertake any response, clean
up, remedial or other action necessary to remove, cleanup or remediate the
Environmental Violation in accordance with the terms of Section 9.1. If Lessee
does not deliver a Termination Notice pursuant to Section 16.1(b), Lessee
shall, upon completion of remedial action by Lessee, cause to be prepared by an
environmental consultant reasonably acceptable to Lessor a report describing
the Environmental Violation and the actions taken by Lessee (or its agents) in
response to such Environmental Violation, and a statement by the consultant
that the Environmental Violation has been remedied in full compliance with
applicable Environmental Law.
15.3 Notice of Environmental Matters. Promptly, but in any event
within five (5) Business Days from the date Lessee has actual knowledge
thereof, Lessee shall provide to Lessor written notice of any material pending
or threatened claim, action or proceeding involving any Environmental Law in
connection with the Property. All such notices shall describe in reasonable
detail the nature of the claim, action or proceeding and Lessee's proposed
response thereto. In addition, Lessee shall provide to Lessor, within five (5)
Business Days of receipt, copies of all material written communications with
any Governmental Authority relating to any Environmental Law in connection with
the Property. Lessee shall also promptly provide
<PAGE> 54
48
such detailed reports of any such material environmental claims as may
reasonably be requested by Lessor.
ARTICLE XVI
16.1 Termination Upon Certain Events. (a) If Lessor or Lessee
shall have received notice of a Total Condemnation of the Property on or after
the Substantial Completion Date for Core and Shell, then Lessee shall be
obligated, within thirty (30) days after Lessee receives notice thereof, to
deliver a written notice in the form described in Section 16.2(a) (a
"Termination Notice") of the termination of this Lease.
(b) If either: (i) Lessee or Lessor shall have received notice of
a Condemnation of the Property on or after the Substantial Completion Date for
Core and Shell and Lessee shall have delivered to Lessor an Officer's
Certificate that such Condemnation is a Significant Condemnation in accordance
with Section 15.1(f); or (ii) a Casualty occurs on or after the Substantial
Completion Date for Core and Shell and Lessee shall have delivered to Lessor an
Officer's Certificate that such Casualty is a Significant Casualty in
accordance with Section 15.1(f); or (iii) an Environmental Violation occurs or
is discovered and Lessee shall have delivered to Lessor an Officer's
Certificate stating that, in the reasonable, good-faith judgment of Lessee, the
cost to remediate the same will exceed FIVE MILLION DOLLARS ($5,000,000); then,
Lessee shall, simultaneously with the delivery of the Officer's Certificate
pursuant to the preceding clause (i), (ii) or (iii), deliver a Termination
Notice.
16.2 Procedures. a. A Termination Notice shall contain: (i) notice
of termination of this Lease on the next Payment Date which occurs at least
thirty (30) days after Lessor's receipt of such Termination Notice (the
"Termination Date"); (ii) a binding and irrevocable agreement of Lessee to pay
the Termination Amount and purchase the Property on such Payment Date; and
(iii) the Officer's Certificate described in Section 16.1(b).
b. On the Termination Date, Lessee shall pay to Lessor the
Termination Amount, plus all amounts owing in respect of Rent (including
Additional Charges) theretofore accruing and Lessor shall convey the Property
or the remaining portion thereof, if any, to Lessee (or Lessee's designee) all
in accordance with Section 19.1, as well as any Net Proceeds with respect to
the Casualty or Condemnation giving rise to the termination of this Lease
theretofore received by Lessor.
<PAGE> 55
49
ARTICLE XVII
17.1 Events of Default. If any one or more of the following events
(each an "Event of Default") shall occur:
a. Lessee shall fail to make payment of any Base Rent or Renewal
Rent, as applicable, any Termination Amount, any Purchase Option Price,
any Residual Guarantee Amount or the Default Amount within five (5) days
after the same has become due and payable;
b. Lessee shall fail to make payment of any other Additional
Charges due and payable within fifteen (15) days after receipt of notice
thereof;
c. If the insurance policies required by Article XIV shall be
terminated or expire without replacement;
d. Lessee shall fail to observe or perform any term, covenant or
condition of this Lease, the Consent to Assignment, the Participation
Agreement or any other Operative Agreement to which it is a party other
than those set forth in Section 17.1(a), (b) or (c) hereof, or any
representation or warranty set forth in this Lease or in Section 7.2 of
the Participation Agreement as of the date hereof, or in Section 4.1(b)
of the Construction Management Agreement, shall be inaccurate in any way
materially adverse to Lessor, and such failure or misrepresentation or
breach of warranty shall remain uncured for a period of thirty (30) days
after receipt of written notice thereof; provided, however, no Event of
Default shall be deemed to occur if such failure, misrepresentation or
breach cannot reasonably be cured within such period, so long as Lessee
shall have promptly commenced the cure thereof, continues to act with
diligence to cure such failure, misrepresentation or breach and, with
respect to any failure, misrepresentation or breach contained in Sections
4.1, 10.2, 12.1, 12.2, 14.1, 14.2, 14.3, 15.2, 15.3, 25.1 and 26.2 hereof
and Sections 7.2(a), (b), (h), (l), (m), (o), (r), (t), (u), (v), 7.3(a),
(b), (f), (g), (i), 7.4(a), (b), (f), (g), (i), Section 8, Section 9,
Sections 14.1, 14.2, 14.3, 14.4, 14.5, 14.7 and 14.9 of the Participation
Agreement, in fact cures such failure, misrepresentation or breach within
180 days after receipt of notice thereof;
e. Lessee shall (i) admit in writing its inability to pay its debts
generally as they become due, (ii) file a petition under the United
States bankruptcy laws or any other applicable insolvency law or statute
of the United States of America or any State or Commonwealth thereof,
(iii) make a general assignment for the benefit of its creditors, (iv)
consent to the appointment of a receiver of itself or the whole or any
substantial part of its property,
<PAGE> 56
50
(v) fail to cause the discharge of any custodian, trustee or receiver
appointed for Lessee or the whole or a substantial part of its
property within ninety (90) days after such appointment, or (vi) file
a petition or answer seeking or consenting to reorganization under the
United States bankruptcy laws or any other applicable insolvency law
or statute of the United States of America or any State or
Commonwealth thereof; or
f. insolvency proceedings or a petition under the United
States bankruptcy laws or any other applicable insolvency law or
statute of the United States of America or any State or Commonwealth
thereof shall be filed against Lessee and not dismissed within ninety
(90) days from the date of its filing, or a court of competent
jurisdiction shall enter an order or decree appointing, without the
consent of Lessee, a receiver of Lessee or the whole or a substantial
part of its property, and such order or decree shall not be vacated or
set aside within ninety (90) days from the date of the entry thereof;
then, in any such event, Lessor may, in addition to the other rights and
remedies provided for in this Article XVII and in Section 18.1, terminate this
Lease by giving Lessee thirty (30) days notice of such termination and upon the
expiration of the time fixed in such notice, this Lease shall terminate,
subject to Lessee's rights under Section 17.6, and all rights of Lessee under
this Lease shall cease. Lessee shall, to the fullest extent permitted by law,
pay as Additional Charges all costs and expenses incurred by or on behalf of
Lessor, including fees and expenses of counsel, as a result of any Event of
Default hereunder.
17.2 Surrender of Possession. If an Event of Default shall
have occurred and be continuing, and whether or not this Lease shall have been
terminated pursuant to Section 17.1, Lessee shall, upon thirty (30) days
written notice, surrender to Lessor possession of the Property and Lessee shall
quit the same, subject, however, to the rights of any subtenants of Lessee to
whom Lessor has accorded nondisturbance rights pursuant to Section 26.2.
Lessor may enter upon and repossess the Property by such means as are available
at law or in equity, and may remove Lessee and all other Persons and any and
all personal property and Lessee's equipment and personalty and severable
Modifications from the Property. Lessor shall have no liability by reason of
any such entry, repossession or removal performed in accordance with applicable
law.
17.3 Reletting. If an Event of Default shall have occurred
and be continuing, and whether or not this Lease shall have been terminated
pursuant to Section 17.1, Lessor may, but (except to the extent required by
applicable law) shall be under no obligation to, relet the Property, for the
account of Lessee
<PAGE> 57
51
or otherwise, for such term or terms (which may be greater or less than the
period which would otherwise have constituted the balance of the Term) and on
such conditions (which may include concessions or free rent) and for such
purposes as Lessor may determine, and Lessor may collect, receive and retain
the rents resulting from such reletting. Lessor shall not be liable to Lessee
for any failure to relet the Property or for any failure to collect any rent
due upon such reletting.
17.4 Damages. Neither (a) the termination of this Lease as
to all or any part of the Property pursuant to Section 17.1; (b) the
repossession of all or any part of the Property; nor (c) except to the extent
required by applicable law, the failure of Lessor to relet all or any part of
the Property, the reletting of all or any portion thereof, nor the failure of
Lessor to collect or receive any rentals due upon any such reletting shall
relieve Lessee of its liability and obligations hereunder, all of which shall
survive any such termination, repossession or reletting. If any Event of
Default shall have occurred and be continuing and notwithstanding any
termination of this Lease pursuant to Section 17.1, Lessee shall forthwith pay
to Lessor all Rent and other sums due and payable hereunder to and including
the date of such termination. Thereafter, on the days on which the Base Rent
or Renewal Rent, as applicable, are payable under this Lease or would have been
payable under this Lease if the same had not been terminated pursuant to
Section 17.1 and until the end of the Term hereof or what would have been the
Term in the absence of such termination, Lessee shall pay Lessor, as current
liquidated damages (it being agreed that it would be impossible accurately to
determine actual damages) an amount equal to the Base Rent or Renewal Rent, as
applicable, and Additional Charges that are payable under this Lease or would
have been payable by Lessee hereunder if this Lease had not been terminated
pursuant to Section 17.1, less the net proceeds, if any, which are actually
received by Lessor with respect to the period in question pursuant to the terms
of the Mortgage and Assignment of Lease of any reletting of the Property or any
portion thereof; provided that Lessee's obligation to make payments of Base
Rent and Renewal Rent under this Section 17.4 shall continue only so long as
Lessor shall not have received the amounts specified in Section 17.5 or Section
17.6. In calculating the amount of such net proceeds from reletting, there
shall be deducted all of Lessor's, the Trustee's and any Holder's expenses in
connection therewith, including repossession costs, brokerage commissions, fees
and expenses of counsel and any necessary repair or alteration costs and
expenses incurred in preparation for such reletting. To the extent Lessor
receives any damages pursuant to this Section 17.4, such amounts shall be
regarded as amounts paid on account of Rent.
17.5 Acceleration of Rent. In the event this Lease is deemed
to be a true lease of the Property by Lessor to Lessee and not a financing
arrangement, then to the extent permitted by
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52
applicable law, if an Event of Default shall have occurred and be continuing,
and this Lease shall not have been terminated pursuant to Section 17.1, and
whether or not Lessor shall have collected any current liquidated damages
pursuant to Section 17.4, Lessor may upon written notice to Lessee accelerate
all payments of Base Rent or Renewal Rent due hereunder and, upon such
acceleration, Lessee shall immediately pay Lessor, as and for final liquidated
damages and in lieu of all current liquidated damages on account of such Event
of Default beyond the date of such acceleration (it being agreed that it would
be impossible accurately to determine actual damages) an amount equal to the
sum of (a) all Base Rent or Renewal Rent, as applicable, due from the date of
such acceleration until the end of the Term, plus (b) the Residual Guarantee
Amount that would be payable under Section 22.1(d) assuming the proceeds of the
sale pursuant to such Section 22.1(d) are equal to zero, discounted to present
value at a rate equal to the lesser of (i) the rate then being paid on United
States treasury securities with maturities corresponding to the then remaining
Term or (ii) five percent (5%). Following payment of such amount by Lessee,
Lessee will be permitted to stay in possession of the Property for the
remainder of the Term, subject to the terms and conditions of this Lease,
provided that no further Event of Default shall occur and be continuing,
following which Lessor shall have all the rights and remedies set forth in this
Article XVII (but not including those set forth in this Section 17.5). If any
statute or rule of law shall limit the amount of such final liquidated damages
to less than the amount agreed upon, Lessor shall be entitled to the maximum
amount allowable under such statute or rule of law. Notwithstanding the
foregoing, if Lessor has elected to seek damages under this Section 17.5,
Lessee may at any time after the occurrence and during the continuance of an
Event of Default elect to pay to Lessor the Default Amount in accordance with
the terms of Section 17.6 and receive an assignment of Lessor's right, title
and interest as lessee under the Ground Lease and Lessor's entire interest in
the Improvements, Fixtures and Modifications all in accordance with the terms
of Section 17.6.
17.6 Final Liquidated Damages. If an Event of Default shall
have occurred and be continuing, whether or not this Lease shall have been
terminated pursuant to Section 17.1 and whether or not Lessor shall have
collected any current liquidated damages pursuant to Section 17.4, Lessor shall
have the right to recover, by demand to Lessee and at Lessor's election, and
Lessee shall pay to Lessor, as and for final liquidated damages, but exclusive
of the indemnities payable under Section 25.1, and in lieu of all current
liquidated damages beyond the date of such demand (it being agreed that it
would be impossible accurately to determine actual damages) the sum of (a) the
Default Amount specified for such Payment Date on Schedule D, plus (b) the
Make-Whole Premium payable by reason of the application of such portion of the
Default Amount as shall be required to be applied to the Notes upon
acceleration thereof, plus (c) all other amounts owing in
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53
respect of Rent and Additional Charges theretofore accruing under this Lease.
If after this Lease shall be terminated pursuant to Section 17.1, Lessor shall
not have elected to demand recovery of final liquidated damages pursuant to the
first sentence of this Section 17.6, Lessee may, at any time within one hundred
eighty (180) days after the earlier of (x) the date Lessor shall have commenced
appropriate proceedings to remove Lessee from occupancy of the Property or (y)
the date the Trustee shall have commenced appropriate proceedings to foreclose
the lien of the Mortgage (but in no event after the completion of such
foreclosure or the actual dispossession of the Lessee), pay the amount of final
liquidated damages required by the first sentence of this Section 17.6 plus the
Lessor Make-Whole Premium to Lessor. Upon payment of the amount specified
pursuant to the first or second sentence of this Section 17.6, Lessee shall be
entitled to receive from Lessor, at Lessee's request and cost, an assignment of
Lessor's right, title and interest as lessee under the Ground Lease and
Lessor's entire interest in the Improvements, Fixtures and Modifications, in
each case (i) with covenants against grantor's acts, (ii) in recordable form
and otherwise in conformity with local custom and (iii) free and clear of the
Lien of all mortgages (including the Mortgage and the Assignment of Lease) and
any defects, Liens or encumbrances that have been created by Lessor, other than
(x) those that Lessee is responsible hereunder to pay or discharge or those
created pursuant to Lessee's request made in accordance with Section 12.2 or
otherwise consented to by Lessee, and (y) ad valorem taxes and Impositions.
Lessee (or Lessee's designee) shall execute and deliver to Lessor an assumption
of all of Lessor's obligations under the Ground Lease. The Property shall be
conveyed to Lessee (or Lessee's designee) "AS IS" and in its then present
physical condition. If any statute or rule of law shall limit the amount of
such final liquidated damages to less than the amount agreed upon, Lessor shall
be entitled to the maximum amount allowable under such statute or rule of law;
provided, however, Lessee shall not be entitled to receive an assignment of
Lessor's interest under the Ground Lease or in the Improvements, Fixtures and
Modifications unless Lessee shall have paid in full the Default Amount, plus
the Make-Whole Premium as provided above.
17.7 Waiver of Certain Rights. If this Lease shall be
terminated pursuant to Section 17.1, Lessee waives, to the fullest extent
permitted by law, (a) any notice of re-entry or the institution of legal
proceedings to obtain re-entry or possession; (b) any right of redemption,
re-entry or repossession; (c) the benefit of any laws now or hereafter in force
exempting property from liability for rent or for debt; and (d) any other
rights which might otherwise limit or modify any of Lessor's rights or remedies
under this Article XVII.
17.8 Assignment of Rights under Contracts. If an Event of
Default shall have occurred and be continuing, and whether or not this Lease
shall have been terminated pursuant to
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54
Section 17.1, Lessee shall upon Lessor's demand immediately assign, transfer
and set over to Lessor all of Lessee's right, title and interest in and to the
Construction Contract, the Demolition Contract, the Development Agreement, each
other Project Contract and all other agreements executed by Lessee in
connection with the construction, development, use or operation of the Property
(including, without limitation, all right, title and interest of Lessee with
respect to all warranty, performance, service and indemnity provisions), as and
to the extent that the same relate to the construction and operation of the
Property.
17.9 Remedies Cumulative. The remedies herein provided shall
be cumulative and in addition to (and not in limitation of) any other remedies
available at law, equity or otherwise, including, without limitation, the
mortgage foreclosure remedies described in Chapter 667 of the Hawaii Revised
Statutes.
ARTICLE XVIII
18.1 Lessor's Right to Cure Lessee's Defaults. Lessor,
without waiving or releasing any obligation or Event of Default, may (but shall
be under no obligation to) remedy any Event of Default for the account and at
the sole cost and expense of Lessee, including the failure by Lessee to
maintain the insurance required by Article XIV, and may, to the fullest extent
permitted by law, and notwithstanding any right of quiet enjoyment in favor of
Lessee, enter upon the Property for such purpose and take all such action
thereon as may be necessary or appropriate therefor. No such entry shall be
deemed an eviction of Lessee. All out-of-pocket costs and expenses so incurred
(including fees and expenses of counsel), together with interest thereon at the
Lessor Overdue Rate from the date on which such sums or expenses are paid by
Lessor, shall be paid by Lessee to Lessor on demand.
ARTICLE XIX
19.1 Provisions Relating to Lessee's Termination of this
Lease or Exercise of Purchase Option. In connection with any termination of
this Lease pursuant to the terms of Section 16.2, or in connection with
Lessee's exercise of its Purchase Option under Article XX, upon the Payment
Date on which this Lease is to terminate or upon the Expiration Date, as
applicable, and upon tender by Lessee (or Lessee's designee) of the amounts set
forth in Section 16.2(b) or Section 20.2, as applicable:
(a) Lessor shall execute and deliver to Lessee (or to Lessee's
designee) at Lessee's cost and expense an assignment of Lessor's
right, title and interest as lessee under the Ground Lease and
Lessor's entire interest in the
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55
Improvements, Fixtures and Modifications (which shall include an
assignment of all of Lessor's right, title and interest in and to any
Net Proceeds not previously received by Lessor), in each case (i) with
covenants against grantor's acts, (ii) in recordable form and
otherwise in conformity with local custom and (iii) free and clear of
the Lien of all mortgages (including the Mortgage and the Assignment
of Lease) and any defects, Liens or encumbrances that have been
created by Lessor, other than (x) those that Lessee is responsible
hereunder to pay or discharge or those created pursuant to Lessee's
request made in accordance with Section 12.2 or otherwise consented to
by Lessee, and (y) ad valorem taxes and Impositions; and
(b) Lessee (or Lessee's designee) shall execute and deliver to
Lessor an assumption of all of Lessor's obligations under the Ground
Lease. The Property shall be conveyed to Lessee (or Lessee's
designee) "AS IS" and in its then present physical condition.
ARTICLE XX
20.1 Lessee's Purchase Option. Lessor hereby grants to
Lessee, an exclusive and irrevocable option (the "Purchase Option") to purchase
Lessor's entire interest in the Property and Lessor's right, title and interest
hereunder in the manner set forth in this Article XX.
20.2 Exercise of Purchase Option. The Purchase Option may be
exercised by Lessee only by delivering to Lessor irrevocable written notice
(the "Election Notice") of Lessee's intention to exercise the Purchase Option
not later than 30 days prior to the scheduled expiration of the then current
Primary Term or Extended Term, as applicable (such scheduled expiration, the
"Expiration Date") (subject, nevertheless, to the terms of Section 21.2(c)).
In the event that Lessee delivers the Election Notice to Lessor in the manner
set forth in the preceding sentence or in the manner set forth in Section
21.2(c), then Lessee shall be obligated to pay to Lessor on the Expiration Date
an amount equal to the Purchase Option Price and all amounts then owing in
respect of Rent and Additional Charges.
20.3 Purchase Option Price. The purchase price (the
"Purchase Option Price") for the Property and Lessor's right, title and
interest therein shall be an amount equal to the excess, if any, of (a) the sum
of (1) the aggregate outstanding principal balance of the Notes as of the
Expiration Date, after applying thereto any payment of Base Rent or Renewal
Rent to be made on the Expiration Date in accordance with the terms of the
Indenture, plus (2) all accrued interest thereon, after applying thereto any
payment of Base Rent or Renewal Rent to be made on the Expiration Date in
accordance with the terms of the
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Indenture, plus (3) the Lessor Return Payment, over (b) the amount of any Net
Proceeds previously paid to Escrowee and not repaid or remitted to Lessee in
accordance with Article XV that are applied by Escrowee to reduce the
outstanding principal amount of the Notes on or prior to the Expiration Date.
20.4 Transfer of the Property Upon Exercise. In the event
the Purchase Option shall have been exercised, on the Expiration Date and upon
tender by Lessee of the Purchase Option Price and all amounts then owing in
respect of Rent and Additional Charges, the terms of Section 19.1 shall be
applicable.
ARTICLE XXI
21.1 Extended Terms. (a) Subject to the terms of Section
21.2, so long as no Event of Default is continuing, Lessor hereby grants to
Lessee one or more options to extend the Term of this Lease on the terms and
conditions set forth in this Section 21.1 and otherwise on all of the terms and
conditions of this Lease.
(b) Provided that Lessee has arranged a Permitted Refinancing
in accordance with the terms of Section 21.2, at the expiration of the Primary
Term and any Extended Term, Lessee shall have the right, upon irrevocable
written notice (an "Extension Notice") to Lessor given at any time during the
Term but not later than thirty (30) days prior to the Expiration Date to extend
this Lease for one or more successive terms, each such term to be not less than
two (2) years and expiring not later than the expiration of the Ground Lease
(any such term an "Extended Term"). The exact length of each Extended Term
shall be specified in the Extension Notice. The Renewal Rent for any Extended
Term in question shall be equal to an amount sufficient to pay interest and
principal, if any, due on any Renewal Notes during such Extended Term plus
Lessor's Margin.
(c) In connection with each renewal of the Term, the
Schedules hereto shall be amended as appropriate to (i) reflect the
determination of the Renewal Rent caused by such renewal and (ii) change the
Default Amount and the Termination Amount, if necessary. Unless otherwise
agreed upon by the parties, the Payment Dates during the Extended Term shall be
the dates upon which payments are required to be made under the applicable
Renewal Notes.
21.2 Permitted Refinancing. (a) In the event that Lessee
intends to exercise its rights to extend the Term and so notifies Lessor of
such intention, Lessee will use all reasonable, good-faith efforts to obtain as
soon as possible a mortgage loan secured by the Property, which loan shall (i)
fully fund no later than the Expiration Date, (ii) be in an amount
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equal to the outstanding principal balance of the Notes, plus, at Lessee's
election, the costs and expenses described in Section 21.2(b) and similar costs
and expenses incurred by Lessee, (iii) mature on the same date as the
expiration of the proposed Extended Term, (iv) be secured by a mortgage
containing provisions in respect of this Lease and Lessee's rights and
obligations hereunder substantially equivalent to those contained in the
Mortgage, subject, however, to the terms of this Section 21.2 and shall be
recourse only to Lessor's interest in the Property, (v) provide for either
interest-only coupon payments (i.e., no amortization of principal prior to
maturity) or amortization of principal on a thirty (30) year schedule and in
the latter event, the Maximum Residual Guarantee Amount shall be reduced by the
amount of principal so amortized. A loan meeting the requirements of the
foregoing clauses (i) through (v) is referred to herein as a "Permitted
Refinancing". In the event Lessee is able to obtain a Permitted Refinancing,
Lessor shall issue a Renewal Note or Renewal Notes and shall execute such other
documents and instruments as are necessary in order to effectuate such
Permitted Refinancing and to satisfy in full the outstanding principal balance
of the Notes.
(b) Except to the extent that the same are financed as a part
of the principal of the Permitted Refinancing, as described in Section
21.2(a)(ii), Lessee shall pay all out-of-pocket expenses incurred by Lessor or
the Trustee (including attorneys' fees and expenses), all premiums (if any) and
all costs and expenses of the new lender incurred in connection with any
Permitted Refinancing.
(c) Notwithstanding anything to the contrary contained
herein, if Lessee has delivered a notice pursuant to Section 22.1(b)(ii) and
neither Lessee nor Lessor is able to obtain a Permitted Refinancing in
accordance with this Section 21.2 at least thirty (30) days prior to the
Expiration Date, then Lessee shall be obligated to exercise its Purchase Option
in accordance with the terms of Article XX, in which event, Lessee shall be
deemed to have delivered a timely Election Notice for the purposes of Section
20.2.
ARTICLE XXII
22.1 Residual Guarantee. (a) On or before the date which is
eighteen (18) months prior to the Expiration Date, Lessee shall deliver to
Lessor a notice indicating whether Lessee intends to attempt to sell the
Property prior to the Expiration Date. Any notice delivered by Lessee to
Lessor pursuant to the terms of this Section 22.1(a) shall not be binding on
Lessee.
(b) On or before the date which is twelve (12) months prior
to the Expiration Date, Lessee shall deliver to Lessor a notice stating either
that:
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(i) Lessee intends to sell the Property and to pay the
Residual Guarantee Amount, if any, on the Expiration Date in
accordance with Section 22.1(d) or pay the Maximum Residual Guarantee
Amount on the Expiration Date in accordance with Section 22.1(e) (but
without limiting Lessee's rights pursuant to Article XXI and Article
XXII hereof); or
(ii) Lessee irrevocably agrees to elect either to exercise
the Purchase Option in accordance with Article XX or to extend the
Term in accordance with Article XXI.
Any notice delivered by Lessee to Lessor pursuant to the terms of this Section
22.1(b) shall be irrevocable and binding on Lessee.
(c) Notwithstanding anything to the contrary contained
herein, if Lessee does not intend to exercise the Purchase Option or elect to
extend the Term, then Lessee (as agent for Lessor) shall use all reasonable,
good-faith efforts to solicit bids with respect to the Property from unrelated
third parties, and Lessor's right, title and interest in the Property will be
sold by Lessor to the Person submitting the highest cash bid (net of any
brokerage commissions and any other sales expenses) as soon as is reasonably
practicable. Lessor shall have no liability or obligation with respect to any
purchase contract described in this Article XXII other than to transfer its
right, title and interest in the Property as contemplated hereby.
(d) In the event a sale of the Property is consummated, and
the proceeds thereof received, on or prior to the Expiration Date in accordance
with the terms of a contract entered into pursuant to Section 22.1(c), Lessee
shall promptly pay to Lessor (but in no event later than the Expiration Date)
the sum of (i) all such proceeds, plus (ii) the Residual Guarantee Amount, but
in no event shall such payment exceed the Maximum Residual Guarantee Amount,
plus (iii) all amounts owing in respect of Rent as of the Expiration Date.
(e) In the event a sale of the Property is not consummated,
or the proceeds thereof are not received by Lessor, on or prior to the
Expiration Date for any reason, Lessee shall on the Expiration Date pay to
Lessor (i) an amount equal to the Maximum Residual Guarantee Amount plus, (ii)
at Lessee's sole option, such additional amount as may be required to satisfy
in full the outstanding principal amount and accrued interest on the Notes. If
Lessee shall have made the payment described in clause (ii) of the first
sentence of this Section 22.1(e) and only in such event, then if a sale of the
Property to a third party is consummated within 48 months of the Expiration
Date, the net cash proceeds of such sale shall be paid by Lessor (x) first, to
reimburse Lessee for any amounts paid by Lessee pursuant to clause (ii) above,
plus interest on such amount at the Debt Overdue Rate until the date of actual
payment, (y) second, to
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Lessor on account of the Lessor Return Payment and (z) the balance, to Lessee.
(f) Notwithstanding anything to the contrary contained in
this Article XXII, in the event Lessee notifies Lessor in accordance with
Section 22.1(b)(i) that it will either pay the Residual Guarantee Amount, if
any, on the Expiration Date in accordance with Section 22.1(d) or pay the
Maximum Residual Guarantee Amount on the Expiration Date in accordance with
Section 22.1(e), Lessee may nevertheless exercise the Purchase Option so long
as it complies with the terms of Article XX or exercise the Renewal Option so
long as it complies with the terms of Article XXI.
ARTICLE XXIII
23.1 Holding Over. If Lessee shall for any reason remain in
possession of the Property after the expiration or earlier termination of this
Lease as to the Property (unless the Property is conveyed to Lessee), such
possession shall be as a tenancy at sufferance during which time Lessee shall
continue to pay Additional Charges that would be payable by Lessee hereunder
were the Lease then in full force and effect with respect to the Property and
Lessee shall continue to pay Base Rent or Renewal Rent at an annual rate equal
to the average rate of Base Rent or Renewal Rent payable hereunder during the
preceding Primary Term or Extended Term, as applicable; provided, however, that
from and after the sixtieth (60th) day Lessee shall remain in possession of the
Property after such expiration or earlier termination, Lessee shall pay Base
Rent or Renewal Rent at an annual rate equal to one hundred and ten percent
(110%) of the Base Rent or Renewal Rent payable hereunder immediately preceding
such expiration or earlier termination. Such Base Rent or Renewal Rent shall
be payable from time to time within ten (10) days after demand by Lessor, which
demands shall not be made by Lessor more often than monthly. During any period
of tenancy at sufferance, Lessee shall, subject to the second preceding
sentence, be obligated to perform and observe all of the terms, covenants and
conditions of this Lease, including Lessee's obligation to indemnify the
Indemnified Parties pursuant to Section 25.1 (notwithstanding anything therein
to the contrary), but shall have no rights hereunder other than the right, to
the extent given by law to tenants at sufferance, to continue its occupancy and
use of the Property and the rights of Lessee under Section 25.1 with respect to
indemnification. Nothing contained in this Article XXIII shall constitute the
consent, express or implied, of Lessor to the holding over of Lessee after the
expiration or earlier termination of this Lease (unless the Property is
conveyed to Lessee) and nothing contained herein shall be read or construed as
preventing Lessor from maintaining a suit for possession of the Property or
exercising any other remedy available to Lessor at law or in equity.
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ARTICLE XXIV
24.1 Risk of Loss. During the Term, unless Lessee shall not
be in actual possession of the Property in question solely by reason of
Lessor's exercise of its remedies of dispossession under Article XVII, the risk
of loss of or decrease in the enjoyment and beneficial use of the Property as a
result of the damage or destruction thereof by fire, the elements, casualties,
thefts, riots, wars or otherwise is assumed by Lessee, and Lessor shall in no
event be answerable or accountable therefor.
ARTICLE XXV
25.1 Indemnification by Lessee. a. Lessee shall indemnify
Lessor, the Administrative Agent, the Trustee and the Holders and any
affiliate, officer, director, employee, agent or shareholder of Lessor, the
Trustee or any Holder (the "Indemnified Parties"), on an After Tax Basis, from
and against all actions, causes of action, claims, lawsuits, administrative
proceedings, hearings, judgments, liabilities, awards, fines, penalties, costs,
fees (including legal, engineers', experts' and consulting fees and expenses),
damages (including natural resource damages), corrective action costs,
financial assurance costs, remediation activities, clean-up costs (including
investigation, monitoring, encapsulation, removal and response costs), Liens
(including any environmental Lien) and all other liabilities incurred by or
imposed on any of the Indemnified Parties, whenever incurred or imposed (but
excluding any liabilities for Impositions imposed by any taxing authority,
which liabilities are covered exclusively by Article IV hereof), arising out
of, imposed upon or incurred by or asserted against the Indemnified Parties by
reason of:
(i) any accident, injury to or death of natural persons or
loss of or damage to property occurring on or about the Property;
(ii) Lessor's ownership of the Property or any Modification;
(iii) the failure by Lessor to qualify as a foreign corporation
in the State of Hawaii;
(iv) any use, misuse, nonuse, condition, operation, possession,
leasing, subleasing, financing, refinancing, disposition, maintenance
or repair of the Property or of any Modification;
(v) the construction, design, purchase, acceptance,
rejection, modification, substitution or condition of the Property or
any Modification, including, without limitation,
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claims or penalties arising from any violation of law or liability in
tort (strict or otherwise);
(vi) entering into the Operative Agreements or any transaction
arising out of the Operative Agreements;
(vii) the breach by Lessee or either of the Ground Lessors of any
representations and warranties in, or the failure on the part of
Lessee or either of the Ground Lessors at any time to perform or
comply with any of the terms or conditions of, the Operative
Agreements to which any of them is a party;
(viii) the nonperformance of any of the terms of any subleases of
the Property to be performed by Lessee as the sublessor thereunder;
(ix) any contest referred to in Article XIII relating to the
Property;
(x) the existence or presence at, on, in or under the
Property of any Hazardous Substance or the Release of any Hazardous
Substance from, at, under or within the Property into the environment
(including air, water vapor, surface water, groundwater, drinking
water, land (including surface or subsurface), plant, aquatic and
animal life);
(xi) the disturbance, pollution, contamination or interference
with any wetland, body of water (whether surface or subsurface),
aquifer or watercourse due to any Hazardous Activity or the existence
or presence of a Hazardous Condition at the Property;
(xii) the occurrence at the Property of any Hazardous Activity
or Hazardous Condition;
(xiii) the transportation use, treatment, storage, disposition,
Release or disposal of any Hazardous Substance found in, on, under or
at the Property;
(xiv) any personal injury to or death of natural persons or
property damage resulting from any Hazardous Activity at the Property,
the existence of a Hazardous Condition at the Property or the Release
of any Hazardous Substance from, at, under or onto the Property;
(xv) any Environmental Violation or alleged violation of
Environmental Law at, on, in or under the Property or in connection
therewith; and
(xvi) the applications of Parts 4 and 5 of Subtitle B of Title I
of ERISA (including, without limitation, any penalties imposed under
Section 501(i) or (1) of ERISA) or
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any excise taxes, charges or penalties imposed under Section 4975 of
the Code, except as a result of the breach by Lessor or any Affiliate
of Lessor of ERISA or any rule or regulation promulgated thereunder
(other than a breach caused by or resulting from an act or omission of
Lessee, either of the Ground Lessors, the Trustee, the Holders or any
of their Affiliates);
except in each case, with respect to any Indemnified Party, to the extent such
liabilities, obligations, claims, damages, penalties, causes of action, costs
or expenses (1) are imposed upon or incurred by or asserted against such
Indemnified Party by reason of the matters described in clauses (i) through
(xvi) above that arise from events commencing solely and entirely after the
later of (x) the expiration or earlier termination of this Lease and (y)
Lessee's actual relinquishment of possession of the Property or (2) solely
result from the gross negligence or the willful misconduct of such Indemnified
Party (except, in the case of Lessor, for Lessor's failure to qualify as a
foreign corporation in the State of Hawaii) or (3) solely result from the
breach by such Indemnified Party of Section 905 or 921 of the Indenture or the
breach by such Indemnified Party of any other provisions of the Operative
Agreements after receipt of notice from Lessee of such breach and a reasonable
opportunity to cure such breach (but only to the extent such Indemnified Party
is not otherwise prevented from curing such breach). For purposes of the
foregoing sentence, it is further agreed by Lessee that the Release or presence
of any Hazardous Substances at, on, in or under the Property, or the presence
of a Hazardous Condition at, on, in or under the Property, that exists as of
(or at any time prior to) the later of the dates specified in clauses (x) and
(y) in the foregoing sentence shall be included in the entirety within the
scope of Lessee's obligations hereunder (even though the same may increase to
remedial levels or require any response or remedial action only subsequent to
such date).
(b) The obligations of Lessee under this Section 25.1 shall
remain unaffected and continue in full force and effect irrespective of and
notwithstanding any action or failure to act or delay on the part of any of the
Indemnified Parties to enforce any rights or remedies against Lessee. Such
obligations shall remain unaffected irrespective of and notwithstanding any
default by any such party in performing any obligation or duty arising under or
out of any Operative Agreement or under this Section 25.1. No amendment,
increase in the interest rate or in the principal amount of any of the Notes
nor any other modification thereof shall act to (i) release Lessee from or (ii)
modify any of Lessee's obligations under this Section 25.1.
(c) The obligations of Lessee pursuant to this Section 25.1
shall survive (i) the expiration or earlier termination of this Lease; (ii) the
repayment of the Notes whether at maturity or earlier due to the acceleration
thereof and satisfaction
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thereof out of any collateral security or by reason of payment by any guarantor
thereof; (iii) the foreclosure of the Mortgage (or the conveyance of the
Property due to any deed in lieu of foreclosure); and (iv) each and every
conveyance of the Property after the date hereof.
(d) Any amounts which become payable by Lessee under this
Article XXV shall be paid promptly and, if such payment is not timely paid,
shall bear interest at the Lessor Overdue Rate from the date when due to the
date of payment. Promptly after receipt by an Indemnified Party of notice of
the commencement or assertion against it of any claim, action or proceeding,
such Indemnified Party shall, if a claim in respect thereof is to be made
against Lessee under this Section 25.1, notify Lessee thereof; but the omission
so to notify Lessee shall not relieve Lessee from any liability which it may
have to such Indemnified Party. Lessee, at its sole cost and expense, acting
through counsel reasonably acceptable to the Indemnified Party, may contest,
resist and defend any claim, action or proceeding with respect to which it
shall have received the notice described in the preceding sentence and may
compromise or otherwise dispose of the same as Lessee shall deem appropriate,
and, upon such assumption by Lessee of such contest and defense, Lessee shall
not be obligated to pay any attorneys' fees or other legal costs incurred by or
on behalf of the Indemnified Party; provided that Lessee may only assume
control of the defense of any such claim to the extent it has provided to such
Indemnified Party written acknowledgement that Lessee is obligated to indemnify
such Indemnified Party with respect to such claim under this Section 25.1; and
provided further that Lessee shall not be entitled to assume and control the
defense of any such contest, action, suit or proceeding if and to the extent
that, (A) in the reasonable opinion of such Indemnified Party, (x) such
contest, action, suit or proceeding involves the potential imposition of
criminal liability or material civil liability (whether or not indemnified
hereunder) on such Indemnified Party or (y) the control of such contest,
action, suit or proceeding would involve Lessee in a bona fide conflict of
interest, (B) an Event of Default has occurred and is continuing or (C) such
contest, action, suit or proceeding involves matters which extend beyond or are
unrelated to the transactions contemplated by the Operative Agreements and if
determined adversely could be materially detrimental to the interests of such
Indemnified Party notwithstanding indemnification by Lessee, in which case the
Indemnified Party will be entitled to assume and take control of the defense
thereof at Lessee's expense. The Indemnified Party may participate in a
reasonable manner at its own expense and with its own counsel in any proceeding
conducted by Lessee in accordance with the foregoing. Each Indemnified Party
shall, at Lessee's request, cooperate with Lessee, at no cost or expense to the
Indemnified Party, in the defense of any such claim, action or proceeding. If,
in the opinion of counsel to any Indemnified Party there are legal defenses
available to such Indemnified
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Party which are different from or in addition to those available to Lessee,
such Indemnified Party shall be permitted to participate in the defense of such
claim, action or proceeding with separate counsel and Lessee shall pay the fees
and expenses of such separate counsel.
ARTICLE XXVI
26.1 Subletting and Assignment. So long as no Event of
Default has occurred and is continuing, Lessee may, without the consent of
Lessor, the Trustee or any Holder, sublet all or any part of the Property or
assign all or any part of its interest under this Lease as to the Property.
Any sublease by Lessee executed during the Term shall by its terms be subject
and subordinate to this Lease and to the rights of Lessor hereunder. In the
event of any assignment or subletting, Lessee shall not be released from any of
its obligations hereunder and shall remain directly and primarily liable under
this Lease as to the Property, or portion thereof, so assigned or sublet.
Lessee shall have the absolute right, without the consent of Lessor, to
terminate any sublease of the Property, whether such sublease was entered into
prior to the date of this Lease or during the Term. Upon the occurrence and
during the continuance of an Event of Default, Lessor shall have the right to
receive all rents under any sublease directly from the sublessee and any rent
received by Lessee shall be deemed held in trust for Lessor and immediately
paid over by Lessee to Lessor.
26.2 Attornment and Nondisturbance. Lessee shall insert in
each sublease permitted under the terms of Section 26.1 and executed during the
Term provisions to the effect that (a) in the event this Lease shall terminate
before the expiration of such sublease, the sublessee thereunder shall attorn
to Lessor and waive any right such sublessee may have to terminate the sublease
or to surrender possession thereunder as a result of the termination of this
Lease; and (b) in the event the sublessee receives notice from Lessor stating
that there has occurred an Event of Default under this Lease, the sublessee
shall thereafter be obligated to pay all rentals accruing under such sublease
directly to Lessor or as Lessor may direct. Lessee shall deliver to Lessor and
the Trustee an Appraiser's Certificate contemporaneously with the execution and
delivery of any sublease of the Property during the Term with a Person
unaffiliated with Lessee (i) the term of which extends beyond the Primary Term
or (ii) the term of which does not extend beyond the Primary Term if such
sublease, when taken together with any other subleases with respect to which
Lessee has not delivered an Appraiser's Certificate, do not in the aggregate
demise more than 42,000 net leasable square feet of the Improvements; provided
that an Appraiser's Certificate shall not be required prior to the execution
and delivery of any sublease referred to in the appraisal of the Property dated
June 3, 1993 prepared by The
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Hallstrom Group, Inc. if such sublease is on rental rates and on substantially
identical other terms as referred to in such appraisal. Provided that Lessee
shall deliver to Lessor, contemporaneously with the execution and delivery of a
sublease of the Property with any Person unaffiliated with Lessee, an
Appraiser's Certificate, then Lessor and the Trustee shall enter into a
non-disturbance and attornment agreement substantially in the form of Schedule
E hereto. Lessor and the Trustee shall also enter into a non-disturbance and
attornment agreement in such form with respect to (i) each sublease referred to
in the appraisal of the Hallstrom Group, Inc. described above, if such sublease
is on rental rates and on substantially identical other terms as referred to in
such appraisal, without the delivery of an Appraiser's Certificate, or (ii) if
the sublease does not extend beyond the Primary Term and, when aggregated with
any other subleases with respect to which the Bank has not delivered an
Appraiser's Certificate pursuant to this clause (ii), does not in the aggregate
demise more than 42,000 net leasable square feet of the Improvements; provided
that Lessee agrees that each of the subleases referred to in the preceding
clause (ii), with respect to which Lessee requests a non-disturbance and
attornment agreement, will, in the reasonable good-faith judgement of Lessee,
provide for rents that represent the fair market value for the space sublet and
contain other terms which, when taken together with all of the term of the
sublease, are commercially reasonable.
26.3 Subleases. Promptly following the execution and
delivery of any sublease of the Improvements during the Term, Lessee shall
deliver a copy of such executed sublease to Lessor and the Trustee.
ARTICLE XXVII
27.1 Estoppel Certificates. At any time and from time to
time upon not less than twenty (20) days' prior request by Lessor or Lessee
(the "Requesting Party"), the other party (whichever party shall have received
such request, the "Certifying Party") shall furnish to the Requesting Party
(but in the case of Lessor, as Certifying Party, not more than four times per
year unless required to satisfy the requirements of any sublessees) a
certificate signed by an individual having the office of vice president or
higher in the Certifying Party certifying that this Lease is in full force and
effect (or that this Lease is in full force and effect as modified and setting
forth the modifications); the dates to which the Base Rent or Renewal Rent and
Additional Charges have been paid; to the best knowledge of the signer of such
certificate, whether or not the Requesting Party is in default under any of its
obligations hereunder (and, if so, the nature of such alleged default); and
such other matters as the Requesting Party may reasonably request. Any such
certificate furnished pursuant to this Article
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XXVII may be relied upon by the Requesting Party, and any existing or
prospective mortgagee, purchaser or lender, and any accountant or auditor, of,
from or to the Requesting Party (or any Affiliate thereof).
ARTICLE XXVIII
28.1 Right to Inspect During any Extended Term. During any
Extended Term, Lessee shall upon reasonable notice from Lessor (except that no
notice shall be required if an Event of Default has occurred and is
continuing), permit Lessor and its authorized representatives to inspect the
Property, provided that such inspections shall not reasonably interfere with
Lessee's business operations at the Property and shall be made in compliance
with the terms of any subleases made with respect to the Property of which
Lessee shall have notified Lessor.
28.2 No Waiver. No failure by Lessor or Lessee to insist
upon the strict performance of any term hereof or to exercise any right, power
or remedy upon a default hereunder, and no acceptance of full or partial
payment of Rent during the continuance of any such default, shall constitute a
waiver of any such default or of any such term. To the fullest extent
permitted by law, no waiver of any default shall affect or alter this Lease,
and this Lease shall continue in full force and effect with respect to any
other then existing or subsequent default.
ARTICLE XXIX
29.1 Acceptance of Surrender. No surrender to Lessor of this
Lease or of all or any portion of the Property or of any part of any thereof or
of any interest therein shall be valid or effective unless agreed to and
accepted in writing by Lessor and, so long as any Notes remain Outstanding, the
Trustee, and no act by Lessor or the Trustee or any representative or agent of
Lessor or the Trustee, other than a written acceptance, shall constitute an
acceptance of any such surrender.
ARTICLE XXX
30.1 No Merger of Title. There shall be no merger of this
Lease or of the leasehold estate created hereby by reason of the fact that the
same Person may acquire, own or hold, directly or indirectly, in whole or in
part, (a) this Lease or the leasehold estate created hereby or any interest in
this Lease or such leasehold estate, (b) the fee estate in the Property, except
as may expressly be stated in a written instrument duly executed and delivered
by the appropriate Person or (c) the stock of Lessor.
<PAGE> 73
67
ARTICLE XXXI
31.1 Notices. All notices, demands, requests, consents,
approvals and other communications hereunder shall be in writing and delivered
personally or by a nationally recognized overnight courier service or mailed
(by registered or certified mail, return receipt requested, postage prepaid),
addressed to the respective parties, as follows:
If to Lessee:
First Hawaiian Bank
1132 Bishop Street
Suite 2500
Honolulu, Hawaii 98613
Attention: Howard H. Karr
If to Lessor:
REFIRST, Inc.
1900 Indian Wood Circle
Maumee, Ohio 43537
Attention: Vice President - First
Hawaiian Bank
Transaction
with a copy to:
REFIRST, Inc.
c/o The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
Attention: Mark A. Ferrucci
If to the Trustee:
First Fidelity Bank, N.A., Pennsylvania
123 South Broad Street
Philadelphia, Pennsylvania 19109
Attention: Corporate Trust Administration
or such additional parties and/or other address as such party may hereafter
designate (provided, however, in no event shall either party be obligated to
notify, in the aggregate, more than five (5) designees of the other party), and
shall be effective upon receipt or refusal thereof.
<PAGE> 74
68
ARTICLE XXXII
32.1 Miscellaneous. Anything contained in this Lease to the
contrary notwithstanding, all claims against and liabilities of Lessee or
Lessor arising from events commencing prior to the expiration or earlier
termination of this Lease shall survive such expiration or earlier termination.
If any term or provision of this Lease or any application thereof shall be
declared invalid or unenforceable, the remainder of this Lease and any other
application of such term or provision shall not be affected thereby. If any
right or option of Lessee provided in this Lease, including any right or option
described in Articles XV, XVI, XX, XXI or XXII, would, in the absence of the
limitation imposed by this sentence, be invalid or unenforceable as being in
violation of the rule against perpetuities or any other rule of law relating to
the vesting of an interest in or the suspension of the power of alienation of
property, then such right or option shall be exercisable only during the period
which shall end twenty-one (21) years after the date of death of the last
survivor of the descendants of Franklin D. Roosevelt, the former President of
the United States, Henry Ford, the deceased automobile manufacturer, and John
D. Rockefeller, the founder of the Standard Oil Company, known to be alive on
the date of the execution, acknowledgement and delivery of this Lease.
32.2 Amendments and Modifications. Neither this Lease nor
any provision hereof may be amended, waived, discharged or terminated except by
an instrument in writing in recordable form signed by Lessor and Lessee.
32.3 Successors and Assigns. All the terms and provisions of
this Lease shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
32.4 Conclusive Reliance on Administrative Agent. Lessor
hereby acknowledges and agrees that each of Lessee, the Ground Lessors and the
Trustee may, in the absence of bad faith on their respective parts,
conclusively rely upon, and in all events shall be fully protected in relying
upon, any document, instrument, certificate, opinion or direction furnished to
any of them by the Administrative Agent and otherwise conforming to the
requirements of any applicable Operative Agreement, and Lessee, each of the
Ground Lessors and the Trustee may treat any such document, instrument,
certificate, opinion or direction as the document, instrument, certificate,
opinion or direction of Lessor.
32.5 Headings and Table of Contents. The headings and table
of contents in this Lease are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.
<PAGE> 75
69
32.6 Schedules. Immediately following are Schedules A, B, C,
D and E referred to in this Lease, which Schedules are hereby incorporated by
reference herein.
32.7 Counterparts. This Lease may be executed in any number
of counterparts, each of which shall be an original, but all of which shall
together constitute one and the same instrument.
32.8 Governing Law. This Lease shall be governed by and
construed in accordance with the laws of the State of Hawaii.
32.9 Memorandum of Lease. This Lease shall not be recorded
(except at Lessee's discretion), but Lessor and Lessee shall, concurrently
herewith, execute and deliver a short-form memorandum of this Lease, in form
suitable for recording under the laws of the State of Hawaii, which memorandum
shall be recorded at Lessee's sole cost and expense.
32.10 Limitations on Recourse. Notwithstanding anything
contained in this Lease to the contrary, Lessee agrees to look solely to
Lessor's estate and interest in the Property for the collection of any judgment
requiring the payment of money by Lessor in the event of liability by Lessor,
and no other property or assets of Lessor or any shareholder, owner or partner
(direct or indirect) in or of Lessor, or any director, officer, employee,
beneficiary, Affiliate of any of the foregoing shall be subject to levy,
execution or other enforcement procedure for the satisfaction of Lessee's
remedies under or with respect to this Lease, the relationship of Lessor and
Lessee hereunder or Lessee's use of the Property or any other liability of
Lessor to Lessee. Nothing in this Section shall be interpreted so as to limit
the terms of Sections 6.1 or 6.2.
ARTICLE XXXIII
33.1 Ground Lease. b. During the Term, Lessee shall observe
and perform all of the obligations of Lessor under the Ground Lease and, in
connection therewith, shall, prior to the occurrence and continuance of an
Event of Default, have the right to enforce Lessor's rights as lessee under the
Ground Lease.
(b) During the Term, Lessee shall have the right to take
enforcement actions against the Ground Lessors in Lessee's own name or, if
necessary, in the name of Lessor, and for that purpose and only to such extent,
prior to the occurrence and continuance of an Event of Default, all the rights
of Lessor under the Ground Lease are hereby conferred upon and assigned to
Lessee, and Lessee is hereby subrogated to such rights. Lessor agrees that it
will cooperate with Lessee, at Lessee's expense, in pursuit of any such claims
against the Ground Lessors.
<PAGE> 76
70
(c) During the Term, Lessor shall not enter into any
agreement to amend, waive or modify any of the terms, covenants or provisions
of the Ground Lease without the consent of Lessee.
<PAGE> 77
71
IN WITNESS WHEREOF, the parties have caused this Lease to be
duly executed and delivered as of the date first above written.
REFIRST, INC.,a Delaware
corporation
By: /s/ Paul J. Bishop
-------------------------------
Name: Paul J. Bishop
Title: President
FIRST HAWAIIAN BANK
By: /s/ Thomas P. Huber
-------------------------------
Name: Thomas P. Huber
Title: Senior Vice President
<PAGE> 78
EXHIBIT A OMITTED
<PAGE> 79
SCHEDULE B OMITTED
<PAGE> 80
SCHEDULE C
Payment Dates and Lessor Base Rent
<TABLE>
<CAPTION>
Lessor
Payment Date Base Rent
- ------------------ ----------
<S> <C>
June 1, 1997 340,172.70
December 1, 1997 340,172.70
June 1, 1998 340,172.70
December 1, 1998 340,172.70
June 1, 1999 340,172.70
December 1, 1999 340,172.70
June 1, 2000 340,172.70
December 1, 2000 340,172.70
June 1, 2001 340,172.70
December 1, 2001 340,172.70
June 1, 2002 289,146.79
December 1, 2002 0.00
June 1, 2003 363,192.73
December 1, 2003 363,192.73
</TABLE>
<PAGE> 81
SCHEDULE D
Default Amount and Termination Amount
<TABLE>
<CAPTION>
Payment Date Amount
- ------------------ --------------
<S> <C>
June 1, 1997 193,699,875.00
December 1, 1997 193,699,875.00
June 1, 1998 193,699,875.00
December 1, 1998 193,699,875.00
June 1, 1999 193,699,875.00
December 1, 1999 193,699,875.00
June 1, 2000 193,699,875.00
December 1, 2000 193,699,875.00
June 1, 2001 193,699,875.00
December 1, 2001 193,699,875.00
June 1, 2002 193,750,900.91
December 1, 2002 194,094,053.52
June 1, 2003 194,094,053.52
December 1, 2003 194,094,053.52
</TABLE>
<PAGE> 82
SCHEDULE E OMITTED
<PAGE> 1
EXHIBIT 10(iv)
CONSTRUCTION MANAGEMENT,
ESCROW AND DEVELOPMENT AGREEMENT
DATED AS OF DECEMBER 1, 1993
AMONG REFIRST, INC., FIRST HAWAIIAN BANK
AND FIRST FIDELITY BANK, N.A., PENNSYLVANIA
<PAGE> 2
____________________________________________________________
CONSTRUCTION MANAGEMENT, ESCROW AND DEVELOPMENT AGREEMENT
among
REFIRST, INC.,
FIRST HAWAIIAN BANK
and
FIRST FIDELITY BANK, N.A.,
PENNSYLVANIA, as Trustee
Dated as of December 1, 1993
____________________________________________________________
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Preliminary Statement . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . 2
1.2 Other Definitional Provisions . . . . . . . . . . . 11
ARTICLE II
APPOINTMENT OF CONSTRUCTION MANAGER
2.1 Appointment . . . . . . . . . . . . . . . . . . . . 12
2.2 Assumption . . . . . . . . . . . . . . . . . . . . . 12
2.3 Term . . . . . . . . . . . . . . . . . . . . . . . . 12
2.4 Scope of Authority . . . . . . . . . . . . . . . . . 12
2.5 Assignment of Project Contracts and
Construction Account . . . . . . . . . . . . . . . 15
2.6 Delegation of Duties . . . . . . . . . . . . . . . . 16
2.7 Covenants of the Construction Manager . . . . . . . 16
2.8 Covenants of the Construction Manager
regarding the Construction Consultant . . . . . . . 19
ARTICLE III
THE BUILDING
3.1 Demolition and Construction . . . . . . . . . . . . 19
3.2 Change Orders . . . . . . . . . . . . . . . . . . . 20
3.3 Failure to Complete Building . . . . . . . . . . . . 23
3.4 Payments at the Overdue Rate . . . . . . . . . . . . 25
ARTICLE IV
PAYMENT OF COSTS OF WORK
4.1 Requisition of Funds Directly from the
Construction Account . . . . . . . . . . . . . . . 26
4.2 Limitation on Obligation to Fund . . . . . . . . . . 29
4.3 Conditions to Disbursement for Retainage . . . . . . 30
</TABLE>
i
<PAGE> 4
ARTICLE V
EVENTS OF DEFAULT
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
5.1 Events of Default . . . . . . . . . . . . . . . . 31
5.2 Damages . . . . . . . . . . . . . . . . . . . . . 33
5.3 Liquidated Damages . . . . . . . . . . . . . . . . 33
5.4 Waiver of Certain Rights . . . . . . . . . . . . . 34
5.5 Remedies Cumulative . . . . . . . . . . . . . . . 34
5.6 Release of the Lessor . . . . . . . . . . . . . . 34
ARTICLE VI
CASUALTY AND CONDEMNATION
6.1 Casualty and Condemnation . . . . . . . . . . . . 35
ARTICLE VII
INDEMNITY
7.1 Indemnification by Construction Manager . . . . . 35
7.2 Payment; Procedure for Claims . . . . . . . . . . 37
ARTICLE VIII
INSURANCE
8.1 Contractor's Insurance . . . . . . . . . . . . . . 39
8.2 Property Insurance . . . . . . . . . . . . . . . . 41
8.3 Coverage . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IX
LESSOR'S RIGHTS; CONSTRUCTION MANAGER'S RIGHTS
9.1 Exercise of the Lessor's Rights . . . . . . . . . 43
9.2 Lease Obligations . . . . . . . . . . . . . . . . 43
9.3 Lessor's Right to Cure Construction
Manager's Defaults . . . . . . . . . . . . . . . 43
ARTICLE X
MISCELLANEOUS
10.1 Notice . . . . . . . . . . . . . . . . . . . . . 44
10.2 Successors and Assigns . . . . . . . . . . . . . 44
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
10.3 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . 44
10.4 Consent To Jurisdiction . . . . . . . . . . . . . . . . 44
10.5 Amendments and Waivers . . . . . . . . . . . . . . . . 46
10.6 Counterparts . . . . . . . . . . . . . . . . . . . . . 46
10.7 Severability . . . . . . . . . . . . . . . . . . . . . 46
10.8 Integration . . . . . . . . . . . . . . . . . . . . . . 46
10.9 Headings and Table of Contents . . . . . . . . . . . . 46
10.10 Security Agreement and Financing Statement
Under Uniform Commercial Code . . . . . . . . . . . . 46
10.11 Directions of the Lessor . . . . . . . . . . . . . . . 47
10.12 Liabilities and Rights of the Trustee . . . . . . . . 47
10.13 Obligations Absolute and Unconditional . . . . . . . . 47
</TABLE>
Schedules
<TABLE>
<S> <C>
Schedule 1 - Default Amount
Schedule 2 - Essential Design Elements
Schedule 3 - [Reserved]
Schedule 4 - Consulting Agreement
Schedule 5 - Project Budget
Schedule 6 - Project Schedule
Schedule 7 - Form of Surety Bonds
Schedule 8 - Form of Project Architect's Certificate of
Substantial Completion for Core and Shell
Schedule 9 - Form of Interior Design Architect's Certificate
of Substantial Completion for Lessee Installations
Schedule 10 - Termination Amount
Schedule 11 - Replacement Construction Consultants
Schedule 12 - Limits for Off Site Materials
Schedule 13 - Assumed Earnings on Construction Account
Schedule 14 - Form of Letter from the Trustee to Sureties
</TABLE>
iii
<PAGE> 6
CONSTRUCTION MANAGEMENT, ESCROW AND DEVELOPMENT AGREEMENT
CONSTRUCTION MANAGEMENT, ESCROW AND DEVELOPMENT AGREEMENT,
dated as of December 1, 1993, among REFIRST, INC., a Delaware corporation (the
"Lessor"), FIRST HAWAIIAN BANK, a Hawaii banking corporation (the "Construction
Manager"), and FIRST FIDELITY BANK, N.A., PENNSYLVANIA, a national banking
association (the "Trustee").
Preliminary Statement
A. The Lessor and the Lessee (as defined below) are
parties to that certain Lease Agreement, dated as of even date herewith (the
"Master Lease"), pursuant to which the Lessee has leased from the Lessor those
certain parcels of real estate described on Schedules A-1 and A-2 to the Master
Lease (the "Land") together with all of the Improvements (as defined below).
B. The Lessor and the Lessee are also parties to that
certain Leased Improvements Construction Agreement, dated as of even date
herewith (the "Leased Improvements Construction Agreement"), pursuant to which
the Lessor has agreed, for the benefit of the Lessee, to cause the demolition
of the Existing Improvements (as defined below) and the construction of the
Building (as defined below) in accordance with the Plans and Specifications (as
defined below).
C. In order to provide funds for the demolition of the
Existing Improvements and the construction of the Building, the Lessor has
issued $161,990,000 of its 6.93% Class A Secured Notes Due 2003 (the "Class A
Notes") and $25,885,000 of its 6.98% Class B Secured Notes Due 2003 (the "Class
B Notes" and, together with the Class A Notes, the "Notes"), pursuant to that
certain Indenture, dated as of even date herewith (the "Indenture"), between
the Lessor and the Trustee, as trustee for the benefit of the holders of the
Notes (collectively, the "Holders"). The Lessor's obligations under the Notes
are secured by a first mortgage on the Property (as defined below) granted
pursuant to that certain Real Property Mortgage, Security Agreement and
Financing Statement, dated as of even date herewith (the "Mortgage"), made by
the Lessor and the Ground Lessors to the Trustee, and by an Assignment of
Leases and Rents, dated as of even date herewith (the "Assignment of Lease"),
from the Lessor to the Trustee and with respect to which the Lessee has
executed and delivered Lessee's Consent (the "Consent to Assignment"), dated as
of even date herewith.
D. Subject to the terms and conditions hereof, (i) the
Lessor desires to appoint the Construction Manager as its manager in connection
with the demolition of the Existing Improvements and the construction of the
Building in accordance with the Plans and Specifications and (ii) the
Construction
1
<PAGE> 7
Manager desires to assume, for the benefit of the Lessor and the Trustee, as
trustee for the benefit of the Holders, each of the Lessor's obligations under
the Leased Improvements Construction Agreement, including the obligations
thereunder to cause the demolition of the Existing Improvements and the
construction of the Building in accordance with the Plans and Specifications
and such other liabilities and obligations as are herein set forth.
NOW, THEREFORE, in consideration of the foregoing, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, terms defined
in the caption or in the Preliminary Statement shall have the meanings set
forth therein, and the following terms shall have the following meanings:
Administrative Agent: As defined in the Participation
Agreement.
Affiliate: As defined in the Master Lease.
After Tax Basis: As defined in the Master Lease.
Agreement: This Construction Management, Escrow and
Development Agreement, as amended, supplemented or otherwise modified
from time to time.
Assignment of Lease: As defined in the Preliminary Statement.
Budget Finalization Date: As defined in Section 3.2(h) hereof.
Building: A 27 story first-class office tower containing
approximately 378,000 square feet of Rentable Area and approximately
700 parking spaces to be built on the Land in accordance with the
Plans and Specifications.
Business Day: As defined in the Master Lease.
Casualty: As defined in the Master Lease, but without regard
to the limitation that such event occur on or after the Final
Substantial Completion Date.
Change Order: As defined in Section 3.2(a) hereof.
2
<PAGE> 8
Class A Notes: As defined in the Preliminary Statement.
Class B Notes: As defined in the Preliminary Statement.
Closing Date: As defined in the Participation Agreement.
Condemnation: As defined in the Master Lease, but without
regard to the limitation that such event occur on or after the Final
Substantial Completion Date.
Consent to Assignment: As defined in the Preliminary
Statement.
Consulting Agreement: The agreement between the Bank and the
Construction Consultant in the form attached as Schedule 4 hereto.
Construction Account: An account established by the Trustee
on or prior to the Closing Date into which the Trustee shall deposit
all payments, receipts and other consideration of any sort whatsoever
received by the Trustee pursuant to this Agreement.
Construction Consultant: Parametrix, Inc., and following the
removal of such construction consultant by the Construction Manager in
accordance with the terms of Section 2.8 hereof, any replacement
construction consultant selected by the Construction Manager from
those construction consultants set forth on Schedule 11 hereto.
Construction Contract: The Construction Agreement dated
November 2, 1993 between the Construction Manager and the General
Contractor, providing for (a) the construction of the core and shell
of the Building in accordance with the Plans and Specifications, (b) a
maximum guaranteed price or stipulation sum, including interest carry,
of not more than $93,510,951 and (c) a turn-key completion, as such
Construction Agreement may be amended, supplemented or otherwise
modified from time to time in accordance with the terms of this
Agreement.
Construction Manager: As defined in the caption hereto.
Construction Project Costs: Those Project Costs which are
payable with respect to all labor, materials, equipment and fixtures
necessary for the demolition of the Existing Improvements and the
construction of the Building, the Lessee Installations and the
Subtenant Installations pursuant to the Project Contracts.
3
<PAGE> 9
Construction Surety Bond: As defined in Section 2.4(d) hereof.
Contingency Reserve: The amount specified as such in the
Project Budget.
Debt Overdue Rate: As defined in the Master Lease.
Default Amount: For any Payment Date, an amount set forth on
Schedule 1 hereto with respect to such Payment Date.
Demolition Contract: The Abatement and Demolition Agreement
dated June 3, 1993 between the Construction Manager and the Demolition
Contractor, providing for the demolition of the Existing Improvements,
as such Demolition Agreement may be amended, supplemented or otherwise
modified from time to time in accordance with the terms of this
Agreement.
Demolition Contractor: Cleveland Wrecking Company, or any
replacement permitted under Section 2.4(a)(v) hereof.
Demolition Surety Bond: As defined in Section 2.4(d) hereof.
Developer: The Myers Corporation, or any replacement
permitted under Section 2.4(a)(v) hereof.
Development Agreement: The Development Management Agreement,
dated December 28, 1992, between the Construction Manager and the
Developer, as such Development Management Agreement may be amended,
supplemented or otherwise modified from time to time in accordance
with the terms of this Agreement.
Disbursement Amount: As defined in Section 4.1(a)(i)(t)
hereof.
Disbursement Request: As defined in Section 4.1(a) hereof.
Environmental Law: As defined in the Master Lease.
Environmental Violation: As defined in the Master Lease.
ERISA: As defined in the Master Lease.
Escrow Termination Date: The date on which all funds
maintained in the Construction Account have been disbursed pursuant to
the terms of Article IV hereof and no additional funds are required to
be deposited in the Construction Account by the Construction Manager
under the terms hereof.
4
<PAGE> 10
Essential Design Elements: Those general features and
elements of the Building which are set forth in Schedule 2 hereto.
Event of Default: As defined in Section 5.1 hereof.
Excepted Payments: As defined in the Indenture.
Excepted Rights: As defined in the Indenture.
Excess Line Item Reserve: As defined in Section 3.2(b)(ii)
hereof.
Existing Improvements: As defined in the Participation
Agreement.
Final Substantial Completion Date: The date upon which both
the Substantial Completion Date for Core and Shell and the final
Substantial Completion Date for Lessee Installations shall have
occurred.
Fixtures: As defined in the Master Lease.
Force Majeure Event: Any event in the nature of acts of God,
civil commotion or enemy action.
General Contractor: Fletcher Pacific Construction Co., Ltd.,
or any replacement permitted under Section 2.4(a)(v) hereof.
Governmental Authority: Any federal, state, county, regional,
municipal or other governmental or regulatory authority, agency,
board, body, commission, instrumentality, court or quasi-governmental
authority.
Ground Lease: The Ground Lease, dated as of even date
herewith, between the Ground Lessors, collectively as ground lessors,
and the Lessor, as ground lessee.
Ground Lessors: As defined in the Participation Agreement.
Hazardous Activity: As defined in the Master Lease.
Hazardous Condition: As defined in the Master Lease.
Hazardous Substance: As defined in the Master Lease.
Holders: As defined in the Preliminary Statement.
Improvements: As defined in the Mortgage.
Indemnified Parties: As defined in Section 7.1(a) hereof.
5
<PAGE> 11
Indenture: As defined in the Preliminary Statement.
Independent Investment Banker: An independent investment
banking institution of national standing appointed by the Lessor that
is independent in fact from, does not have any direct financial
interest in, or any material indirect financial interest in, the
Lessor or the Construction Manager or any Affiliate of the Lessor or
the Construction Manager and is not connected with the Lessor or the
Construction Manager or any Affiliate of the Lessor or the
Construction Manager as an officer, employee, promoter, underwriter,
trustee, partner, director or Person performing similar functions.
Insurance Requirements: As defined in the Master Lease.
Interior Design Architect: With respect to any portion of the
interior space in the Building, the interior design architect selected
by the Construction Manager or, with respect to any portion of the
space in the Building subject to a sublease, the subtenant, as the
case may be, to design such portion of the interior space in the
Building.
Interior Design Plans and Specifications: The plans and
specifications for the construction of the Lessee Installations, as
such plans and specifications may be amended, supplemented or
otherwise modified from time to time in accordance with the terms of
this Agreement.
Land: As defined in the Preliminary Statement.
Leased Improvements Construction Agreement: As defined in the
Preliminary Statement.
Legal Requirements: As defined in the Master Lease.
Lessee: First Hawaiian Bank, a Hawaii banking corporation,
and its successors and assigns expressly permitted under the Master
Lease.
Lessee Installations: The tenant installations and fixtures
to be constructed in the space in the Building to be initially
occupied by the Lessee or any of its Affiliates.
Lessor Base Rent: As defined in the Master Lease.
Lessor Contribution: As defined in the Participation
Agreement.
Lessor Make-Whole Premium: As defined in the Master Lease.
6
<PAGE> 12
Lessor Overdue Rate: As defined in the Master Lease.
Lien: As defined in the Indenture.
Make-Whole Premium: As defined in the Indenture.
Master Lease: As defined in the Preliminary Statement.
Modifications: As defined in the Master Lease.
Moody's: As defined in the Participation Agreement.
Mortgage: As defined in the Preliminary Statement.
Notes: As defined in the Preliminary Statement.
Officer's Certificate: A certificate of the Construction
Manager signed by an individual holding the office of vice president
or higher, which certificate shall certify as true and correct the
subject matter being certified to in such certificate.
Operative Agreements: As defined in the Participation
Agreement.
Outside Completion Date for Core and Shell: October 1, 1997,
it being agreed this date may not be extended, regardless of any
extension, whether by Change Order or otherwise, of the date by which
the General Contractor or the Demolition Contractor must complete
performance of its obligations under the Construction Contract or the
Demolition Contract, as applicable.
Outside Completion Date for Lessee Installations: (a) With
respect to 76,000 square feet of Rentable Area of space in the
Building, October 1, 1998, (b) with respect to 114,000 square feet of
Rentable Area of space in the Building, February 1, 1999, and (c) with
respect to 152,000 square feet of Rentable Area of space in the
Building, June 1, 1999, it being agreed that such dates may not be
extended, regardless of any extension, whether by Change Order or
otherwise, of the date by which the Lessee Installations must be
completed under any Tenant Installation Contracts.
Outstanding: As defined in the Indenture.
Participants: As defined in Section 8.1(a) hereof.
Participation Agreement: The Participation Agreement, dated
as of November 19, 1993, among the Lessee, the Ground Lessors, the
Lessor and the Trustee.
Payment Date: As defined in the Indenture.
7
<PAGE> 13
Permitted Exceptions: As defined in the Master Lease.
Plans and Specifications: The plans and specifications for
the construction of the Building dated September 7, 1993 (as revised
through the Closing Date) and prepared by the Project Architect, as
such plans and specifications may be amended, supplemented or
otherwise modified from time to time in accordance with the terms of
this Agreement.
Project Architect: Kohn Pedersen Fox Associates P.C., or
another licensed architect selected by the Construction Manager which
both (i) is comparable in size and experience to Kohn Pedersen Fox
Associates P.C. and has comparable experience in the design and
construction administration of projects similar to the Building and
(ii) assigns to the Building an individual having experience in the
design and construction administration of projects similar to the
Building comparable to that of the on-site representative originally
assigned by Kohn Pedersen Fox Associates P.C.
Project Budget: The budget attached as Schedule 5 hereto
specifying all anticipated Project Costs, as such budget may be
amended, supplemented or otherwise modified from time to time in
accordance with the terms of this Agreement.
Project Contracts: The collective reference to the
Construction Contract, the Demolition Contract, the Development
Agreement, the Tenant Installation Contracts, the Surety Bonds, the
Consulting Agreement, and all other contracts between the Construction
Manager and any architect, engineer, consultant, contractor or other
professional which may be executed from time to time in connection
with the demolition of the Existing Improvements, the development and
construction of the Building, the Lessee Installations and the
Subtenant Installations, or the preparation of the Building for
occupancy by the Lessee or subtenants under Space Leases.
Project Costs: All costs and expenses incurred by the
Construction Manager or otherwise expended in connection with the
demolition of the Existing Improvements and the development, financing
or construction of the Building, the Lessee Installations and the
Subtenant Installations, or the preparation of the Building for
occupancy by the Lessee or subtenants under Space Leases, including,
without limitation, the following (but without duplication of any
item): (a) the costs of obtaining, and complying with, all necessary
demolition, building and other construction permits and licenses from
Governmental Authorities; (b) the costs of reviewing and implementing
safety programs; (c) the costs of preparing and distributing bid
packages in connection with engaging architects, engineers,
consultants, contractors or other professionals; (d) real estate taxes
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and assessments; (e) personal property taxes, if applicable; (f)
charges of utilities provided to the Land; (g) premiums payable under
insurance policies (which, in the case of any policies covering
multiple properties, shall be allocated to the Building pro rata in
proportion to the insured value of the properties covered by such
policies); (h) premiums payable under the Surety Bonds; (i) legal fees
and expenses; (j) security costs; (k) fees and expenses of the
Trustee, the Administrative Agent and the Construction Consultant; (l)
survey costs and title premiums; (m) fees and expenses of architects,
consultants, appraisers, engineers and other professionals; (n) costs
for soil analysis, hazardous waste audits and other consultants'
studies, reports and surveys; (o) the relocation expenses of Lessee;
(p) Sublease Expenditures; (q) the cost of the Lessee Installations;
and (r) all fees and expenses relating to the issuance and sale of the
Notes, including legal fees and expenses, rating agency fees and
expenses, accounting fees and expenses, printing fees and expenses and
placement agent fees and expenses.
Project Costs Increase: As defined in Section 3.2(b)(i)(y)
hereof.
Project Schedule: The construction schedule for the Building
and the completion of the Lessee Installations attached as Schedule 6
hereto, as such schedule may be amended, supplemented or otherwise
modified from time to time in accordance with the terms of this
Agreement.
Property: As defined in the Master Lease.
Release: As defined in the Master Lease.
Rent Commencement Date: As defined in the Master Lease.
Rentable Area: As defined by the Building Owners and Managers
Association International, commonly known as BOMA.
S&P: As defined in the Participation Agreement.
Significant Event: As defined in Section 3.3(a)(i) hereof.
Space Leases: Subleases for space in the Building to tenants
other than the Lessee or any of its Affiliates.
Sublease Expenditures: All costs, expenses and fees relating
to the subletting by the Lessee of space in the Building, including,
without limitation, all costs and expenses relating to the Subtenant
Installations, fees and expenses of architects and legal counsel,
brokerage commissions, marketing costs, and any work allowance
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payments made to subtenants in lieu of work letter installations.
Substantial Completion Date for Core and Shell: The date on
which Substantial Completion for Core and Shell shall occur.
Substantial Completion Date for Lessee Installations: The
dates on which Substantial Completion for Lessee Installations shall
occur.
Substantial Completion for Core and Shell: The completion of
construction of the Building in accordance with the Plans and
Specifications, subject only to punch list items, as certified to by
the Project Architect pursuant to a Certificate of Substantial
Completion for Core and Shell, in the form attached as Schedule 8
hereto.
Substantial Completion for Lessee Installations: The
completion of construction of Lessee Installations in 76,000 square
feet of Rentable Area of space in the Building, 114,000 square feet of
Rentable Area of space in the Building and 152,000 square feet of
Rentable Area of space in the Building, respectively, in each case in
accordance with the Interior Design Plans and Specifications, subject
only to punch list items, as certified to by the Interior Design
Architect pursuant to a Certificate of Substantial Completion for
Lessee Installations, in the form attached as Schedule 9 hereto.
Subtenant Installations: The tenant installations and
fixtures to be constructed in the space in the Building to be
subleased by the Lessee to subtenants other than Affiliates of the
Lessee.
Surety Bonds: Collectively, the Construction Surety Bond and
the Demolition Surety Bond.
Tenant Installation Contracts: All contracts for the
construction of Lessee Installations or Subtenant Installations.
Termination Amount: As of any Payment Date, the amount set
forth on Schedule 10 hereto with respect to such Payment Date.
Termination Date: As defined in Section 3.3(c) hereof.
Termination Notice: As defined in Section 3.3(b) hereof.
Title Company: Ticor Title Insurance Co., or another
nationally recognized title insurance company reasonably acceptable to
the Trustee.
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Title Policy: The lender's policy of title insurance issued
on the Closing Date to the Trustee in an amount equal to 187,875,000.
Total Condemnation: As defined in the Master Lease.
Treasury Yield: With respect to the calculation of the Lessor
Make-Whole Premium, a per annum rate, determined as of the date of
determination of the Lessor Make-Whole Premium, equal to the weekly
average yield to maturity of United States Treasury Notes having a
constant maturity as set forth in the most recent weekly statistical
release (or any successor release) published by the Board of Governors
of the Federal Reserve System and designated "H.15(519) Selected
Interest Rates" (the "H.15 Statistical Release"), corresponding to the
average weighted life of the Lessor Contribution (calculated to the
nearest 1/12 of a year) (the "Weighted Average Life"); such yield
described in this clause to be calculated by the Independent
Investment Banker, by interpolation (unless the Weighted Average Life
of the Lessor Contribution equals a constant maturity set forth in the
H.15 Statistical Release) on a straight-line basis, between the
weekly average yields (rounded, if necessary, to the nearest 1/100 of
1% with any figure of 1/200 of 1% or above rounded upward) on (a) the
United States Treasury Notes with a constant maturity closest to and
greater than the Weighted Average Life and (b) the United States
Treasury Notes with a constant maturity closest to and less than the
Weighted Average Life, or if such weekly average yields are not
available, by interpolation of comparable rates selected by the
Independent Investment Banker.
Trustee: As defined in the caption hereto, or any replacement
Trustee appointed pursuant to the terms of the Indenture.
1.2 Other Definitional Provisions. (a) Words and phrases
used in the singular shall be deemed to include the plural and vice versa, and
nouns and pronouns used in any particular gender shall be deemed to include any
other gender, as the context may permit.
(b) Unless otherwise specified, all references herein to
designated "Articles", "Sections", "Schedules" and other subdivisions shall be
to the designated Articles, Sections, Schedules and other subdivisions of this
Agreement.
(c) The words "including" and "include", and words of similar
import, shall be deemed to be followed by "without limitation".
(d) The words "herein", "hereof" and "hereunder", and words
of similar import, shall refer to this Agreement as a whole
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and not to any particular Article, Section, Schedule or other subdivision of
this Agreement.
ARTICLE II
APPOINTMENT OF CONSTRUCTION MANAGER
2.1 Appointment. Subject to the terms and conditions hereof,
the Lessor hereby irrevocably designates and appoints the Construction Manager
as its exclusive manager in connection with the demolition of the Existing
Improvements and the development and construction of the Building on the Land
in accordance with the Plans and Specifications, as an independent contractor
and not as the Lessor's agent. Notwithstanding any provision to the contrary
contained in this Agreement, the Construction Manager shall not have any duties
or responsibilities, except those expressly provided herein and in the other
Operative Agreements to which the Construction Manager is a party, or any
fiduciary relationship with the Lessor, and no implied covenants,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Construction Manager.
2.2 Assumption. The Construction Manager hereby
unconditionally assumes, for the benefit of the Lessor and the Trustee, as
trustee for the benefit of the Holders, the performance and satisfaction of all
of the Lessor's obligations under the Leased Improvements Construction
Agreement. The Construction Manager also hereby agrees, unconditionally and
for the benefit of the Lessor and the Trustee, as trustee for the benefit of
the Holders, to cause the Substantial Completion Date for Core and Shell to
occur on or prior to the Outside Completion Date for Core and Shell and each
Substantial Completion Date for Lessee Installations to occur on or prior to
the applicable Outside Completion Date Completion Date for Lessee
Installations. In consideration for such obligations, the Lessor has on the
date hereof, deposited in the Construction Account for disbursement in
accordance with the terms hereof, an amount equal to the Project Costs as
specified in the current Project Budget less the amount specified in the
Project Budget on account of assumed earnings on the Construction Account.
2.3 Term. This Agreement shall commence on the date hereof
and shall terminate upon the earlier to occur of (a) the Escrow Termination
Date and (b) payment by the Construction Manager of the Termination Amount in
accordance with the terms of Section 3.3 hereof.
2.4 Scope of Authority. (a) The Lessor hereby expressly
authorizes the Construction Manager, or the Developer as the agent of the
Construction Manager, and the Construction Manager unconditionally agrees, for
the benefit of the Lessor and the Trustee, to take all action necessary or
desirable for the
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performance and satisfaction of all of the Lessor's obligations under the
Leased Improvements Construction Agreement and to fulfill all of the
obligations of the Construction Manager hereunder, including, without
limitation:
(i) negotiating and entering into the Project Contracts
and all other arrangements with architects, engineers, managers,
consultants, contractors and other professionals on such terms and
conditions as are customary and reasonable in light of local standards
and practices;
(ii) terminating for any reason any Project Contract
(other than the Construction Contract, the Demolition Contract, the
Development Agreement and the Surety Bonds) and terminating for cause
the Construction Contract, the Demolition Contract, the Development
Agreement or the Surety Bonds;
(iii) to the extent expressly permitted by Section 3.2
hereof, modifying or amending the Project Contracts (subject at all
times to the obligations contained in Section 2.4(c) hereof);
(iv) supervising and directing the work of all
architects, engineers, managers, consultants, contractors and other
professionals;
(v) entering into any contract or contracts necessary
to replace a Project Contract that has been terminated in accordance
with the terms hereof; provided that (x) the replacement Project
Contract is substantially similar in scope to the Project Contract
being terminated, by its terms will require Substantial Completion for
Core and Shell to occur on or prior to the Outside Completion Date for
Core and Shell, or, with respect to Lessee Installations, will require
Substantial Completion for Lessee Installations to occur on or prior
to the each Outside Completion Date for Lessee Installations, and will
not increase the Project Costs except to the extent permitted under
Section 3.2 hereof and (y) the contracting party has the demonstrable
reputation, experience and economic capacity to perform the scope of
work required under the replacement Project Contract; and provided
further that in the event of the failure of the General Contractor,
the Demolition Contractor or the Developer to perform their respective
obligations under the Construction Contract, the Demolition Contract
or the Development Agreement, respectively, in any material respect,
the Construction Manager shall use its best efforts to replace the
General Contractor, the Demolition Contractor or the Developer, as the
case may be, as soon as reasonably practicable in light of the then
current status of the Building;
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(vi) obtaining all necessary permits, licenses,
consents, approvals and other authorizations, including those required
under applicable Environmental Laws, from all Governmental Authorities
in connection with the demolition and disposal of the Existing
Improvements (including any Hazardous Substances) and the development
and construction of the Building in accordance with the Plans and
Specifications and the Lessee Installations in accordance with the
Interior Design Plans and Specifications;
(vii) performing all acts necessary or desirable to
construct the Lessee Installations and the Subtenant Installations;
and
(viii) performing any other acts necessary or desirable in
connection with the demolition of the Existing Improvements and the
development and construction of the Building in accordance with the
Plans and Specifications.
(b) Neither the Construction Manager, the Developer nor any
of their respective Affiliates or agents shall enter into any Project Contract
which would, directly or indirectly, impose any liability or obligation on the
Lessor.
(c) The Construction Manager shall cause each of the
Demolition Contractor and the General Contractor to procure and maintain at all
times during which work is being performed under, or Disbursement Requests are
being made in respect of, the Demolition Contract or the Construction Contract,
as applicable, a performance and payment bond guaranteeing the faithful
performance and payment of the obligations arising under the Demolition
Contract and the Construction Contract, respectively, or the payment of an
amount equal to the contract sum. Each such performance and payment bond shall
be in the form attached as Schedule 7 hereto.
(d) The surety bond which supports the obligations of the
Demolition Contractor (the "Demolition Surety Bond") shall be issued by The
Insurance Company of the State of Pennsylvania. The Surety Bond which supports
the obligations of the General Contractor (the "Construction Surety Bond") will
be issued by one or more insurance companies which has, or whose parent
corporation has, a "claims paying ability" rating from S&P and Moody's of at
least "A" and "A1", respectively. In the event that at any time prior to the
completion of the demolition of the Existing Improvements the rating of the
Notes from S&P or Moody's is less than "BBB" or "Baa2", respectively, unless at
the same time the "claims paying ability" rating assigned to an insurance
company which has issued (and is liable for the entire obligation under) the
Construction Surety Bond, or its parent corporation, from either S&P or Moody's
is at least equal to "BBB-" or "Baa3", respectively, then the Construction
Manager shall either replace such surety with a surety which has, or whose
parent corporation has, a "claims paying ability" rating from S&P and Moody's
of at
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least "BBB-" and "Baa3", respectively, or provide additional credit support for
the obligations of The Insurance Company of the State of Pennsylvania in order
to ensure that such obligations are equivalent to the obligations of an entity
whose "claims paying ability" ratings from S&P and Moody's are at least "BBB-"
and "Baa3", respectively. Further, in the event that at any time prior to the
completion of construction of the core and shell of the Building the rating of
the Notes from S&P or Moody's is less than "BBB" or "Baa2", respectively,
unless at the same time the "claims paying ability" rating assigned to an
insurance company which has issued (and is liable for the entire obligation
under) the Construction Surety Bond, or its parent corporation, from either S&P
or Moody's is at least equal to "BBB-" or "Baa3", respectively, then the
Construction Manager shall either replace such surety with one or more sureties
which has, or whose parent corporation has, a "claims paying ability" rating
from S&P and Moody's of at least "BBB-" and "Baa3", respectively, or provide
additional credit support for the obligations of such surety in order to ensure
that such obligations are equivalent to the obligations of an entity whose
"claims paying ability" ratings from S&P and Moody's are at least "BBB-" and
"Baa3", respectively.
(e) The Trustee will promptly execute and deliver at the
request of the Construction Manager a letter in the form attached as Schedule
14 hereto in favor of each of the insurance companies which have issued the
Surety Bonds.
2.5 Assignment of Project Contracts and Construction Account.
(a) As security for its obligation to cause Substantial Completion for Core
and Shell to occur on or prior to the Outside Completion Date for Core and
Shell and to cause each Substantial Completion for Lessee Installations to
occur on or prior to the applicable Outside Completion Date for Lessee
Installations, the Construction Manager hereby assigns, transfers, conveys and
sets over to the Lessor all of its right, title and interest in and to the
Project Contracts. Notwithstanding the foregoing, so long as no Event of
Default shall have occurred and be continuing, the Construction Manager shall
retain (i) all rights to pursue claims for damages in respect of the Building
arising as a result of any default by any architect, engineer, consultant,
contractor or other professional retained by the Construction Manager,
including, without limitation, all rights with respect to warranty, service,
performance guarantee and indemnity provisions contained in any Project
Contract (it being agreed, however, that all warranties and guaranties relating
to the Building, such as those covering the elevators, roof, curtain wall,
heating, HVAC and electrical systems will be issued jointly to the Construction
Manager and to the Lessor) and (ii) all rights to compel performance of the
terms of the Project Contracts.
(b) Pursuant to the Indenture, the Lessor has pledged its
right, title and interest in and to all funds from time to
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<PAGE> 21
time deposited in the Construction Account to the Trustee as security for the
benefit of the Holders. The Construction Manager and the Lessor each
acknowledges that such pledge has been effected and agrees that the terms of
the Indenture shall control the disposition of the funds in the Construction
Account to the extent there exists or occurs any conflict between the terms of
the Indenture and this Agreement.
2.6 Delegation of Duties. The Construction Manager may
execute any of its duties under this Agreement by or through agents or
attorneys-in-fact, including, without limitation, the Developer; provided,
however, that no such delegation shall limit or reduce in any way the
Construction Manager's duties and obligations under this Agreement.
2.7 Covenants of the Construction Manager. The Construction
Manager hereby covenants and agrees that it will:
(a) Permit the Construction Consultant to enter upon the
Land, inspect the Improvements and all materials to be used in the
construction thereof and examine all detailed plans and shop drawings
which are kept on the Land; it will cooperate with, and cause the
Demolition Contractor, the General Contractor, the Developer and all
subcontractors to cooperate with, the Construction Consultant to
enable him to perform his functions hereunder; at the time of each
inspection by the Construction Consultant, the Construction Manager
will make available to the Construction Consultant, on demand, daily
log sheets covering the period since the immediately preceding
inspection showing the date, weather, subcontractors on the job,
number of workers and status of construction;
(b) Pay all Project Costs, including, without limitation:
(i) all costs and expenses of the Lessor
incurred or required to be paid under the Leased Improvements
Construction Agreement;
(ii) all document and stamp taxes, recording and
filing expenses and fees and commissions lawfully due to
brokers in connection with the transactions contemplated
hereby; and
(iii) the fees and expense of the Construction
Consultant in connection with the transactions contemplated
hereby.
(c) Following the commencement of construction of the
Building, cause construction of the Building to be prosecuted
diligently and continuously in accordance with the Plans and
Specifications; and cause the Substantial Completion Date for Core and
Shell to occur on or prior to
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the Outside Completion Date for Core and Shell and cause each
Substantial Completion Date for Lessee Installations to occur on or
prior to the applicable Outside Completion Date for Lessee
Installations, in each case in a good and workmanlike manner and free
and clear of defects and Liens or claims for materials supplied or
labor or services performed in connection with the demolition of the
Existing Improvements or the construction of the Building or the
Lessee Installations;
(d) Upon the written request of the Lessor, the Trustee or
the Construction Consultant, deliver to the Lessor, the Trustee or the
Construction Consultant, as applicable, copies of all contracts, bills
of sale, statements, receipted vouchers or agreements under which the
Construction Manager claims title to any materials, fixtures or
articles incorporated in the Building, or under which it has incurred
costs or expenses for which it is entitled to a disbursement
hereunder, and deliver to the Lessor, the Trustee and the Construction
Consultant such other information or documents in connection with the
Building and the Lessee Installations as they may from time to time
reasonably request;
(e) Upon demand of the Lessor, the Trustee or the
Construction Consultant, correct any defects (including structural
defects) in the Building or the Lessee Installations or any departures
from the Plans and Specifications or the Interior Design Plans and
Specifications not permitted under the terms of this Agreement;
(f) Employ suitable means to protect from theft or vandalism
all portions of the Improvements and all tools and building materials
stored on the Land;
(g) Ensure that at all times there are sufficient funds on
deposit in the Construction Account (after taking into account the
interest expected to be earned on such funds as reflected in the
Project Budget) in order to provide that (i) the Building will be
constructed in accordance with the Plans and Specifications, (ii) the
Lessee Installations will be constructed in accordance with the
Interior Design Plans and Specifications, (iii) Substantial Completion
for Core and Shell will occur on or prior to the Outside Completion
Date for Core and Shell, and (iv) each Substantial Completion for
Lessee Installations will occur on or prior to the applicable Outside
Completion Date for Lessee Installations, in each case by depositing
additional funds in the Construction Account as necessary to comply
with this Section 2.7(g);
(h) Following the Substantial Completion Date for Core and
Shell and the final Substantial Completion Date for
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Lessee Installations, respectively, use reasonable good-faith efforts
to cause all outstanding punch list items with respect to the Building
and the Lessee Installations to be completed;
(i) Each year during the calendar month in which occurs the
anniversary of the Substantial Completion Date for Core and Shell, the
Construction Manager shall cause the Construction Consultant to enter
upon the Land, to inspect the Improvements and to prepare a written
report of the condition of the Improvements for delivery to the Lessor
and the Trustee and shall cooperate with the Construction Consultant
as may be reasonably required to enable it to prepare such report (and
the obligation of the Construction Consultant set forth in this
Section 2.7(i) shall expressly survive the expiration or earlier
termination of this Agreement until the principal amount of the Notes
shall have been paid in full); and
(j) In addition to the right to receive a written report of
the condition of the Improvements contained in Section 2.7(i) above,
as often as the Lessor shall reasonably request, the Construction
Manager shall promptly cause the Construction Consultant to enter upon
the Land, to inspect the Improvements and to prepare a written report
of the condition of the Improvements for delivery to the Lessor and
shall cooperate with the Construction Consultant as may be reasonably
required to enable it to prepare such report (and the obligation of
the Construction Manager set forth in this Section 2.7(j) shall remain
in full force and effect until December 1, 2003 notwithstanding any
expiration or earlier termination of this Agreement). In the event
that any report of the Construction Consultant contemplated by either
the preceding sentence or Section 2.7(i) above reasonably demonstrates
that a condition exists which results, or a potential condition exists
which if left uncured could result, in a default hereunder or a
default under the Master Lease or is adverse to the interests of the
Lessor in the Property, then the Lessor shall deliver a written notice
to the Construction Manager reasonably identifying such condition.
Within fifteen (15) days of receipt by the Construction Manager of
such notice from the Lessor, the Construction Manager will (i) remedy
such condition or such potential condition, or (ii) present to the
Lessor a plan to remedy such condition or potential condition and
diligently commence efforts to cure such condition or such potential
condition. If the Construction Manager fails to observe or perform
its obligations under clauses (i) or (ii) of the preceding sentence,
then the Lessor (in addition to any other rights and remedies it may
have hereunder or under the Master Lease) shall have the right to
inspect the Property. Further, if at any time there occurs and is
continuing a default hereunder or a default under the Master Lease,
then the Lessor shall (in
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<PAGE> 24
addition to any other rights and remedies it may have hereunder or
under the Master Lease) have the right to inspect the Property in
accordance with the terms and provisions of the Master Lease.
2.8 Covenants of the Construction Manager regarding the
Construction Consultant. (a) The Construction Manager shall engage the
Construction Consultant pursuant to the Consulting Agreement. The Construction
Manager shall not terminate the Construction Consultant except for cause (which
will in no event include the reasonable, good-faith performance by the
Construction Consultant of its duties under the Consulting Agreement, even if
the Construction Manager disagrees with the conclusions reached by the
Construction Consultant in the performance of such duties).
(b) The Construction Manager shall cause the Construction
Consultant to perform its duties as set forth in the Consulting Agreement and
shall terminate the Construction Consultant if at any time it fails to perform
such duties.
(c) The Construction Manager will not amend, modify or
supplement the Consulting Agreement without the prior written consent of the
Trustee.
(d) In the event the Construction Consultant is terminated in
accordance with clause (a) or (b) above, a replacement Construction Consultant
shall be selected by the Bank from the consultants listed on Schedule 11 hereto
(provided that such replacement consultant shall not at the time of its
selection derive a significant portion of its annual revenues from the
Construction Manager) to perform the same duties, and subject to the same terms
and conditions, as set forth in the Consulting Agreement.
(e) The obligations of the Construction Manager contained in
this Section 2.8 shall remain in full force and effect until December 1, 2003
notwithstanding any expiration or earlier termination of this Agreement.
ARTICLE III
THE BUILDING
3.1 Demolition and Construction. (a) The Construction
Manager will cause the Existing Improvements and any Hazardous Substances
therein to be demolished, used, handled, managed, treated, stored, transported,
deposited and disposed of in accordance with the Demolition Contract and in
full compliance with all Legal Requirements, including, without limitation, all
Legal Requirements relating to the removal, handling, management, storage,
transport and disposal of the asbestos-containing materials present in the
Existing Improvements.
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(b) The Construction Manager will cause (i) Substantial
Completion for Core and Shell to occur on or prior to the Outside Completion
Date for Core and Shell, and (ii) the Building to be constructed and equipped
in full compliance with all Legal Requirements (including Environmental Laws)
and Insurance Requirements.
(c) The Construction Manager will cause (i) each Substantial
Completion for Lessee Installations to occur on or prior to the applicable
Outside Completion Date for Lessee Installations, (ii) the Subtenant
Installations to be constructed as may be required under any Space Lease which
requires construction of Subtenant Installations, and (iii) all Sublease
Expenditures to be paid as and when incurred.
3.2 Change Orders. (a) The Construction Manager may at any
time following the Budget Finalization Date revise, amend or modify the Plans
and Specifications, the Interior Design Plans and Specifications, the Project
Budget or the Project Schedule (but not beyond the Outside Completion Date for
Core and Shell or the Outside Completion Date for Lessee Installations, as
applicable) (any such revision, amendment or modification, a "Change Order")
and enter into any related amendments, modifications or supplements to any of
the Project Contracts (other than the Consulting Agreement), the Project Budget
and the Project Schedule without the consent of the Lessor or the Trustee;
provided that such Change Orders or related amendments, modifications or
supplements to any Project Contract do not result in a rescission, termination
or cancellation of the Construction Contract, the Demolition Contract, the
Development Agreement or the Surety Bonds.
(b) Except as otherwise provided in Sections 3.2(c) and
3.2(h) below, within thirty (30) days of implementing any such Change Order,
the Construction Manager shall:
(i) deliver to the Lessor, the Trustee and the
Construction Consultant an Officer's Certificate and a certificate of
the Developer (each of which shall be executed only after consultation
with the Project Architect and only with the concurrence of the
Project Architect, if appropriate), in each case setting forth (x) any
changes in the Project Budget or the Project Schedule resulting from
the Change Order, (y) the estimated increase, if any, in Project Costs
relating to any line item in the Project Budget that will result from
implementation of the Change Order (each such increase, a "Project
Costs Increase") and (z) a statement that the Change Order (1) is
permitted under the Surety Bonds or that the Surety Bonds have been
amended to allow such Change Order, (2) is in compliance with all
applicable Legal Requirements, (3) will not extend the Substantial
Completion Date for Core and Shell past the Outside Completion Date
for Core and Shell and will not extend any Substantial Completion Date
for Lessee
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Installations past the applicable Outside Completion Date for Lessee
Installations, (4) if undertaken, would not result in the Building
being constructed other than in accordance with the Essential Design
Elements and (5) complies with the requirements of Section 3.2(f)
hereof; and
(ii) to the extent that all or a portion of any Project
Costs Increase cannot be funded from the yet unallocated Contingency
Reserve line item in the Project Budget or from excess funds available
under any line item of the Project Budget (other than the line item
for Project Costs to be incurred for Subtenant Installations and
Lessee Installations) where the yet unfunded amount allocated to such
line item under the Project Budget exceeds the amount necessary to
complete such line item as certified to by the Project Architect or,
if such line item is outside the scope of the expertise of the Project
Architect, by the Developer (as so certified, an "Excess Line Item
Reserve"), cause to be deposited in the Construction Account an amount
in cash equal to the Project Costs Increase or such portion thereof.
The Construction Manager shall cause the funds required by the preceding clause
(ii) to be deposited by paying its own funds into the Construction Account.
Any such funds so deposited in the Construction Account shall be disbursed in
accordance with the terms of Article IV hereof.
(c) Except as otherwise provided in Section 3.2(h) below, the
Construction Manager shall comply with the requirements of clauses (i) and (ii)
of Section 3.2(b) above at least ten (10) days in advance of implementing any
such Change Order if either (i) prior to the time referred to in clause (ii)
below, such Change Order anticipates a net increase or decrease of greater than
$1,000,000 either in (x) any one line item in the Project Budget individually
or (y) any number of line items in the Project Budget in the aggregate or (ii)
from and after the time the Construction Manager shall have begun the
implementation of Change Orders, all of which Change Orders taken together
result in a net increase or decrease of greater than $5,000,000 in any number
of line items in the Project Budget in the aggregate or in a net increase or
decrease of greater than $2,000,000 in any one line item in the Project Budget
individually, such Change Order anticipates a net increase or decrease of
greater than $100,000 either in (x) any one line item in the Project Budget
individually or (y) any number of line items in the Project Budget in the
aggregate.
(d) If either (i) prior to the time referred to in clause
(ii) below, any Change Order anticipates a net decrease of greater than
$1,000,000 either in (x) any one line item in the Project Budget individually
or (y) any number of line items in the Project Budget in the aggregate or (ii)
from and after the time the Construction Manager has begun the implementation
of
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Change Orders, all of which Change Orders taken together result in a net
decrease of greater than $5,000,000 in any number of line items in the Project
Budget in the aggregate or in a net decrease of greater than $2,000,000 in any
one line item in the Project Budget individually, any Change Order (when
aggregated with any other Change Orders with respect to which the Construction
Manager has not delivered an appraiser's certificate) anticipates a net
decrease of greater than $500,000 either in (x) any one line item in the
Project Budget individually or (y) any number of line items in the Project
Budget in the aggregate, then at least ten days in advance of implementing any
such Change Order, the Construction Manager shall deliver to the Lessor, the
Trustee and the Construction Consultant a certificate of The Hallstrom Group,
Inc. or another reputable appraisal firm, which is a member of the Appraisal
Institute, which has received not more than 5% of its gross income during the
previous two (2) years from business with the Construction Manager and which
has at least five (5) years experience in the downtown Honolulu office market,
stating that the aggregate effect of such Change Order, together with any
previous or contemporaneous Change Orders, will not be to reduce the fair
market value of the Building when completed.
(e) Upon compliance by the Construction Manager with all of
the provisions of this Section, the Project Budget, the Project Schedule, the
Plans and Specifications and the Interior Design Plans and Specifications shall
be deemed amended in accordance with the Change Order.
(f) The Construction Manager agrees that it will not
implement any Change Order if the aggregate effect of such Change Order,
together with any previous or contemporaneous Change Orders, would be to reduce
the fair market value of the Building when completed.
(g) The Project Budget assumes that the earnings, on a
cumulative basis, on investments of the funds deposited in the Construction
Account, on a month-by-month basis are as reflected on Schedule 13. To the
extent that the actual cumulative earnings on investments of the funds
deposited in the Construction Account for any particular month are less than
the assumed cumulative earnings for such month set forth in Schedule 13, the
Construction Manager shall either (i) deposit in the Construction Account an
amount equal to such deficiency as a condition to any further disbursements or
(ii) implement a Change Order in accordance with Section 3.2(a) through (f)
which has the effect of reducing Project Costs by an amount at least equal to
such deficiency. The Construction Manager shall have the right to implement a
Change Order in respect of the earnings line item in the Project Budget to the
extent of any reduction of another line item in the Project Budget (adopted in
accordance with the Change Order procedures set forth in Section 3.2(a) through
(f), and in that event, Schedule 13 shall be modified. To the extent that the
actual cumulative earnings on the Construction Account
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for any particular month are greater than the assumed cumulative earnings for
such month set forth in Schedule 13, the Construction Manager shall have the
right to implement one or more Change Orders which has the effect of increasing
Project Costs by an amount equal to such excess.
(h) Notwithstanding the provisions of paragraphs (a) through
(g) above, the Construction Manager shall amend the Project Budget within four
(4) months of the date of this Agreement without complying with the
requirements of paragraphs (a) through (g) above and within a reasonable time
after the General Contractor delivers to the Construction Manager its detailed
breakdown of the costs and expenses included within the scope of the
Construction Contract (the date upon which the Project Budget shall be so
amended, the "Budget Finalization Date"). Pursuant to such amendment, the
Construction Manager shall (i) reallocate the aggregate amount of $93,510,951
set forth in the "Building Construction" category in the Project Budget among
the nineteen (19) "Divisions" constituting the "Building Construction
Categories" attached to the Project Budget and (ii) shall further allocate the
amount allocated to each of these nineteen (19) "Divisions" to each of the
line-items set forth as a subheading to such "Division" in the Project Budget.
Such amendment with respect to the Project Budget shall be consistent in all
material respects with the cost breakdown agreed upon between the Construction
Manager and the General Contractor and shall be subject to the prior approval
of the Construction Consultant.
3.3 Failure to Complete Building. (a) If at any time prior
to the Substantial Completion Date for Core and Shell there occurs a Casualty
or a Force Majeure Event or the Lessor or the Construction Manager receives
notice of a Condemnation then in each case the Construction Manager shall
either:
(i) terminate this Agreement in accordance with Sections
3.3(b) and 3.3(c) below in the event of (x) a Total Condemnation or
(y) a Condemnation, Casualty or Force Majeure Event which in the
reasonable, good-faith judgment of the Construction Manager (as
evidenced by an Officer's Certificate) and in the judgment of the
Construction Consultant (as evidenced by a certificate of the
Construction Consultant) is so substantial in nature such that
achieving (1) the Substantial Completion Date for Core and Shell on or
prior to the Outside Completion Date for Core and Shell would be
impracticable or impossible or (2) any Substantial Completion Date for
Lessee Installations on or prior to the applicable Outside Completion
Date for Lessee Installations would be impracticable or impossible
(each of the events described in this Section 3.3(a)(i), a "Significant
Event"); or
(ii) promptly and diligently complete the construction of
the Building and the Lessee Installations in
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accordance with the Plans and Specifications and the Interior Design
Plans and Specifications, respectively, and with the terms hereof, and
otherwise at the Construction Manager's sole cost and expense, and
cause the Substantial Completion Date for Core and Shell to occur on
or prior to the Outside Completion Date for Core and Shell and each
Substantial Completion Date for Lessee Installations to occur on or
prior to the applicable Outside Completion Date for Lessee
Installations, in the event of a Condemnation, Casualty or Force
Majeure Event which in the reasonable, good-faith judgement of the
Construction Manager (as evidenced by an Officer's Certificate) does
not constitute a Significant Event.
(b) If prior to the Substantial Completion Date for Core
and Shell the Lessor or the Construction Manager shall have received notice of
a Total Condemnation of the Property, then the Construction Manager shall,
within thirty (30) days after the Construction Manager receives notice thereof,
deliver to the Lessor and the Trustee a written notice in the form described in
Section 3.3(c) (a "Termination Notice") of the termination of this Agreement.
If prior to the Substantial Completion Date for Core and Shell the Lessor or
the Construction Manager shall have received notice of a Condemnation of the
Property or a Casualty or Force Majeure Event occurs, and the Construction
Manager shall have delivered to the Lessor an Officer's Certificate and a
certificate of the Construction Consultant to the effect that such
Condemnation, Casualty or Force Majeure Event constitutes a Significant Event
in accordance with Section 3.3(a)(i), then the Construction Manager shall,
simultaneously with the delivery of such Officer's Certificate and certificate
of the Construction Consultant, deliver to the Lessor and the Trustee a
Termination Notice.
(c) A Termination Notice shall contain (i) notice of the
Construction Manager's termination of this Agreement on the next Payment Date
which occurs at least thirty (30) days after the Lessor's and the Trustee's
receipt of such Termination Notice (the "Termination Date"), (ii) a binding and
irrevocable agreement of the Construction Manager to pay the Termination Amount
and purchase the Lessor's right, title and interest in the Property on such
Payment Date and (iii) the Officer's Certificate and the certificate of the
Construction Consultant described in Section 3.3(a)(i). On the Termination
Date, the Construction Manager shall pay to the Lessor the Termination Amount
and all amounts owing in respect of Rent (including Additional Charges),
including any indemnities under Article VII hereof or Articles IV and XXV of
the Master Lease (if any), theretofore accruing hereunder or under the Master
Lease, and the Lessor shall convey its right, title and interest in the
Property, or the remaining portion thereof, to the Construction Manager (or the
Construction Manager's designee) in accordance with Section 19.1 of the Master
Lease.
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(d) Notwithstanding anything to the contrary set forth in
this Agreement, if a Casualty occurs or the Lessor or the Construction Manager
shall receive notice of a Condemnation, in each case on or after the
Substantial Completion Date for Core and Shell, such Casualty or Condemnation
shall be governed by the provisions in respect thereof contained in the Master
Lease. Notwithstanding anything to the contrary set forth in this Agreement,
if a Force Majeure Event occurs after the Substantial Completion Date for Core
and Shell, the Construction Manager shall cause construction of the Lessee
Installations to be prosecuted diligently and continuously in accordance with
the Interior Design Plans and Specifications but the Construction Manager shall
be relieved of its obligation to achieve each Substantial Completion for Lessee
Installations on or prior to the applicable Outside Completion Date for Lessee
Installations and its obligation to deliver, or cause to be delivered, as a
condition to its ability to receive funds from the Construction Account,
certificates to the effect that each Substantial Completion for Lessee
Installations will be achieved on or prior to the applicable Outside Completion
Date for Lessee Installations.
(e) Notwithstanding anything to the contrary set forth in
this Agreement, if the Master Lease terminates as a result of the provisions of
Section 16.1(b)(iii) thereof, this Agreement shall also terminate concurrently
therewith.
3.4 Payments at the Overdue Rate. The Construction Manager
shall pay to the Lessor (i) interest at the Debt Overdue Rate on any portion of
the Termination Amount, Default Amount, Make-Whole Premium or other amount
payable under this Agreement that is required to be paid to the Trustee and
applied to the payment of principal, interest or premium (if any) due under the
Notes or to the payment of any other amount due the Trustee hereunder, under
the Indenture or under any other Operative Agreement (provided, that the Debt
Overdue Rate shall not apply to an overdue payment to the extent that the
application of the Debt Overdue Rate would render unenforceable the payment of
Make-Whole Premium due hereunder (but only if such payment of Make-Whole
Premium would otherwise exceed the payment resulting from such application of
the Debt Overdue Rate) and (ii) interest at the Lessor Overdue Rate on any
portion of the Termination Amount, Default Amount, Lessor Make-Whole Premium or
other amount payable under this Agreement that is required to be paid to the
Trustee on account of the Lessor Contribution or otherwise payable to the
Lessor hereunder, in each case not paid when due from the due date to the date
of actual payment.
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ARTICLE IV
PAYMENT OF COSTS OF WORK
4.1 Requisition of Funds Directly from the Construction
Account. (a) On the tenth (10th) day of each calendar month (or if such day
is not a Business Day, the next succeeding Business Day), the Construction
Manager shall submit to the Lessor, with a copy to the Construction Consultant
and the Trustee, a request for a disbursement from the Construction Account (a
"Disbursement Request"), together with:
(i) an Officer's Certificate, certified as true and
correct by the Developer, setting forth the following:
(t) the amount of Project Costs that the Construction Manager
has incurred in accordance with the Plans and Specifications and the
Project Budget since the last Disbursement Request submitted to the
Lessor for the payment of amounts due on account of Project Costs (the
"Disbursement Amount") broken down by the categories identified in the
Project Budget, accompanied by evidence supporting each such item of
Project Costs covered by such Disbursement Request, including a copy
of the disbursement request and all related information presented by
the Demolition Contractor, the General Contractor or any other
contractor under any Project Contract with respect to such
Disbursement Request, and indicating that such amounts are currently
due and payable;
(u) a statement and evidence that all amounts advanced to the
Construction Manager during the previous calendar month for the
payment of Project Costs have been properly applied to such Project
Costs;
(v) a statement that the construction of the Building and the
Lessee Installations, if applicable, to date has been performed in a
good and workmanlike manner and in accordance with the Plans and
Specifications and the Interior Design Plans and Specifications, as
applicable, and in compliance with all applicable Legal Requirements
(including Environmental Laws) and Insurance Requirements and that the
progress thereof is such that the Substantial Completion Date for Core
and Shell will occur on or prior to the Outside Completion Date for
Core and Shell and that each Substantial Completion Date for Lessee
Installations will occur on or prior to the applicable Outside
Completion Date for Lessee Installations;
(w) a statement with respect to any Disbursement Amount
that relates to the payment of Construction Project Costs, that such
amount has been paid by the Construction Manager or is currently due
and payable for (A) work, labor or materials incorporated in the
Building, the Lessee
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Installations or the Subtenant Installations; (B) materials suitably
stored on the Land but not incorporated in the Building; (C) materials
warehoused; or (D) materials otherwise identifiable and for which
customary arrangements have been made with the manufacturer or
fabricator for payment and delivery, in each case up to the date of
such Disbursement Request (in the case of the first Disbursement
Request) or to the date of such Disbursement Request from the date of
the last previous Disbursement Request (in the case of any subsequent
Disbursement Request), together with evidence that, following
disbursement of that portion of the Disbursement Amount which relates
to a particular category of materials described in the preceding
clause (C) or this clause (D), the value of such materials, when
aggregated with all materials of the same category which are currently
neither incorporated into the Building, the Lessee Installations or
the Subtenant Installations nor stored on the Land (but which are
either warehoused or are otherwise identifiable and for which
customary arrangements have been made for payment and delivery) and
which were the subject of a previous Disbursement Request, do not
exceed the amount set forth opposite such category listed on Schedule
12 hereto;
(x) a statement with respect to any Disbursement Amount that
relates to the payment of Project Costs (other than Construction
Project Costs), that such amount has been paid by the Construction
Manager or is currently due and payable for such Project Costs;
(y) a statement that the unadvanced funds in the Construction
Account (including the then current amount of assumed earnings on the
Construction Account) allocable to Project Costs in each line item of
the Project Budget are sufficient (after application of any available
Excess Line Item Reserve and the Contingency Reserve) to pay in full
Project Costs of such line item which will be required for the
Substantial Completion Date for Core and Shell to occur on or prior to
the Outside Completion Date for Core and Shell and for each
Substantial Completion Date for Lessee Installations to occur on or
prior to the applicable Outside Completion Date for Lessee
Installations; and
(z) a statement that no part of the Project Costs described
in such Disbursement Request has been previously paid under a prior
Disbursement Request.
(ii) a certificate of the Project Architect setting forth the
following:
(x) a statement that to the best of the Project Architect's
knowledge, information and belief, the work covered by such
Disbursement Request and by all prior Disbursement Requests has been
completed in accordance with
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the Plans and Specifications and in a good and workmanlike manner; and
(y) the stage and percentage of completion, based on the
Plans and Specifications, which has been achieved with respect to the
various contract categories in the construction of the Building.
(iii) with respect to any Disbursement Request which contains
a request for the funding of Subtenant Installations (and in lieu of the
materials required under clause (ii) above), the following:
(x) a certificate from the Interior Design Architect setting
forth the following:
(1) a statement that to the best of the Interior
Design Architect's knowledge, information and belief, the
construction of the Subtenant Installations covered by such
Disbursement Request and by all prior Disbursement Requests
has been performed in a good and workmanlike manner and in
accordance with the applicable terms of the Space Lease or
Space Leases pursuant to which such Subtenant Installations
are being performed; and
(2) with respect to each Space Lease pursuant to
which Subtenant Installations are being performed, the stage
and percentage of completion, based on the approved plans and
specifications for such Space Lease, which have been achieved
with respect to the various contract categories in the
construction of such Subtenant Installations; and
(y) an Officer's Certificate, certified as true and correct
by the Developer, stating that, after giving effect to such
Disbursement Amount, and any previous Disbursement Amount for the
payment of the costs of Subtenant Installations, the unadvanced funds
in the Construction Account allocable to the line item for Project
Costs to be incurred for Subtenant Installations are at least equal to
$40 per square foot of the remaining unimproved space demised to
subtenants under Space Leases (with a partially improved space being
considered improved to the extent of the percentage completion
indicated by the Interior Design Architect in its certificate
delivered pursuant to clause (iii)(x)(2) above).
(iv) with respect to any Disbursement Request which contains
a request for the funding of Lessee Installations (and in lieu of the materials
required under clause (ii) above), a certificate from the Interior Design
Architect setting forth the following:
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(x) a statement that to the best of the Interior Design
Architect's knowledge, information and belief, the construction of the
Lessee Installations covered by such Disbursement Request and by all
prior Disbursement Requests has been performed in a good and
workmanlike manner and in accordance with the Interior Design Plans
and Specifications; and
(y) the stage and percentage of completion, based on the
Interior Design Plans and Specifications, which has been achieved with
respect to the various contract categories in the construction of the
Lessee Installations.
(v) an endorsement to the Title Policy from the Title Company
insuring that the Disbursement Amount is secured by the Mortgage and the
Assignment of Lease and constitutes a valid first lien on the Land and the
Improvements without exception, other than Permitted Exceptions.
(b) Each Disbursement Request and each receipt of the
Disbursement Amount requested thereby shall constitute a representation and
warranty by the Construction Manager that each representation and warranty
contained in Section 7.2 of the Participation Agreement (provided, that, except
for the first disbursement to be made on the Closing Date, no such
representation shall be made in respect of the first sentence of subsection
7.2(a) thereof, as to which a comparable representation shall be true, or in
subsection 7.2(p), subsection 7.2(q), as to which a comparable representation
shall also be true, or subsection 7.2(w) thereof) are true and correct on the
date of such Disbursement Request or such receipt, as the case may be.
(c) Unless within ten (10) days of receipt by the Lessor, the
Trustee and the Construction Consultant of a Disbursement Request, the
Construction Consultant advises the Construction Manager, the Lessor and the
Trustee that the Disbursement Request is deficient (including, without
limitation, due to the fact that any certification included therewith is
inaccurate or that any condition to disbursement set forth in Section 4.2 has
not been satisfied), the Trustee shall transfer from the Construction Account
to the account of the Construction Manager maintained with the Trustee funds
equal to the Disbursement Amount, as limited or adjusted in accordance with
Section 4.2 below. If the Construction Consultant determines that the
Disbursement Request is deficient in some manner, it shall promptly advise the
Construction Manager, the Lessor and the Trustee of the nature of the
deficiency.
4.2 Limitation on Obligation to Fund. (a) With respect to
any Disbursement Request, disbursements for the payment of Project Costs in
each category of cost in the Project Budget shall be limited (i) in the
aggregate to the amount shown for such category in the Project Budget in the
column entitled
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"Reserve" and (ii) in each case to the Disbursement Amount on account of such
amounts as stated in a particular Disbursement Request. Disbursements shall be
made only to defray Project Costs described in the Project Budget and actually
incurred or then due and payable.
(b) If the unadvanced funds in the Construction Account
allocable to Project Costs in any line item in the Project Budget is at any
time not sufficient to pay in full Project Costs of such line item which will
be required for the Substantial Completion Date for Core and Shell to occur on
or prior to the Outside Completion Date for Core and Shell and for each
Substantial Completion Date for Lessee Installations to occur on or prior to
the applicable Outside Completion Date for Lessee Installations, the Trustee
shall not make further Disbursements and the Construction Manager shall
promptly (i) reallocate the amount of such deficiency from the Contingency
Reserve line item in the Project Budget or from any available Excess Line Item
Reserve, or any combination of such amounts, or (ii) deposit funds in the
Construction Account in the amount of such deficiency. Following any such
reallocation or deposit, the Project Budget shall be amended to reflect the
increased Project Costs and the Trustee shall continue to make disbursements in
accordance with such revised Project Budget. For the purpose of this Section
4.2(b), the Construction Account shall be deemed to include the then current
amount, as shown on Schedule 13 hereto, of the assumed earnings on the
Construction Account.
(c) No disbursement shall be made if either (i) there
shall have occurred and be continuing either a default hereunder, with respect
to which the Construction Manager has received written notice thereof, or an
Event of Default or (ii) any of the representations or warranties contained in
Section 7.2 of the Participation Agreement (provided, that, except for the
first disbursement to be made on the Closing Date, no such representation shall
be made in respect of the first sentence of subsection 7.2(a) thereof, as to
which a comparable representation shall be true, or in subsection 7.2(p),
subsection 7.2(q), as to which a comparable representation shall also be true,
or subsection 7.2(w) thereof) shall not be true and correct in any material
respect as of the date of such disbursement.
4.3 Conditions to Disbursement for Retainage. On or prior to
the date of the disbursement for the release of the retainage withheld from the
General Contractor in accordance with the Construction Contract, the Lessor,
the Trustee and the Construction Consultant shall have received, in addition to
the documentation required by Section 4.1 hereof:
(a) Architects Certificate. A Certificate of Substantial
Completion for Core and Shell in the form attached as Schedule 8
hereto signed by the Project Architect stating that, subject to punch
list items, the
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Building has been completed in accordance with the Plans and
Specifications;
(b) Release of Liens. A release of liens signed by the
Project Architect, the Developer, the Demolition Contractor, the
General Contractor, all other contractors under the Project Contracts
and all other subcontractors and materialmen; provided that a release
of liens shall not be required with respect to contracts (i) which the
Construction Manager is contesting and with respect to which the
Construction Manager has a reasonable, good-faith belief that a
release of lien should have been delivered and (ii) the aggregate
amount owed to contractors and subcontractors under which is no
greater than $2,000,000;
(c) Survey. A survey of the Land and the Improvements by an
independent surveyor licensed in the State of Hawaii (i) showing no
encroachments by the Building over the lot lines or easements other
than those permitted by express written easements or appropriate
governmental approval, (ii) noting any visible work on the Land which
is on-going on the date of such survey and (iii) based on an
inspection within thirty (30) days prior to the date of the
Disbursement Request;
(d) Utilities. Letters from local utility companies or
Governmental Authorities stating that electric power, sanitary and
storm sewer and water facilities and other necessary utilities are
available to and are serving the Building; and
(e) Governmental Approvals. Evidence of approval by all
Governmental Authorities whose approval may then be required with
respect to the completion of the Building, the Lessee Installations
and the Subtenant Installations, and the intended use thereof, under
any Legal Requirements at such time.
ARTICLE V
EVENTS OF DEFAULT
5.1 Events of Default. If any one or more of the following
events (each an "Event of Default") shall occur:
(a) the Construction Manager shall fail to make any payment
or deposit any funds required to be paid or deposited hereunder within
five (5) days after receipt of notice that the same has become due and
payable;
(b) the Substantial Completion Date for Core and Shell shall
fail for any reason to occur on or prior to the Outside Completion
Date for Core and Shell or any
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Substantial Completion Date for Lessee Installations shall fail for
any reason to occur on or prior to the applicable Outside Completion
Date for Lessee Installations;
(c) if the insurance policy required by Section 8.2 shall
be terminated or expire without replacement;
(d) the Construction Manager shall fail to observe or perform
any term, covenant or condition of this Agreement, the Master Lease,
the Participation Agreement or any other Operative Agreement (except
with respect to breaches discussed in clauses (a), (b) and (c) above)
to which it is a party, or any representation or warranty set forth in
Section 7.2 of the Participation Agreement as of the date hereof, or
in Section 4.1(b) of this Agreement, shall be inaccurate in any way
materially adverse to the Lessor, and such failure or
misrepresentation or breach of warranty shall remain uncured for a
period of thirty (30) days after notice thereof; provided, however, no
Event of Default shall be deemed to occur if such failure,
misrepresentation or breach cannot reasonably be cured within such
period, so long as the Construction Manager shall have promptly
commenced the cure thereof and continues to act with diligence to cure
such failure, misrepresentation or breach and, with respect to any
failure, misrepresentation or breach contained in Sections 2.2, 2.4,
2.5, 2.7(a), (b), (d), (g), 2.8, 3.1(b)(i), 3.1(c)(i), 3.2 and 7.1
hereof and Sections 7.2(a), (b), (h), (l), (m), (o), (r), (t), (u),
(v), 7.3(a), (b), (f), (g), (i), 7.4(a), (b), (f), (g), (i), Section
8, Section 9, Sections 14.1, 14.2, 14.3, 14.4, 14.5, 14.7 and 14.9 of
the Participation Agreement, in fact cures such failure,
misrepresentation or breach within 180 days after receipt of notice
thereof;
(e) the Construction Manager shall (i) admit in writing its
inability to pay its debts generally as they become due, (ii) file a
petition under the United States bankruptcy laws or any other
applicable insolvency law or statute of the United States of America
or any State or Commonwealth thereof, (iii) make a general assignment
for the benefit of its creditors, (iv) consent to the appointment of a
receiver of itself or the whole or any substantial part of its
property, (v) fail to cause the discharge of any custodian, trustee,
receiver or conservator appointed for the Construction Manager or the
whole or a substantial part of its property within ninety (90) days
after such appointment, or (vi) file a petition or answer seeking or
consenting to reorganization under the United States bankruptcy laws
or any other applicable insolvency law or statute of the United States
of America or any State or Commonwealth thereof; or
(f) insolvency proceedings or a petition under the United
States bankruptcy laws or any other applicable insolvency law or
statute of the United States of America or
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any State or Commonwealth thereof shall be filed against the
Construction Manager and not dismissed within ninety (90) days from
the date of its filing, or a court of competent jurisdiction shall
enter an order or decree appointing, without the consent of the
Construction Manager, a receiver or conservator of the Construction
Manager or the whole or a substantial part of its property, and such
order or decree shall not be vacated or set aside within ninety (90)
days from the date of the entry thereof;
then, in any such event, the Lessor may, in addition to the other rights and
remedies provided for in this Article, terminate this Agreement by giving the
Construction Manager thirty (30) days notice of such termination and upon the
expiration of the time fixed in such notice, this Agreement shall terminate and
all rights of the Construction Manager under this Agreement shall cease,
subject to the Construction Manager's rights under Section 5.3. The
Construction Manager shall pay all costs and expenses incurred by or on behalf
of the Lessor, including fees and expenses of counsel, as a result of any Event
of Default hereunder.
5.2 Damages. The termination of this Agreement pursuant to
Section 5.1 shall in no event relieve the Construction Manager of its liability
and obligations hereunder or under the Master Lease, or in respect of any
indemnity hereunder or under the Master Lease, all of which shall survive any
such termination. In the event of any termination of this Agreement pursuant
to Section 5.1, the Construction Manager shall forthwith pay to the Lessor all
sums on account of funds required to be paid or deposited hereunder to and
including the date of such termination.
5.3 Liquidated Damages. (a) At any time after this
Agreement shall be terminated pursuant to Section 5.1, whether or not the
Lessor shall have collected any damages pursuant to Section 5.2, the Lessor
shall have the right to recover, by demand to the Construction Manager and at
the Lessor's election, and the Construction Manager shall pay to the Lessor, as
and for final liquidated damages, and in lieu of all current liquidated damages
beyond the date of such demand (it being agreed that it would be impossible
accurately to determine actual damages), but exclusive of any indemnity
payments under Article VII hereof or Section 25.1 or Article IV of the Master
Lease, an amount equal to the sum of (i) the Default Amount specified for such
Payment Date on Schedule 1 hereto plus (ii) the Make-Whole Premium payable by
reason of the application of the Default Amount as shall be required to be
applied to the Notes upon acceleration thereof, plus (iii) the Lessor Make-
Whole Premium, if any, required to be paid to the Lessor under Section 5.3(b)
hereof, plus (iv) all amounts owing in respect of Rent (including Additional
Charges) theretofore accruing under the Master Lease. Upon the payment in full
of the amount specified in the first sentence of this Section 5.3, the
Construction Manager or its
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designee shall be entitled to receive from the Lessor, at the Construction
Manager's request and cost, an assignment of the Lessor's right, title and
interest as lessee under the Ground Lease and the Lessor's entire interest in
the Improvements, Fixtures and Modifications all in accordance with Section
19.1 of the Master Lease. The Construction Manager (or the Construction
Manager's designee) shall execute and deliver to the Lessor an assumption of
all of the Lessor's obligations under the Ground Lease. The Property shall be
conveyed to the Construction Manager (or the Construction Manager's designee)
"AS IS" and in its then present physical condition. If any statute or rule of
law shall limit the amount of such final liquidated damages to less than the
amount agreed upon, the Lessor shall be entitled to the maximum amount
allowable under such statute or rule of law; provided, however, that the
Construction Manager shall not be entitled to receive an assignment of the
Lessor's interest under the Ground Lease or in the Improvements unless the
Construction Manager shall have paid in full the Default Amount plus the
Make-Whole Premium, the Lessor Make-Whole Premium, if applicable, and all
accrued Rent (including Additional Charges) as provided for in the previous
sentence.
(b) In the event this Agreement is terminated solely as a
result of the Construction Manager's willful and deliberate failure to cause
the Substantial Completion Date for Core and Shell to occur on or prior to the
Outside Completion Date for Core and Shell or any Substantial Completion Date
for Lessee Installations to occur on or prior to the applicable Outside
Completion Date for Lessee Installations, then the Lessor shall have the right
to recover on the Payment Date on which payment is made, pursuant to paragraph
(a) above, by demand to the Construction Manager and at the Lessor's sole
election, and the Construction Manager shall pay to the Lessor on such Payment
Date, an amount equal to the Lessor Make-Whole Premium.
5.4 Waiver of Certain Rights. If this Agreement shall be
terminated pursuant to Section 5.1, the Construction Manager waives, to the
fullest extent permitted by law, (a) any notice of re-entry or the institution
of legal proceedings to obtain re-entry or possession; (b) any right of
redemption, re-entry or repossession; (c) the benefit of any laws now or
hereafter in force exempting property from liability for rent or for debt; and
(d) any other rights which might otherwise limit or modify any of the Lessor's
rights or remedies under this Article.
5.5 Remedies Cumulative. The remedies herein provided shall
be cumulative and in addition to (and not in limitation of) any other remedies
available at law, equity or otherwise.
5.6 Release of the Lessor. In the event the Lessor assigns
all of its right, title and interest as lessee under the Ground Lease and its
entire interest in the Improvements, Fixtures and Modifications to the
Construction Manager (or the Construction Manager's designee) all in accordance
with Section
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19.1 of the Master Lease and the terms of this Agreement, then the Lessor shall
be released from all of its obligations under this Agreement.
ARTICLE VI
CASUALTY AND CONDEMNATION
6.1 Casualty and Condemnation. In the event of a Casualty or
Condemnation which occurs prior to the Substantial Completion Date for Core and
Shell, any award, compensation or insurance proceeds shall be paid to the
Trustee, and any such award, compensation or insurance proceeds received by the
Trustee shall be (a) first applied by the Trustee to reimburse the Lessor, the
Trustee and the Holders for any expenses (including, without limitation, any
reasonable attorneys' and consultants' fees and expenses) incurred by any of
the foregoing in connection with the collection of such award, compensation or
insurance proceeds, or the determination of the amount of the loss, and then
(b) deposited into the Construction Account to be disbursed in accordance with
the terms of Article IV hereof.
ARTICLE VII
INDEMNITY
7.1 Indemnification by Construction Manager. (a) The
Construction Manager shall indemnify the Lessor, the Administrative Agent, the
Trustee and the Holders and any affiliate, officer, director, employee, agent
or shareholder of the Lessor, the Administrative Agent, the Trustee or any
Holder (collectively, the "Indemnified Parties"), on an After Tax Basis, from
and against all actions, causes of action, claims, lawsuits, administrative
proceedings, hearings, judgments, liabilities, awards, fines, penalties, costs,
fees (including legal, engineers', experts' and consulting fees and expenses),
damages (including natural resource damages), corrective action costs,
financial assurance costs, remediation activities and clean-up costs (including
investigation, monitoring, encapsulation, removal and response costs), Liens
(including any environmental Lien), and all other liabilities incurred by or
imposed on any of the Indemnified Parties, whenever incurred or imposed (but
excluding any liabilities for Impositions imposed by any taxing authority,
which liabilities are covered exclusively by Article IV of the Master Lease),
arising out of, imposed upon or incurred by or asserted against the Indemnified
Parties by reason of:
(i) any accident, injury to or death of natural
persons or loss of or damage to property occurring on or about the
Property;
(ii) the Lessor's ownership of the Property;
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(iii) the failure by the Lessor to qualify as a foreign
corporation in the State of Hawaii;
(iv) any use, misuse, nonuse, condition, operation,
possession, leasing, subleasing, financing, refinancing, disposition,
maintenance or repair of the Property;
(v) the construction, design, purchase, acceptance,
rejection, modification, substitution or condition of the Property,
including, without limitation, claims or penalties arising from any
violation of law or liability in tort (strict or otherwise);
(vi) entering into the Operative Agreements or any
transaction arising out of the Operative Agreements;
(vii) the breach by the Construction Manager of any of its
representations and warranties, or the failure on the part of the
Construction Manager at any time to perform or comply with any of the
terms or conditions, in any of the Operative Agreements to which it is
a party;
(viii) the existence or presence at, on, in or under the
Property of any Hazardous Substance or the Release of any Hazardous
Substance from, at, under or within the Property into the environment
(including air, water vapor, surface water, groundwater, drinking
water, land (including surface or subsurface), plant, aquatic and
animal life);
(ix) the disturbance, pollution, contamination or
interference with any wetland, body of water (whether surface or
subsurface), aquifer or watercourse due to any Hazardous Activity or
the existence or presence of a Hazardous Condition at the Property;
(x) the occurrence at the Property of any Hazardous Activity
or Hazardous Condition;
(xi) the transportation, use, treatment, storage,
disposition, Release or disposal of any Hazardous Substance found in,
on, under or at the Property;
(xii) any personal injury to or death of natural persons or
property damage resulting from any Hazardous Activity at the Property,
the existence of a Hazardous Condition at the Property or the Release
of any Hazardous Substance from, at, under or onto the Property;
(xiii) any Environmental Violation or alleged violation of
Environmental Law at, on, in or under the Property or in connection
therewith;
(xiv) the applications of Parts 4 and 5 of Subtitle B of
Title I of ERISA (including, without limitation, any
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penalties imposed under Section 501(i) or (1) of ERISA) or any excise
taxes, charges or penalties imposed under Section 4975 of the Code,
except as a result of the breach by the Lessor or any Affiliate of the
Lessor of ERISA or any rule or regulation promulgated thereunder
(other than a breach caused by or resulting from an act or omission of
the Construction Manager, either of the Ground Lessors, the Trustee,
the Holders or any of their respective Affiliates); and
(xv) the demolition of the Existing Improvements or the
development and construction of the Building as contemplated by this
Agreement;
except in each case, with respect to any Indemnified Party, to the extent such
liabilities, obligations, claims, damages, penalties, causes of action, costs
or expenses (x) are imposed upon or incurred by or asserted against such
Indemnified Party by reason of the matters described in clauses (i) through
(xv) above that arise from events commencing solely and entirely after the
later of the expiration or earlier termination of this Agreement; (y) solely
result from the gross negligence or the willful misconduct by of such
Indemnified Party (except, in the case of the Lessor, for the Lessor's failure
to qualify as a foreign corporation in the State of Hawaii); or (z) solely
result from the breach by such Indemnified Party of Section 905 or 921 of the
Indenture or the breach by such Indemnified Party of any other provisions of
the Operative Agreements after receipt of notice of such breach and a
reasonable opportunity to cure such breach (but only to the extent such
Indemnified Party is not otherwise prevented from curing such breach).
(b) The obligations of the Construction Manager under this
subsection shall remain unaffected and continue in full force and effect
irrespective of and notwithstanding any action or failure to act or delay on
the part of any of the Indemnified Parties to enforce any rights or remedies
against the Construction Manager. Such obligations shall remain unaffected
irrespective of and notwithstanding any default by any such party in performing
any obligation or duty arising under this subsection.
(c) The obligations of the Construction Manager pursuant to
this subsection shall survive the expiration or earlier termination of this
Agreement notwithstanding anything herein to the contrary.
7.2 Payment; Procedure for Claims. (a) Any amounts which
become payable by the Construction Manager under subsection 7.1 shall be paid
promptly after demand by the Indemnified Party entitled thereto and, if such
payment is not timely paid, shall bear interest at the Lessor Overdue Rate from
the date when due to the date of payment.
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(b) Promptly after receipt by an Indemnified Party of notice
of the commencement or assertion against it of any claim, action or proceeding,
such Indemnified Party shall, if a claim in respect thereof is to be made
against the Construction Manager under this subsection, notify the
Construction Manager thereof; but the omission so to notify the Construction
Manager shall not relieve the Construction Manager from any liability which it
may have to such Indemnified Party. The Construction Manager, at its sole cost
and expense, acting through counsel reasonably acceptable to the Indemnified
Party, may contest, resist and defend any claim, action or proceeding with
respect to which it shall have received the notice described in the preceding
sentence and may compromise or otherwise dispose of the same as the
Construction Manager shall deem appropriate, and, upon such assumption by the
Construction Manager of such contest and defense, the Construction Manager
shall not be obligated to pay any attorneys' fees or other legal costs incurred
by or on behalf of the Indemnified Party; provided that the Construction
Manager may only assume control of the defense of any such claim to the extent
that it has provided to such Indemnified Party written acknowledgement that the
Construction Manager is obligated to indemnify such Indemnified Party with
respect to such claim; and provided further that the Construction Manager shall
not be entitled to assume and control the defense of any such contest, action,
suit or proceeding if and to the extent that (i) in the reasonable opinion of
such Indemnified Party; (x) such contest, action, suit or proceeding involves
the potential imposition of criminal liability or material civil liability
(whether or not indemnified hereunder) on such Indemnified Party or (y) the
control of such contest, action, suit or proceeding would involve the
Construction Manager in a bona fide conflict of interest, (ii) an Event of
Default has occurred and is continuing or (iii) such contest, action, suit or
proceeding involves matters which extend beyond or are unrelated to the
transactions contemplated by the Operative Agreements and if determined
adversely could be materially detrimental to the interests of such Indemnified
Party notwithstanding indemnification by the Construction Manager, in which
case the Indemnified Party will be entitled to assume and take control of the
defense thereof at the Construction Manager's expense. The Indemnified Party
may participate in a reasonable manner at its own expense and with its own
counsel in any proceeding conducted by the Construction Manager in accordance
with the foregoing. Each Indemnified Party shall, at the Construction
Manager's request, cooperate with the Construction Manager, at no cost or
expense to the Indemnified Party, in the defense of any such claim, action or
proceeding. If, in the opinion of counsel to any Indemnified Party, there are
legal defenses available to such Indemnified Party which are different from or
in addition to those available to the Construction Manager, such Indemnified
Party shall be permitted to participate in the defense of such claim, action or
proceeding with separate counsel and the Construction Manager shall pay the
fees and expenses of such separate counsel.
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ARTICLE VIII
INSURANCE
8.1 Contractor's Insurance. The Construction Manager shall
cause both the Demolition Contractor and the General Contractor, except as
otherwise indicated, to purchase and maintain during the terms of the
Demolition Contract and the Construction Contract, respectively (except that
(x) the insurance referred to in Sections 8.1(b)(iii) and 8.1(d) below shall be
carried by the Demolition Contractor for an additional period of one year
following completion of work under the Demolition Contract and by the
Construction Contractor for an additional period of three years following
completion of work under the Construction Contract and (y) either (A) the
insurance referred to in Section 8.1(f) below shall contain a three-year
discovery period from the date of completion of the demolition of the Existing
Improvements or (B) the Demolition Contractor shall carry, and continue to
provide evidence of, completed operations coverage with respect to pollution
liability insurance for a period of three years from the date of the completion
of the demolition of the Existing Improvements), the following insurance
coverages:
(a) Workers compensation and employers' liability insurance
as required by Hawaii law or the laws of other applicable
jurisdictions, with statutory limits for workers' compensation
insurance and limits for employers' liability insurance of:
$1,000,000 each accident; $1,000,000 disease - policy limits; and
$1,000,000 disease - each employee. Further, such policy shall
contain a waiver of subrogation in favor of the Developer, the Ground
Lessors, the Construction Manager, the Lessor, the Trustee and the
Administrative Agent (the "Participants"). Alternatively, the
Demolition Contractor and the General Contractor may be "qualified"
self-insurers in the State of Hawaii.
(b) Commercial general liability insurance on an
"occurrence" form, which shall include coverage for (i) premises-
operations, (ii) independent contractors, (iii) products and completed
operations, (iv) broad form property damage, (v) blanket contractual
liability, (vi) personal and advertising injury, (vii) employees named
as additional insureds, (viii) demolition, explosion, collapse, (ix)
underground property damage, and (x) severability of interest. The
limits for such coverage shall be (A) bodily injury and property
damage combined single limit: $1,000,000 per occurrence; $2,000,000
general aggregate; and $2,000,000 products-completed operations
aggregate; and (B) personal injury limit: $1,000,000 per occurrence;
$2,000,000 general aggregate; and a self-insured retention of no
greater than $2,000,000. Such policy shall also be specifically
endorsed to provide that the policy
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shall be considered to be primary insurance which shall apply to any
loss or claim before any contribution by any insurance which any of
the Participants may have in force; and shall name each of the
Participants as an additional insured; and further it shall contain a
waiver of subrogation clause with respect to each of the Participants.
Such policy shall also contain a provision that the general aggregate
limit thereunder applies exclusively to the demolition of the Existing
Improvements or the construction of the Building, as the case may be.
(c) Automobile liability insurance for all owned,
non-owned and hired autos and automobile contractual liability, which
contains limits of: $1,000,000 per person/$1,000,000 per
accident-bodily injury; $1,000,000 per accident-property damage; and
basic no fault coverage as required by Hawaii law.
(d) Umbrella or excess liability insurance which shall be
excess over the commercial general liability, automobile liability and
employers' liability. Such policy shall be written on an "occurrence"
form with a limit of liability of $10,000,000 during the term of the
Demolition Contract and $50,000,000 during the term of the
Construction Contract. Such policy shall also be specifically
endorsed to provide that it shall be considered to be part of an
unbroken chain of primary and excess liability insurance which shall
apply to any loss or claim before any contribution by any insurance
which any of the Participants may have in force. Such policy shall
also contain a clause specifically naming each of the Participants as
an additional insured. Such policy shall also contain a waiver of
subrogation clause which states that the insured waives any right of
recovery they may have against any of the Participants because of
payments made under such policy. If such policy contains an "insured
vs. insured" exclusion, the policy must state that it applies only to
the "named insured" or "insured persons" not "additional insureds."
(e) Asbestos abatement liability insurance must be
carried by the Demolition Contractor. Such policy shall be written on
an "occurrence" form and shall include coverage for (i) operations
including removal and disposal, (ii) independent contractors, (iii)
completed operations, (iv) broad form property damage, (v) contractual
liability, (vi) personal injury or death, (vii) employees named as
additional insureds, and (viii) transportation to the disposal site.
The limits of such policy shall be $5,000,000 for bodily injury and
property damage combined single limit each occurrence and project
aggregate. Such policy shall name FH Center, Inc.; and Lessee shall
use best efforts to promptly after the date hereof have the Lessor
also named as an additional insured, and the Construction Manager as
additional insureds. The policy shall also
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contain a waiver of subrogation for FH Center, Inc. and the
Construction Manager; and Lessee shall use best efforts to promptly
after the date hereof obtain a waiver of subrogation for the Lessor.
(f) Pollution liability insurance shall be carried by the
Demolition Contractor. Such policy shall be written on a claims-made
form which shall include coverage for bodily injury and property
damage (defined to include loss of use of undamaged property and
clean-up or response costs). The limit of such policy shall be
$5,000,000 each loss; $5,000,000 project aggregate. Any self-insured
retention on such policy shall not exceed $500,000. Each of the
Participants shall be a named insured; provided, however, that with
respect to coverage for transportation of PCB's, the coverage shall be
$1,000,000 combined single limit bodily injury and property damage
insurance and shall name the Developer, FH Center, Inc., the
Construction Manager and the Lessor as an additional insured.
8.2 Property Insurance. (a) At all times during which work
is being performed under, or Disbursement Requests are being made in respect
of, the Construction Contract, the Construction Manager shall maintain property
insurance in the amount of $93,510,951 (or, if the Construction Contract is
converted to a lump sum contract in accordance with Section 2.4(a)(iii) hereof,
the lump sum payable under the Construction Contract) (plus any Project Costs
Increases for which the Construction Manager is required to make deposits in
accordance with Section 3.2(a)(ii) hereof) on a replacement basis. Such
property insurance shall be a builder's risk policy form written on an I.S.O.
standard "broad" causes of loss form as filed with the Hawaii Insurance
Commissioner or equivalent coverage, including (unless such coverage is not
commonly maintained with respect to similar properties or is prohibitively
expensive) earthquake, volcanic activity, windstorm and flood, and shall insure
against perils of direct physical loss to the work including loss occasioned by
fire, lightning, vandalism, malicious mischief and collapse. The policy shall
also include coverage for debris removal and reasonable compensation for
architect's services and expenses required as a result of such insured loss.
(b) The Construction Manager shall purchase and maintain
boiler and machinery insurance which shall specifically cover such insured
objects during installation and until final acceptance by the Construction
Manager.
(c) The builder's risk property insurance will be written
with a deductible not to exceed $500,000 to apply to damage occasioned by all
perils of loss covered in the property insurance; provided, however, that the
deductible for wind, earthquake and flood losses may exceed $500,000 but will
not exceed 5% of the estimated total completed value of the Building.
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(d) The property insurance maintained by the Construction
Manager (or the property insurance maintained by the General Contractor) shall
cover building materials for which disbursement has been made and which are (i)
not yet installed but intended for use in the construction of the Building and
stored on the Land, (ii) stored at other sites or (iii) in transit, other than
ocean transit. The insurance will not cover any General Contractor's equipment
including cranes or the tools owned by the General Contractor or any
subcontractors stored at the job site or any other location.
8.3 Coverage. (a) The builder's risk property insurance
required by this Agreement shall be maintained with insurance companies that
may lawfully conduct insurance business in the State of Hawaii and that have a
"Best's" rating of not less than A-/X. If the above-stated rating system is
changed or terminated, the A-/X rating will be adjusted by the Construction
Manager to a comparable rating, as established by an Officer's Certificate of
the Construction Manager. Further, in the event that the rating of the Notes
from S&P or Moody's is at any time less than "BBB" or "Baa2", respectively,
then the Construction Manager will be required to either (i) maintain the
builder's risk property insurance with an insurer which has, or whose parent
corporation has, a "claims paying ability" rating from S&P and Moody's of at
least "BBB" and "Baa2", respectively, or (ii) provide additional credit
support for the obligations of the insurer which provides the builder's risk
property insurance in order to ensure that such obligations are equivalent to
the obligations of an entity whose "claims paying ability" ratings from S&P and
Moody's are at least "BBB" and "Baa2", respectively.
(b) The Construction Manager shall furnish the Lessor and the
Trustee with certificates showing the insurance required under Sections 8.1 and
8.2 to be in effect and naming each of the Participants as an additional
insured. All such insurance shall be at the cost and expense of the
Construction Manager, the Demolition Contractor or the General Contractor.
Such certificates shall include a provision for thirty (30) days' advance
written notice by the insurer to the Lessor and the Trustee in the event of
cancellation of such insurance. If an Event of Default shall have occurred and
is continuing and the Lessor so requests, the Construction Manger shall
deliver, or cause to be delivered, to the Lessor copies of all insurance
policies required by Sections 8.1 and 8.2.
(c) All insurance policies required by subsection 8.2 shall
include a "New York" or standard form mortgagee endorsement in favor of the
Trustee.
(d) Neither the Lessor nor the Construction Manager shall
carry separate insurance concurrent in kind or form or contributing in the
event of loss with any insurance required under this Article VIII except that
the Construction Manager and the Lessor may carry separate liability insurance
so long as
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(i) the Construction Manager's insurance is designated as primary and in no
event excess or contributory to any insurance the Lessor may have in force
which would apply to a loss covered under the Construction Manager's policy and
(ii) the policy will not cause the Construction Manager's insurance required
under this Article VIII to be subject to a co-insurance exception of any kind.
ARTICLE IX
LESSOR'S RIGHTS; CONSTRUCTION MANAGER'S RIGHTS
9.1 Exercise of the Lessor's Rights. Subject to the Excepted
Rights and the Excepted Payments, the Lessor and the Construction Manager
hereby acknowledge and agree that, subject to and in accordance with Section
909 of the Indenture, the rights and powers of the Lessor under this Agreement
have been assigned to the Trustee for the benefit of the Holders. The
Construction Manager and the Lessor further acknowledge and agree that the
Trustee shall have the right to rely on the Construction Consultant in
connection with exercising any such right or power and shall not object to any
decision made by the Trustee on the basis of the Trustee's reliance on the
advice of the Construction Consultant.
9.2 Lease Obligations. Notwithstanding anything contained
herein or in the Master Lease to the contrary and to the extent not paid or
satisfied out of funds deposited in the Construction Account, prior to the
Final Substantial Completion Date, the Construction Manager shall perform or
cause to be performed all of Lessee's obligations regarding (a) Additional
Charges with respect to the Property pursuant to Section 3.3 of the Master
Lease, (b) payment of taxes, utility and related charges pursuant to Article IV
of the Master Lease, (c) maintenance and repair of the Property pursuant to
Section 10.1 of the Master Lease, (d) the maintenance of title to the Property
pursuant to Section 12.1(a) of the Master Lease, (e) compliance with all laws
and insurance requirements pursuant to Section 9.1 of the Master Lease and (f)
payments by Lessee to Lessor with respect to Lessor's right to cure defaults
pursuant to Section 18.1 of the Master Lease; provided, that nothing in this
Section shall in any way relieve the Lessee from any of its obligations under
the Master Lease.
9.3 Lessor's Right to Cure Construction Manager's Defaults.
The Lessor, without waiving or releasing any obligation or Event of Default,
may (but shall be under no obligation to) remedy any Event of Default for the
account of and at the sole cost and expense of the Construction Manager. All
out of pocket costs and expenses so incurred (including fees and expenses of
counsel), together with interest thereon at the Lessor Overdue Rate from the
date on which such sums or expenses
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are paid by the Lessor, shall be paid by the Construction Manager to the Lessor
on demand.
ARTICLE X
MISCELLANEOUS
10.1 Notices. All notices, requests and demands to or upon
the parties hereto to be effective shall be in writing (including by facsimile
transmission), and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when actually delivered or, in the case of
notice by facsimile transmission, when received and telephonically confirmed,
addressed as follows, or to such address as may be hereafter notified in
writing by the parties hereto:
If to the Lessor: REFIRST, Inc. 1900 Indian Wood Circle
Maumee, Ohio 43537
Attention: Vice President - First
Hawaiian Bank Transaction
with a copy to: REFIRST, Inc.
1209 Orange Street
Wilmington, Delaware 19801
Attention: Mark A. Ferrucci
If to the
Construction Manager: First Hawaiian Bank
1132 Bishop Street
Suite 2500
Honolulu, Hawaii 96813
Attention: Howard H. Karr
If to the Trustee: First Fidelity Bank, N.A., Pennsylvania
123 South Broad Street
Philadelphia, Pennsylvania 19109
Attention: Corporate Trust
Administration
10.2 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Lessor, the Construction Manager, the
Trustee, and their respective successors and assigns.
10.3 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
10.4 Consent To Jurisdiction. (a) Each of the Lessor, the
Construction Manager and the Trustee agrees that any
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legal suit, action or proceeding arising out of or based upon this Agreement
may be instituted in any state or Federal court in New York County, New York,
and waives, to the extent it may effectively do so, any objection which it may
have now or hereafter to the laying of the venue of any such suit, action or
proceeding, and irrevocably submits to the jurisdiction of any such court in
any such suit, action or proceeding.
(b) The Lessor hereby (i) irrevocably designates, appoints
and empowers CT Corporation System, 1633 Broadway, New York, New York 10019 as
its agent to receive for and on its behalf service of process in said County in
any such suit, action or proceeding, (ii) agrees that (x) service of any and
all process which may be served in any such suit, action or proceeding in any
such court may be made by (1) service on such agent, with a copy to the Lessor
at the address set forth in Section 10.1 of this Agreement or (2) mailing by
registered or certified mail, postage prepaid, return receipt requested, to
such address, (y) either of (1) or (2) above shall be deemed in every respect
effective service of process upon the Lessor in any such suit, action or
proceeding and shall be taken and held to be valid personal service upon the
Lessor, whether or not Lessor shall then be doing, or at any time shall have
done, business within the State of New York, and (z) any such service of
process shall be of the same force and validity as if service were made upon it
according to the laws governing the validity and requirements of such service
in such State, and waives all claim or error by reason of any such service.
(c) The Construction Manager hereby (i) irrevocably
designates, appoints and empowers CT Corporation System, 1633 Broadway, New
York, New York 10019 as its agent to receive for and on its behalf service of
process in said County in any such suit, action or proceeding, (ii) agrees that
(x) service of any and all process which may be served in any such suit, action
or proceeding in any such court may be made by (1) service on such agent, with
a copy to the Construction Manager at the address set forth in Section 10.1 of
this Agreement or (2) mailing by registered or certified mail, postage prepaid,
return receipt requested, to such address, (y) either of (1) or (2) above shall
be deemed in every respect effective service of process upon the Construction
Manager in any such suit, action or proceeding and shall be taken and held to
be valid personal service upon the Construction Manager, whether or not the
Construction Manager shall then be doing, or at any time shall have done,
business within the State of New York, and (z) any such service of process
shall be of the same force and validity as if service were made upon it
according to the laws governing the validity and requirements of such service
in such State, and waives all claim or error by reason of any such service.
(d) The Lessor and the Construction Manager each agree to
take all action as may be necessary to continue the designation and appointment
of the above-specified agents (or a
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replacement agent) so that each of the Lessor and the Construction Manager
shall at all times have an agent for service of process for the above purpose
in the County designated above in this Section.
(e) Notwithstanding the foregoing, nothing contained herein
shall affect the right of any party hereto to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
any other party hereto in any other jurisdiction in which such other party may
be subject to suit. Each of the Lessor, the Construction Manager and the
Trustee agrees that final judgment (i.e., no longer appealable) in any such
action or proceeding shall be conclusive and, to the extent permitted by
applicable law, enforceable in any other jurisdiction by suit thereon, and that
such party shall institute no proceedings or take any action inconsistent with
the intent of the parties that such legal suit, action or proceeding arising
out of or based upon this Agreement, shall have the venue and governing law set
forth in this Agreement.
10.5 Amendments and Waivers. The Lessor, the Construction
Manager and the Trustee may from time to time, enter into written amendments,
supplements or modifications hereto.
10.6 Counterparts. This Agreement may be executed on any
number of separate counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
10.7 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.8 Integration. This Agreement, the Participation
Agreement and the Leased Improvements Construction Agreement represent the
entire agreement of the Lessor, the Construction Manager and the Trustee with
respect to the demolition of the Existing Improvements and the development and
construction of the Building on the Land, and there are no promises,
undertakings, representations or warranties by the Lessor, the Construction
Manager or the Trustee relative to the subject matter hereof which are not
expressly set forth or referred to herein or therein.
10.9 Headings and Table of Contents. The headings and table
of contents contained in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
46
<PAGE> 52
10.10 Security Agreement and Financing Statement Under
Uniform Commercial Code. This Agreement shall constitute a security agreement
and financing statement under the Uniform Commercial Code, as enacted in the
State of New York; and the Construction Manager, as debtor, hereby grants to
the Lessor, as secured party, a security interest in any or all of the Project
Contracts. The Construction Manager and any permitted assignee of the
Construction Manager will assist in the preparation of and execute from time to
time, alone or with the Lessor, and deliver, file and record any financing or
continuation statements, mortgages or other instruments, and do such further
acts as the Lessor may request to establish, maintain and perfect the security
interest of the Lessor in the Project Contracts and the Construction Account,
and all renewals, additions, substitutions, improvements to the same and the
proceeds thereof, and otherwise to protect the same against the rights and
interests of third parties. The terms of this Agreement shall be deemed
commercially reasonable within the meaning of the Uniform Commercial Code, as
enacted in the State of New York.
10.11 Directions of the Lessor. The Lessor hereby
acknowledges and agrees that each of the Construction Manager, the Construction
Consultant and the Trustee may, in the absence of bad faith on their respective
parts, conclusively rely upon, and in all events shall be fully protected in
relying upon, any document, instrument, certificate, opinion or direction
furnished to any of them by the Administrative Agent and otherwise conforming
to the requirements of any applicable Operative Agreement, and the Construction
Manager, the Trustee and the Construction Consultant may treat any such
document, instrument, certificate, opinion or direction as the document,
instrument, certificate, opinion or direction of the Lessor.
10.12 Liabilities and Rights of the Trustee. The Trustee is
entering into this Agreement in its capacity as Trustee under the Indenture,
and all of the rights, immunities, indemnities, and protections of the Trustee
set forth in Article Six under the Indenture shall inure to the benefit of the
Trustee hereunder. In all events, the Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer, unless it shall
be proved that the Trustee was negligent in ascertaining the pertinent facts.
10.13 Obligations Absolute and Unconditional. The
Construction Manager's obligations to make payments under this Agreement shall
be absolute and unconditional and such payments shall be made without any
abatement, suspension, deferment, reduction, setoff, counterclaim or defense
whatsoever.
47
<PAGE> 53
IN WITNESS WHEREOF, the parties hereto have caused this
Construction Management, Escrow and Development Agreement to be duly executed
and delivered by their proper and duly authorized officers as of the day and
year first above written.
REFIRST, INC.
By: /s/ Paul J. Bishop
-----------------------------
Name: Paul J. Bishop
Title: President
FIRST HAWAIIAN BANK
By: /s/ Thomas P. Huber
-----------------------------
Name: Thomas P. Huber
Title: Senior Vice President
FIRST FIDELITY BANK, N.A., PENNSYLVANIA
By: /s/ John H. Clapham
-------------------------------
Name: John H. Clapham
Title: First Vice President
48
<PAGE> 54
Schedule 1
Default Amount
<TABLE>
<CAPTION>
Payment Date Amount
- ------------------- --------------
<S> <C>
June 1, 1994 194,000,000.00
December 1, 1994 193,862,187.50
June 1, 1995 193,862,187.50
December 1, 1995 193,724,375.00
June 1, 1996 193,724,375.00
December 1, 1996 193,699,875.00
</TABLE>
<PAGE> 55
Schedule 2
Essential Design Elements
The size of the lot area (55,775 square feet)
The height of the Building (428 feet, including a 35-foot mechanical penthouse)
The number of office floors (27)
The gross building area (418,313 square feet), plus or minus a variance of 5%
The rentable building area (380,000 square feet), plus or minus a variance
of 5%.
700 parking spaces, plus or minus a variance of 5%
The size of the average typical floor plate is 14,066 gross square feet at the
16th floor. Note: Because of the configuration of the Building, the floor
plate varies from floor to floor
The configuration of the exterior building envelope, including the tower and
three-story podium
The area of the below-grade structure (278,875 square feet), plus or minus a
variance of 5%
The size of the First Hawaiian Banking Hall and Contemporary Art Museum at the
ground floor (10,000 square feet), plus or minus a variance of 5%
The size and configuration of the public open space at grade (24,000 square
feet), plus or minus a variance of 5%
The Bankers Club Private Dining facility
The size of the Health Club facility (5,451 gross square feet), plus or minus
a variance of 5%
the vertical transportation configuration (3 garage, 5 low-rise, 1 service,
1 main branch and 4 outside high-rise elevators)
<PAGE> 56
SCHEDULE 4 OMITTED
<PAGE> 57
<TABLE>
<CAPTION>
SCHEDULE S
First Hawaiian Center
Consolidated Cashflow
November 16, 1993
Line Item Description 11/16/93
Budget
<S> <C>
1.0 Building Construction $93,510,951
2.0 Demolition $5,000,000
3.0 Special Building Features
3.1 Bankers Club F F & E 2,750,000
3.2 Athletic Club F F & E 793,000
3.3 Public Space F F & E 60,000
3.4 Art 481,000
Special Features Subtotal $4,084,000
4.0 Tenant Improvement Allowance/Incentives
4.1 Base Building Tenant Improvements 14,779,000
4.2 Incentives 2,986,000
4.3 FHB TI (In Excess of Allowance)
4.1.1 Main Branch 2,333,000
4.1.2 Staff Dining 1,100,000
4.1.3 Executive Floors 3,360,000
4.1.4 Administrative Offices 1,269,000
Tenant Improvement Allowance/Incentive Subtotal $25,827,000
5.0 Soft Costs:
5.1 Due Diligence
5.1.1 Soils Analysis 74,000
5.1.2 Topographic & ALTA Surveys 10,000
5.2 Permits and Fees
5.2.1 Demolition/Building Permit 144,000
5.2.2 Water Fees 200,000
5.2.3 Sewer Fees 150,000
5.3 Design Fees
5.3.1 Architect, Electrical, Mechanical, Structural 4,923,000
5.3.2 Architect Site Representative 466,000
5.3.3 Banking Hall Programming 42,000
5.3.4 Civil Engineer 172,000
5.3.5 Traffic Engineer 20,000
5.3.6 Soils Engineer/Analysis 100,000
5.3.7 Hazardous Waste 115,000
5.3.8 Acoustical Engineer 16,000
5.3.9 Landscape Architect 145,000
5.3.10 Vertical Transportation 56,000
5.3.11 Parking Consultant 8,000
5.3.12 Curtainwall Consultant 150,000
5.3.13 Wind Tunnel Testing Consultant 58,000
5.3.14 Lighting Consultant 56,000
5.3.15 Water Features Consultant 121,000
5.3.16 Tele/Data Communications Consultant 38,000
5.3.17 Security Consultant 82,000
5.3.18 Waterproofing Consultant 45,000
5.3.19 Building Graphic Consultant 46,500
</TABLE>
<PAGE> 58
<TABLE>
<S> <C>
5.3.20 Kitchen Consultant 50,500
5.3.21 Specialty Glass Consultant 178,000
5.3.22 Stone Consultants 106,000
5.3.23 Electronic Consultant 47,000
5.3.24 Special Building Features
5.3.24.1 Bankers Center 300,000
5.3.24.2 Health Club 82,000
5.3.24.3 Banking Hall/Main Branch (2nd & 3rd) 355,000
5.3.24.4 FHB Staff Dining 171,000
5.3.24.5 FHB Administrative Offices 66,000
5.3.25 Consultant Reimbursables 1,300,000
5.4 Testing and Inspection 420,000
5.5 Marketing
5.5.1 Public Relations 150,000
5.5.2 Scale Model 176,000
5.5.3 Architectural Renderings 30,000
5.5.4 Market Analysis 214,000
5.5.5 Collateral 132,000
5.5.6 Tenant Programming/Space Planning 112,000
5.5.7 Tenant Work Letter 56,000
5.5.8 "History of Bishop Street" Book 150,000
5.6 Project Administration
5.6.1 Photography 40,000
5.6.2 Legal
5.6.2.1 Due Diligence 50,000
5.6.2.2 Contracts, Gen'l Conditions & Sec. 106 600,000
5.6.2.3 Tenant Work Letter Legal 60,000
5.6.3 Appraisals 40,000
5.6.4 Accounting 30,000
5.6.5 TMC Development Management 9,999,820
5.6.6 TMC Reimbursables 430,000
5.6.7 FHB Reimbursables 240,000
5.7 Insurance 1,240,000
5.8 Property Taxes 2,100,000
Soft Costs Subtotal $26,162,820
6.0 Financing Costs:
6.1 Title Insurance 150,000
6.2 Legal 3,000,000
6.3 Accounting 30,000
6.4 Transaction Fee 1,940,000
6.5 Moody's Fee 74,000
6.6 Standard & Poor's Fee 92,000
6.7 Printing 35,000
6.8 Trustee Fee 30,000
6.9 Reimbursables 30,000
8.10 Conveyance Tax 38,000
8.11 Construction Consultant 216,000
8.12 Rating Agencies Annual Fees 39,888
8.13 Trustee's Annual Fees 55,704
8.14 Mortgage Recordation Tax 360,000
Financing Costs Subtotal $6,090,592
</TABLE>
<PAGE> 59
<TABLE>
<S> <C>
7.0 Project Contingency $6,135,444
Total Project Costs $166,810,807
Projected Cumulative Outflow
Actual Cumulative Outflow $166,832,193
8.0 Interest
8.1 Interest: Purchase Stripped Treasuries 37,748,000
8.2 Projected Swap Income (10,580,193)
Interest Expense Subtotal $27,167,807
Grand Total Project Costs $193,978,614
Projected Cumulative Outflow
Actual Cumulative Outflow $194,000,000
</TABLE>
<PAGE> 60
EXHIBIT A
First Hawaiian Center
Building Construction Categories
<TABLE>
<S> <C> <C>
Division 1 GENERAL CONDITIONS 7,944,725
Division 2 SITEWORK 10,452,645
02050 Demolition and Removal
02140 Dewatering
02150 Permanent Prestressed Tock Anchors
02200 Earthwork (including shoring system)
02280 Soil Treatment and Subterranean Termite Control
02400 Storm Drainage System
02500 Paving and Surfacing
02501 Pavement Marking and Signage
02510 Concrete Sidewalks, Curbs and Gutters
02515 Precast Concrete Pavers
02517 Stone Paving/Feature Stone
02718 Water System
02722 Sanitary Sewer System
02810 Landscape Irrigation System
02900 Landscaping
Division 3 CONCRETE 16,344,068
03100 Concrete Formwork
03200 Concrete Reinforcement
03250 Waterstop
03300 Cast in Place Concrete
03345 Cementitious Crystalline Waterproofing
Division 4 MASONRY 1,506,830
04220 Concrete Masonry Unit
04400 Exterior Hand Set Stone Cladding
04401 Interior Stone Cladding
04402 Stone Counters
Division 5 METALS 9,644,049
05120 Structural Steel
05300 Metal Decking
05500 Miscellaneous Metals
05510 Metal Stairs
05700 Ornamental Metals/Metal Ceilings
Division 6 WOOD AND PLASTICS 158,131
06200 Carpentry
06400 Architectural Woodwork
06600 Fiberglass Reinforced Fabrication
</TABLE>
<PAGE> 61
<TABLE>
<S> <C> <C>
Division 7 THERMAL & MOISTURE 2,723,481
07110 Exterior Concrete Elastomeric Waterproofing
07120 Fluid Applied Membrane Waterproofing
07136 Composits Bentonite Waterproofing System
07200 Building Insulation
07253 Sprayed-on Fireproofing
07271 Firestops and Smokeseals
07552 Fluid Applied Protected Membrane Roofing
07575 Fluid Applied Membranes
07579 Penetrating Sealers for Concrete
07600 Sheet Metal Work
07700 Roof Specialties and Accessories
07900 Joint Sealers
07910 Miscellaneous Joint Fillers
Division 8 DOORS AND WINDOWS 14,958,466
08100 Metal Doors and Frames
08200 Wood Doors
08300 Access Doors
08330 Roll Up doors
08340 Roll Up Grilles
08411 Glazed Entrances and Storefronts
08700 Finish Hardware
08800 Miscellaneous Glass and Glazing
08900 Glazed Curtainwall (Includes Assoc. Stone Cladding)
08910 Art Glass Wall
Division 9 FINISHES 7,243,326
09200 Lathing and Plastering
09250 Gypsum Drywall
09310 Tile Work
09510 Acoustic Panel Ceilings
09600 Stone Flooring
09660 Resilient Tile Flooring
09685 Carpeting (Tackless)
09900 Painting and Finishing
Division 10 SPECIALTIES 783,464
10160 Ceiling Mounted Toilet Partitions
10200 Aluminum Louvers
10400 Identifying Devices
10522 Fire Extinguishers and Cabinets
10800 Toilet Accessories
Division 11 EQUIPMENT 65,454
11012 Window Washing Equipment
11150 Parking Control Equipment
11160 Loading Dock Equipment
Division 13 SPECIAL CONSTRUCTION 520,657
13150 Electrical: Fountains and Waterways
13151 Plumbing: Fountains and Waterways
Division 14 CONVEYING SYSTEM 4,185,088
14100 Dumb Waiter
</TABLE>
<PAGE> 62
<TABLE>
<S> <C> <C>
14200 Elevators (Include Cab Finish)
Division 15 MECHANICAL 6,421,928
15060 Piping and Accessories (Includes valves)
15160 Pumps
15240 Sound Vibration and Siesmis Control
15250 Mechanical Insulation
15320 Fire Pump System
15330 Wet Pipe Sprinkler & Dry Standpipe System
15400 Plumbing
15440 Plumbing Fixtures
15611 Fuel System
15655 Packaged Cooling System
15680 Water Chillers
15710 Cooling Towers
15720 Water Treatment
15850 Air Handling Equipment
15870 Dampers
15880 Air Distribution
Section 16 ELECTRICAL 3,860,595
16050 Electrical: Basic Materials and Methods
16400 Electrical: Service and Distribution
16500 Luminaires
16612 Diesel Engine Standby Power Plant
16720 Fire Alarm and Detection System
Division 17 SECURITY 347,104
17200 Point Monitoring & Access Control System (PMAC)
17200 Closed Circuit Television (CCTV)
17200 Intercom
17200 Console Construction
17200 Wires & Cables
Division 18 BUILDING AUTOMATION SYSTEM 842,968
18050 Building Automation System
PERFORMANCE BOND 541,483
CONTRACTOR'S FEE 4,428,080
G.I. TAX @ 4.17% 538,508
----------
TOTAL 93,510,951
</TABLE>
<PAGE> 63
SCHEDULE 6 OMITTED
<PAGE> 64
SCHEDULE 7 OMITTED
<PAGE> 65
SCHEDULE 8 OMITTED
<PAGE> 66
SCHEDULE 9 OMITTED
<PAGE> 67
SCHEDULE 10
Termination Amount
<TABLE>
<CAPTION>
Payment Date Amount
- ------------------ ---------------
<S> <C>
June 1, 1994 194,000,000.00
December 1, 1994 193,862,187.50
June 1, 1995 193,862,187.50
December 1, 1995 193,724,375.00
June 1, 1996 193,724,375.00
December 1, 1996 193,699,875.00
</TABLE>
<PAGE> 68
SCHEDULE 11 OMITTED
<PAGE> 69
SCHEDULE 12 OMITTED
<PAGE> 70
SCHEDULE 13
Assumed Earnings on Construction Account
<TABLE>
<S> <C>
January 1, 1994 $490,854
February 1, 1994 483,848
March 1, 1994 470,923
April 1, 1994 465,996
May 1, 1994 459,198
June 1, 1994 453,386
July 1, 1994 447,672
August 1, 1994 439,165
September 1, 1994 431,873
October 1, 1994 423,160
November 1, 1994 414,416
December 1, 1994 403,812
January 1, 1995 393,204
February 1, 1995 381,711
March 1, 1995 367,434
April 1, 1995 355,044
May 1, 1995 342,576
June 1, 1995 327,504
July 1, 1995 313,291
August 1, 1995 296,096
September 1, 1995 280,060
October 1, 1995 265,688
November 1, 1995 251,204
December 1, 1995 236,768
January 1, 1996 223,868
February 1, 1996 209,866
March 1, 1996 197,997
April 1, 1996 186,838
May 1, 1996 173,529
June 1, 1996 159,431
July 1, 1996 140,783
August 1, 1996 120,639
September 1, 1996 99,037
October 1, 1996 78,321
November 1, 1996 57,486
December 1, 1996 39,521
</TABLE>
<PAGE> 71
SCHEDULE 14 OMITTED
<PAGE> 1
EXHIBIT 10(v)
GROUND LEASE
DATED AS OF DECEMBER 1, 1993
AMONG FIRST HAWAIIAN CENTER LIMITED PARTNERSHIP,
FH CENTER, INC. AND REFIRST, INC.
<PAGE> 2
____________________________________________________________________
GROUND LEASE
DATED AS OF DECEMBER 1, 1993
BY AND BETWEEN
FIRST HAWAIIAN CENTER LIMITED PARTNERSHIP
A HAWAII LIMITED PARTNERSHIP,
FH CENTER, INC.,
A HAWAII CORPORATION,
COLLECTIVELY, GROUND LESSOR
AND
REFIRST, INC.
A DELAWARE CORPORATION,
AS GROUND LESSEE.
FIRST HAWAIIAN CENTER
HONOLULU, HAWAII
____________________________________________________________________
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C> <C>
ARTICLE I
DEFINITIONS
Section 1.01. General Definitions . . . . . . . . . . 2
Section 1.02. Additional Rental . . . . . . . . . . . 2
Section 1.03. Basic Ground Lease Rent . . . . . . . . . 2
Section 1.04. Closing Date . . . . . . . . . . . . . . 2
Section 1.05. Default Rate . . . . . . . . . . . . . . 2
Section 1.06. Ground Lease Rent . . . . . . . . . . . . 2
Section 1.07. Ground Lease Term . . . . . . . . . . . . 2
Section 1.08. Ground Lease Year . . . . . . . . . . . . 2
Section 1.09. Ground Lessee's Default . . . . . . . . 3
Section 1.10. Ground Lessor's Default . . . . . . . . . 4
Section 1.11. Lease . . . . . . . . . . . . . . . . . . 4
Section 1.12. Leasehold Mortgage . . . . . . . . . . . 4
Section 1.13. Leasehold Term . . . . . . . . . . . . . 4
Section 1.14. Leasehold Mortgagee . . . . . . . . . . 4
Section 1.16. Permitted Exceptions . . . . . . . . . . 5
Section 1.17. Real Estate Taxes . . . . . . . . . . . 5
ARTICLE II
GRANTING CLAUSE
Section 2.01. Grant . . . . . . . . . . . . . . . . . . . 5
Section 2.02. Restated Ground Lease Provisions . . . . . 6
ARTICLE III
RENTAL PAYMENTS
Section 3.01. Basic Ground Lease Rent . . . . . . . . . . 6
Section 3.02. Interest . . . . . . . . . . . . . . . . . 6
Section 3.03. Method of Payment . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C> <C>
ARTICLE IV
CONDEMNATION AND CASUALTY
Section 4.01. Termination Upon a Casualty or
Condemnation . . . . . . . . . . . . . 7
Section 4.02. Application of Payment . . . . . . . . . 7
Section 4.03. Temporary Taking . . . . . . . . . . . . 7
ARTICLE V
USE OF SITE
Section 5.01. Use of Site . . . . . . . . . . . . . . . 8
ARTICLE VI
IMPROVEMENTS
Section 6.01. Improvements
Section 6.02. Free From Liens . . . . . . . . . . . . . 8
Section 6.03. Reversion of Title to Building . . . . . 9
ARTICLE VII
INSURANCE
Section 7.01. Reconstruction Obligation . . . . . . . . 9
Section 7.02. Insurance . . . . . . . . . . . . . . . . 9
Section 7.03. Exculpation and Indemnification . . . . . 9
Section 7.04. Distribution of Property Insurance
Proceeds . . . . . . . . . . . . . . . 9
ARTICLE VIII
SURRENDER
Section 8.01. Surrender . . . . . . . . . . . . . . . . 10
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C> <C>
ARTICLE IX
ASSIGNMENT; SUBLETTING
Section 9.01. By the Ground Lessor . . . . . . . . . . 10
Section 9.02. By the Ground Lessee . . . . . . . . . . 11
ARTICLE X
FINANCING
Section 10.01. The Ground Lessee's Right to Obtain
Financing . . . . . . . . . . . . . . . 12
Section 10.02. Limitations on Financing . . . . . . . . . 12
Section 10.03. Leasehold Mortgage; No Assumption By
Noteholders . . . . . . . . . . . . . . 12
Section 10.04. Notification of the Ground Lessor . . . . 13
Section 10.05. Rights of Holders of Indebtedness . . . . 13
Section 10.06. New Lease with Noteholders upon
Termination . . . . . . . . . . . . . . 15
Section 10.07. Consent to Modification . . . . . . . . . 16
ARTICLE XI
REMEDIES
Section 11.02. Default by the Ground Lessor . . . . . . . 17
Section 11.03. No Waiver . . . . . . . . . . . . . . . . 17
Section 11.04. Force Majeure . . . . . . . . . . . . . . 17
ARTICLE XII
WARRANTIES
Section 12.01. Quiet Enjoyment . . . . . . . . . . . . . 17
Section 12.02. Indemnity . . . . . . . . . . . . . . . . 18
Section 12.03. Covenants of the Ground Lessor . . . . . . 18
</TABLE>
iii
<PAGE> 6
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C> <C>
ARTICLE XIII
NET LEASE
Section 13.01. Net Lease . . . . . . . . . . . . . . . . 18
ARTICLE XIV
LIMITED LIABILITY
Section 14.01. Limited Liability . . . . . . . . . . . . 18
ARTICLE XV
MISCELLANEOUS
Section 15.01. No Agency or Partnership . . . . . . . . . 19
Section 15.02. Estoppel Certificates . . . . . . . . . . 19
Section 15.03. Headings . . . . . . . . . . . . . . . . . 20
Section 15.04. Notice . . . . . . . . . . . . . . . . . . 20
Section 15.05. Governing Law . . . . . . . . . . . . . . 20
Section 15.06. Severability of Provisions . . . . . . . . 20
Section 15.07. Amendment; Expansion of Site . . . . . . . 20
Section 15.08. Multiple Counterparts . . . . . . . . . . 20
Section 15.09. Successors and Assigns . . . . . . . . . . 20
Section 15.10. Attorney's Fees . . . . . . . . . . . . . 21
Section 15.11. Attornment and Non-Disturbance
Agreements . . . . . . . . . . . . . . . 21
Section 15.12. Non-Merger . . . . . . . . . . . . . . . . 21
Section 15.13. Inspection . . . . . . . . . . . . . . . . 21
Section 15.14. Further Assurances and Cooperation . . . . 22
<S> <C>
Exhibit A: . . . . Portion of Site owned by the Partnership
---------
Exhibit B: . . . . . . . . . Portion of Site owned by Center
---------
Exhibit C: . . . . . . . . . . . . . . Permitted Exceptions
---------
</TABLE>
iv
<PAGE> 7
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
Exhibit D: . . . . . . . . . . . . . . . Restated Ground Lease
---------
</TABLE>
v
<PAGE> 8
GROUND LEASE
Ground Lease (this "Ground Lease") dated as of December 1, 1993, by
and between FH CENTER LIMITED PARTNERSHIP, a Hawaii limited partnership (the
"Partnership"), and FIRST HAWAIIAN CENTER, INC., a Hawaii corporation ("Center"
and together with the Partnership being collectively referred to as the "Ground
Lessor"), as ground lessors, and REFIRST, INC., a Delaware corporation (the
"Ground Lessee), as ground lessee.
WHEREAS, the Partnership is the owner of the property described in
Exhibit A attached hereto and made a part hereof, and Center is the owner of
the property described in Exhibit B attached hereto and made a part hereof
(collectively, the "Site"); and
WHEREAS, this lease of the Site is being made by the Ground Lessor to
the Ground Lessee (a) subject to a reservation by the Ground Lessor of all
buildings and other improvements existing on the Site as of the date hereof
(the "Existing Improvements"), (b) to permit Ground Lessee to cause the
demolition and removal of the Existing Improvements and the development on the
Site of an office building to be known as "First Hawaiian Center" (the
"Building"), (c) to permit Ground Lessee to enter into a further sublease of
the Site and a lease of the Building with First Hawaiian Bank, a Hawaii
corporation ("FHB"), (d) to enable FHB to finance the demolition of the
existing buildings on the Site and the construction of the Building by issuing
certain notes (the "Notes") pursuant to an indenture (the "Indenture") between
FHB and the indenture trustee (the "Trustee") and (e) to enable FHB to secure
repayment of the Notes pursuant to a real property mortgage, financing
statement and security agreement (the "Mortgage"), from FHB to the Trustee
(the "Mortgagee") covering this Lease and FHB's interest in the Building; and
WHEREAS, the Ground Lessee desires to lease the Site from the Ground
Lessor and the Ground Lessor agrees to lease the Site to the Ground Lessee, on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Ground Lessor and the
Ground Lessee, intending to be legally bound hereby, agree as follows:
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ARTICLE I
Definitions
SECTION 1.01. GENERAL DEFINITIONS. For the purposes of this Ground
Lease, capitalized terms used in this Ground Lease and not otherwise defined in
this Article I or otherwise in this Ground Lease shall have the meanings
assigned to them in the Participation Agreement, dated as of November 19, 1993
by and among FHB, Ground Lessee, Partnership, Center, and the Trustee (the
"Participation Agreement"). Unless otherwise indicated, references in this
Ground Lease to articles, sections, paragraphs, clauses, appendices, schedules
and exhibits are to the same contained in or attached to this Ground Lease.
SECTION 1.02. ADDITIONAL RENTAL. "Additional Rental" means all
payments due from the Ground Lessee to the Ground Lessor under this Ground
Lease other than under Section 3.03 and other than Basic Ground Lease Rent.
SECTION 1.03. BASIC GROUND LEASE RENT. "Basic Ground Lease Rent"
shall have the meaning assigned in Section 3.01.
SECTION 1.04. CLOSING DATE. "Closing Date" means December 1, 1993.
SECTION 1.05. DEFAULT RATE. "Default Rate" shall have the meaning
assigned in Section 3.03.
SECTION 1.06. GROUND LEASE RENT. "Ground Lease Rent" means all
payments of Basic Ground Lease Rent and Additional Rental due from the Ground
Lessee to the Ground Lessor under the terms and provisions of this Ground
Lease.
SECTION 1.07. GROUND LEASE TERM. "Ground Lease Term" means the entire
term of this Ground Lease, which shall begin on the Closing Date and end on
the date which is the 99th anniversary of the day prior to the Closing Date,
which date is November 30, 2092, subject to the extension or earlier
termination of this Ground Lease in accordance with the provisions hereof.
SECTION 1.08. GROUND LEASE YEAR. "Ground Lease Year" means, with
respect to the first Ground Lease Year, the period commencing on the Closing
Date and ending on the last day of the calendar year in which the Closing Date
occurs, and, with respect to each subsequent Ground Lease Year, each successive
calendar year thereafter (or, with respect to the last Ground Lease Year, the
part thereof).
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SECTION 1.09. GROUND LESSEE'S DEFAULT. "Ground Lessee's Default"
means the occurrence of any one or more of the following events:
(a) default by the Ground Lessee in the payment of any
Ground Lease Rent as and when the same shall be due and payable, and
the failure of the Ground Lessee to cure such default within 30 days
after delivery of a written notice from the Ground Lessor to the
Ground Lessee specifying such default and requesting that it be
remedied;
(b) default by the Ground Lessee in the observance or
performance of any of the other covenants, agreements, or obligations
to be performed by the Ground Lessee under the terms and provisions of
this Ground Lease, and the failure of the Ground Lessee to cure
such default within 60 days after delivery of written notice from
the Ground Lessor to the Ground Lessee specifying such default and
requesting that it be remedied; provided, that if such default is
capable of being remedied and is not so remedied within such 60-day
period, no Ground Lessee's Default shall be deemed to have occurred if
the Ground Lessee or its sublessee commences actions to remedy such
default within such 60-day period and thereafter diligently and
continuously pursues such remedial actions until such default is
cured; and
(c) the commencement by the Ground Lessee of a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under bankruptcy,
insolvency or other similar law now or hereafter in effect, or the
seeking of the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, or the consent by the Ground Lessee to any such relief
or to the appointment of or taking of possession by any such official
in an involuntary case or other proceeding commenced against it, or
the making of a general assignment for the benefit of creditors, or
the taking of any action to authorize any of the foregoing; or a
decree or order for relief being entered by a court having
jurisdiction over the Ground Lessee in any involuntary case under any
bankruptcy, insolvency or other similar law now or hereafter in effect
or appointing a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of property, or
ordering the winding-up or liquidation of the affairs of either of
them, and such decree or order shall remain undismissed or unstayed
for a period of 180 consecutive days;
provided, however, that (i) none of the foregoing events or conditions set
forth in clause (a) or in this Section 1.09 shall constitute a Ground Lessee's
Default if such event or condition results from any failure on the part of the
Ground Lessor or FHB to perform or observe or have performed or observed any of
their respective
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covenants, conditions, agreements, obligations, representations or warranties
required by them to be performed under the Ground Lease or the Lease, or
results from any default by the Ground Lessor or FHB under any of the Operative
Agreements, and (ii) none of the foregoing events or conditions set forth in
clause (a) or (b) in this Section 1.09 shall constitute a Ground Lessee's
Default so long as any Ground Lessor's Default has occurred and is continuing
under this Ground Lease, any Lease Default exists or any Lease Event of Default
has occurred and is continuing, or any default by the Ground Lessor or FHB of
their respective obligations under the other Operative Agreements has occurred
or is continuing (it being understood and agreed that the Ground Lessee and any
assignee of the Ground Lessee shall not be required to cure or remedy any such
event occurring or condition caused by the Ground Lessor or FHB existing on or
prior to the Lease Conversion Date).
SECTION 1.10. GROUND LESSOR'S DEFAULT. "Ground Lessor's
Default" means a default by the Ground Lessor in the observance or performance
of any of the covenants, agreements or obligations to be performed by the
Ground Lessor hereunder and the failure of the Ground Lessor to cure such
default within 60 days after delivery of a written notice from the Ground
Lessee to the Ground Lessor specifying such default and requesting that it be
remedied provided, that if such default is capable of being remedied but is
not capable of being remedied within such 60-day period, no Ground Lessor's
Default shall be deemed to have occurred if the Ground Lessor commences actions
to remedy such default within such 60-day period and thereafter diligently and
continuously pursues such remedial actions until such default is cured.
SECTION 1.11. LEASE. "Lease" means the Lease Agreement of
even date herewith between Ground Lessee, as lessor, and FHB, as lessee,
leasing the Building and subleasing the Site, substantially in the form of
Exhibit C to the Participation Agreement, as the same may be amended, modified
or supplemented from time to time in accordance with the provisions thereof.
SECTION 1.12. LEASEHOLD MORTGAGE. "Leasehold Mortgage" shall
have the meaning assigned in Section 11.03.
SECTION 1.13. LEASEHOLD TERM. "LEASE TERM" SHALL MEAN THE
TERM OF THE LEASE.
SECTION 1.14. LEASEHOLD MORTGAGEE. "Leasehold Mortgagee" shall
have the meaning assigned in Section 11.03.
SECTION 1.15. LEASE CONVERSION DATE. "Lease Conversion Date"
shall mean the earlier to occur of (i) the expiration of the then current term
or renewal term of the Lease or the earlier termination of the Lease other than
pursuant
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to Article XVII of the Lease and (ii) after the occurrence of a Lease Event of
Default and a termination of the Lease by the Ground Lessee or the Trustee or
any other Leasehold Mortgagee, the earlier to occur of (w) the date which, but
for such termination, would otherwise be the date of the event set forth in the
previous clause (i), (x) the foreclosure by the Trustee or any other
Leasehold Mortgagee on the Ground Lessee's interest in the Building and the
Site, (y) the transfer of the Site by deed-in-lieu of foreclosure, or (z) any
refinancing or restructuring of the debt evidenced by the Notes.
SECTION 1.16. PERMITTED EXCEPTIONS. "Permitted Exceptions"
means those exceptions to title to the Site listed on Exhibit C attached
hereto and made a part hereof.
SECTION 1.17. REAL ESTATE TAXES. "Real Estate Taxes" means
any and all ad valorem taxes, special assessments and other governmental
charges of any kind or character which may, at any time during the Ground Lease
Term, be assessed against the Site and the Building or any part thereof
(including any taxes, assessments or other governmental charges which may be
levied or assessed against the Site and the Building or any part thereof in the
future, whether similar or dissimilar to currently existing ad valorem taxes,
assessments and governmental charges including, but not limited to, taxes
assessed against the Ground Lessor relating to the receipt of Ground Lease Rent
described below) by any state, city, county or municipal taxing authority
having jurisdiction thereof; in all cases inclusive of penalties and interest.
The term "Real Estate Taxes" shall not include any income taxes imposed against
the Ground Lessor or against the Ground Lease Rent under any current or future
laws of the United States, any state or any political subdivision or taxing
authority thereof; any sales, excise, use or similar taxes payable by the
Ground Lessor; any corporate franchise tax or similar tax or fee payable by the
Ground Lessor, nor any other tax or charge payable by the Ground Lessor unless
and to the extent that such tax or taxes are a substitute, in whole or in part,
for the imposition of current Real Estate Taxes and otherwise fully comply with
the definition thereof.
ARTICLE II
GRANTING CLAUSE
SECTION 2.01. GRANT. In consideration of the terms, covenants
and conditions set forth in this Ground Lease, the Ground Lessor does hereby
lease, demise and let unto the Ground Lessee, and the Ground Lessee does hereby
take and lease from the Ground Lessor, the Site and all easements and rights
that are appurtenant to the fee interest in the Site (the "Easements"), TO HAVE
AND TO HOLD the Site and all such easements and rights that are appurtenant to
the fee
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interest in the Site, for the Ground Lease Term, subject to the Permitted
Exceptions. It is the express intention of the Ground Lessor and the Ground
Lessee that: (x) this Ground Lease and the Site, which is the subject of this
Ground Lease, does not include the Existing Improvements, inasmuch as title to
the Existing Improvements is being retained by the Ground Lessor.
SECTION 2.02. RESTATED GROUND LEASE PROVISIONS. From and
after the Lease Conversion Date, the terms and conditions of this Ground
Lease shall be and become the terms and conditions set forth in Exhibit D
attached hereto and made a part hereof (the "Restated Ground Lease"). It is the
intent of the parties that on the Lease Conversion Date this Ground Lease shall
be restated in its entirety and the provisions of Exhibit D shall take effect
and constitute the Ground Lease in substitution for the terms and conditions of
the Ground Lease in effect from the Closing Date until the Lease Conversion
Date.
ARTICLE III
RENTAL PAYMENTS
SECTION 3.01. BASIC GROUND LEASE RENT. Basic Rent. The Ground
Lessee hereby covenants and agrees to pay rent ("Basic Ground Lease Rent"),
over and above all other charges herein set forth, as follows:
(a) No Rent During Term of the Lease. Prior to
the Lease Conversion Date, Ground Lessee shall pay no rent for the Site.
(b) After Termination of the Lease. From and
after the Lease Conversion Date, the annual rental payable under this
Ground Lease from and after such Lease Conversion Date shall be as set forth in
the Restated Ground Lease.
SECTION 3.02. INTEREST. Upon the occurrence of a Ground
Lessee's Default under Section 1.09(a) (except for nonpayment of Additional
Rental), the Ground Lessor shall be entitled to collect from the Ground Lessee
interest on the unpaid Ground Lease Rent from the date when due until the date
paid at a rate per annum equal to the Lessor Overdue Rate (the "Default Rate").
In the event that any Additional Rental is not paid when due and remains unpaid
for a period of ten Business Days after written notice of such failure to pay
is delivered to the Ground Lessee, the Ground Lessor shall be entitled to
collect from the Ground Lessee interest thereon from the date such written
notice is delivered to Ground Lessee until the date paid at a rate per annum
equal to the Default Rate.
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SECTION 3.03. METHOD OF PAYMENT. Each payment of Ground Lease
Rent shall be made in immediately available funds no later than 12:00 noon
local time at the place of receipt and shall be paid to the Ground Lessor at
its address specified in the Participation Agreement or at any other address so
given to the Ground Lessee in the manner provided in Section 17.04.
Nonetheless, the Ground Lessee shall be accorded a one-day grace period should
it fail to cause Ground Lease Rent to be received as described in the
immediately preceding sentence if such failure could not have been reasonably
anticipated and corrected. Any payment that is due on either a day that is not
a Business Day or a day on which banks in the place of receipt are not
generally open for business may instead be made on the next succeeding day that
is both a Business Day and a day on which banks in the place of receipt are
generally open for business; and, notwithstanding Section 3.02, no interest
shall accrue for the intervening period, nor in respect of any payments made in
compliance with the above-described one-day grace period.
ARTICLE IV
CONDEMNATION AND CASUALTY
SECTION 4.01. TERMINATION UPON A CASUALTY OR CONDEMNATION. If,
during the Ground Lease Term and when the Lease is in effect, the Ground Lessee
has received written notice from FHB that FHB has declared a Significant
Casualty or a Significant Condemnation, and the Ground Lessee has given written
notice to the Ground Lessor that the Ground Lessee intends to terminate this
Ground Lease, this Ground Lease shall terminate on the Lease Conversion Date,
and all the obligations of Ground Lessee hereunder, including its obligation to
pay Ground Lease Rent, arising after the occurrence of such Significant
Casualty or Significant Condemnation shall terminate.
SECTION 4.02. APPLICATION OF PAYMENT. Any amount received at
any time by the Ground Lessor or the Ground Lessee from any Governmental
Authority or other Person as a result of any Condemnation or Casualty shall be
applied in accordance with the provisions of the Lease (and shall be paid over
by the recipient to the Persons entitled thereto under the Lease).
SECTION 4.03. TEMPORARY TAKING. If all or only a part of the
Site is taken for any public or quasi-public use or purpose by virtue of
eminent domain or by private sale in lieu thereof (which taking does not
constitute a Significant Casualty or a Significant Condemnation) for a definite
or indefinite period which is less than the then unexpired portion of the
Ground Lease Term, this Ground Lease shall remain in full force and effect and
the Basic Ground Lease Rent payable to the Ground Lessor hereunder, if any,
shall not be reduced. Any amount received at any time by the
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Ground Lessor or the Ground Lessee from any Governmental Authority or other
Person as a result of the occurrence of any such event shall be applied (i) in
accordance with the provisions of the Lease (and shall be paid over by the
recipient to the Persons entitled thereto under the Lease) if such event occurs
on or prior to the Lease Conversion Date or (ii) in accordance with the
Restated Ground Lease if such event occurs after the Lease Conversion Date.
ARTICLE V
USE OF SITE
SECTION 5.01. USE OF SITE. The Ground Lessee may, during the
Lease Term, use the Site for commercial office and retail purposes or any other
use permitted by applicable Legal Requirements. Use of the Building and any
other improvements are not and shall not be governed by this Ground Lease. The
Ground Lessee may, after the Lease Conversion Date, use the Site for any use
permitted by the Restated Ground Lease.
ARTICLE VI
IMPROVEMENTS
SECTION 6.01. IMPROVEMENTS. The Ground Lessee shall have the
right to remove, repair, replace, modify, maintain, rebuild and construct
improvements on the Site subject to the provisions of the Lease.
SECTION 6.02. FREE FROM LIENS. The Ground Lessee covenants and
agrees that during the Ground Lease Term, the Site will be free and clear of
all Liens, excepting Liens of the type described in clauses (i), (iii), (iv)
and (v) of Section 12.1(a) of the Lease, such mortgage Lien or Liens as are
expressly permitted under the provisions of this Ground Lease and the Leasehold
Mortgage, and such Liens that are caused by the Ground Lessor or to which the
Ground Lessor has consented. The Ground Lessee will conform to and observe all
applicable Legal Requirements; provided that the Ground Lessee may in good
faith contest any such Legal Requirements so long as such contest or
noncompliance does not involve (A) any danger of (1) foreclosure, forfeiture
or loss of the Building or the Site or (2) criminal liability being imposed on
the Ground Lessor or (B) any substantial danger of (1) the sale of, or the
creation of any Lien (other than a Liens of the type described in clauses (i),
(iii), (iv) and (v) of Section 12.1(a) of the Lease) on, the Building or the
Site, (2) material civil liability being imposed on the Ground Lessor or (3)
the extension of the ultimate imposition of such Legal Requirements beyond the
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last day of the Ground Lease Term. The Ground Lessee shall provide the Ground
Lessor with notice of any contest of the type described in clause (A) above in
detail sufficient to enable the Ground Lessor to ascertain whether such contest
may have any material adverse effect of the type described in the above
proviso.
SECTION 6.03. REVERSION OF TITLE TO BUILDING. Title to and
ownership of all portions of the Building and any other improvements existing
on the Site which have not theretofore been removed from the Site by the Ground
Lessee in accordance with Section 7.01 shall, upon expiration or valid
termination of this Ground Lease, revert to and vest in the Ground Lessor. At
the expiration or valid termination of this Ground Lease, the parties, at the
Ground Lessor's sole cost and expense, will execute a recordable instrument
confirming such termination.
ARTICLE VII
INSURANCE
SECTION 7.01. RECONSTRUCTION OBLIGATION. In no event shall
the Ground Lessor have any liability or responsibility whatsoever for
rebuilding, reconstructing or replacing any portion of the Building.
SECTION 7.02. INSURANCE. During the Lease Term, the Ground
Lessee shall have no obligation to maintain any insurance with respect to the
Site or the Building and Lessee shall carry any such insurance as is required
under the Lease and the Construction Management Agreement.
SECTION 7.03. EXCULPATION AND INDEMNIFICATION. The Ground
Lessor shall not be liable to the Ground Lessee or to the Ground Lessee's
agents, servants, employees, customers or invitees for any damage to person or
property caused by any act, omission or neglect of the Ground Lessee, its
agents, servants or employees, nor shall the Ground Lessor be liable for any
loss, cost, expense or claim arising out of the ownership of the Site or
operation of the Building, except to the extent such claims are based upon the
willful acts or gross negligence of the Ground Lessor. Prior to the Lease
Conversion Date, the Ground Lessee shall not be liable to the Ground Lessor or
to the Ground Lessor's agents, servants, employees, customers or invitees for
any damage to person or property caused by any act, omission or neglect of the
Ground Lessor, its agents, servants or employees, and the Ground Lessor agrees
to indemnify and hold the Ground Lessee harmless from any such claims or
liabilities.
SECTION 7.04. DISTRIBUTION OF PROPERTY INSURANCE PROCEEDS.
During the Lease Term, all proceeds from policies of insurance shall be
distributed in
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accordance with the terms of the Lease and thereafter in accordance with the
terms of the Restated Ground Lease.
ARTICLE VIII
SURRENDER
SECTION 8.01. SURRENDER. The Ground Lessee shall, at the end
of the Ground Lease Term or upon any termination of this Ground Lease at any
other time, deliver up and surrender the Site to the Ground Lessor free and
clear of any Liens created by or consented to by the Ground Lessee (except for
Liens of the type described in clauses (i), (iii), (iv) and (v) of Section
12.1(a) of the Lease) and in compliance with material applicable Legal
Requirements; provided, however, that the Ground Lessee shall have no
obligation to comply with any applicable Legal Requirement that pertains to a
condition of the Site or the improvements thereon or with the use or occupancy
of the Site or the improvements thereon which existed on the Lease Conversion
Date (unless (i) the Site and such improvements, in the absence of such
compliance and assuming such improvements remain unused and unoccupied, would
constitute a clear and present danger to health or safety or (ii) any removal
by the Ground Lessee of building systems or other portions of the Building
shall have caused material structural damage to the Building).
ARTICLE IX
ASSIGNMENT; SUBLETTING
SECTION 9.01. BY THE GROUND LESSOR. The Ground Lessor may
sell or assign its fee simple title to the Site, in each case subject and
subordinate to this Ground Lease and the other Operative Agreements to which
the Ground Lessor is a party or which encumber the Site, to any Person and
assign its rights and delegate its obligations under this Ground Lease to such
Person without the consent of the Ground Lessee; provided, that such sale or
assignment is permitted under the Participation Agreement and any other
Operative Document. Before any such sale or assignment shall become effective,
the Ground Lessor shall provide the Ground Lessee with the following:
(A) a representation and warranty by such Person that
this Ground Lease and, prior to the Lease Conversion Date, any other
Operative Agreements to which the Ground Lessor is a party will, upon
the consummation of the sale or assignment, be the valid, legal and
binding obligations of such Person; and
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(B) an opinion of counsel (which counsel may be an
employee of such Person or an Affiliate thereof), addressed to the
Ground Lessee, in form and substance reasonably satisfactory to each
of the Ground Lessee and any Leasehold Mortgagee, that (i) such Person
is a corporation or other legal entity in good standing in the state
of its incorporation or formation and is qualified to do business in
the State of Hawaii and (ii) this Ground Lease and, prior to the
Lease Conversion Date, any other Operative Agreements to which the
Ground Lessor is a party will, upon the consummation of the sale or
assignment, be the valid, legal and binding obligations of such
Person.
After the Lease Conversion Date, subject to the provisions of
the Restated Ground Lease, the Ground Lessor may grant a mortgage secured by
its fee simple interest in the Site without the consent of the Ground Lessee,
but subject and subordinate in any case to this Ground Lease and any other
Operative Agreements to which the Ground Lessor is a party.
SECTION 9.02. BY THE GROUND LESSEE. At any time, from time to
time, during the Ground Lease Term, the Ground Lessee, in addition to its
rights under Article X, may mortgage, assign or pledge this Ground Lease, in
whole or in part, to the Trustee or sublet the Site, in whole or in part, to
any Person subject to the Lease, so long as the same shall be in effect;
provided that such mortgage, assignment or pledge is permitted under the
Participation Agreement or any other Operative Agreement. Before any such
sublet or assignment shall become effective, the Ground Lessee shall provide
the Ground Lessor with the following:
(A) a representation and warranty by such Person that
this Ground Lease and prior to the Lease Conversion Date, any other
Operative Agreements to which the Ground Lessee is a party will, upon
the assignment, be the valid, legal and binding obligations of such
Person; and
(B) an opinion of counsel (which counsel may be an
employee of such Person or an Affiliate thereof), addressed to the
Ground Lessor, in form and substance reasonably satisfactory to the
Ground Lessor that this Ground Lease and prior to the Lease
Conversion Date, any other Operative Agreements to which the Ground
Lessee is a party will, upon the assignment, be the valid, legal and
binding obligations of such Person.
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ARTICLE X
FINANCING
SECTION 10.01. THE GROUND LESSEE'S RIGHT TO OBTAIN FINANCING.
Prior to the Lease Conversion Date, the Ground Lessee may encumber its
leasehold interest in the Site as set forth in Section 9.02 and Section 10.03.
After the Lease Conversion Date, at any time and from time to time, the Ground
Lessee may refinance the indebtedness secured by the Indenture in accordance
with the provisions of the Restated Ground Lease.
SECTION 10.02. LIMITATIONS ON FINANCING. The Ground Lessee's
rights to obtain such financing and refinancing shall be subject to the
following conditions:
(a) No Ground Lessee's Default under this Ground Lease
shall have occurred and be continuing.
(b) Any instrument evidencing such financing or
refinancing shall provide that the Ground Lessor shall not be liable
for the payment of such indebtedness or the performance of any of the
covenants contained in the documents securing payment thereof, and
that in the event of default in payment or performance thereof, the
holder of such indebtedness will not look to the Ground Lessor's
interest in the Site for satisfaction of the indebtedness thereby
secured.
SECTION 10.03. LEASEHOLD MORTGAGE; NO ASSUMPTION BY
NOTEHOLDERS. The Ground Lessee may from time to time mortgage or otherwise
encumber its leasehold interest in the Site and its interest in the Building
(such a mortgage and related agreements (including the Indenture and the
Mortgage) being collectively referred to as a "Leasehold Mortgage" and the
holder of a Leasehold Mortgage (including the Trustee) a "Leasehold
Mortgagee"), and, in connection therewith, assign this Ground Lease and the
rents, issues and profits from the Site and the Building; provided, however,
that during the time the Notes are outstanding, the Indenture shall be the only
Leasehold Mortgage of its leasehold interest in the Site and its interest in
the Building permitted under this Ground Lease. Notwithstanding any other
provision of this Ground Lease, any transfer of the Ground Lessee's leasehold
interest in the Site and its interest in the Building pursuant to, or in lieu
of, foreclosure (including a transfer ordered or authorized in a proceeding
under the Bankruptcy Code) of a Leasehold Mortgage shall be permitted without
the Ground Lessor's consent (any such transfer being hereinafter referred to as
a "foreclosure"). Any Person who becomes the owner of the Ground Lessee's
leasehold interest in the
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Site and its interest in the Building through a foreclosure shall have no
personal liability, direct or indirect, to the Ground Lessor for payment of any
Ground Lease Rent (except as provided in clause (b)(i) of Section 10.05(b) or
clause (i) of Section 10.06) or for satisfaction of any other claims based on
events occurring prior to the date of such Person's acquisition of the Site and
the Building, nor for conditions existing on or prior to the date of such
Person's accession to title, and any such Person may thereafter assign this
Ground Lease and transfer the Building with the prior written consent of Ground
Lessor and shall be released from any and all obligations under this Ground
Lease which arise after, or relate to any period following, the effective date
of such assignment. If a Leasehold Mortgagee or its designee shall become the
owner of the Building and a leasehold interest in the Site and if the Building
shall have been or become materially damaged on, before or after the date such
Leasehold Mortgagee or its designee acquires the Building and a leasehold
interest in the Site, the Leasehold Mortgagee or its designee shall be
obligated to repair or reconstruct the Building or raze the Building and clear
the Site only to the extent that the cost of the repair or reconstruction or
razing and clearing can be paid from the net insurance proceeds actually
received by the Leasehold Mortgagee or its designee by reason of such damage.
SECTION 10.04. NOTIFICATION OF THE GROUND LESSOR. If the
Ground Lessee shall grant a Leasehold Mortgage and shall provide the Ground
Lessor with notice thereof specifying the name and address of the Leasehold
Mortgagee, then the Ground Lessor, upon giving the Ground Lessee a notice of
(i) default, (ii) termination or proposed termination, (iii) a matter on which
the Ground Lessor may claim or base a default, (iv) consent to an assignment or
subletting or (v) any other matter which could materially and adversely affect
the rights or obligations of the Ground Lessor or the Ground Lessee, shall at
the same time also give such notice to the Leasehold Mortgagee or the notice
given shall be deemed ineffective as to the Leasehold Mortgagee and the Ground
Lessee. In the case of a default notice, such notice shall set forth with
particularity those defaults being claimed at that time. The Ground Lessor
hereby acknowledges notice of the Indenture and the Mortgage as a Leasehold
Mortgage and the name and address of the Trustee as a Leasehold Mortgagee.
SECTION 10.05. RIGHTS OF HOLDERS OF INDEBTEDNESS. (a) A
Leasehold Mortgagee shall have the right, but not any obligation, to perform
any term, covenant, condition or agreement of this Ground Lease and to remedy
any default by the Ground Lessee hereunder within the time limits set forth in
this Ground Lease (and such additional time (x) as is reasonably required to
cure any non-monetary Ground Lessee's Default which is capable of cure,
proceeding with diligence and (y) if possession of the Building and a
leasehold interest in the Site is required to cure such default, as is
reasonably required to obtain possession of the Site and the Building and to
cure such default) and the Ground Lessor will accept such performance.
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(b) Notwithstanding anything contained in this
Ground Lease to the contrary, the Ground Lessor hereby acknowledges and agrees
for the sole benefit of the Trustee that the Ground Lessor will not be entitled
to terminate this Ground Lease by reason of any Ground Lessee's Default for so
long as any of the Notes secured by the Indenture is outstanding or until the
Trustee has succeeded to the interest of the Ground Lessee in connection with
the exercise of its rights under the Indenture. Without limiting the foregoing,
if at any time a Ground Lessee's Default shall occur which would otherwise
entitle the Ground Lessor to terminate this Ground Lease, the Ground Lessor
shall have no right to terminate this Ground Lease unless, following the
expiration of the period of time given the Ground Lessee to cure such default,
the Ground Lessor shall give the Leasehold Mortgagee additional written notice
of the Ground Lessee's Default and the Leasehold Mortgagee shall have 60 days
following its receipt of such notice to remedy any such default (and such
additional time (x) as is reasonably required to cure any non-monetary Ground
Lessee's Default which is capable of cure, proceeding with diligence and (y) if
possession of the Site and the Building is required to cure such default, as is
reasonably required to obtain possession of the Site and the Building and to
cure such default) and the Ground Lessor will accept such performance. In the
event that the Leasehold Mortgagee fails to cure any Ground Lessee's Default
in the manner or within the time period herein provided, the Ground Lessor
shall provide the Leasehold Mortgagee with written notice of the Ground
Lessor's intent to terminate this Ground Lease at least 60-days in advance of
the proposed effective date of such termination. The Leasehold Mortgagee, in
addition to its right as described above to cure defaults by the Ground Lessee,
shall have the right to postpone the date on which this Ground Lease would
terminate as a result of the Ground Lessee's default in accordance with said
notice by (a) giving Ground Lessor written notice within such 60-day period of
the Leasehold Mortgagee's election to postpone the date on which the Ground
Lease would terminate, and (b) proceeding with due diligence (i) to cure all
defaults, if any, from the date of the Ground Lessee's Default then existing
which may be cured by the payment of a sum of money (other than obligations of
the Ground Lessee to satisfy or otherwise discharge any Lien against the
premises junior in priority to the Lien of the Leasehold Mortgage held by such
Leasehold Mortgagee), (ii) to initiate and pursue steps to acquire the Site and
the Building by foreclosure of its Leasehold Mortgage or otherwise and (iii)
after obtaining possession of the Site and the Building, to cure any other
then existing default of the Ground Lessee susceptible of being cured by the
Leasehold Mortgagee from the date of the Ground Lessee's Default. In the case
of a default which is personal to the Ground Lessee and which cannot be cured
by the Leasehold Mortgagee, the Ground Lessor's right to terminate this Ground
Lease on account thereof shall be deemed to be waived so long as all other
defaults are cured by the Leasehold Mortgagee as provided in this Ground Lease.
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SECTION 10.06. NEW LEASE WITH NOTEHOLDERS UPON TERMINATION.
If within 60 days (as such period may be extended while diligent efforts to
cure are proceeding) following Leasehold Mortgagee's receipt of notice pursuant
to Section 11.05 of the Ground Lessor's intention to terminate this Ground
Lease, the Leasehold Mortgagee shall deliver to the Ground Lessor a written
request for a new ground lease of the Site, then the Ground Lessor shall
promptly enter into a new ground lease of the Site with such Leasehold
Mortgagee or its designee effective as of the date of actual termination of
Ground Lessee's rights under this Ground Lease on the same terms as this Ground
Lease, provided, that (i) the Ground Lessor receives, at or prior to the
execution of such new ground lease, payment of any Ground Lease Rent due from
the date of the Ground Lessee's Default to the date of the delivery of the new
ground lease (to the extent any such Ground Lease Rent would be due if this
Ground Lease were not terminated and after offsetting an amount equal to any
income derived by the Ground Lessor from the operation of the Building or other
improvements located on the Site during the period prior to execution of the
new ground lease), and (ii) the Ground Lessor receives an undertaking in
writing that, promptly following the delivery of the new ground lease, such
Leasehold Mortgagee or its designee will perform or cause to be performed all
of the other covenants and agreements contained in this Ground Lease on the
Ground Lessee's part to be performed from the date of the Ground Lessee's
Default (except to the extent (i) the Ground Lessee shall have performed the
same prior to the date of delivery of such new ground lease, (ii) performance
is not required pursuant to clause (b)(i) of the fourth sentence of the fifth
sentence of Section 10.05 hereof or (iii) such covenants and agreements cannot
reasonably, with the exercise of due diligence, be performed by such Leasehold
Mortgage or its designee). A new ground lease shall (a) be effective as of the
date of the termination of the Ground Lessee's rights under this Ground Lease
as such remainder existed immediately prior to termination, (b) require the
same Ground Lease Rent and other charges to be paid as were payable under this
Ground Lease, (c) include the same terms, covenants, conditions and agreements
as are contained in this Ground Lease (as modified hereby), (d) have the same
priority as this Ground Lease (including priority over any mortgage or other
Lien on the fee title to the Site), and (e) provide that the ground lessee
under such any ground lease shall be liable to perform the obligations imposed
on the ground lessee by such new ground lease only during the time period that
such party is the ground lessee of the Site. In the event that the Leasehold
Mortgagee fails to provide a written response to the Ground Lessor's notice of
intent to terminate this Ground Lease or sign and deliver the new ground lease
tendered by the Ground Lessor as provided for in this Section 10.06 within the
applicable 60-day period, this Ground Lease shall terminate on the date
provided for in the Ground Lessor's notice of intent to terminate.
Notwithstanding anything to the contrary contained herein, the Ground Lessor
acknowledges and agrees that the Ground Lessor shall, without further request,
notice or action by the Trustee, grant to the Leasehold Mortgagee a new ground
lease if the Ground Lessee
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rejects this Ground Lease under Section 365 of the Bankruptcy Code in a
bankruptcy of the Ground Lessee.
SECTION 10.07. CONSENT TO MODIFICATION. It is understood
and agreed by the parties hereto that any waiver, consent, alteration,
modification, amendment, supplement or termination of or in respect of this
Ground Lease that requires the consent of the Trustee or any or all Noteholders
(in each case as provided in the Indenture) shall not be effective unless and
until such consent shall have been obtained as provided in, and in accordance
with the provisions of, the Indenture. With respect to any Leasehold Mortgagee
other than the Trustee, the Ground Lessor will not accept any surrender, agree
to the cancellation, or enter into any modification, of this Ground Lease
without the prior written consent thereto of any Leasehold Mortgagee of which
the Ground Lessor has been given notice by the Ground Lessee. Without limiting
the generality of the foregoing, no termination under Section 365(h) of the
Bankruptcy Code shall be effective against the Leasehold Mortgagee without the
prior written consent of the Leasehold Mortgagee.
ARTICLE XI
REMEDIES
SECTION 11.01. DEFAULT BY THE GROUND LESSEE. Upon the
occurrence of a Ground Lessee's Default, and following the expiration of all
applicable notice, grace and cure periods, the Ground Lessor shall have only
the following rights, exercisable any time thereafter so long as such Ground
Lessee's Default remains uncured (the Ground Lessor expressly agrees that the
rights enumerated in this Section 11.01 shall constitute the sole remedies of
the Ground Lessor and hereby waives the benefit of, and covenants not to
exercise, any other right or remedy that may be available to the Ground Lessor
at law, in equity, or otherwise):
(a) To enforce, by all proper, equitable and legal suits
and other means, its rights hereunder, including, but not limited to,
the collection of Ground Lease Rent, without reentering or resuming
possession of the Site and without terminating this Ground Lease;
(b) To cure any default by the Ground Lessee and recover
any sums so expended, which sums shall constitute Additional Rental,
or
(c) Subject to the rights of the Leasehold Mortgagee
under Article X, to terminate this Ground Lease and all of the Ground
Lessee's rights hereunder, and to enforce such termination by an
action in ejectment, or
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similar legal action, and to have such other rights and remedies as
are provided for in the Restated Ground Lease.
SECTION 11.02. DEFAULT BY THE GROUND LESSOR. Upon the
occurrence of a Ground Lessor's Default, and following the expiration of all
applicable notice, grace and cure periods, the Ground Lessee shall be entitled
to cure such default and recover any sums so reasonably expended, together with
interest thereon from the date expended at a rate per annum equal to the
Default Rate directly from the Ground Lessor, and to seek injunctive or other
equitable relief and to exercise any remedy, including, without limitation, the
right of offset provided hereunder; provided, however, that, except as
otherwise expressly provided herein, it is expressly agreed that the rights
enumerated in this Section 11.02 shall be the Ground Lessee's sole remedies and
the Ground Lessee hereby waives the benefit of, and covenants not to exercise,
any other right or remedy which may be available to the Ground Lessee at law or
in equity.
SECTION 11.03. NO WAIVER. No waiver by the Ground Lessor or
the Ground Lessee of any default or breach of any covenant, condition or
stipulation herein contained shall be treated as a waiver of any subsequent
default or breach of the same or any other covenant, condition or stipulation
hereof.
SECTION 11.04. FORCE MAJEURE. It is expressly understood and
agreed that if the curing of any Ground Lessor's Default or any Ground Lessee's
Default (other than failure to pay Ground Lease Rent), or the performance of
any other covenant, agreement, obligation or undertaking herein contained is
delayed by reason of war, riot or civil commotion, acts of God, governmental
restrictions or regulations, fire or other casualty, strikes, shortages of
labor or material or any circumstances beyond the control of the party
obligated or permitted under the terms hereof to do or perform the same,
regardless of whether or not any such circumstance is similar to any of those
enumerated above, the Ground Lessee or the Ground Lessor, as the case may be,
shall be excused from doing or performing the same during such period of delay.
ARTICLE XII
WARRANTIES
SECTION 12.01. QUIET ENJOYMENT. The Ground Lessor hereby
warrants to the Ground Lessee that the peaceable possession, use and enjoyment
of the Site shall not be disturbed by the Ground Lessor or any other Person
claiming by or through the Ground Lessor or acting at the direction of the
Ground Lessor.
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SECTION 12.02. INDEMNITY. The Ground Lessor shall indemnify
and hold harmless the Ground Lessee against any violation of the warranty set
forth in Section 12.01. From and after the Lease Conversion Date, and except as
otherwise provided herein, the Ground Lessee covenants and agrees to abide by,
perform, satisfy and otherwise fulfill all of the duties and obligations with
respect to the leasehold interest in the Site which are created or arise under
applicable Legal Requirements and any encumbrance affecting title to the
leasehold interest in the Site to which the Ground Lessee shall have
specifically consented in writing.
SECTION 12.03. COVENANTS OF THE GROUND LESSOR. The Ground
Lessor hereby covenants and agrees with the Ground Lessee that during the
Ground Lease Term, the Ground Lessor shall not take or omit to take any action
that will cause the Ground Lessee's ownership, use or occupancy of the Building
or use and occupancy of the Site to violate applicable Legal Requirements.
ARTICLE XIII
NET LEASE
SECTION 13.01. NET LEASE. This is a net lease and all costs of
maintenance and repair to the Site and insurance required hereunder shall be at
the sole cost and expense of the Ground Lessee; and (except for damages caused
by the Ground Lessor or any of its agents, servants or employees) the Ground
Lessor shall not be obligated to make any improvements, repairs, alterations,
additions or replacements whatsoever to the Building or to the Site.
ARTICLE XIV
LIMITED LIABILITY
SECTION 14.01. LIMITED LIABILITY. The Ground Lessee shall have
no personal or corporate liability for the payment of monies or the performance
of any of its covenants or obligations herein contained, except to the extent
(i) of its interest in the Site, and (ii) that the Ground Lessee shall have
personal and corporate liability the extent of the actual receipt of funds,
money or proceeds from any policy of insurance, condemnation award or similar
circumstance associated with the Site and the Building.
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ARTICLE XV
MISCELLANEOUS
SECTION 15.01. NO AGENCY OR PARTNERSHIP. Nothing herein
contained shall be deemed or construed by the parties hereto, nor by any third
party, as creating the relationship of principal and agent or of partnership or
of joint venture between the parties hereto, it being understood and agreed
that no provision contained herein, nor any acts of the parties hereto, shall
be deemed to create any relationship between the parties hereto other than the
relationship of ground lessor and ground lessee.
SECTION 15.02. ESTOPPEL CERTIFICATES.
(a) The Ground Lessee agrees, at any time and
from time to time, upon not less than 30 days' prior written notice from the
Ground Lessor, to execute, acknowledge and deliver to the Ground Lessor a
statement in writing (i) certifying that this Ground Lease is unmodified and in
full force and effect (or if there have been modifications, that this Ground
Lease is in full force and effect as modified and stating the modifications
hereto); (ii) stating the dates to which the Ground Lease Rent and other
charges hereunder have been paid by the Ground Lessee; and (iii) stating the
address to which notices to the Ground Lessee shall be sent. Prior to the
commencement of, or during the Ground Lease Term, the Ground Lessor shall, if
requested by the Ground Lessee, deliver an estoppel certificate, in the
substance and form described above, relative to the status of this Ground Lease
and any underlying first mortgage.
(b) The Ground Lessor agrees, at any time and
from time to time, upon not less than 30 days' prior written notice from the
Ground Lessee, to execute, acknowledge and deliver to the Ground Lessee a
statement in writing (i) certifying that this Ground Lease is unmodified and
in full force and effect (or if there have been modifications, that this Ground
Lease is in full force and effect as modified and stating the modifications
hereto); (ii) stating the dates to which the Basic Ground Lease Rent and other
charges hereunder have been paid by the Ground Lessee; (iii) stating whether or
not the Ground Lessor has knowledge that the Ground Lessee is in default in the
performance of any covenant, agreement or condition contained in this Ground
Lease, and, if the Ground Lessor has knowledge of such a default, specifying
each such default; and (iv) stating the address to which notices to the Ground
Lessor shall be sent. If so requested by the Ground Lessee, the Ground Lessor
shall also address such estoppel certificates to lenders, partners, investors
or others with a bona fide business purpose requesting the same.
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SECTION 15.03. HEADINGS. The division of this Ground Lease
into sections, the provision of a table of contents and the insertion of
headings are for convenience of reference only and shall not affect the
construction or interpretation of this Ground Lease.
SECTION 15.04. NOTICE. All communications, declarations,
demands and notices provided for in this Ground Lease shall be in writing and
shall be given in person or by means of telecopy, or other wire transmission,
or mailed by registered or certified mail, or sent by courier, addressed as
provided in the Participation Agreement. All such communications, declarations,
demands and notices given in such manner shall be effective on the date of
receipt. Each party's initial address for delivery of any notice is designated
in the Participation Agreement, but any party from time to time may designate a
different address for delivery of any notice by delivering to the other party
notice of such different address as provided herein.
SECTION 15.05. GOVERNING LAW. This Ground Lease shall be
governed by and construed in accordance with the laws of the State of Hawaii
without regard to conflicts of laws principles.
SECTION 15.06. SEVERABILITY OF PROVISIONS. Any provision of
this Ground Lease that may be determined by competent authority to be
prohibited or unenforceable in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable Legal Requirements, the Ground Lessee and the Ground Lessor
hereby waive any provision of law that renders any provision hereof prohibited
or unenforceable in any respect.
SECTION 15.07. AMENDMENT; EXPANSION OF SITE. The provisions
of this Ground Lease may not be waived, altered, modified, amended,
supplemented or terminated in any manner whatsoever except by written
instrument signed by the Ground Lessor and the Ground Lessee.
SECTION 15.08. MULTIPLE COUNTERPARTS. This Ground Lease may be
executed in a number of identical counterparts, each of which constitutes an
original, but all of which together shall constitute one and the same
agreement; provided, however, that in making proof of this Ground Lease, it
shall not be necessary for any party hereto to produce or account for more than
one such counterpart.
SECTION 15.09. SUCCESSORS AND ASSIGNS. This Lease shall be
binding upon and inure to the benefit of the Ground Lessor and the Ground
Lessee, and their respective permitted successors and permitted assigns except
as otherwise limited or specifically qualified in this Ground Lease. For
purposes of this Ground Lease, any action by either Ground Lessor shall
lawfully bind the other Ground Lessor and third parties shall be entitled to
rely thereon.
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SECTION 15.10. ATTORNEYS' FEES. In the event of any action or
proceeding brought by either party under this Ground Lease against the other
party, the prevailing party in such action or proceeding shall be entitled to
recover from the other party all costs or expenses (including reasonable
attorneys' fees) incurred by reason of such action or proceeding.
SECTION 15.11. ATTORNMENT AND NON-DISTURBANCE AGREEMENTS.
From time to time at the request of the Ground Lessee, the Ground Lessor shall
execute and deliver to the Ground Lessee for the benefit of any tenant in the
Building attornment and non-disturbance agreements in form and substance
reasonably satisfactory to the Ground Lessor under which the Ground Lessor, as
applicable, shall agree to recognize the lease of any such tenant and to permit
such tenant to remain in occupancy of its premises within the Building
notwithstanding any default hereunder by the Ground Lessee, so long as such
tenant is not in default under the lease covering its premises within the
Building and the tenancy of such tenant does not extend beyond the Ground Lease
Term (calculated without regard to terminations resulting from a Ground
Lessee's Default). Any such agreement shall provide that such tenant is
obligated to attorn to the Ground Lessor if this Ground Lease is terminated
under the terms hereof and to recognize the Ground Lessor as the landlord under
the lease with such tenant covering its premises within the Building. The
issuance of any such agreement shall in no way release or diminish the Ground
Lessee's duties and obligations under this Ground Lease. Notwithstanding the
foregoing, this Section 15.11 does not apply to the Trustee under the
Indenture.
SECTION 15.12. NON-MERGER. There shall be no merger of this
Ground Lease, the leasehold interest in the Site or the Building with the fee
estate in and to the Site by reason of the fact that this Ground Lease, the
leasehold interest in the Site or the Building, or any interest in any of them,
may at any time be held directly or indirectly by or for the account of any
Person who shall own the fee estate in and to the Site, or any portion thereof,
and no such merger shall occur unless and until all persons at the time having
any interest in the fee estate and all persons having any interest in this
Ground Lease, the leasehold estate, or the improvements to the Site, including
the holder of any mortgage upon the fee estate in and to the Site, shall join
in a written instrument effecting such merger.
SECTION 15.13. INSPECTION. Upon not less than five Business
Days' notice to the Ground Lessee, the Ground Lessor and their authorized
representatives shall have the right to inspect the Site (subject, in each
event, to applicable Legal Requirements, applicable confidentiality
understandings, then existing leases as to the Building, and the Ground
Lessee's reasonable procedures) expense. Upon not less than five Business Days'
notice to the Ground Lessee after the delivery of a notice of termination of
this Ground Lease or within the last year of the Ground Lease Term, the Ground
Lessor and its authorized representatives shall have the right (subject, in
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each event, to applicable Legal Requirements, applicable confidentiality
understandings, then existing leases as to the Building, and the Ground
Lessee's reasonable procedures), at their expense, to inspect the books and
records of the Ground Lessee relating to the Building and the Site or the
operation thereof and to make copies of and extracts therefrom (other than
copies of and extracts from proprietary data and information).
SECTION 15.14. FURTHER ASSURANCES AND COOPERATION. The Ground
Lessor and the Ground Lessee each agree to cause to be promptly and duly taken,
executed, acknowledged and delivered all such further acts, documents and
assurances as the other party from time to time may reasonably request in order
to carry out more effectively the intent and purposes of this Ground Lease.
Upon request of the Ground Lessee, the Ground Lessor shall cooperate with the
Ground Lessee in obtaining the valid and effective issuance or transfer or
amendment, as the case may be, of all Governmental Approvals necessary or in
the reasonable opinion of the Ground Lessee desirable for the ownership,
operation and possession of the Site and the Building (or any property
purported to be covered by this Ground Lease) by the Ground Lessee or any
transferee, lessee or assignee thereof.
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IN WITNESS WHEREOF, each of the parties hereto has caused
this Ground Lease to be duly executed by an officer thereunto duly authorized
as of the date and year first above written.
GROUND LESSOR
FIRST HAWAIIAN CENTER
LIMITED PARTNERSHIP, a Hawaii
limited partnership
By: FHB Properties, Inc.,
its general partner
By: /s/ Thomas P. Huber
--------------------------
Name: Thomas P. Huber
Title: Vice President
FH CENTER, INC., a Hawaii
corporation
By: /s/ Thomas P. Huber
--------------------------
Name: Thomas P. Huber
Title: Vice President
GROUND LESSEE
REFIRST, INC., a Delaware
corporation
By: /s/ Paul J. Bishop
--------------------------
Name: Paul J. Bishop
Title: President
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<PAGE> 31
EXHIBIT A OMITTED
<PAGE> 32
EXHIBIT B OMITTED
<PAGE> 33
EXHIBIT C OMITTED
<PAGE> 34
EXHIBIT D
LAND COURT SYSTEM REGULAR SYSTEM
Return by Mail ( ) Pickup ( X ) Phone: 521-9200 To:
AMENDED AND RESTATED GROUND LEASE
THIS INDENTURE OF LEASE ("Ground Lease") is dated as of
_____________________, _________, by and between FIRST HAWAIIAN CENTER LIMITED
PARTNERSHIP, a Hawaii limited partnership (the "Partnership"), and FH CENTER,
INC., a Hawaii corporation ("Center"), both having their principal places of
business and post office addresses at First Hawaiian Tower, 1132 Bishop
Street, 25th Floor, Honolulu, Hawaii 96813, hereinafter collectively called the
"Ground Lessor", and REFIRST, INC., a Delaware corporation, with principal
place of business and post office address at 1900 Indian Wood Circle, Maumee,
Ohio 43537, hereinafter called the "Ground Lessee",
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<PAGE> 35
BACKGROUND
1. The Partnership is the owner of the property described
in Exhibit "A" attached hereto and made a part hereof, and Center is the owner
of the property described in Exhibit "B" attached hereto and made a part hereof
(hereafter collectively called the "Site"), together with the building and
other improvements thereon.
2. The Ground Lessee has caused to be constructed upon
the Site a high rise office building known as "First Hawaiian Center" (the
"Building").
3. This Ground Lease amends and restates the Ground Lease,
dated as of December 1, 1993, by and between the Partnership, the Center and
Ground Lessee (the "Original Ground Lease").
GROUND LEASE
SECTION 1 GRANTING CLAUSE
1.1 DEMISE. In consideration of the rent hereinafter
reserved and of the covenants herein contained and on the part of the
Ground Lessee to be observed and performed and upon and subject to the terms
and conditions hereinafter set forth, the Ground Lessor hereby demise and lease
to the Ground Lessee, and the Ground Lessee hereby leases from the Ground
Lessor all of the Site described in Exhibits "A" and "B" attached hereto and
made a part hereof for every purpose;
TO HAVE AND TO HOLD THE SAME, together with all
buildings, fixtures and other improvements hereafter constructed on the
Site, and all tenements, rights, easements, privileges and appurtenances
thereon or thereunto belonging or appertaining, or held and enjoyed therewith,
unto the Ground Lessee, for the term hereinafter get forth.
SUBJECT to the encumbrances (the "Encumbrances")
described in Exhibits "A" and "B".
1.2 CONDITION OF THE SITE. The Ground Lessee is renting
the Site without representation, warranty or covenant, expressed or implied, by
the Ground Lessor, except as set out in this Ground Lease, and subject to any
state of facts which an accurate survey or physical inspection might show.
Except as
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expressly set out in this Ground Lease, Ground Lessor has not made nor shall
be deemed to have made any representation or warranty, express or implied, nor
shall be deemed to have any liability whatsoever as to the value,
habitability, use, condition, design, operation or fitness for use of the Site
(or any part thereof), or any other representation or warranty whatsoever,
express or implied, with respect to the Site (or any part thereof) and the
Ground Lessor shall not be liable for any latent, hidden, or patent defect
therein or the failure of the Site or any part thereof, to comply with any
legal requirement applicable to the Site or Ground Lessee's use thereof.
SECTION 2 TERM. The term of this Ground Lease (together
with the term of the Original Ground Lease) shall be for a period of
ninety-nine (99) years, from December 1, 1993 (the "Original Commencement
Date"), to and including December 1, 2092, unless such term is extended or
sooner terminated as hereinafter provided (the "Term"). The date of this
Ground Lease is referred to herein as the "Commencement Date." Each one-year
period from the anniversary of the Original Commencement Date is referred to
as a "Ground Lease Year."
SECTION 3 RENT.
3.1 BASIC RENT. The Ground Lessee hereby covenants and
agrees to pay, over and above all other charges herein set forth, from and
after the Commencement Date, annual rental during each Ground Lease Year as
follows: (a) for each of the first ten Ground Lease Years and for so long
thereafter as the Lease Agreement dated as of December 1, 1993 between the
Ground Lessee, as lessor, and First Hawaiian Bank, as lessee (the "Bank Lease")
is outstanding, an amount equal to $0; (b) for the eleventh through the
twentieth Ground Lease Years (so long as the Bank Lease is not in effect) an
amount equal to the product of $4,080,000 multiplied by the percentage
increase in the Consumer Price Index for Honolulu, Hawaii from the Original
Commencement Date to the commencement of the eleventh Ground Lease Year; (c)
for each ten Ground Lease Years thereafter (so long as the Bank Lease is not
in effect) an amount equal to the product of (i) the fair market value in fee
simple of the Site (exclusive of improvements) as of the commencement of such
ten Ground Lease Years and (ii) the prevailing annual rate of return, as of
the commencement of such ten Ground Lease Years, on land of similar use and
location on the Island of Oahu; PROVIDED, HOWEVER, that if the Ground Lessor
and the Ground Lessee are unable to agree upon such fair market value or such
prevailing annual rate of return or both, the same shall be determined by an
appraiser or appraisers appointed as
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hereinafter provided, who shall ascertain the fair market value in fee simple
of the Site (exclusive of any improvements and as if unencumbered by any
lease), or the prevailing annual rate of return on land of similar use and
location on the Island of Oahu, or both, as of the commencement of such ten
Ground Lease Years for which rent is sought to be determined. Such rent,
whether determined by agreement or appraisal, shall in no event be less than
the annual rent payable during the immediately preceding ten Ground Lease Year
period. Such annual rent shall be payable in equal monthly installments in
advance on the first day of each month. Each subsequent ten Ground Lease Years
after November 30, 2003 shall hereafter be referred to as a "Subsequent Rental
Period."
3.2 APPRAISAL. (a) If the Ground Lessor and the Ground
Lessee are unable to agree upon the fair market value of the Site or upon the
prevailing annual rate of return on land of similar use and location on the
Island of Oahu, or both, at least ninety (90) days prior to the commencement of
a Subsequent Rental Period, then either party may give to the other written
notice of a desire to have such fair market value, or such prevailing annual
rate of return, or both, determined by appraisal. If the parties agree upon a
single appraiser, such appraiser shall determine such fair market value or such
prevailing rate of return, or both, and his decision shall be final, conclusive
and binding upon both parties, subject to the minimum limitations stated above.
If the parties fail to agree upon a single appraiser, Ground Lessor and Ground
Lessee shall each promptly appoint an appraiser and such appraisers shall
perform the appraisal required hereunder, provided that if either Ground Lessor
or Ground Lessee fail to appoint an appraiser by the end of the ten (10) day
period following the appointment of an appraiser by the other, then the
appraiser appointed by one party shall alone perform such appraisal. The
appraisers shall render their appraisals in writing within thirty (30) days
after their appointment and shall deliver counterpart copies thereof to Ground
Lessor and Ground Lessee. The fair market value of the Site or the prevailing
annual rate of return, or both, shall be deemed to be the average of the two
figures reported by the two appraisers appointed pursuant to this Section 3.2;
provided, however, that in the event the larger of such figures for fair market
value or prevailing rate of return is greater than one hundred and five percent
(105%) of the smaller of such figures, the two appraisers so appointed shall
appoint a third appraiser within ten (10) days of notice by either Ground
Lessee or Ground Lessor that such appointment is necessary and an appraisal
shall be made by such third appraiser within thirty (30) days of the
appointment of the
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third appraiser. If the two appraisers appointed by Ground Lessor and Ground
Lessee shall be unable to agree on a third appraiser, either party hereto may
apply to a court of competent jurisdiction to make such appointment. In the
event a third appraiser is so appointed, the fair market value of the Site or
prevailing rate of return, as applicable, shall be deemed to be the average of
the two greatest figures reported by the three appraisers appointed pursuant to
this Section 3.2. All appraisers appointed pursuant to this Section 3.2 shall
be members in good standing of the American Institute of Real Estate Appraisers
(or any successor organization thereto). Ground Lessee and Ground Lessor shall
each be responsible for the aggregate cost of the appraisals delivered
hereunder.
(b) In determining fair market value in fee
simple of the Site, the appraisers shall assume for purposes of their appraisal
that the Site, enhanced by street and road improvements, contributing benefits,
betterments and other related economic influences and value factors, are vacant
of all buildings, unencumbered by lease or the subsistence of any right to or
interest in the Site in a person other than the Ground Lessor, and available
for immediate development and utilization to the use then being made of the
Site by the Ground Lessee. Subject to the foregoing provisions, the process or
method of appraisal shall be that receiving general acceptance among competent,
experienced and recognized appraisers in the field of real estate valuation in
the State of Hawaii.
(c) If and whenever the fixing of such fair
market value, or such prevailing annual rate of return, or both, is being
determined by appraisal, the Ground Lessee, pending the determination thereof,
shall continue to pay the same rent which it had been paying during the last
preceding Subsequent Rental Period and shall promptly pay the deficiency, if
any, upon the conclusion of the appraisal process, plus interest at the rate of
twelve percent (12%) per annum on the amount of such deficiency computed from
the date or dates when the amount of such deficiency would have been payable
but for the pendency of the appraisal process.
3.3 NET RENT; GENERAL EXCISE TAXES. All of such rent
shall be net above taxes, assessments and charges of any kind otherwise payable
by the Ground Lessee; and the Ground Lessee shall also pay (in addition to such
rent, taxes, assessments and charges) an amount (presently 4.167% of each such
payment) which when added to such rents and other payments shall yield to the
Ground Lessor after deduction of all such tax payable by the Ground Lessor with
respect to all such payments
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a net amount which the Ground Lessor would have realized from such payment had
no such tax been imposed. It is the intent of this provisions and of the other
provisions of this Ground Lease to insure that all amounts provided hereunder
to be paid to the Ground Lessor by the Ground Lessee will be received by the
Ground Lessor without diminution by any tax, assessment, charge or levy of any
nature whatever, except any net income taxes, and the terms and conditions of
this Ground Lease shall be liberally construed to effect such purpose.
SECTION 4 GROUND LESSOR'S COVENANTS. The Ground
Lessor hereby covenants with the Ground Lessee that upon payment by the Ground
Lessee of the rent as aforesaid, and upon the observance and performance of all
of the terms, covenants and conditions and agreements herein contained and on
the part of the Ground Lessee to be observed and performed, the Ground Lessee
shall peaceably hold and enjoy the Site during the term of this Ground Lease
without hindrance or interruption by the Ground Lessor or anyone lawfully or
equitably claiming by, through or under it, except as in this Ground Lease
expressly provided.
SECTION 5 GROUND LESSEE'S COVENANTS. The Ground
Lessee, in consideration of the premises, hereby covenants and agrees with the
Ground Lessor as follows:
5.1 PAYMENT OF RENT. The Ground Lessee will pay all of
the rent and other charges herein reserved in lawful money of the United States
of America to the Ground Lessor at the Ground Lessor's principal places of
business in Honolulu, Hawaii, or at such other place and to such person or
agent as the Ground Lessor shall designate by notice in writing to the Ground
Lessee, in the manner and time aforesaid, without any deduction or set-off and
without any other notice or demand.
5.2 PAYMENT OF IMPOSITIONS.
(a) Except as described in the next sentence,
Impositions shall mean any and all liabilities, losses, expenses and costs of
any kind whatsoever for fees, taxes, levies, imposts, duties, charges,
assessments or withholdings ("Taxes") including (i) real and personal property
taxes, including personal property taxes on any property covered by this Ground
Lease that is classified by governmental authorities as personal property, and
real estate or ad valorem taxes in the nature of property taxes; (ii) sales
taxes, use taxes and other similar taxes (including rent taxes and intangibles
taxes); (iii) the Hawaii General Excise Tax; (iv) real estate transfer taxes,
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conveyance taxes, stamp taxes and documentary recording taxes and fees; (v)
taxes that are or are in the nature of franchise, income, value added and doing
business taxes; and (vi) assessments on the Site and the Building, including
all assessments for public improvements or benefits, whether or not such
improvements are commenced or completed within the Term); and all interest and
penalties thereon, which at any time prior to, during or with respect to the
Term or in respect of any period for which Ground Lessee shall be obligated to
pay any amounts due hereunder, may be levied, assessed or imposed by any
Federal, State, city or local authority upon or with respect to (a) the Site
and the Building or any part thereof; (b) the financing, refinancing,
demolition, construction, substitution, subleasing, assignment, control,
condition, occupancy, servicing, maintenance, repair, ownership, possession,
activity conducted on, delivery, insuring, use, operation, improvement,
transfer of title, return or other disposition of the Site and the Building or
any part thereof; (c) indebtedness with respect to the Site and the Building or
any part thereof; (d) the rentals, receipts or earnings arising from the Site;
(e) the income or other proceeds received with respect to the Site and the
Building or any part thereof upon the sale or disposition thereof; or (f) any
contract relating to the demolition, construction, acquisition or delivery of
the Site or any part thereof.
The term "Imposition" shall not mean or include:
(i) Taxes and impositions that are
imposed on Ground Lessor or the Trustee (as defined in the Lease) by the United
States federal government that are based on or measured by the net income
(including taxes based on capital gains and minimum taxes) of either of them;
(ii) any Tax or imposition to the
extent, but only to such extent, it relates to any act, event or omission that
occurs after the termination of this Ground Lease (but not any tax or
imposition that relates to any period prior to the termination of this Ground
Lease);
(iii) any Tax or imposition for so
long as, but only for so long as, it is being contested in accordance with the
provisions of this Ground Lease;
(iv) any interest or penalties
imposed on the Ground Lessor as a result of the failure of the Ground Lessor to
file any report timely and in the form prescribed by law or pay any tax or
imposition, except to the extent such
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failure is a result of a breach by the Ground Lessee of its obligations
hereunder; provided that this clause (iv) shall not apply if such interest or
penalties arise as a result of a position taken (or requested to be taken) by
the Ground Lessee in a contest controlled by Ground Lessee under Section 5.2(e)
hereof.
(v) any Taxes or impositions imposed
on the Ground Lessor that are a result of the Ground Lessor not being
considered a "United States person" as defined in Section 7701(a)(30) of the
Code;
(vi) any Taxes or impositions that
are enacted or adopted by their express terms as a substitute for any tax that
would not have been indemnified against pursuant to the terms of this Ground
Lease;
(vii) any Taxes which are imposed as
a result of the gross negligence or wilful misconduct of the Ground Lessor
itself (as opposed to gross negligence or wilful misconduct imputed to the
Ground Lessor) or any of the Ground Lessor Affiliates, but not taxes as a
result of ordinary negligence of the Ground Lessor of any of the Ground Lessor
Affiliates;
(viii) any Taxes or impositions to
the extent that such taxes are actually reimbursed to the Ground Lessor by
another person;
(ix) any Taxes or impositions imposed
upon the Ground Lessor with respect to any voluntary transfer, sale, financing
or other voluntary disposition of any interest in the Site or any involuntary
transfer of any of the foregoing interests resulting form the bankruptcy or
insolvency of Ground Lessor (other than in connection with the existence of an
event of default);
(x) any gift or inheritance taxes; or
(xi) any Taxes or impositions, to the
extent the Ground Lessor actually receive a credit (or otherwise has a
reduction in a liability for taxes) in respect thereof against taxes that are
not indemnified hereunder (but only to the extent such credit is not taken into
account in calculating the indemnity payment on an After Tax Basis (as defined
in the Lease).
Any Tax or imposition excluded from the defined term
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<PAGE> 42
"Imposition" in any one of the foregoing clauses (i) through (xi) shall not be
construed as constituting an Imposition by any provision of any other of the
aforementioned clauses.
(b) The Ground Lessee shall pay or cause to
be paid and assume liability for all Impositions.
(c) If any written claim is made against the
Site, the Building or the Ground Lessor, or if any proceeding is commenced
against the Site, the Building or the Ground Lessor, in each case for any
Impositions as to which the Ground Lessee has an obligation pursuant to this
section, the Ground Lessor shall promptly notify the Ground Lessee. If the
Ground Lessor obtains a refund of all or any part of any Imposition paid or
reimbursed by the Ground Lessee, the Ground Lessor shall promptly pay to the
Ground Lessee the amount of such refund net of reasonable expenses not already
paid or reimbursed by the Ground Lessee.
(d) Subject to the Ground Lessee's right to
contest Impositions set out below, the Ground Lessee shall pay or cause to be
paid all Impositions for which it is liable under this section directly to the
taxing authorities where feasible and otherwise to the Ground Lessor and the
Ground Lessee shall, upon the Ground Lessor's reasonable request, furnish to
the Ground Lessor copies of official receipts or other satisfactory proof
evidencing such payment.
In the case of Impositions for which the
Ground Lessee is liable pursuant to this Section 5.2 and for which no contest
is conducted and which the Ground Lessee pays directly to the taxing
authorities, the Ground Lessee shall pay such Impositions prior to the latest
time permitted by the relevant taxing authority for timely payment. In the case
of such Impositions for which the Ground Lessee reimburses the Ground Lessor,
the Ground Lessee shall do so within thirty (30) days after receipt by the
Ground Lessee of demand therefor. In the case of Impositions for which the
Ground Lessee is liable pursuant to this section and for which a contest is
conducted, the Ground Lessee shall pay such Impositions or reimburse the Ground
Lessor for such Impositions, to the extent not previously paid or reimbursed,
prior to the latest time permitted by the relevant taxing authority for timely
payment after conclusion of all contests under this section.
Impositions imposed with respect to the
Site and the Building for the initial and terminal years hereof shall be
prorated on a daily basis as of the date of
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commencement and the date of termination of the term hereof, respectively. If
any Imposition may, at the option of the taxpayer, lawfully be paid in
installments, then, (i) if such Imposition is payable during the term of this
Ground Lease, the Ground Lessee may exercise, or at the request of the Ground
Lessee, the Ground Lessor shall exercise the option to pay the same in
installments, and in such event the Ground Lessee shall pay only those
installments that become due and payable during the term of this Ground Lease
and (ii) if such Imposition is payable prior to the commencement of this Ground
Lease, the Ground Lessor shall exercise the option to pay the same in
installments, and in such event the Ground Lessor shall (subject to the Ground
Lessor's right to contest the same in good faith by appropriate legal
proceedings) pay only those installments that become due and payable prior to
the commencement of this Ground Lease.
(e) Nothing herein contained shall prevent
the Ground Lessee from contesting in good faith the amount or validity, or
both, of any such Impositions by appropriate legal proceedings commenced before
the same become delinquent, and the Ground Lessor, if legally required to do
so, shall join in such proceedings, on condition, however, that such
proceedings shall not operate to cause the sale of the Site or of the
improvements thereon or any part thereof to satisfy any such Imposition, and on
further condition that the Ground Lessee shall pay on demand any reasonable
costs or attorneys' fees incurred by the Ground Lessor in any such proceedings,
and on further condition that if all or part of any such Imposition, the amount
or validity of which shall have been so contested, shall finally be determined
by any court or other governmental authority of competent jurisdiction to be
lawfully charged, assessed, imposed, due or payable, the Ground Lessee will
promptly pay the same, together with any interest, penalty or fine resulting
from any such contest by the Ground Lessee.
(f) If the Ground Lessee shall fail to pay
any such Imposition as herein provided, the Ground Lessor may at any time after
the same become due pay the same, together with any interest, penalties, fines
and costs accrued thereon or imposed in connection therewith, and the Ground
Lessee will repay to the Ground Lessor, upon demand, the full amount so paid by
the Ground Lessor.
5.3 UTILITY CHARGES. The Ground Lessee will pay or cause
to be paid directly, before the same become delinquent, all charges, duties,
rates and other outgoings of every description to which the Site or any part
thereof or any
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<PAGE> 44
improvements thereon, or the Ground Lessor or the Ground Lessee in respect
thereof, may during the term be assessed or become liable for electricity, gas,
refuse collection, telephone, sewage disposal, water, cable television or any
other utilities or services or any connections or meters therefor, whether
assessed to or payable by the Ground Lessor or the Ground Lessee.
5.4 IMPROVEMENTS REQUIRED BY LAW. The Ground Lessee
will, at the Ground Lessee's own expense, during the entire term, make, build,
maintain and repair all fences, walls, sewers, drains, roads, curbs and
sidewalks which may be required by law to be made, built, maintained and
repaired upon or adjoining or in connection with or for the use of the Site,
the Building or any part thereof, in the same manner as would be required of
the Ground Lessee if the Ground Lessee were the owner in fee simple of the
lands demised hereunder.
5.5 USE OF SITE. The Ground Lessee may use the Site for
any lawful purpose, including, without limitation, the construction,
maintenance and operation thereon of an office building.
5.6 CONSTRUCTION OF IMPROVEMENTS. The Ground Lessee,
without cost to the Ground Lessor, may at any time and from time to time after
completion of the Building, make or cause to be made further alterations,
renovations, improvements and additions to the Building or any part thereof and
substitutions and replacements therefor (collectively, the "Modifications");
PROVIDED, HOWEVER, that (i) the Modification shall be done expeditiously and in
a good and workmanlike manner; and (ii) the Ground Lessee shall comply with all
legal and insurance requirements applicable to the Modification, including the
obtaining of all permits and certificates of occupancy.
5.7 LIENS AND ENCUMBRANCES. The Ground Lessee will keep
the Site free of any mechanics' or materialmen's liens and any attachment,
execution or judgment liens, and any charge or encumbrance whatsoever. Should
any such lien, charge or encumbrance or notice thereof be recorded against or
attach to the Site, or any part thereof, or any interest therein, then, unless
the Ground Lessee shall elect to contest the validity of the same or the amount
of the claim in respect of which the same shall have been recorded as provided
below, the Ground Lessee will immediately pay off the same and cause the same
to be satisfied and discharged of record. If the Ground Lessee shall not elect
to contest in a timely manner the validity of the same
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or the amount of the claim in respect of which the same shall have been
recorded and shall not pay off the same and cause it to be satisfied and
discharged of record promptly, the Ground Lessor may, at the Ground Lessor's
option, pay off the same, and any amount so paid by the Ground Lessor shall
thereupon be and become immediately due and payable by the Ground Lessee to the
Ground Lessor; PROVIDED, HOWEVER, that the Ground Lessee will have the right to
contest the amount or validity of any such lien, charge or encumbrance or of
the claim in respect of which the same shall have been recorded by appropriate
legal proceedings, and the Ground Lessor, if legally required to do so, will
join in such proceedings, on condition, however, that such proceedings shall
not operate to cause the sale of the Site or the improvements thereon, or any
part thereof, to satisfy any such lien, charge or encumbrance, and on further
condition that the Ground Lessee shall pay all reasonable costs and attorneys'
fees incurred by the Ground Lessor in any such legal proceedings, and on
further condition that if all or any part of such lien, charge or encumbrance,
or claim in respect of which the same shall have been recorded, the amount or
validity of which shall have been go contested, shall be finally determined by
any court, or any other governmental authority of competent jurisdiction, to be
lawful or valid, the Ground Lessee shall promptly pay the same, together with
any interest, penalty or fine resulting from such contest by the Ground Lessee
and shall promptly cause the same to be satisfied and discharged of record.
5.8 INDEMNITY. The Ground Lessee, as a material part
of the consideration to the Ground Lessor for this Ground Lease, will and does
hereby assume all risk of bodily injury, wrongful death and/or property damage,
business interruption or economic loss occasioned by any accident, fire or
nuisance made or suffered in the Site or the Building or resulting from any
failure on the part of the Ground Lessee to maintain the Site or the Building
in a safe condition, and the Ground Lessee hereby waives on its own behalf, and
on behalf of its agents, employees, contractors, invitees, customers,
sublessees and licensees (herein collectively called the "Ground Lessee's
Affiliates"), all claims in respect thereof against the Ground Lessor and the
Ground Lessor's officers, directors, partners, trustees, employees, agents,
licensees, contractors and invitees (herein collectively called the "Ground
Lessor's Affiliates"), and acknowledges that this assumption of risk by the
Ground Lessee has been bargained for in determining rent and other obligations
of the Ground Lessee under this Ground Lease. The Ground Lessee hereby agrees
to indemnify and save harmless the Ground Lessor and the Ground Lessor's
Affiliates from and
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against any and all claims for bodily injury, wrongful death and/or property
damage, business interruption and economic loss by any person (including
without limiting the generality of said term, the Ground Lessee's Affiliates
and the Ground Lessor's Affiliates) arising out of, caused by, occasioned by or
resulting from any accident, fire or nuisance in the Site and the Building, or
the Ground Lessee's failure to maintain the Site and the Building, except where
such injury, death or loss is caused by the willful act or gross neglect of the
Ground Lessor or the Ground Lessor's Affiliates. The Ground Lessee further
agrees to indemnify and save harmless the Ground Lessor, and the Ground
Lessor's Affiliates, from and against any and all liability, loss, costs,
charges, fines, penalties, obligations or expenses of whatsoever nature in
connection with any and all claims by or on behalf of any person or persons,
firm or firms, corporation or corporations, arising from the conduct or
management of any work or thing whatsoever done by the Ground Lessee or the
Ground Lessee's Affiliates in or about the Site and the Building, or from any
transactions of Ground Lessee concerning the Site and the Building, and will
further indemnify and save the Ground Lessor and the Ground Lessor's Affiliates
harmless from any and all claims arising from any breach or default on the part
of the Ground Lessee in the performance of any covenants or agreement on the
part of the Ground Lessee to be performed pursuant to the terms of this Ground
Lease, or arising from any act or negligence of the Ground Lessee or the Ground
Lessee's Affiliates for all costs, attorneys' fees, expenses and liabilities
incurred in connection with any such claim or any action or proceeding brought
thereon. The Ground Lessee further agrees that in case of any claim, demand,
proceeding, action or cause of action, threatened or actual, against the Ground
Lessor or the Ground Lessor's Affiliates, the Ground Lessee, upon the written
request of the Ground Lessor or any of the Ground Lessor's Affiliates, shall
defend the Ground Lessor and the Ground Lessor's Affiliates at the Ground
Lessee's expense by counsel satisfactory to the Ground Lessor or Ground
Lessor's Affiliates, as the case may be. If the Ground Lessor or any of the
Ground Lessor's Affiliates does not request such defense or the Ground Lessee
does not provide such defense, then the Ground Lessee will reimburse the Ground
Lessor and the Ground Lessor's Affiliates as aforesaid, and agrees to cooperate
with the Ground Lessor and the Ground Lessor's Affiliates in such defense,
including, but not limited to, by providing affidavits and testimony upon
request of the Ground Lessor or the Ground Lessor's Affiliates.
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5.9 ASSUMPTION OF RISK BY THE GROUND LESSEE. The Ground
Lessee, as a material part of the consideration to the Ground Lessor for this
Ground Lease, will and hereby does assume all risk of loss or damage to
buildings, structures, improvements, machinery, equipment, fixtures, supplies,
merchandise, and other property, by whomsoever owned, stored or placed in, upon
or about the Site, and does hereby agree that the Ground Lessor shall not be
responsible for loss or damage to any such property, unless caused by the
willful act or gross neglect of the Ground Lessor or Ground Lessor's
Affiliates, and the Ground Lessee waives all claims in respect thereof and
acknowledges that this assumption of risk by the Ground Lessee has been
bargained for in determining rent and other obligations of the Ground Lessee
under this Ground Lease. The Ground Lessee hereby agrees to indemnify and save
harmless the Ground Lessor and the Ground Lessor's Affiliates from and against
any and all claims for such loss or damage, including claims for bodily injury,
wrongful death, property damage, business interruption and/or economic loss,
other than damage or loss caused by the willful act or gross neglect of the
Ground Lessor and the Ground Lessor's Affiliates, or arising out of a defect
which the Ground Lessor is required hereunder to repair and has failed to
remedy within a reasonable time after having been given notice in writing
thereof. Without prejudice to the generality of the foregoing, the Ground
Lessor shall not be liable for loss or damage to any property entrusted to the
Ground Lessor or the Ground Lessor's Affiliates nor for loss or damage to any
property at any time stored or kept in the Site and the Building, either from
rain or from any other water which may leak, issue or flow from any part of the
Site and the Building, or from the pipes or plumbing of the same or from any
other place or quarter, nor for any loss or damage to property in the Site and
the Building caused by theft, or by accident involving escalators, or for
damage or any character, including bodily injury, wrongful death, property
damage, business interruption or economic loss arising out of defects of
construction of the Building or any machinery, equipment, electrical wiring or
facility therein or failure or breakdown thereof or from lack of repair or
proper operation of the same or from any other cause unless the cause be a
defect with the Ground Lessor is required hereunder to repair and the Ground
Lessor shall have failed to remedy such defect within a reasonable time after
written notice thereof.
5.10 REPAIR AND MAINTENANCE. The Ground Lessee will, at
the Ground Lessee's own expense, from time to time and at all times during the
term, keep all buildings, structures, fixtures and improvements hereafter
constructed on the Site in good
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order, condition and repair, excepting reasonable wear and tear.
5.11 WASTE; OBSERVANCE OF LAWS. Subject to Ground
Lessee's right to demolish the existing improvements on the Site, to construct
the Building and to make Modifications as provided in Section 5.6 above, the
Ground Lessee will not make or suffer any waste or strip and will not make or
suffer any improper, offensive or unlawful use of the Site and the Building and
will at all times during the term keep the Site and the Building in good order
and in a strictly clean and sanitary condition. Subject to the terms of Section
5.2(e) relating to permitted contests, Ground Lessee will observe and comply
with all laws, ordinances, rules and regulations now or hereafter made by any
governmental authority for the time being applicable to or in connection with
the Site or any improvement thereon or the use thereof.
5.12 HAZARD INSURANCE.
(a) GENERAL REQUIREMENTS. (i) Ground Lessee shall
during the term of this Ground Lease, keep or cause to be kept, the buildings,
fixtures and other improvements now situated or hereafter constructed on the
Site continuously insured against loss or damage by fire and all other risks
covered by an I.S.O. standard "broad" causes of loss form as filed with the
Hawaii Insurance Commissioner or equivalent coverage in amounts equal to actual
replacement cost. The insurance coverage required to be obtained pursuant to
the immediately preceding sentence may have a deductible or self-insured
retention.
(ii) During any period in which
Modifications costing in the aggregate in excess of FIVE MILLION DOLLARS
($5,000,000) at the Site are being undertaken, the Ground Lessee shall obtain
or cause the contractor performing such Modifications to obtain builder's risk,
general liability, worker's compensation and automobile liability insurance
with respect to the improvements on the Site.
(iii) If at any time during the term of
this Ground Lease the area in which the Site is located is designated a
"flood-prone" area pursuant to the Flood Disaster Protection Act of 1973, or
any amendments or supplements thereto, then the Ground Lessee shall comply or
cause compliance with the National Flood Insurance Program as set forth in the
Flood Disaster Protection Act of 1973. In addition, the Ground Lessee will
fully comply or cause compliance with the requirements of the National Flood
Insurance Act of 1968 and the
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Flood Disaster Protection Act of 1973, as each may be amended from time to
time, and with any other legal requirement, concerning flood insurance to the
extent that it may apply to the Site.
(iv) The Ground Lessee shall
obtain and maintain or cause to be obtained and maintained during the term of
this Ground Lease for the Site and the Building a Difference-in-Conditions
policy which includes at a minimum the perils of collapse, earthquake and
flood. The policy may be written on a loss limit basis determined to be prudent
by the Ground Lessee.
(b) RIGHTS TO INSURANCE PROCEEDS. Every policy of
insurance required to be obtained by Section 5.11(a) shall provide that such
insurance proceeds shall be payable to the Ground Lessee, and will be adjusted
by or at the direction of the Ground Lessee. The respective interests of the
Ground Lessor and the Ground Lessee in any proceeds of such insurance payable
for loss or damage to such buildings, fixtures and improvements shall be fixed
and determined as of the date of such loss or damage as follows:
(i) The Ground Lessor will be
entitled to collect and receive all Net Proceeds (as defined in Section 6.3
below) payable for loss or damage to any building, fixtures and other
improvements located on the Site at the commencement of the term of this Ground
Lease.
(ii) The interest of the Ground
Lessor in the Net Proceeds described in Section 5.11(b)(i) above shall be a
proportionate amount thereof in the ratio which the expired portion of the term
of this Ground Lease from the date of original completion of such building and
improvements to the date of such loss or damage, bears to the portion of such
term from the date of original completion of such building to the date
prescribed in Section 2 of this Ground Lease for expiration of the term of this
Ground Lease. The interest of the Ground Lessee therein shall be the balance of
such proceeds.
5.13 LIABILITY INSURANCE. The Ground Lessee shall procure
and carry, or cause to procure and carry, without cost to the Ground Lessor, at
all times during the term of this Ground Lease, commercial general liability
insurance for claims for injuries or death sustained by persons or damage to
property while on the Site and such other public liability coverages as are
ordinarily procured by persons who own or operate similar buildings in
Honolulu, Hawaii. The commercial general liability
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insurance policy shall include coverage for premises and operations,
independent contractors, products and completed operations, blanket contractual
liability, personal and advertising injury, liquor liability, employees as
additional insureds and severability of interest. The combined single limit of
liability for bodily injury and property damage shall be $1,000,000.00 per
occurrence, $1,000,000.00 general aggregate, and $1,000,000.00 products --
completed operations aggregate. The limit for personal injury shall be
$1,000,000.00 per person/organization subject to $1,000,000.00 general
aggregate. Umbrella (excess liability) coverage shall be $50,000,000.00. The
policy shall be endorsed to state that the general aggregate of the primary
policy applies exclusively to the Site. The policy shall be endorsed to name
the Ground Lessor, any mortgagee of any interest of the Ground Lessor in the
Site and any Leasehold Mortgagee as hereinafter defined (collectively, the
"Additional Insureds"), as additional insureds. The policy shall also
specifically provide that the policy shall be considered primary insurance
which shall apply to any loss or claim before any contribution by any insurance
which any Additional Insured may have in force. The insurance required to be
obtained pursuant to this Section may have a deductible or self-insured
retention as approved by the Ground Lessor .
5.14 PARTICULAR INSURANCE POLICY PROVISIONS.
(a) All of the insurance coverages described in
Sections 5.11 and 5.12 shall be with insurance companies that may lawfully
conduct an insurance business in the State of Hawaii and that have a "Best's"
rating of not less than A/VI. If the Best's rating system is changed or
terminated, the rating of A/VI shall be adjusted to a comparable rating.
(b) Ground Lessee shall furnish the Ground Lessor
with certificates showing the insurance required under Sections 5.11 and 5.12
to be in effect and naming the Ground Lessor, any mortgagee of any interest of
the Ground Lessor in the Site and the Building and any Leasehold Mortgagee, as
additional insureds. All such insurance shall be at the cost and expense of
Ground Lessee or its sublessees. Such certificates shall include a provision
for thirty (30) days' advance written notice by the insurer to each of the
Additional Insureds in the event of cancellation of such insurance.
(c) The Ground Lessee agrees that the insurance
policy or policies required by Sections 5.11(a)(i), 5.11(a)(iii), 5.11(a)(iv)
and, with respect to property
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insurance, Section 5.11(a)(ii), shall include an appropriate clause pursuant to
which the insurance carriers waive all rights to subrogation against each of
the Additional Insureds with respect to losses payable under such policy, and
such policy shall also provide that such policy will not be invalidated should
the Ground Lessee waive, in writing, prior to a loss, any or all rights of
recovery against any party for losses covered by such policy.
(d) All insurance policies required by Section 5.11
shall include a standard form mortgagee endorsement which shall:
(i) provide that any reference to a mortgagee
in such policy shall mean and include all holders of mortgages
of any interest in the Site, in their respective order and
preference;
(ii) provide that such insurance as to the
interest of any mortgagee shall not be invalidated by any act
or neglect of any Additional Insured, the Ground Lessee or any
person claiming by, through or under any of them; and
(iii) waive any provision invalidating such
mortgagee clause by reason of the failure of any Additional
Insured or the Ground Lessee or any person claiming by,
through or under any of them to notify the insurer of any
hazardous use, vacancy or occupancy, any requirement that any
mortgagee pay any premium thereon, and any contribution
clause.
(e) Ground Lessee shall pay or cause to pay as they
become due all premiums for the insurance required by Section 5.11 and Section
5.12, shall renew or replace or cause to be renewed or replaced each policy
prior to the expiration date thereof and shall promptly deliver to each
Additional Insured certificates for renewal and replacement policies.
(f) Anything in this Section 5.13 to the contrary
notwithstanding, any insurance which the Ground Lessee is required to obtain
pursuant to Sections 5.11 and 5.12 may be carried under a "blanket" or umbrella
policy or policies governing other properties or liabilities of the Ground
Lessee.
5.15 INSPECTION. The Ground Lessee will permit the Ground
Lessor and its agents, at all reasonable times during the term of this Ground
Lease, to enter upon the Site and the
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Building and to inspect and examine the same, and the use being made of the
same, and the state of repair and condition of the same.
5.16 SUBLETTING AND ASSIGNMENT. The Ground Lessee may,
without the consent of the Ground Lessor, sublet all or any part of the Site
and the Building or assign all or any part of its interest under this Ground
Lease. Any sublease by the Ground Lessee shall by its terms be subject and
subordinate to this Ground Lease and to the right of the Ground Lessor
hereunder. In the event of any assignment or subletting, the Ground Lessee
shall not be released from its obligation hereunder and shall remain directly
and primarily liable under this Ground Lease as to the Site and the Building,
or portion thereof, so assigned or sublet. The Ground Lessee will deliver to
the Ground Lessor a true copy of any such sublease or assignment document
promptly upon signing the same.
5.17 ATTORNMENT AND NON-DISTURBANCE. From time to time
at the request of the Ground Lessee, the Ground Lessor shall execute and
deliver to the Ground Lessee for the benefit of any tenant in the Building
attornment and non-disturbance agreements in form and substance reasonably
satisfactory to the Ground Lessor under which the Ground Lessor, as applicable,
shall agree to recognize the lease of any such tenant and to permit such tenant
to remain in occupancy of its premises within the Building notwithstanding any
default hereunder by the Ground Lessee, so long as such tenant is not in
default under the lease covering its premises within the Building and the
tenancy of such tenant does not extend beyond the Term (calculated without
regard to terminations resulting from a Ground Lessee's default). Any such
agreement shall provide that such tenant is obligated to attorn to the Ground
Lessor if this Ground Lease is terminated under the terms hereof and to
recognize the Ground Lessor as the landlord under the lease with such tenant
covering its premises within the Building. The issuance of any such agreement
shall in no way release or diminish the Ground Lessee's duties and obligations
under this Ground Lease.
5.18 GROUND LESSOR'S COSTS AND ATTORNEYS' FEES. The
Ground Lessee will pay to the Ground Lessor, on demand, all costs and expenses,
including attorneys' fees, incurred by the Ground Lessor in enforcing any of
the covenants herein contained, in remedying any breach by the Ground Lessee of
its covenants, in recovering possession of the Site, in collecting any
delinquent rent, taxes or other charges payable by the Ground Lessee hereunder,
or in connection with any litigation commenced by or against the Ground Lessee
(other than
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condemnation proceedings) to which the Ground Lessor, without any fault on its
part, shall be made a party.
5.19 SURRENDER. Upon the expiration of the term of this
Ground Lease or any extension thereof, or sooner termination thereof as in this
Ground Lease provided, the Ground Lessee will peaceably and quietly leave and
surrender and deliver up to the Ground Lessor possession of the Site, together
with the buildings, structures, fixtures and other improvements hereafter
constructed thereon, in good repair, order and condition, except for reasonable
wear and tear, and unavoidable casualty against which insurance is not required
under this Ground Lease; PROVIDED, HOWEVER, that the Ground Lessee may, if the
Ground Lessee is not in default under this Ground Lease, remove furniture,
furnishings, appliances and equipment placed by the Ground Lessee on the Site,
and if the Ground Lessee shall so remove any of the same, the Ground Lessee
will complete such removal and repair all damage occasioned thereby prior to
the expiration of the term or any extension thereof.
5.20 HAZARDOUS MATERIALS.
(a) USE OF HAZARDOUS MATERIALS. Except as provided
herein, the Ground Lessee shall not cause or permit any Hazardous Material to
be brought upon, kept or used in or about the Site and the Building by the
Ground Lessee without the prior written consent of the Ground Lessor, which
consent may be granted or withheld in the Ground Lessor's sole discretion. As
a condition of obtaining the Ground Lessor's consent, the Ground Lessee must
demonstrate to the Ground Lessor's sole satisfaction that such Hazardous
Material is necessary or useful to the Ground Lessee's business and will be
used, kept, stored and disposed of in a manner that complies with all laws
regulating any such Hazardous Material so brought upon or used or kept in or
about the Site. If the Ground Lessee breaches the obligations stated in the
preceding sentence, or if the presence of Hazardous Material on the Site and
the Building caused or permitted by the Ground Lessee results in contamination
of the Site or the Building, or if contamination of the Site or the Building
by Hazardous Material otherwise occurs for which the Ground Lessee is legally
liable to the Ground Lessor for damage resulting therefrom, then the Ground
Lessee shall indemnify, defend and hold the Ground Lessor harmless from any
and all claims, judgments, damages, penalties, fines, costs, liabilities or
losses (including, without limitation, diminution in value of the Site or the
Building, damages for the loss or restriction on use of rentable or usable
space or of any amenity of the Site or the Building, and sums paid in
settlement of claims, attorneys'
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fees, consultation fees and expert fees) which arise during or after the Ground
Lease term as a result of such contamination. This indemnification of the
Ground Lessor by the Ground Lessee includes, without limitation, costs incurred
in connection with any investigation of site conditions or any clean-up,
remedial, removal or restoration work required by any federal, state or local
governmental agency or political subdivision because of Hazardous Material
present in the soil or ground water under the Site. Without limiting the
foregoing, if the presence of any Hazardous Material on the Site or the
Building caused or permitted by the Ground Lessee results in any contamination
of the Site or the Building, the Ground Lessee shall promptly take all actions
at its sole expense as are necessary to return the Site the Building to the
condition existing prior to the introduction of any such Hazardous Material to
the Site or the Building; provided that the Ground Lessor's prior written
approval of such actions shall first be obtained, which approval shall not be
unreasonably withheld so long as such actions would not potentially have any
material adverse long-term or short-term effect on the Site or the Building.
The foregoing indemnity shall survive the expiration or earlier termination of
this Ground Lease.
(b) DEFINITIONS. As used herein, the term
"Hazardous Material" means any hazardous or toxic substance, material or waste,
including, but not limited to, those substances, materials and wastes listed in
the United States Department of Transportation Hazardous Material Table (49 CFR
172.101) or by the United States Environmental Protection Agency as hazardous
substance (40 CFR Part 302) or as defined in the Hawaii Hazardous Waste Law
(Haw. Rev. Stat. Chapter 342J) and amendments thereto, or such substances,
materials and wastes that are or become regulated under any applicable local,
state or federal law, including infectious waste governed by the provisions of
Section 321-21 of the Haw. Rev. Stat. and the rules and regulations promulgated
thereunder.)
(c) DISCLOSURE. At the commencement of this
Ground Lease, and on January 1 of the each year thereafter (each such date
being hereafter called "Disclosure Dates"), including January 1 of the year
after the termination of this Ground Lease, the Ground Lessee shall disclose to
the Ground Lessor the names and amounts of all Hazardous Material, or any
combination thereof, which were stored, used or disposed of or on the Site or
the Building, or which the Ground Lessee intends to store, use or dispose of or
on the Site or the Building in the future.
(d) INSPECTION. The Ground Lessor and their
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agents shall have the right, but not the duty, to inspect the Site and the
Building at any time to determine whether the Ground Lessee is complying with
the provisions of this Section 5.20, the Ground Lessor shall have the right to
immediately enter upon the Site and the Building to remedy any contamination
caused by the Ground Lessee's failure to comply notwithstanding any other
provision of this Ground Lease. The Ground Lessor shall use reasonable efforts
to minimize interference with the Ground Lessee's business but shall not be
liable for any interference caused thereby.
(e) REPORTS. To the extent the Ground Lessee
is required to file any reports with the United States Environmental Protection
Agency or any other federal, state, city or county agency having jurisdiction
over Hazardous Material, the Ground Lessee shall concurrently provide the
Ground Lessor a copy of such report.
5.21 COMPLIANCE WITH DISABILITY ACCESS LAWS. The Ground
Lessee hereby covenants and agrees with the Ground Lessor that the Ground
Lessee shall at all times during the term of this Ground Lease comply with any
and all governmental regulation of the Site and the Building regarding access
of disabled persons, including without limitations, Titles III and V of the
Americans with Disabilities Act of 1990, 42 U.S.C. Sec. 12101 et seq. or any
other similar federal, state or local laws or ordinances and the regulations
promulgated thereunder (collectively "Disability Access Laws"). The Ground
Lessor shall not be liable for any failure by the Ground Lessee to comply with
the requirements of the Disability Access Laws with respect to the Site and the
Building during the term hereof and the Ground Lessee expressly releases the
Ground Lessor from any and all liability for any failure by the Ground Lessee
to so comply. The Ground Lessee shall indemnify, defend and hold the Ground
Lessor harmless from and against any and all claims and demands for loss or
damage, including claims for discrimination, personal injury, monetary damage
or injunctive relief arising out of or in connection with any failure or
alleged failure of the Site or the Building to comply with the Disability
Access Laws, and the Ground Lessee shall reimburse the Ground Lessor for all
costs and expenses, including reasonable attorneys' and other professional or
consultants' fees, paid or incurred by the Ground Lessor in connection with the
defense of any such claims including, but not limited to, all costs for
research regarding settlement or other preventive measures which the Ground
Lessor may take prior to the filing of such action or to attempt to prevent the
filing of such an action.
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SECTION 6 MUTUAL COVENANTS. The Ground Lessor and
the Ground Lessee hereby mutually covenant and agree, each with the other, as
follows:
6.1 CONDEMNATION.
(a) CONSEQUENCES OF CONDEMNATION. In the
event at any time or times during the term of this Ground Lease the Site or any
part thereof shall be taken or condemned by any authority having the power of
eminent domain, then, and in every such case, the estate and interest of the
Ground Lessee in any part of the Site so taken or condemned shall at once cease
and terminate at the effective date of condemnation defined in section 6.1(b)
below, and the Ground Lessee shall peaceably surrender possession of the Site
so taken or condemned.
(b) COMPENSATION AND DAMAGES. In every such
case of taking or condemnation of the Site or any part thereof, all Net
Proceeds (as defined in Section 6.3 below) payable for or on account of the
Ground Lessor's fee simple interest (as encumbered by this Ground Lease) in any
of the land hereby demised shall be payable to and be the sole property of the
Ground Lessor, and the Ground Lessee shall have no interest or claim to such
Net Proceeds or any part thereof whatsoever; and all Net Proceeds payable for
or on account of the buildings, fixtures and other improvements on the Site and
the Ground Lessee's interest in the Site shall be payable to the Ground Lessor
and the Ground Lessee, as their respective interests shall appear, and said
respective interests in such Net Proceeds payable for or on account of any such
buildings, fixtures and other improvements shall be fixed and determined as of
the date ("the effective date of condemnation") when the Ground Lessee shall by
reason of such taking or condemnation lose the right to possession of such part
of the Site so taken or condemned, as follows:
(i) The Ground Lessor shall be entitled to
collect and receive all Net Proceeds payable for or on account
of the building, fixtures and other improvements located on
the Site at the commencement of the Term of this Ground Lease.
(ii) The interest of the Ground Lessor in the
Net Proceeds payable for or on account of the Building,
fixtures and other improvements constructed on the Site after
the commencement of the Term shall be a proportionate amount
thereof in the ratio which the expired portion of the term of
this Ground Lease
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from the date of original completion of such building and
improvements to the date of such loss or damage, bears to the
portion of such term from the date of original completion of
such building to the date prescribed in section 2 of this
Ground Lease for expiration of the term of this Ground Lease.
The interest of the Ground Lessee therein shall be the balance
of such proceeds.
(c) ABATEMENT OF RENT ON CONDEMNATION. In
case any portion of the land hereby demised shall be taken by condemnation by
any duly constituted authority and thereby pass out of the control of the
Ground Lessor, and the Ground Lessee shall by reason thereof lose the right to
possession of such portion of such land as lessee hereunder, then, and in every
such event, unless the parties shall otherwise agree, the annual rental payable
hereunder shall be reduced, except as hereinafter provided, in the proportion
which the area of the land taken bears to the total area covered by this Ground
Lease.
(d) CONDEMNATION OF LEASEHOLD INTEREST. If at
any time or times during the term of this Ground Lease a leasehold interest in
the Site or any part thereof shall be so taken or condemned, then, and in every
such case, notwithstanding the foregoing provisions of this section 6.1, such
taking or condemnation shall not result in any reduction in rent hereunder, or
give the Ground Lessee any right to terminate this Ground Lease with respect to
any part of the Site, or excuse the Ground Lessee from the full and faithful
performance of its covenants and obligations hereunder for the payment of
money, or excuse or relieve the Ground Lessee from the performance of its other
covenants and obligations hereunder, except to the extent that and for so long
as the performance of such other covenants and obligations shall be rendered
impossible by reason of the loss by the Ground Lessee of possession of such
part of the Site subject to such taking or condemnation; but in every such case
of taking or condemnation of a leasehold interest, the Ground Lessee shall be
entitled to claim and recover from the condemning authority its damages
sustained by reason thereof, and all compensation and damages payable for or on
account of such taking or condemnation of any part of the leasehold interest of
the Ground Lessee hereunder shall be payable to and be the sole property of the
Ground Lessee.
(e) LOSS OF BUSINESS DAMAGES. Notwithstanding
the foregoing provisions of this section 6.1, the Ground Lessee shall have the
right to claim and recover from the condemning
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authority, but not from the Ground Lessor, such compensation as may be
separately awarded or recoverable by the Ground Lessee in its own right on
account of any and all damage to its business by reason of any condemnation and
for or on account of any cost or loss to which the Ground Lessee might be put
in removing its furnishings and equipment.
6.2 PAYMENT AND USE OF INSURANCE OR CONDEMNATION
PROCEEDS. Subject to the Ground Lessee's right to terminate this Ground Lease
as provided in Section 6.3 below, in case:
1. the buildings, fixtures or other
improvements on the Site, or any part thereof, shall
be destroyed or damaged by fire or other casualty
herein required to be insured against (a "Casualty"),
or
2. the use, access, occupancy, easement
rights or title to the Site or any part thereof is
wholly, partially or temporarily taken or sold in,
by or on account of any actual or threatened eminent
domain proceeding or other taking of action by any
person having the power of eminent domain, including
an action by a governmental authority to change the
grade of, or widen the streets adjacent to, the Site
or alter the pedestrian or vehicular traffic flow to
the Site so as to result in a change in access to
the Site, or by or on account of an eviction by
paramount title or any transfer made in lieu of any
such proceeding or action (in each instance, a
"Condemnation");
then, and as often as the same shall happen, any award, compensation or
insurance proceeds to which Ground Lessee or Ground Lessor may become entitled
by reason of a Casualty or Condemnation shall be paid to Ground Lessee and
available for and used with all reasonable dispatch by the Ground Lessee in
rebuilding, repairing or otherwise reinstating such buildings, fixtures and
other improvements in conformity with the requirements of Section 5.6 above so
as to restore the operation and function of the Site to the same condition as
existed immediately prior to such Casualty or Condemnation; provided, however,
that any loss, the estimated cost of restoration of which is in excess of FIVE
MILLION DOLLARS ($5,000,000), shall be made payable to an escrow agent, a
lender providing financing for the construction of improvements on the Site, or
a trustee experienced in administering construction loans, as chosen by or
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at the direction of the Ground Lessee in its discretion (the "Escrowee"). The
Escrowee shall have no obligation whatsoever to effect, maintain or renew such
insurance, or to attend to any claim for loss or damage thereunder, or the
collection of any proceeds thereof, or to incur any expenses therefor, and
shall be responsible only for the proper custody and application as herein
provided of all award, compensation or insurance proceeds that shall actually
come into its possession, and the Ground Lessee will pay or cause to be paid
all fees and expenses of the Escrowee for or in connection with its services.
In case such proceeds shall be insufficient in amount to so rebuild, repair or
reinstate such buildings, fixtures and other improvements, the Ground Lessee
shall make up the deficiency for such purpose out of the Ground Lessee's own
funds.
Notwithstanding anything to the contrary contained
herein, the Ground Lessor and the Ground Lessee agree that during such time as
the Lease is in effect, any award, compensation or insurance proceeds shall be
adjusted, held, deposited, and disbursed pursuant to the provisions of the
Lease.
The Ground Lessee may appear in any proceeding or
action to negotiate, prosecute, adjust or appeal any claim for any award,
compensation or insurance payment on account of any Casualty or Condemnation
and shall pay all expenses thereof. At the Ground Lessee's request, the Ground
Lessor shall participate in any such proceeding, action, negotiation,
prosecution or adjustment.
6.3 TERMINATION OF GROUND LEASE; NET PROCEEDS. If the
Ground Lessor or the Ground Lessee shall receive notice of a possible
Condemnation of the Site or any interest therein, it shall give notice thereof
to the other promptly after the receipt of such notice. In the event of a
Significant Casualty (as defined below) or receipt of notice by Ground Lessee
of a Total Condemnation or a Significant Condemnation (each as defined below),
the Ground Lessee shall, not later than forty-five (45) days after such
occurrence or such longer time as may reasonably be required (as specified by
notice from Ground Lessee to Ground Lessor from time to time delivered prior to
the termination of such forty-five (45) days, as the same may be extended) to
determine the full extent of loss, the probable expense and time of restoration
and the probable amount of the award or insurance payment, deliver to the
Ground Lessor a written notice stating Ground Lessee's election either (i) to
keep this Ground Lease in full force and effect and, at Ground Lessee's sole
cost and expense, promptly and diligently restore
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the Site in accordance with the terms of Section 5.6 or (ii) to terminate this
Ground Lease in accordance with this Section 6.3. As used herein, "Total
Condemnation" means a Condemnation that involves a taking of Ground Lessor's
entire fee simple title to the Site. "Significant Condemnation" means a
Condemnation that in the reasonable, good faith judgment of Ground Lessee
either (a) renders the Building unsuitable for continued use as a first-class
office building or (b) is so substantial in nature such that restoration of the
Building to substantially its condition as existed immediately prior to such
Condemnation would be impracticable. "Significant Casualty" means a Casualty
that in the reasonable, good faith judgment of Ground Lessee either (x) renders
the Building unsuitable for continued use as a first-class office building or
(y) is so substantial in nature such that restoration of the Building to
substantially its condition as existed immediately prior to such Casualty would
be impracticable or, because of applicable legal requirements, impossible.
If the Ground Lessee shall elect to terminate this
Ground Lease then, this Ground Lease shall terminate on the termination date
specified in the written notice. On the termination date, Ground Lessee shall
pay to the Ground Lessor all rent and other obligations theretofore accruing
under the Ground Lease, and Ground Lessor and Ground Lessee shall be entitled
to all Net Proceeds as provided in Section 5.12(b) or 6.1(b), respectively.
Upon such termination, the Ground Lessee shall be relieved of all further
obligations under this Ground Lease, and the Ground Lessor shall refund to the
Ground Lessee any unearned portion of the rent paid in advance prior to the
effective date of such termination. As used herein, the term "Net Proceeds"
shall mean all amounts paid in connection with any Casualty or Condemnation,
and all interest earned thereon, less the expense of claiming and collecting
such amounts, including all costs and expenses in connection therewith for
which the Ground Lessor or Ground Lessee is entitled to be reimbursed pursuant
to this Ground Lease (including reasonable fees and expenses of counsel).
6.4 CONSENT TO MORTGAGE AND PROTECTION OF MORTGAGEE.
(a) RIGHT TO MORTGAGE. Notwithstanding any
provision in this Ground Lease to the contrary, the Ground Lessee shall have
the absolute right without the consent of the Ground Lessor to take back a
purchase money leasehold mortgage upon a sale or assignment of all or any
portion of its right, title and interest in, to and under this Ground Lease, or
to assign all or any portion of its right, title and interest in,
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to and under this Ground Lease, by way of mortgage, to any bank, insurance
company, trustee on behalf of secured note holders or other established lending
institution or institutions or any officer or designee of the foregoing
(including, without limitation, the Mortgagee) (each such bank, insurance
company, lending institution, officer or designee herein called a "Leasehold
Mortgagee"), to secure the repayment of funds borrowed in connection with the
construction, repair or alteration of any building or improvements now or
hereafter located on the Site, which mortgage may contain such terms,
conditions and maturity as the Ground Lessee may determine, and the Ground
Lessee may enter into any and all such extensions, modifications or amendments
of any such mortgage as it may determine, PROVIDED that the Ground Lessee shall
upon execution of any such mortgage, extension, modification or amendment
promptly deliver a true copy thereof to the Ground Lessor (the Ground Lessor
hereby acknowledging that they have received an executed copy of the Mortgage).
The execution and delivery of any such mortgage shall not be deemed to
constitute such an assignment or transfer of this Ground Lease as would require
the holder or holders thereof, as such, to assume the observance or performance
of any of the terms, covenants or conditions on the part of the Ground Lessee
to be observed or performed hereunder. Any Leasehold Mortgagee and its
successors and assigns, may enforce such mortgage and may acquire title to the
mortgaged leasehold estate in any lawful way, and pending foreclosure of such
mortgage (or sale by deed or assignment in lieu of foreclosure) may take
possession of and sublease the Site and Building demised hereunder, or cause
any person to take possession of and sublease the Site and Building demised
hereunder, and upon foreclosure thereof (or in the event of any sale by deed or
assignment in lieu of foreclosure) may without further consent of the Ground
Lessor sell and assign this Ground Lease by assignment in which the assignee
shall expressly assume and agree to observe and perform all the covenants of
the Ground Lessee hereunder for so long as such assignee shall retain title to
the Ground Lessee's interest hereunder, and any such assignee shall also have
the absolute right to assign all or any portion of its right, title and
interest in, to and under this Ground Lease to any other Leasehold Mortgagee,
by way of mortgage, upon the same terms and conditions hereinabove made
available to the Ground Lessee, provided that upon the execution of any such
assignment or mortgage a true copy thereof shall be delivered promptly to the
Ground Lessor. The Leasehold Mortgagee and each of its assigns shall be liable
to perform the obligations of the Ground Lessee hereunder only during the
period that such person has possession of or title to the Ground Lessee's
interest hereunder.
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(b) PROTECTION OF LEASEHOLD MORTGAGEE. The
following provisions shall apply and inure to and for the benefit of each
Leasehold Mortgagee, and its successors and assigns:
(i) This Ground Lease shall not be amended,
altered, modified or rescinded, or (except in accordance with
the provisions contained in this subsection following the
Ground Lessee's default) terminated prior to the expiration of
the stated term hereof, without the prior written consent of
each Leasehold Mortgagee.
(ii) The Ground Lessor shall, upon serving the
Ground Lessee any notice of default under the provisions of or
with respect to this Ground Lease, at the same time serve a
copy of such notice upon each Leasehold Mortgagee, by
registered or certified mail or by courier service, addressed
to it at the address shown in such mortgage, and no notice of
default by the Ground Lessor to the Ground Lessee shall be
deemed to be duly given unless and until a copy thereof shall
have been go mailed to each Leasehold Mortgagee.
(iii) Each Leasehold Mortgagee, if the Ground
Lessee shall be in default hereunder, shall have the right
(but shall not be obligated) within the same period as is
given to the Ground Lessee therefor, plus the additional
period of time specified in subsection 6.4(b)(v) below, to
remedy or commence to remedy such default or to cause the same
to be remedied, and the Ground Lessor shall accept such
performance by or at the instigation of such mortgagee as if
the same were done by the Ground Lessee.
(iv) The Ground Lessee hereby constitutes and
appoints each Leasehold Mortgagee as the Ground Lessee's
agent and attorney-in-fact with full power, in the Ground
Lessee's name, place and stead, and at the Ground Lessee's
cost and expense, to enter upon the Site and the Building and
make repairs thereon and therein, maintain the same, remove
any violations of law, statutes, ordinances or rule or
regulation of governing authorities and otherwise to perform
any of the obligations of the Ground Lessee under this Ground
Lease.
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(v) In the event of any default of the Ground
Lessee (including those relating to bankruptcy or insolvency)
other than a default in the payment of money or a default
susceptible of being cured by the payment of money, the Ground
Lessor shall not take any action to effect a termination of
this Ground Lease, whether by service of a notice of
termination or otherwise, due to such default of the Ground
Lessee, without allowing each Leasehold Mortgagee (or a
receiver appointed at the Leasehold Mortgagee's request or an
independent contractor with the Leasehold Mortgagee) one
hundred twenty (120) days within which either (1) to obtain
possession of the Site and the Building and the interest of
the Ground Lessee under this Ground Lease and cure the
default, if the default is susceptible of being cured after
obtaining such possession by the Leasehold Mortgagee, receiver
or independent contractor, or (2) if not enjoined or stayed,
to institute and complete foreclosure proceedings or otherwise
sell or acquire the Ground Lessee's interest in the Site and
the Building and in this Ground Lease, and any such default
shall be considered as having been waived by the Ground Lessor
upon the completion of foreclosure, or such sale or
acquisition of the Ground Lessee's interest, PROVIDED that (A)
the Leasehold Mortgagee shall not be required to continue
possession or foreclosure proceedings if the default which
would have given cause for such notice shall have been cured
or if such Leasehold Mortgagee gives to the Ground Lessor not
less than 30-days' notice of its intention to abandon such
foreclosure proceedings or discontinue such possession, (B)
during any period of forbearance, the foregoing shall not
preclude the Ground Lessor from exercising any remedies
hereunder relating to any other default of the Ground Lessee,
and (C) on and after the date of such foreclosure sale or
other acquisition and for so long as it shall hold such title,
the party holding title to the Ground Lessee's interest under
this Ground Lease shall observe and perform, or cause to be
observed and performed, all of the covenants and agreements on
the part of the Ground Lessee hereunder to be observed and
performed. If during the 120 day period, the Leasehold
Mortgagee shall have instituted foreclosure proceedings or
otherwise taken steps to sell or acquire the Ground Lessee's
interest in the Site and the Building and this Ground Lease,
but not completed such proceedings
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by the end of the 120 day period despite its good faith and
reasonable diligence, or if such proceedings shall have been
stayed or enjoined, then this Ground Lease shall not terminate
at the end of the 120 day period and the time for completion
by the Leasehold Mortgagee of its proceedings shall continue
so long as the Leasehold Mortgagee is stayed or enjoined and
thereafter for so long as the Leasehold Mortgagee proceeds to
complete steps to acquire or sell Ground Lessee's interest in
the Site and this Ground Lease by foreclosure or other
appropriate means with reasonable diligence and continuity.
Nothing in this subsection (v) shall be construed to extend
this Ground Lease beyond the term of this Ground Lease.
(vi) No such Leasehold Mortgagee shall become
personally liable under the agreements, terms, covenants or
conditions of this Ground Lease unless and until such time as
the Leasehold Mortgagee becomes, and then only for as long as
it remains, the owner of the leasehold estate, or is in
possession of the Site, PROVIDED that, upon assignment of this
Ground Lease by the Leasehold Mortgagee, such assignee shall
assume and agree to perform and observe all covenants and
conditions in this Ground Lease contained and on the part of
the Ground Lessee to be performed and observed.
(vii) In the event of termination of this Ground
Lease or any succeeding Ground Lease made pursuant to the
provisions of this subsection (vii) prior to its stated
expiration date for any reason whatsoever (including
termination that results from rejection of this Ground Lease
by the Ground Lessee's trustee in bankruptcy), the Ground
Lessor will enter into a new Ground Lease of the demised Site
with the Leasehold Mortgagee, or, if there be more than one
mortgage, then with the Leasehold Mortgagee entitled under
subparagraph (C) of this subsection (vii), for the remainder
of the term, effective as at the date of such termination, at
the rent and upon the covenants, agreements, terms, provisions
and limitations herein contained (which lease shall have the
same priority as this Ground Lease had prior to its
termination), PROVIDED:
(A) such Leasehold Mortgagee makes
written request upon the Ground Lessor
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for such new Ground Lease within thirty (30) days from the
date of its receipt of notice from the Ground Lessor of such
termination;
(B) such Leasehold Mortgagee pays to the Ground
Lessor at the time of the execution and delivery of
such new Ground Lease any and all sums which would
at the time of the execution and delivery thereof be
due under this Ground Lease but for such termination
and pays any and all expenses, including reasonable
counsel fees, court costs and disbursements incurred
by the Ground Lessor in connection with any such
default and termination as well as in connection
with the execution and delivery of such new Ground
Lease, less the net income derived by the Ground
Lessor from the Site and the Building subsequent to
the date of Ground Lease termination and prior to
the execution and delivery of the new Ground Lease;
and
(C) if more than one such Leasehold Mortgagee
makes written request upon the Ground Lessor in
accordance with the provisions of subparagraph (A)
of this subsection (vii), the new Ground Lease shall
be delivered to Mortgagee, unless all of the Notes
have been paid in full, in which event the new lease
shall be delivered to the Leasehold Mortgagee
requesting such new Ground Lease whose mortgage is
prior in lien, and the written request of any
Leasehold Mortgagee whose mortgage is subordinate in
lien shall be void and of no force and effect.
(viii) Any new Ground Lease made in accordance with
the provisions of subsection (vii) of this paragraph, shall be
prior to any mortgage or other lien on, or charge or
encumbrance of the fee of the Site which was subordinate to
this Ground Lease, and the new lessee shall have the same
right, title and interest in and to the Site and the Building
and other improvements thereon as the Ground Lessee had under
this Ground Lease.
(ix) Upon the execution and delivery of a new Ground
Lease in accordance with the provisions
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of subsection (vii) of this paragraph, the Ground Lessee's
interest in all subleases and management agreements which
theretofore may have been assigned or otherwise transferred
to the Ground Lessor shall thereupon be assigned and
transferred without recourse by the Ground Lessor to the
Leasehold Mortgagee as the new lessee.
(x) Each Leasehold Mortgagee shall have and be
subrogated to any and all rights of the Ground Lessor with
respect to the remedying of any default hereunder by the
Ground Lessee. The Ground Lessee irrevocably authorizes and
directs the Ground Lessor to accept, and the Ground Lessor
shall accept, performance by a Leasehold Mortgagee of any of
the covenants or agreements on the Ground Lessee's part to be
performed hereunder, with the same force and effect as though
performed or exercised by the Ground Lessee. A Leasehold
Mortgagee who acquires the Ground Lessee's interests in this
Ground Lease or who obtains a new Ground Lease pursuant to
6.4(b)(vii) shall, upon any assignment of such interest, be
released of all rights and obligations hereunder accruing
thereafter.
(xi) The Ground Lessee shall deliver to each
Leasehold Mortgagee copies of all notices and other
instruments which the Ground Lessee may deliver pursuant to
this Ground Lease. Any notice, approval, estoppel, consent,
waiver or other delivery purportedly delivered or given (or
deemed delivered or given) by or on behalf of the Ground
Lessee pursuant to this Ground Lease shall be of no force or
effect unless in writing and consented to by each Leasehold
Mortgagee.
6.5 GRANTS AND RELEASES OF EASEMENTS. The Ground Lessor hereby
consents in each instance to the following actions by the Ground Lessee, in the
name and stead of the Ground Lessor, but at the cost and expense of the person
performing such action: (a) the granting of easements, licenses, rights-of-way
and other rights and privileges in the nature of easements reasonably necessary
or desirable for the use, repair or maintenance of the Site and the Building as
herein provided, whether or not such grants are reciprocal to the Ground
Lessee, (b) the release of existing easements or other rights in the nature of
easements which are for the benefit of the Site or the Building, (c) the
dedication or transfer of unimproved portions of the Site for road, highway or
other public purposes, (d) the
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execution of petitions to have the Site annexed to any municipal corporation or
utility district and (e) the execution of amendments to any covenants and
restrictions affecting the Site or the Building; PROVIDED, HOWEVER, in each
case the Ground Lessor shall have received a certificate of the person
performing the action stating that (i) such grant, release, dedication or
transfer does not materially impair the use of the Site or the Building, or
materially reduce their value, (ii) such grant, release, dedication or transfer
is reasonably necessary in connection with the use, maintenance, alteration or
improvement of the Site or the Building, (iii) the Ground Lessee shall remain
obligated under this lease in accordance with its terms, as though such grant,
release, dedication or transfer, had not been effected and (iv) the person
performing such action shall pay and perform any obligations of the Ground
Lessor under such grant, release, dedication or transfer. Without limiting the
effectiveness of the foregoing, the Ground Lessor shall, upon the request of
the Ground Lessee or the Lessee, and at the sole cost and expense of the
requesting person, execute and deliver any instruments necessary or appropriate
to confirm any such grant, release, dedication or transfer to any person
permitted under this section.
6.6 APPLICATIONS FOR BUILDING PERMITS AND OTHER APPROVALS. The
Ground Lessor will cooperate with the Ground Lessee in the execution and
delivery of any instruments required, and in all other respects, in connection
with any applications made by the Ground Lessee for building permits,
easements, licenses or other forms of governmental permission required or
desirable in connection with the construction of the improvements or otherwise
in connection with the use and enjoyment of the Site.
6.7 ESTOPPEL CERTIFICATES. From time to time, the Ground Lessor
and the Ground Lessee shall provide each to the other, upon written request
therefor, estoppel certificates in recordable form certifying that, if such be
the case, there are no outstanding breaches of the terms, conditions or
covenants contained in this Ground Lease.
6.8 CONSENTS. Whenever under the terms of this Ground Lease the
consent of either party shall be required, such consent shall not be
unreasonably or arbitrarily withheld, and no charge, direct or indirect, shall
be made therefor other than a reasonable fee reflecting the costs of processing
such approval. If the party receiving any request for consent or approval shall
fail to act upon such request within sixty (60) days after receipt of written
request therefor, such consent or
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<PAGE> 68
approval shall be presumed to have been given.
6.9 EVENTS AND CONSEQUENCES OF DEFAULT. This demise is upon the
express condition that if any one or more of the following events of default
shall occur, to wit:
(a) The Ground Lessee shall fail to pay the rent herein
reserved or any part thereof when due, and such failure shall continue for a
period of ten (10) days after written notice thereof shall have been given by
the Ground Lessor to the Ground Lessee; or
(b) The Ground Lessee shall fail to observe or perform
any other of the covenants herein contained and on the part of the Ground
Lessee to be observed and performed, and such failure shall continue for a
period of thirty (30) days after written notice thereof shall have been given
by the Ground Lessor to the Ground Lessee, unless the Ground Lessee shall have
taken steps in good faith within such period to remedy the same and is
continuing to so act with diligence and continuity reasonably satisfactory to
the Ground Lessor; or
(c) The Ground Lessee shall abandon the Site; or
(d) The Ground Lessee then entitled to possession of the
Site shall become bankrupt or seek protection under any provision of the
Federal Bankruptcy Act, or if any assignment of the Ground Lessee's property
for the benefit of the Ground Lessee's creditors shall be made, or if the Site
shall be attached through legal process or taken upon execution, unless the
Ground Lessee shall take steps in good faith to have such attachment or
execution set aside within ninety (90) days after such attachment or execution;
THEN, AND IN CASE OF ANY SUCH EVENT OF DEFAULT, the Ground Lessor may, upon the
occurrence of such event of default, or at any time thereafter during the
continuance of such default, at the Ground Lessor's option, terminate this
Ground Lease by giving thirty (30) days' prior written notice thereof to the
Ground Lessee, and upon such termination, the Ground Lessor may then or at any
time thereafter reenter the Site or any part thereof, in the name of the whole,
and thereupon, take possession of the Site and all improvements thereon and may
expel and remove from the Site the Ground Lessee and those claiming under the
Ground Lessee, and the Ground Lessee's and their effects, without service of
notice or resort to any legal process and without being deemed guilty of any
trespass or
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<PAGE> 69
becoming liable for any loss or damage which may be occasioned thereby, or may
then, or at any time thereafter, bring an action for summary possession of the
Site or any part thereof as provided by law, all without prejudice to any other
remedy or right of action which the Ground Lessor may have for arrears of rent
or for any preceding or other breach of this Ground Lease. Such termination of
this Ground Lease may, but need not necessarily, be made effective by filing in
the Office of the Assistant Registrar of the Land Court of the State of Hawaii
(if appropriate) or by recording in the Bureau of Conveyances of the State of
Hawaii an affidavit that such notice of termination has been given to the
Ground Lessee.
6.10 NONWAIVER OF BREACH. The acceptance of rent by the Ground
Lessor shall not be deemed to be a waiver by the Ground Lessor of any breach by
the Ground Lessee of any term, covenant or condition of this Ground Lease
herein contained, or of the Ground Lessor's right to declare and enforce a
forfeiture for any such breach. The failure of the Ground Lessor to insist upon
strict performance of any of the terms, covenants and conditions of this Ground
Lease, or to exercise any option herein conferred in any one or more instances,
shall not be construed as a waiver or relinquishment for the future of any such
terms, covenants, conditions or option, but the same shall be and remain in
full force and effect.
6.11 INTERPRETATION. Unless the context otherwise requires, the
term "Site" means and includes the land hereinabove described and all
buildings, structures, fixtures and improvements now located upon or at any
time hereafter constructed or placed upon such land during the term of this
Ground Lease; the term "mortgage" means any assignment, deed of trust or other
transfer of this Ground Lease, made as security for any indebtedness of the
Ground Lessee; the term "mortgagee" means any person to whom any such mortgage
of this Ground Lease is made. The headings of sections and subsections herein
are inserted only for convenience and reference and shall in no way define,
limit or describe the scope or intent of any provision of this Ground Lease.
The use of any gender shall include all genders. Use of the singular shall
include the plural, and use of the plural shall include the singular, as
appropriate in the context. This Ground Lease contains all of the agreements
between the parties relating to the Ground Lessee's use and occupancy of the
Site and supersedes all other prior or concurrent oral or written letters,
agreements and understandings. This Ground Lease shall be construed and
interpreted under and pursuant to the laws of the State of Hawaii.
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<PAGE> 70
6.12 NEITHER GROUND LESSOR NOR GROUND LESSEE DEEMED DRAFTER. All
provisions of this Ground Lease have been negotiated by the Ground Lessor and
the Ground Lessee at arm's length and with full representation of their
respective legal counsel and neither party shall be deemed to be the drafter of
this Ground Lease. If this Ground Lease is ever construed by a court of law,
such court shall not construe this Ground Lease or any provision of this Ground
Lease against either party as the drafter of the Ground Lease.
6.13 NOTICES. Any notice or demand to be given to or served upon
either the Ground Lessor or the Ground Lessee in connection with this Ground
Lease shall be deemed to have been sufficiently given or served for all
purposes by being sent as registered or certified mail, postage prepaid,
addressed in the case of the Ground Lessor to such party at the place
hereinabove designated for the payment of rent, or at such other address as the
Ground Lessor may from time to time designate in writing to the Ground Lessee,
and in the case of the Ground Lessee, to such party at the Site, or at such
other address or to such other persons as the Ground Lessee may from time to
time designate in writing to the Ground Lessor, and any such notice or demand
shall be deemed conclusively to have been given or served upon the earlier to
occur of the actual date of delivery or five (5) days after the date of
mailing.
6.14 PARTIES IN INTEREST. All of the terms, conditions and
covenants of this Ground Lease shall inure to the benefit of and be binding
upon the successors and assigns of the Ground Lessor, and the successors and
permitted assigns of the Ground Lessee, and each Leasehold Mortgagee and its
successors and assigns, to the same extent as such terms, conditions and
covenants inure to the benefit of and are binding upon the Ground Lessor and
the Ground Lessee, respectively.
6.15 PERFORMANCE ON A NON-BUSINESS DAY. If any payment or
performance is required hereunder on a day that is not a banking day in both
the City of New York, New York, and the City and County of Honolulu, Hawaii,
then such payment or performance shall be due on the next succeeding business
day.
6.16 SHORT FORM GROUND LEASE. On the date hereof, the parties
shall join in the execution of a memorandum or so-called "short form" of this
Ground Lease for the purposes of recordation. Such memorandum or short form of
this Ground Lease shall describe the parties, the leased Site and the term of
this Ground Lease and shall incorporate this Ground Lease by reference.
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<PAGE> 71
6.17 NO ACCORD AND SATISFACTION. No payment by the Ground Lessee or
receipt by the Ground Lessor of a lesser amount than the monthly rent herein
stipulated shall be deemed to be other than on account of the earliest
stipulated rent, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and the Ground Lessor may accept such check or payment without
prejudice to the Ground Lessor's right to recover the balance of such rent or
pursue any other remedy in this Ground Lease provided.
6.18 INTEREST ON PAST DUE ACCOUNT. Any amount owing by the Ground
Lessee to the Ground Lessor under the terms of this Ground Lease shall bear
interest from the date the same became due until paid at a floating rate equal
to three (3) percent over the large business prime rate then being charged by
First Hawaiian Bank, but in no event to exceed the highest rate then allowed by
applicable law. Said interest shall be considered as a part of the rental
payable hereunder.
6.19 PERFORMANCE BY THE GROUND LESSOR. If the Ground Lessee shall
fail to pay any sum of money other than rent required to be paid by it
hereunder, or shall fail to perform any other act or affirmative covenant to be
performed by the Ground Lessee pursuant to the terms of this Ground Lease, and
such failure shall continue for ten (10) days after written notice thereof to
the Ground Lessee, then the Ground Lessor may, but shall not be obligated so to
do, perform any such affirmative covenant, or make any such payment, as the
Ground Lessee's agent, and the full amount of the cost and expense entailed, or
the Ground Lessor, and the Ground Lessor shall have the right to add the amount
thereof, together with interest at the rate specified in Section 6.18, from the
date of payment, to the rentals then due or thereafter coming due hereunder.
The option given in this Section is for the sole protection of the Ground
Lessor, and its existence shall not release the Ground Lessee from the
obligation to perform any of the covenants herein provided to be performed by
the Ground Lessee, or deprive the Ground Lessor of any legal rights which the
Ground Lessor may have by reason of any such default by the Ground Lessee.
6.20 GROUND LESSOR'S FAILURE TO PERFORM. The Ground Lessor shall
not be deemed to be in default in the performance of any obligation required by
it under this Ground Lease unless and until it has failed to perform such
obligation within thirty (30) days after written notice by the Ground Lessee to
the Ground Lessor, specifying wherein the Ground Lessor have failed to perform
such obligation; provided that if the nature of
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<PAGE> 72
Ground Lessor's obligation is such that more than thirty (30) days are required
for its performance, the Ground Lessor shall not be in default if Ground Lessor
commences to cure the default within such thirty (30) day period and thereafter
diligently prosecutes the same to completion. No such failure by the Ground
Lessor shall constitute grounds for cancelling this Ground Lease.
6.21 BROKERAGE COMMISSIONS. The Ground Lessee agrees to indemnify
the Ground Lessor against, and hold the Ground Lessor harmless from, all
liabilities arising from the claims of any broker, the finder or the like
relating to this Ground Lease based upon acts of the Ground Lessee (including,
without limitation, attorneys' fees incurred by the Ground Lessor in connection
therewith).
6.22 SALE OR ASSIGNMENT BY GROUND LESSOR. The term "Ground Lessor"
as used in this Ground Lease shall be limited to mean and include only the fee
owner or owners at the time in question of the Site. Each Lessor shall be
automatically free and relieved from all liability respecting the performance
of any covenants or obligations on the part of the Ground Lessor contained in
this Ground Lease upon a sale, conveyance or assignment of its interest in the
Site, except as to obligations already accrued. Upon any such sale, conveyance
or assignment, the buyer, grantee or assignee shall only become responsible for
all of the covenants and conditions herein contained and on the part of the
Ground Lessor to be observed and performed after the time of such sale or
conveyance. Notwithstanding any provision in this Ground lease to the contrary,
the Ground Lessor shall have the right without the consent of the Ground Lessee
to assign by way of mortgage all or any portion of its fee interest in the land
demised hereunder, provided that any such mortgage shall be expressly
subordinate to the Ground Lessee's interest under this Ground Lease.
6.23 REIMBURSEMENT OF THE GROUND LESSOR'S PROCESSING COSTS. The
Ground Lessee shall reimburse the Ground Lessor for all costs and expenses
(including attorneys' fees and other professional fees) incurred by the Ground
Lessor in processing all consents and approvals required of the Ground Lessor
including, but not limited to, the preparation and review of all documents,
plans or specifications in connection therewith. The amount of such costs and
expenses shall be payable to the Ground Lessor on demand and, if not paid,
shall carry interest as provided in this Ground Lease. Failure to pay such
amounts shall also constitute a default under this Ground Lease entitling the
Ground Lessor to exercise their rights upon
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<PAGE> 73
default by the Ground Lessee.
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<PAGE> 74
IN WITNESS WHEREOF, the parties have executed these presents as of the
day and year first above written.
FIRST HAWAIIAN LIMITED PARTNERSHIP
By _______________________________
Its
By _______________________________
Its
FH CENTER, INC.
By _______________________________
Its
By _______________________________
Its
"GROUND LESSOR"
REFIRST, INC.
By _______________________________
Its
By _______________________________
Its
"GROUND LESSEE"
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<PAGE> 75
STATE OF HAWAII )
) SS:
CITY AND COUNTY OF HONOLULU )
On this _____ day of _____________, 1993, before me
appeared ______________________________ and _________________________,
to me personally known, who, being by me duly sworn or affirmed,
did say that such persons executed the foregoing instrument as the
free act and deed of such persons, and if applicable in the capacity
shown, having been duly authorized to execute such instrument in
such capacity.
_________________________________
Notary Public, State of Hawaii
My commission expires: __________
<PAGE> 76
STATE OF HAWAII )
) SS:
CITY AND COUNTY OF HONOLULU )
On this _____ day of _____________, 1993, before me appeared
__________________________________ and _______________________________,
to me personally known, who, being by me duly sworn or affirmed, did say
that such persons executed the foregoing instrument as the free act and
deed of such persons, and if applicable in the capacity shown, having
been duly authorized to execute such instrument in such capacity.
_________________________________
Notary Public, State of Hawaii
My commission expires: __________
<PAGE> 77
STATE OF HAWAII )
) SS:
CITY AND COUNTY OF HONOLULU )
On this _____ day of _____________, 1993, before me appeared
___________________________________________________ and _____________, to me
personally known, who, being by me duly sworn or affirmed, did say that such
persons executed the foregoing instrument as the free act and deed of such
persons, and if applicable in the capacity shown, having been duly authorized
to execute such instrument in such capacity.
_________________________________
Notary Public, State of Hawaii
My commission expires: __________
<PAGE> 1
EXHIBIT 12
STATEMENT
RE: COMPUTATION OF RATIOS
<PAGE> 2
First Hawaiian, Inc. and Subsidiaries
Computation of Consolidated Ratios of Earnings to Fixed Charges
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
------------- ------------ ------------ ------------ ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Income before income taxes
and cumulative effect of a
change in accounting principle $ 119,105 $ 127,880 $ 120,200 $ 104,540 $ 83,853
---------- ----------- ---------- ---------- -----------
Fixed charges:(1)
Interest expense 163,541 217,693 270,851 283,676 249,674
Capitalized interest 1,084 3,732 1,404 - -
Rental expense 2,929 2,069 1,510 851 835
---------- ----------- ---------- ---------- -----------
167,554 223,494 273,765 284,527 250,509
Less interest on deposits 129,719 186,725 255,099 271,710 238,991
---------- ----------- ---------- ---------- -----------
Net fixed charges 37,835 36,769 18,666 12,817 11,518
---------- ----------- ---------- ---------- -----------
Earnings, excluding
interest on deposits $ 156,940 $ 164,649 $ 138,866 $ 117,357 $ 95,371
========== =========== ========== ========== ===========
Earnings, including
interest on deposits $ 286,659 $ 351,374 $ 393,965 $ 389,067 $ 334,362
========== =========== ========== ========== ===========
Ratio of earnings to
fixed charges:
Excluding interest
on deposits 4.15 X 4.48 x 7.44 x 9.16 x 8.28 x
Including interest
on deposits 1.71 X 1.57 x 1.44 x 1.37 x 1.33 x
</TABLE>
(1) For purposes of computing the above ratios, earnings represent income
before income taxes plus fixed charges. Fixed charges, excluding
interest on deposits, include interest (other than on deposits), whether
expensed or capitalized, and that portion of rental expense (generally
one third) deemed representative of the interest factor. Fixed charges,
including interest on deposits, include all interest, whether expensed
or capitalized, and that portion of rental expense (generally one third)
deemed representative of the interest factor.
Exhibit 12
<PAGE> 1
EXHIBIT 13
CORPORATION'S
ANNUAL REPORT 1993
<PAGE> 2
First Hawaiian, Inc. Financial Review 1993 Index to Financial Review
<TABLE>
<S> <C>
14 Corporate Organization
15 Common Stock Information
16 Summary of Selected Consolidated Financial Data
17 Management's Discussion and Analysis of Financial Condition
and Results of Operations
33 Summary of Quarterly Financial Data
(Unaudited)
34 Report of Independent Accountants
Financial Statements:
35 Consolidated Balance Sheets
36 Consolidated Statements of Income
37 Consolidated Statements of Changes in Stockholders' Equity
38 Consolidated Statements of Cash Flows
39 Notes to Financial Statements
52 Corporate Addresses
52 Supplemental Information
</TABLE>
<PAGE> 3
CORPORATE ORGANIZATION First Hawaiian, Inc. and Subsidiaries
FIRST HAWAIIAN, INC.
First Hawaiian, Inc. ("Parent") is a registered bank holding company under
the Bank Holding Company Act of 1956, as amended, and is incorporated under
the laws of the State of Delaware. As a bank holding company, the Parent is
allowed to acquire or invest in the securities of companies that are engaged
in activities closely related to banking and sanctioned by the Federal Reserve
Board and other regulatory agencies.
The Parent's organization consists of the following wholly-owned
subsidiaries:
FIRST HAWAIIAN BANK
First Hawaiian Bank ("Bank") is a full-service bank conducting general
commercial and savings banking business and offering trust services. The Bank's
activities include receiving demand, savings and time deposits, making
commercial, agricultural, real estate and consumer loans; selling traveler's
checks, bank money orders, mutual funds and annuities; issuing letters of
credit; handling domestic and foreign collections; renting safe deposit boxes;
and providing data processing services to customers.
The Bank's main office is located in Honolulu, Hawaii with 58 other
banking offices located throughout the State of Hawaii. It also has two banking
offices in Guam, an offshore branch in Grand Cayman, British West Indies, a
representative office in Tokyo, Japan and a worldwide network of correspondent
banks.
Deposits in the Bank are insured by the Federal Deposit Insurance
Corporation ("FDIC") to the extent, and subject to the limitations, set forth
in the Federal Deposit Insurance Act, as amended (the "Act"). The Bank is a
State of Hawaii chartered bank and is not a member of the Federal Reserve
System.
The Bank also conducts business through the following wholly-owned
subsidiaries:
o FH CENTER, INC.
FH Center, Inc. was organized to own certain real property in
connection with the construction of First Hawaiian Center.
o FHB MORTGAGE COMPANY, INC.
FHB Mortgage Company, Inc. was organized to operate a mortgage
brokerage company and is presently doing business as Phoenix Financial
Services in Honolulu, Hawaii.
o FIRST HAWAIIAN OVERSEAS CORPORATION
First Hawaiian Overseas Corporation is engaged in foreign banking
investements and activities outside the United States.
o FHB PROPERTIES, INC. AND AMERICAN SECURITY PROPERTIES, INC.
FHB Properties, Inc. and American Security Properties, Inc. were
organized to hold title to certain property and premises upon which
the Bank's business is conducted.
PIONEER FEDERAL SAVINGS BANK
Pioneer Federal Savings Bank ("Pioneer") is a federally chartered savings
bank headquartered in Honolulu, Hawaii. Pioneer, chartered in 1890, currently
conducts its business through 19 full-service offices located on the islands of
Oahu, Maui, Hawaii and Kauai. Pioneer has two wholly-owned subsidiaries --
Pioneer Insurance Agency, Inc. and Pioneer Advertising Agency, Inc. The
operations of these subsidiaries constitute a small portion of Pioneer's
business.
Pioneer's principal business consists of attracting deposits from the
general public through a variety of deposit products. The deposits are insured
by the Savings Association Insurance Fund of the FDIC to the extent, and
subject to the limitations, set forth in the Act. The deposits, together with
borrowings, principally from the Federal Home Loan Bank ("FHLB") of Seattle,
and funds from ongoing operations, are used in the origination of one-to-four
family residential mortgage loans and, to a lesser extent, consumer loans and
other mortgage loans.
FIRST HAWAIIAN CREDITCORP, INC.
First Hawaiian Creditcorp, Inc. ("Creditcorp") is a financial services laon
company operating in the State of Hawaii.
The lending activities of Creditcorp are concentrated in both consumer
and commercial financing which are primarily collateralized by real estate.
The primary source of funds of Creditcorp is receiving savings and time
deposits. Deposits are insured by the FDIC to the extent, and subject to the
limitations, set forth in the Act.
Creditcorp has 11 branch offices located throughout the four major
islands of the State of Hawaii and a loan production office in Guam.
FIRST HAWAIIAN LEASING, INC.
First Hawaiian Leasing, Inc. is primarily engaged in commercial equipment and
vehicle leasing and financing and is also a licensed financial services loan
company.
FHI INTERNATIONAL, INC.
FHI International, Inc. was organized to engage and/or invest in consumer
financing services and related activities outside the United States.
<PAGE> 4
COMMON STOCK INFORMATION First Hawaiian, Inc. and Subsidiaries
The common stock of First Hawaiian, Inc. ("Company") is traded over-
the-counter on the National Association of Securities Dealers ("Nasdaq")
National Market under the symbol FHWN. As of December 31, 1993, there were
5,151 holders of record of the Company's common stock. A large number of shares
are also held in the names of nominees and brokers for individuals and
institutions.
On December 1, 1993, the Bank purchased certain assets and assumed
certain liabilities of GKN, Inc., which did business as Phoenix Financial
Services at a purchase price of $1,000,000 in the form of an exchange for
41,186 newly-issued shares of common stock of the Company.
On August 27, 1992, the Company entered into a merger agreement with
Finance Investment Company, Limited whereby the Company acquired FH Center,
Inc. and its parcel of land in exchange for 423,077 newly-issued shares of the
Company's common stock.
On March 15, 1990, the Company's stockholders approved an increase in
the number of authorized shares of common stock from 40,000,000 to 60,000,000
shares. On May 25, 1990, the Company's stockholders approved a further increase
in the number of authorized shares of common stock from 60,000,000 to
66,500,000 shares and waived their preemptive rights to purchase those shares.
On July 24, 1990, the Company sold 4,600,000 shares of common stock in
a public offering at a price of $23.75 per share. Additionally, on August 2,
1990, the underwriter exercised its option to purchase 570,000 shares to cover
over-allotments. Proceeds from the sale of the 5,170,000 shares of common stock
were $118,114,000, net of underwriting discount and expenses.
A compilation of certain quarterly and annual per share data is presented below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Market Price
Net Dividends ----------------------------------------
Income Paid High Low Close
------ --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1993
First Quarter $ .67 $ .28 $ 30 1/4 $ 26 3/4 $ 30 1/4
Second Quarter .68 .28 30 3/4 26 1/2 28
Third Quarter .57 .28 29 1/2 27 27 1/2
Fourth Quarter .60 .295 28 23 3/4 24 3/4
------ -------
Annual $ 2.52 $ 1.135 30 3/4 23 3/4 24 3/4
------ -------
1992
First Quarter $ .66 $ .26 29 3/4 24 1/4 26 1/4
Second Quarter .69 .26 27 3/4 23 1/2 25
Third Quarter .66 .26 27 1/4 24 1/4 24 7/8
Fourth Quarter .69 .28 29 1/2 23 1/2 28 3/4
------ -------
Annual $ 2.70 $ 1.06 29 3/4 23 1/2 28 3/4
------ -------
1991 $ 2.55 $ .95 31 1/4 17 3/4 27 3/4
1990 $ 2.45 $ .83 25 3/4 14 1/2 19 3/4
1989 $ 2.14 .70 26 3/4 14 7/8 25 1/4
- ------------------------------------------------------------------------------------------------
</TABLE>
The Company expects to continue its policy of paying quarterly cash dividends.
The declaration and payment of cash dividends are subject to the Company's
future earnings, capital requirements, financial condition and certain
limitations as described in Note 10 to the Financial Statements.
<PAGE> 5
<TABLE>
<CAPTION>
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA First Hawaiian, Inc. and Subsidiaries
----------------------------------------------------
1993 1992 1991 1990 1989
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENTS AND DIVIDENDS
(in thousands)
Interest income $441,595 $486,272 $523,578 $498,889 $431,129
Interest expense 163,541 217,693 270,851 283,676 249,674
----------------------------------------------------
Net interest income 278,054 268,579 252,727 215,213 181,455
Provision for loan and lease losses 13,262 12,812 10,252 9,077 9,012
Other operating income 70,013 60,738 54,265 42,006 42,370
Other operating expenses 215,700 188,625 176,540 143,602 130,960
----------------------------------------------------
Income before income taxes and
cumulative effect of change
in accounting principle 119,105 127,880 120,200 104,540 83,853
Income taxes 40,898 40,980 38,490 33,068 26,418
----------------------------------------------------
Income before cumulative effect
of a change in accounting principle 78,207 86,900 81,710 71,472 57.435
Cumulative effect of a change
in accounting principle 3,650 -- -- -- --
----------------------------------------------------
Net income $ 81,857 $ 86,900 $ 81,710 $ 71,472 $ 57,435
====================================================
Cash dividends $ 36,821 $ 34,161 $ 30,395 $ 24,463 $ 18,733
COMMON STOCK DATA
Per share:
Income before cumulative effect
of a change in accounting principle $ 2.41 $ 2.70 $ 2.55 $ 2.45 $ 2.14
Net income $ 2.52 $ 2.70 $ 2.55 $ 2.45 $ 2.14
Cash dividends $ 1.135 $ 1.06 $ .95 $ .83 $ .70
Book value (at December 31) $ 18.69 $ 17.30 $ 15.53 $ 13.93 $ 10.45
Market price (close at December 31) $ 24.75 $ 28.75 $ 27.75 $ 19.75 $ 25.25
Average shares outstanding (in thousands) 32,505 32,225 32,079 29,175 26,909
BALANCE SHEETS
(in millions)
Average balances:
Total assets $ 6,755 $ 6,537 $ 6,007 $ 5,292 $ 4,446
Total earnings assets $ 6,106 $ 5,966 $ 5,538 $ 4,922 $ 4,129
Loans and leases $ 4,619 $ 4,358 $ 3,837 $ 3,032 $ 2,525
Deposits $ 5,069 4 5,084 $ 5,159 $ 4,686 $ 3,959
Stockholders' equity $ 584 $ 526 $ 470 $ 352 $ 259
At December 31:
Total assets $ 7,269 $ 6,553 $ 6,511 $ 5,509 $ 5,080
Loans and leases $ 5,067 $ 4,396 $ 4,329 $ 3,262 $ 2,807
Deposits $ 5,220 $ 5,088 $ 5,337 $ 4,777 $ 4,512
Long-term debt $ 222 $ 71 $ 62 $ 50 $ 60
Stockholders' equity $ 608 $ 562 $ 498 $ 447 $ 281
SELECTED RATIOS
Return on average total assets 1.21% 1.33% 1.36% 1.35% 1.29%
Return on average stockholders' equity 14.01% 16.52% 17.38% 20.29% 22.15%
Dividend payout ratio 45.04% 39.26% 37.25% 33.88% 32.71%
Average stockholders' equity
to average total assets 8.65% 8.05% 7.82% 6.66% 5.83%
====================================================
</TABLE>
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
First Hawaiian, Inc. and Subsidiaries
OVERVIEW
1993 marked the second highest year of earnings for First Hawaiian, Inc.
("Company"). The year was highlighted by the acquisition of Pioneer Federal
Savings Bank ("Pioneer") on August 6, 1993 and an increase in dividends--the
sixth increase in the last five years.
Consolidated net income for 1993 was $81,857,000, compared to $86,900,000
for 1992, a decrease of $5,043,000, or 5.8%. This decrease resulted primarily
from a slowdown in earnings growth caused by the current economic recession in
Hawaii. Net income for 1992 increased by $5,190,000, or 6.4%, over 1991,
reflecting growth in both net interest income and other operating income and
continued control over operating expenses. The Company's net income has grown
at an annual compounded rate of 13.6% for the last five years and 14.5% for the
last ten years.
On a per share basis, net income for 1993 was $2.52, a decrease of $.18, or
6.7%, compared to the $2.70 earned in 1992. Net income per share was $2.55 in
1991.
The Company's return on average total assets for 1993 was 1.21% compared to
1.33% for 1992 and 1.36% for 1991. This rate of return has averaged 1.30% for
the last five years.
In 1993, the return on average stockholders' equity was 14.01% compared to
16.52% for 1992 and 17.38% in 1991. This rate of return has averaged 18.07% for
the last five years.
The Company's asset quality measures, which have historically been strong
compared to its peer group, improved from 1992 to 1993, with nonperforming
assets (including 90 days and over past due loans and leases) decreasing to
2.24% of total loans and leases and other real estate owned from 2.92% in 1992.
Net charge-offs remained stable at .27% of average loans and leases in both
1993 and 1992, which continues to be well below peer group levels. At December
31, 1993, the Company's coverage ratio (consisting of the allowance for loan
and lease losses to nonperforming loans and leases, excluding 90 days and over
past due loans and leases) increased to 1.03x from .79x at year-end 1992. The
coverage ratio was 1.49x at year-end 1991.
The Company's continued commitment to tight expense controls has kept its
overhead expense levels below that of its peer group. The Company's efficiency
ratio (consisting of other operating expenses as a percentage of total
operating revenue and exclusive of nonrecurring items) was 59.3% for 1993,
56.1% for 1992 and 55.7% for 1991.
RECENT ACQUISITIONS
The Company has completed two significant acquisitions since 1991: the
acquisition on May 31, 1991 of First Interstate of Hawaii, Inc. ("FIHI"), a
commercial bank holding company with $900 million of total assets, and the
acquisition on August 6, 1993 of Pioneer, a federal savings bank with $604
million in total assets. Both acquisitions were accounted for under the
purchase method and accordingly, are included in the Company's financial
statements from the respective dates of acquisition.
[GRAPHS]
17
<PAGE> 7
<TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) First Hawaiian, Inc. and Subsidiaries
TABLE 1: EARNINGS ANALYSIS (TAXABLE EQUIVALENT BASIS)
<CAPTION>
% Change
----------------
(in thousands, except per share data) 1993 1992 1991 1990 1989 1993/92 1992/91
---- ---- ---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income (1) $449,766 $493,269 $533,542 $509,552 $441,984 (8.8)% (7.5)%
Interest expense 163,541 217,693 270,851 283,676 249,674 (24.9) (19.6)
-------- -------- -------- -------- --------
Net interest income 286,225 275,576 262,691 225,876 192,310 3.9 4.9
Provision for loan and lease losses 13,262 12,812 10,252 9,077 9,012 3.5 25.0
Other operating income 70,013 60,738 54,265 42,006 42,370 15.3 11.9
Other operating expenses 215,700 188,625 176,540 143,602 130,960 14.4 6.8
-------- -------- -------- -------- --------
Income before income taxes,
cumulative effect of a change
in accounting principle and
taxable equivalent adjustment 127,276 134,877 130,164 115,203 94,708 (5.6) 3.6
Income taxes 40,898 40,980 38,490 33,068 26,418 (0.2) 6.5
-------- -------- -------- -------- --------
Income before cumulative effect
of a change in accounting principle
and taxable equivalent adjustment 86,378 93,897 91,674 82,135 68,290 (8.0) 2.4
Cumulative effect of a change
in accounting principle 3,650 -- -- -- -- -- --
Taxable equivalent adjustment (1) 8,171 6,997 9,964 10,663 10,855 16.8 (29.8)
-------- -------- -------- -------- --------
Net income $ 81,857 $ 86,900 $ 81,710 $ 71,472 $ 57,435 (5.8)% 6.4%
======== ======== ======== ======== ======== ==== =====
Net income per share $2.52 $2.70 $2.55 $2.45 $2.14 (6.7)% 5.9%
===== ===== ===== ===== ===== ==== =====
</TABLE>
NOTE:
(1) Interest income is adjusted to a taxable equivalent basis; that is, income
exempt from Federal income taxes is converted to a taxable equivalent basis
by the amount of income taxes that would have been applicable. This
adjustment is also reflected in the income tax provision in the above
analysis.
18
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
First Hawaiian, Inc. and Subsidiaries
NET INTEREST INCOME
As reflected in Table 1, net interest income, on a taxable equivalent basis,
increased $10,649,000, or 3.9%, from $275,576,000 in 1992 to $286,225,000 in
1993. This increase was due to the 2.3% increase in average earning assets
(principally as a result of the Pioneer acquisition) and a 7 basis point (1%
equals 100 basis points) increase in the net interest margin. Net interest
income increased by $12,885,000, or 4.9%, from 1991 to 1992 due to the 7.7%
increase in average earning assets (principally as a result of the FIHI
acquisition) which offset a 12 basis point decline in the net interest margin.
Tables 2 and 3 present an analysis of the components and changes in net
interest income for 1993, 1992 and 1991.
In 1993, the yield on average earning assets decreased 90 basis points and
the rate paid for the sources of funds used for such earning assets decreased
97 basis points, which resulted in an increase in the net interest margin from
4.62% to 4.69%. The increase in the net interest margin was primarily
attributable to the lower interest rate on savings accounts. In 1991, First
Hawaiian Bank ("Bank") committed to pay a rate of 5.5% through December 1, 1992
on all savings accounts opened before December 1, 1991. Upon the expiration of
this commitment, rates on these savings accounts declined to current market
rates. As a result, the average interest rate paid on the Company's savings
accounts declined from 4.76% in 1992 to 2.58% in 1993.
The net interest margin declined between 1991 and 1992 by 12 basis points,
from 4.74% to 4.62%, as lower prevailing interest rates resulted in a steeper
drop in yields on earning assets than in the rates paid on savings accounts,
many of which were held at prevailing 1991 rates for most of 1992 pursuant to
the Bank's commitment described above.
Average earning assets increased by $139,586,000, or 2.3%, in 1993 over
1992. In addition, the mix of earning assets changed slightly, as the Company
increased the amount of higher-yielding loans and leases in its portfolio, from
73% of total earning assets in 1992 to 76% in 1993, and reduced the amount of
investment securities from 20% of total earning assets in 1992 to 18% in 1993.
Average loans and leases increased by $261,038,000, or 6.0%, from 1992 to 1993,
principally as a result of the Pioneer acquisition.
Primarily as a result of the acquisition of FIHI, average earning assets
increased by $428,145,000, or 7.7%, in 1992 over 1991. In addition, the mix of
earning assets reflected an increase in the higher-yielding loans and leases
from 69% of total earning assets in 1991 to 73% in 1992. Average loans and
leases increased by $521,519,000, or 13.6%, from 1991 to 1992.
During 1993, average interest-bearing deposits and liabilities increased by
$81,125,000, or 1.6%, over 1992. As reflected in Table 3, the decrease in total
interest expense of $54,152,000 from 1992 to 1993 was comprised of an increase
of $2,396,000 due to higher average balances, offset by a decrease of
$56,548,000 due to lower interest rates; primarily, the rate on savings
accounts. The increase in average interest-bearing deposits and liabilities
was a result of the acquisition of Pioneer's deposits and related
interest-bearing liabilities and the issuance of $100,000,000 of subordinated
notes in order to finance the acquisition of Pioneer.
Average interest-bearing deposits and liabilities increased by
$364,962,000, or 7.9%, from 1991 to 1992, principally as a result of the FIHI
acquisition. The Bank's commitment to retain a 5 1/2% interest rate to December
1, 1992, accounted for the 60.3% increase in savings balances from 1991 to
1992.
[GRAPHS]
19
<PAGE> 9
<TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) First Hawaiian, Inc. and Subsidiaries
TABLE 2: AVERAGE BALANCES, INTEREST INCOME AND EXPENSE, AND YIELDS AND RATES
(TAXABLE EQUIVALENT BASIS)
<CAPTION>
1993 1992 1991
---------------------------- ---------------------------- ------------------------------
Interest Interest Interest
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
(dollars in thousands) Balance Expense Rate Balance Expense Rate Balance Expense Rate
------- ------- ------ ------- ------- ------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Interest-bearing deposits
in other banks:
Domestic $ 21,098 $ 633 3.00% $ 12,316 $ 729 5.92% $ 22,182 $ 1,282 5.78%
Foreign 211,543 6,666 3.15 194,020 9,537 4.92 260,524 19,848 7.62
--------- ------- --------- ------- --------- -------
Total interest-bearing
deposits in other banks 232,641 7,299 3.14 206,336 10,266 4.98 282,706 21,130 7.47
--------- ------- --------- ------- --------- -------
Federal funds sold and
securities purchased under
agreements to resell 160,647 5,097 3.17 235,890 8,323 3.53 148,422 8,776 5.91
Held-to-maturity securities: (1)
U.S. Treasury and other U.S.
Government agencies and
corporations 803,096 39,537 4.92 840,485 57,715 6.87 777,495 62,266 8.01
States and political
subdivisions 184,678 21,925 11.87 193,870 21,317 11.00 214,552 23,582 10.99
Other 54,476 3,879 7.12 131,186 8,246 6.29 277,966 19,305 6.95
--------- ------- --------- ------- --------- -------
Total held-to-maturity
securities 1,042,250 65,341 6.27 1,165,541 87,278 7.49 1,270,013 105,153 8.28
--------- ------- --------- ------- --------- -------
Available-for-sale securities (1) 50,777 1,950 3.84 -- -- -- -- -- --
Loans and leases: (1)(2)
Domestic 4,412,653 352,742 7.99 4,126,715 367,742 8.91 3,629,823 370,182 10.20
Foreign 206,748 17,337 8.39 231,648 19,660 8.49 207,021 28,301 13.67
--------- ------- --------- ------- --------- -------
Total loans and leases 4,619,401 370,079 8.01 4,358,363 387,402 8.89 3,836,844 398,483 10.39
--------- ------- --------- ------- --------- -------
Total earning assets 6,105,716 449,766 7.37 5,966,130 493,269 8.27 5,537,985 533,542 9.63
--------- ------- --------- ------- --------- -------
Cash and due from banks 298,765 298,818 269,439
Premises and equipment 230,547 174,288 121,899
Core deposit premium 13,156 11,903 7,950
Goodwill 67,678 57,441 29,422
Other assets 39,390 28,021 40,169
--------- --------- ---------
Total assets $6,755,252 $6,536,601 $6,006,864
========== ========== ==========
</TABLE>
Notes:
(1) Interest income on investment securities and loans and leases is adjusted
to a taxable equivalent basis.
(2) Interest income on loans and leases includes loan fees.
20
<PAGE> 10
<TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) First Hawaiian, Inc. and Subsidiaries
<CAPTION>
1993 1992 1991
------------------------------- ------------------------------- -------------------------------
Interest Interest Interest
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
(dollars in thousands) Balance Expense Rate Balance Expense Rate Balance Expense Rate
------- ------- ------ ------- -------- ------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing deposits
and liabilities:
Deposits:
Interest-bearing
demand $1,212,630 $ 26,036 2.15% $1,182,870 $ 34,858 2.95% $1,153,811 $ 54,797 4.75%
Savings 1,395,859 35,964 2.58 1,285,884 61,178 4.76 802,312 41,769 5.21
Time 1,407,310 63,905 4.54 1,584,905 83,876 5.29 2,173,367 144,256 6.64
Foreign (interest-
bearing) 127,830 3,814 2.98 161,196 6,813 4.23 247,245 14,277 5.77
---------- -------- ---------- -------- ---------- --------
Total interest-bearing
deposits 4,143,629 129,719 3.13 4,214,855 186,725 4.43 4,376,735 255,099 5.83
Short-term borrowings 814,843 26,477 3.25 723,731 26,622 3.68 201,042 9,800 4.87
Long-term debt 127,505 7,345 5.76 66,266 4,346 6.56 62,113 5,952 9.58
---------- -------- ---------- -------- ---------- --------
Total interest-
bearing deposits
and liabilities 5,085,977 163,541 3.22 5,004,852 217,693 4.35 4,639,890 270,851 5.84
---------- -------- ---------- -------- ---------- --------
Noninterest-bearing
demand deposits 925,497 869,025 782,279
Other liabilities 159,403 136,849 114,683
---------- ---------- ----------
Total liabilities 6,170,877 6,010,726 5,536,852
Stockholders' equity 584,375 525,875 470,012
---------- ---------- ----------
Total liabilities and
stockholders' equity $6,755,252 $6,536,601 $6,006,864
========== ========== ==========
Net interest income
and margin on
earning assets 286,225 4.69% 275,576 4.62% 262,691 4.74%
Tax equivalent
adjustment 8,171 6,997 9,964
-------- -------- --------
Net interest income $278,054 $268,579 $252,727
======== ======== ========
</TABLE>
21
<PAGE> 11
<TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) First Hawaiian, Inc. and Subsidiaries
TABLE 3: ANALYSIS OF CHANGES IN NET INTEREST INCOME (TAXABLE EQUIVALENT BASIS)
<CAPTION>
1993 Compared to 1992-- 1992 Compared to 1991--
Increase (Decrease) Due to: Increase (Decrease) Due to:
-------------------------------- --------------------------------
Net Increase Net Increase
(in thousands) Volume Rate (Decrease) Volume Rate (Decrease)
------ ---- ------------ ------ ---- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Interest-bearing deposits
in other banks:
Domestic $ 332 $ (428) $ (96) $ (541) $ (12) $ (553)
Foreign 800 (3,671) (2,871) (4,314) (5,997) (10,311)
------- -------- -------- -------- -------- --------
Total interest-
bearing deposits
in other banks 1,132 (4,099) (2,967) (4,855) (6,009) (10,864)
------- -------- -------- -------- -------- --------
Federal funds sold and
securities purchased under
agreements to resell (2,451) (775) (3,226) 3,933 (4,386) (453)
Available-for-sale securities 1,950 -- 1,950 -- -- --
Held-to maturity securities:
U.S. Treasury and other
U.S. Government
agencies and
corporations (2,469) (15,709) (18,178) 4,784 (9,335) (4,551)
States and political
subdivisions (1,040) 1,648 608 (2,274) 9 (2,265)
Other (5,344) 977 (4,367) (9,373) (1,686) (11,059)
------- -------- -------- -------- -------- --------
Total held-to-maturity
securities (8,853) (13,084) (21,937) (6,863) (11,012) (17,875)
------- -------- -------- -------- -------- --------
Loans and leases: (1) (2)
Domestic 24,425 (39,425) (15,000) 47,347 (49,787) (2,440)
Foreign (2,090) (233) (2,323) 3,062 (11,703) (8,641)
------- -------- -------- -------- -------- --------
Total loans and leases 22,335 (39,658) (17,323) 50,409 (61,490) (11,081)
------- -------- -------- -------- -------- --------
Total earning assets 14,113 (57,616) (43,503) 42,624 (82,897) (40,273)
------- -------- -------- -------- -------- --------
Interest paid on:
Deposits:
Interest-bearing demand 857 (9,679) (8,822) 1,347 (21,286) (19,939)
Savings 4,855 (30,069) (25,214) 23,278 (3,869) 19,409
Time (8,810) (11,161) (19,971) (34,531) (25,849) (60,380)
Foreign (interest-bearing) (1,239) (1,760) (2,999) (4,216) (3,248) (7,464)
------- -------- -------- -------- -------- --------
Total interest-bearing deposits (4,337) (52,669) (57,006) (14,122) (54,252) (68,374)
Short-term borrowings 3,149 (3,294) (145) 19,609 (2,787) 16,822
Long-term debt 3,584 (585) 2,999 655 (2,261) (1,606)
------- -------- -------- -------- -------- --------
Total interest-bearing deposits
and liabilities 2,396 (56,548) (54,152) 6,142 (59,300) (53,158)
------- -------- -------- -------- -------- --------
Increase (decrease) in
net interest income
(taxable equivalent basis) $11,717 $ (1,068) $ 10,649 $ 36,482 $(23,597) $ 12,885
======= ======== ======== ======== ======== ========
</TABLE>
Notes:
(1) Nonaccruing loans and leases have been included in the computations of
average loan and lease balances.
(2) Interest income for loans and leases includes loan fees of $25,145, $28,725
and $19,884 for 1993, 1992 and 1991, respectively.
22
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
First Hawaiian, Inc. and Subsidiaries
OTHER OPERATING INCOME
Total other operating income increased $9,275,000, or 15.3%, from $60,738,000
in 1992 to $70,013,000 in 1993.
Trust fees increased $3,230,000, or 17.8%, from 1992 to 1993. This increase
was primarily the result of increases in fees from pension plans and
irrevocable trusts and investment management fees which were the result of new
business and the performance of the stock market which increased the value of
assets under management.
Service charges on deposit accounts increased $3,468,000, or 18.9%, from
1992 to 1993. This increase was partly attributable to increases in fees on
checking accounts and on checks returned and paid from Pioneer.
Other service charges and fees increased $631,000, or 3.7%, from 1992 to
1993. This increase was primarily the result of fee income from annuity sales.
The Company sold certain trading securities and recognized a gain of
$1,873,000 in 1993. The Company held no trading securities as of December 31,
1993.
Other operating income of FIHI is included in the Company's other operating
income since May 31, 1991 and primarily accounts for the increase between 1992
and 1991.
Components of and changes in other operating income are reflected below for
the years indicated:
<TABLE>
<CAPTION>
1993/92 Change 1992/91 Change
---------------- ---------------
(in thousands) 1993 1992 1991 Amount % Amount %
------- ------- ------- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Trust income $21,401 $18,171 $15,937 $3,230 17.8% $2,234 14.0%
Service charges on deposit
accounts 21,791 18,323 14,911 3,468 18.9 3,412 22.9
Other service charges
and fees 17,918 17,287 15,913 631 3.7 1,374 8.6
Securities gains, net 1,955 161 262 1,794 1,114.3 (101) (38.5)
Other 6,948 6,796 7,242 152 2.2 (446) (6.2)
------- ------- ------- ------ ------
Total other operating income $70,013 $60,738 $54,265 $9,275 15.3% $6,473 11.9%
======= ======= ======= ====== ==== ====== ====
</TABLE>
PROVISION AND ALLOWANCE FOR LOAN AND LEASE LOSSES
The provision for loan and lease losses is based upon management's judgment as
to the adequacy of the allowance to absorb future losses. In assessing the
adequacy of the allowance for loan and lease losses, management's methodology
takes into consideration the Company's historical loan loss experience, value
and adequacy of collateral, level of nonperforming (nonaccrual and
renegotiated) loans and leases, loan concentrations, risk exposures, if any, in
connection with its highly-leveraged transactions, the growth and composition
of the portfolio, review of monthly delinquency reports, results of
examinations of individual loans and leases and/or evaluation of the overall
portfolio by senior credit personnel, internal auditors, and Federal and State
regulatory agencies and general economic conditions. This assessment is
performed on a quarterly basis.
The provision for loan and lease losses for 1993 was $13,262,000, an
increase of 3.5%, or $450,000 compared to 1992, reflecting the decline in
nonperforming assets and stable trend in net charge-offs from 1992 to 1993. Net
charge-offs in 1993 totalled $12,619,000 compared to $11,561,000 in 1992. Net
charge-offs in 1993 and 1992 represented .27% of average outstanding loans and
leases, which remains below peer group levels.
At December 31, 1993, the allowance for loan and lease losses totalled
$62,253,000 and represented 1.23% of total outstanding loans and leases
compared to $56,385,000 and 1.28% as of December 31, 1992.
The provision for loan and lease losses in 1992 was $12,812,000, an
increase of 25.0%, or $2,560,000, compared to 1991, reflecting increased levels
of nonperforming assets and charge-offs due to weak real estate markets in
California and the recession in Hawaii. Net charge-offs in 1992 totalled
$11,561,000 compared to $5,106,000 in 1991.
23
<PAGE> 13
<TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) First Hawaiian, Inc. and Subsidiaries
The following sets forth the activity in the allowance for loan and lease
losses for the years indicated:
<CAPTION>
(dollars in thousands) 1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Loans and leases outstanding (end of year) $5,066,809 $4,396,018 $4,329,321 $3,262,000 $2,807,000
========== ========== ========== ========== ==========
Average loans and leases outstanding $4,619,401 $4,358,363 $3,836,844 $3,032,000 $2,525,000
========== ========== ========== ========== ==========
Allowance for loan and lease losses:
Balance at beginning of year $ 56,385 $ 55,134 $ 39,847 $ 34,154 $ 27,733
Allowance applicable to loans
of purchased company (1) 5,225 -- 10,141 -- --
Loans and leases charged off:
Commercial, financial and agricultural 3,004 2,110 758 167 322
Real estate--commercial 125 250 294 200 15
Real estate--residential 562 -- -- 13 --
Real estate--construction 4,506 3,932 -- -- --
Consumer 6,839 7,093 5,481 3,461 3,195
Lease financing 27 25 -- 67 4
Foreign -- -- -- 570 600
---------- ---------- ---------- ---------- ----------
Total loans and leases charged off 15,063 13,410 6,533 4,478 4,136
---------- ---------- ---------- ---------- ----------
Recoveries on loans and leases
previously charged off:
Commercial, financial and agricultural 235 349 313 308 136
Real estate--commercial 321 1 42 21 818
Real estate--residential 207 35 -- 46 4
Real estate--construction -- -- 1 -- --
Consumer 1,667 1,456 1,066 713 558
Lease financing 14 8 5 6 29
---------- ---------- ---------- ---------- ----------
Total recoveries on loans and leases
previously charged off 2,444 1,849 1,427 1,094 1,545
---------- ---------- ---------- ---------- ----------
Net charge-offs (12,619) (11,561) (5,106) (3,384) (2,591)
Provision charged to expense 13,262 12,812 10,252 9,077 9,012
---------- ---------- ---------- ---------- ----------
Balance at end of year $ 62,253 $ 56,385 $ 55,134 $ 39,847 $ 34,154
========== ========== ========== ========== ==========
Net loans and leases charged off
to average loans and leases .27% .27% .13% .11% .10%
Net loans and leases charged off to
allowance for loan and lease losses 20.27% 20.50% 9.26% 8.49% 7.59%
Allowance for loan and lease losses to
total loans and leases (end of year) 1.23% 1.28% 1.27% 1.22% 1.22%
Allowance for loan and lease losses to
nonperforming loans and leases:
Excluding past due loans and leases 1.03x .79x 1.49x 25.19x 49.14x
Including past due loans and leases .62x .44x .86x 4.36x 4.35x
====== ====== ====== ====== ======
</TABLE>
Note:
(1) Allowances of $5,225 and $10,141 were related to the acquisition of
Pioneer Federal Savings Bank and First Interstate of Hawaii, Inc. and its
primary, wholly-owned subsidiary, First Interstate Bank of Hawaii,
respectively.
24
<PAGE> 14
<TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) First Hawaiian, Inc. and Subsidiaries
The Company has allocated a portion of the allowance for loan and lease
losses according to the amount deemed to be reasonably necessary to provide for
the possibility of losses being incurred within the various loan and lease
categories as of December 31 for the years indicated:
<CAPTION>
1993 1992 1991 1990 1989
--------------------- -------------------- -------------------- ------------------- --------------------
Percent of Percent of Percent of Percent of Percent of
Loans/Leases Loans/Leases Loans/Leases Loans/Leases Loans/Leases
in Each in Each in Each in Each in Each
Category Category Category Category Category
Allowance to Total Allowance to Total Allowance to Total Allowance to Total Allowance to Total
(in thousands) Amount Loans/Lease Amount Loans/Lease Amount Loans/Lease Amount Loans/Lease Amount Loans/Leases
------ ----------- ------ ----------- ------ ----------- ------ ----------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Domestic:
Commercial, financial
and agricultural $13,000 24% $14,700 27% $14,335 26% $10,282 27% $ 7,410 26%
Real estate--
construction 11,850 7 4,400 10 7,719 11 5,648 9 4,230 8
Real estate--
commercial 3,400 17 5,400 16 1,785 17 1,394 17 1,307 14
Real estate--
residential 4,700 35 3,000 28 2,626 25 1,722 21 1,868 20
Consumer 7,500 9 7,100 10 7,121 11 3,710 14 3,305 17
Lease financing 1,350 4 1,300 4 1,367 5 1,431 5 640 5
Foreign 1,600 4 1,700 5 500 5 1,153 7 2,050 10
General allowance 18,853 N/A 18,785 N/A 19,681 N/A 14,507 N/A 13,344 N/A
------- --- ------- --- ------- --- ------- --- ------- ----
Consolidated $62,253 100% $56,385 100% $55,134 100% $39,847 100% $34,154 100%
======= === ======= === ======= === ======= === ======= ===
</TABLE>
[GRAPH]
In May, 1993, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by
Creditors for Impairment of a Loan," which requires that impaired loans be
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate or the market price or fair value of the
collateral if the loan is collateral dependent. SFAS No. 114 is effective for
fiscal years beginning after December 15, 1994. The Company has not determined
the effect, if any, the adoption of SFAS No. 114 will have on its financial
position or results of operations.
OTHER OPERATING EXPENSES
Total other operating expenses for 1993 totalled $215,700,000, an increase of
$27,075,000, or 14.4%, from 1992.
Total personnel expenses for 1993 increased $8,529,000, or 8.3%, over 1992.
Salaries and wages increased $5,691,000, or 7.1%, reflecting normal merit
increases and increased staff levels, primarily as a result of the Pioneer
acquisition.
Occupancy expense increased $3,395,000, or 19.9%, as a result of higher
depreciation expense related to the new operations center and rental expense,
primarily as a result of the Pioneer acquisition.
Equipment expense increased $1,721,000, or 9.3%, primarily as a result of
higher depreciation and rental expense and maintenance service contracts in
connection with the conversion of the computer mainframes and improvements in
the delivery and processing systems.
Deposit insurance expense remained unchanged compared to 1992 as the
Company continued to shift public deposits into security repurchase agreements
25
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
First Hawaiian, Inc. and Subsidiaries
which has resulted in annual savings in excess of $1,500,000.
Other expenses increased $7,893,000, or 32.3%, primarily as a result of
higher outside services, telephone charges and professional fees, the Pioneer
acquisition and lower interest capitalization on construction in progress.
Other operating expenses of FIHI are included in the Company's other
operating expenses since May 31, 1991 and primarily account for the increase
between 1992 and 1991.
Components of and changes in other operating expenses are reflected below for
the years indicated:
<TABLE>
<CAPTION>
1993/92 Change 1992/91 Change
----------------- ----------------
(in thousands) 1993 1992 1991 Amount % Amount %
-------- -------- -------- ------- ---- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Personnel:
Salaries and wages $ 86,011 $ 80,320 $ 73,096 $ 5,691 7.1% $ 7,224 9.9%
Employee benefits 24,781 21,943 18,981 2,838 12.9 2,962 15.6
-------- -------- -------- ------- --------
Total personnel expenses 110,792 102,263 92,077 8,529 8.3 10,186 11.1
Occupancy expense 20,416 17,021 15,034 3,395 19.9 1,987 13.2
Equipment expense 20,243 18,522 16,815 1,721 9.3 1,707 10.2
Deposit insurance 11,122 11,122 10,468 -- -- 654 6.2
Stationery and supplies 8,430 8,922 8,284 (492) (5.5) 638 7.7
Advertising and promotion 6,911 6,326 7,216 585 9.2 (890) (12.3)
Write-off of building costs 5,444 -- -- 5,444 -- -- --
Other 32,342 24,449 26,646 7,893 32.3 (2,197) (8.2)
-------- -------- -------- ------- --------
Total other operating
expenses $215,700 $188,625 $176,540 $27,075 14.4% $ 12,085 6.8%
======== ======== ======== ======= ==== ======== ====
</TABLE>
Effective January 1, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," which changes the
practice of accounting for postretirement benefits from a cash basis to an
accrual basis during the years that the employee renders the necessary service.
The Company has been accounting for postretirement medical benefits on an
accrual basis. As a result, the adoption of SFAS No. 106 did not have a
material effect on the consolidated financial statements of the Company.
In November, 1992, the FASB issued SFAS No. 112, "Employer's Accounting for
Postretirement Benefits," which requires that the estimated cost of benefits
provided by an employer to former or inactive employees after employment but
before retirement be accounted for on an accrual basis. SFAS No. 112 is
effective for fiscal years beginning after December 15, 1993. The Company has
not determined the effect, if any, the adoption of SFAS No. 112 will have on
its financial position or results of operations.
INCOME TAXES
The provision for income taxes as shown in the Consolidated Statements of
Income represents 34.3% of pre-tax income for 1993, compared with 32.0% for
both 1992 and 1991, respectively.
On a taxable equivalent basis, the effective tax rate for 1993, 1992 and
1991 was 38.6%, 35.6% and 37.2%, respectively. Additional information on the
Company's income taxes is provided in Note 13 to the Financial Statements.
Effective January 1, 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes," the cumulative effect of which was the
recognition of an income tax benefit of $3,650,000 in the first quarter of
1993. Under SFAS No. 109, deferred tax assets and liabilities are measured
using enacted tax rates scheduled to be in effect at the time the related
temporary differences between financial reporting and tax reporting of income
and expense are expected to reverse. The effect of changes in tax rates is
recognized in income in the period that includes the enactment date. On August
10, 1993, the Omnibus Budget Reconciliation Act of 1993 was signed into law,
increasing the Federal corporate tax rate from 34% to 35%, retroac-
26
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
First Hawaiian, Inc. and Subsidiaries
tive to January 1, 1993. As a result, the Company recognized retroactive
adjustments to its deferred tax liability and current tax provision of
$1,520,000 and $402,000, respectively, in the third quarter of 1993.
LOANS
The following table sets forth the loan portfolio by major categories and loan
mix as of December 31 for the years indicated:
<TABLE>
<CAPTION>
(in millions) 1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Domestic:
Commercial, financial and agricultural $1,209 $1,175 $1,149 $ 883 $ 741
Real estate:
Construction 317 438 484 283 212
Residential 1,786 1,217 1,060 697 563
Commercial 883 720 739 555 399
Consumer 312 326 355 364 379
Credit cards 148 148 142 104 93
Lease financing 201 171 181 149 129
Foreign:
Governments and official institutions 2 3 22 13 17
Banks and other financial institutions -- -- 4 36 112
Commercial and industrial 79 78 74 79 78
Other 130 120 119 99 84
------ ------ ------ ------ ------
Total loans and leases $5,067 $4,396 $4,329 $3,262 $2,807
====== ====== ====== ====== ======
</TABLE>
The loan and lease portfolio is the largest component of earning assets and
accounts for the greatest portion of total interest income. At December 31,
1993, total loans and leases were $5,066,809,000, an increase of 15.3% from
December 31, 1992. The increase was primarily attributable to the acquisition
of Pioneer as well as increased origination volume by the Bank. At December 31,
1993, total loans of Pioneer, which primarily consist of real
estate-residential loans, were $543,959,000.
Total loans and leases at December 31, 1993, represented 69.7% of total
assets, 78.6% of total earning assets and 97.1% of total deposits compared to
67.1% of total assets, 74.2% of total earning assets and 86.4% of total
deposits at December 31, 1992. Governmental and certain other time deposits
were shifted into security repurchase agreements at December 31, 1993 and 1992
to reduce the Company's deposit insurance premiums. If these repurchase
agreements had been included in the deposit base, total loans and leases as a
percentage of total deposits would represent 83.8% and 80.8%, respectively, at
such dates.
Loan concentrations are considered to exist when there are amounts loaned
to multiple borrowers engaged in similar activities which would cause them to
be similarly impacted by economic or other conditions. At December 31, 1993,
commercial real estate loans totalled $882,628,000, or 17.4%, of total loans
and leases. The increase in commercial real estate loans of $162,546,000, or
22.6%, from December 31, 1992 to December 31, 1993 was attributable to loans
transferred from real estate--construction, and new loans made to a diverse
range of commercial sectors including shopping centers, and office and
industrial buildings. The Company has selectively participated as a lender on
commercial properties on the mainland United States, principally on the west
coast. Such loans totalled $67,642,000 and $67,951,000 at December 31, 1993 and
1992, respectively. At December 31, 1993, the largest concentration of
commercial real estate loans to a single borrower was $31.0 million.
Construction and land development loans decreased 27.6% from December 31,
1992 to December 31, 1993 due to repayments, transfers to commercial real
estate as discussed previously, and a curtailment of new lending in such
categories by the Company in light of deteriorating conditions in both mainland
and Hawaii real estate markets.
At December 31, 1993, the Company's outstanding loans to highly-leveraged
transaction ("HLT") borrowers were $47,445,000, with additional unfunded
commitments of $7,534,000. At December 31, 1993, the HLT
27
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
First Hawaiian, Inc. and Subsidiaries
portfolio consisted of six borrowers. The Company's largest single outstanding
HLT loan exposure (including unfunded commitments) at December 31, 1993 was
$19,339,000 and the average exposure was $9,163,000. Of the six HLT borowers,
five are either based in Hawaii or had subsidiaries or divisions operating in
Hawaii. At December 31, 1992, the Company's loans outstanding to HLT borrowers
were $69,183,000, with additional unfunded commitments of $6,808,000.
NONPERFORMING ASSETS AND PAST DUE LOANS
Nonaccrual loans at December 31, 1993 consist of real estate secured loans.
The decrease in the nonaccrual loan category of $11,142,000, or 15.6%, at
December 31, 1993 from December 31, 1992 was primarily attributable to a
$6.1 million commercial loan which was returned to performing status and a
$10.0 million commercial real estate loan secured by West Coast property which
was transferred to other real estate owned as a result of foreclosure, offset
by the addition of a $4.6 million commercial loan to nonaccrual status and
nonaccrual loans of $3.5 million which were acquired in the Pioneer
acquisition.
Nonperforming assets are reflected below for the years indicated:
<TABLE>
<CAPTION>
(dollars in thousands) 1993 1992 1991 1990 1989
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Nonperforming loans and leases:
Nonaccrual:
Commercial, financial and agricultural $14,024 $15,489 $11,389 $ 504 $ 285
Real estate:
Commercial 8,571 3,790 2,199 856 80
Construction 28,571 41,018 23,298 -- --
Residential:
Insured, guaranteed, or conventional 1,685 1,950 -- -- --
Home equity credit lines 255 -- -- -- --
------- ------- ------- ------ ------
Total real estate loans 39,082 46,758 25,497 856 80
Consumer 45 106 86 30 55
Lease financing -- 27 -- -- --
Foreign 7,161 9,074 -- -- --
------- ------- ------- ------ ------
Total nonaccrual loans and leases 60,312 71,454 36,972 1,390 420
Renegotiated--commercial, financial and agricultural 20 77 136 192 275
------- ------- ------- ------ ------
Total nonperforming loans and leases 60,332 71,531 37,108 1,582 695
Other real estate owned 13,034 1,211 1,811 1,248 1,281
------- ------- ------- ------ ------
Total nonperforming assets $73,366 $72,742 $38,919 $2,830 $1,976
======= ======= ======= ====== ======
Nonperforming assets to total loans and leases
and other real estate owned (end of year):
Excluding past due loans and leases 1.44% 1.65% .90% .09% .07%
Including past due loans and leases 2.24% 2.92% 1.52% .32% .33%
Nonperforming assets to total assets (end of year):
Excluding past due loans and leases 1.01% 1.11% .60% .05% .04%
Including past due loans and leases 1.56% 1.96% 1.01% .19% .18%
==== ==== ==== === ===
</TABLE>
28
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
First Hawaiian, Inc. and Subsidiaries
Other real estate owned increased from $1,211,000 at December 31, 1992 to
$13,034,000 at December 31, 1993 primarily as a result of the foreclosure
mentioned previously.
Loans and leases past due 90 days or more and still accruing interest
totalled $40,285,000 and $55,704,000 at December 31, 1993 and 1992,
respectively. All of the loans which are past due 90 days or more and still
accruing interest are in management's judgement adequately secured and in the
process of collection.
The following table presents information related to loans and leases on a
nonaccrual basis for the year ended December 31, 1993:
<TABLE>
<CAPTION>
(dollars in thousands) Domestic Foreign Total
-------- ------- ------
<S> <C> <C> <C>
Interest income which would
have been recorded if loans
and leases had been current $7,699 $ -- $7,699
------ ----- ------
Interest income recorded
during this period $ 419 $ -- $ 419
====== ===== ======
</TABLE>
DEPOSITS
Deposits are the largest component of the Company's liabilities and account for
the greatest portion of total interest expense. At December 31, 1993, total
deposits were $5,220,128,000, an increase of $131,969,000, or 2.6%, from
December 31, 1992. The increase was primarily attributable to the acquisition
of Pioneer, which had total deposits of $399,424,000 at December 31, 1993,
which offset a reduction in deposits at the Bank of $280,743,000, or 5.9%, from
the prior year as a result of the continuing shifting of public deposits as
previously described and customers seeking higher-yielding alternative
investments.
For 1993, average deposits decreased $14,754,000, or .3%, as compared to
1992. Exclusive of the average deposits of Pioneer for the year ended December
31, 1993, average deposits decreased $177,541,000, or 3.5%. Average deposits
decreased $75,134,000, or 1.5%, from 1991 to 1992. The investment by customers
in higher-yielding alternative investments, generally with non-financial
institutions, and the shift of public deposits contributed to the decrease in
average deposits during the last two years.
The following table presents the average amount and average rate paid on
deposits for the years indicated:
<TABLE>
<CAPTION>
1993 1992 1991
-------------- -------------- --------------
(dollars in millions) Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Domestic:
Noninterest-bearing
demand $ 925 -- % $ 869 -- % $ 782 -- %
Interest-bearing
demand 1,213 2.15 1,183 2.95 1,154 4.75
Savings 1,396 2.58 1,286 4.76 802 5.21
Time 1,407 4.54 1,585 5.29 2,174 6.64
Foreign 128 2.98 161 4.23 247 5.77
------ ------ ------
Total $5,069 $5,084 $5,159
====== ====== ======
</TABLE>
The following table presents the maturity distribution of domestic time
certificates of deposits of $100,000 or more at December 31 for the years
indicated:
<TABLE>
<CAPTION>
(in millions) 1993 1992 1991
---- ---- ------
<S> <C> <C> <C>
3 months or less $231 $271 $ 744
Over 3 months through 6 months 66 111 136
Over 6 months through 12 months 97 76 82
Over 12 months 129 100 73
---- ---- ------
Total $523 $558 $1,035
==== ==== ======
</TABLE>
29
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
First Hawaiian, Inc. and Subsidiaries
LIQUIDITY MANAGEMENT
Liquidity refers to the Company's ability to provide sufficient cash flows to
fund operations and to meet obligations and commitments on a timely basis at
reasonable costs. The Company achieves its liquidity objectives from both
assets and liabilities.
Asset-based liquidity is derived from its investment securities portfolio
and short-term investments which can be readily converted to cash. These liquid
assets consist of cash and due from banks, interest-bearing deposits, Federal
funds sold, securities purchased under agreements to resell and investment
securities. The aggregate of these assets represented 25.0% of total assets at
the end of 1993 compared to 28.0% in 1992. Additional information on
off-balance sheet items is presented in Note 17 to the Financial Statements.
Liability-based liquidity is provided primarily from deposits. Average
total deposits for 1993 decreased $14,755,000, or .3%, to $5,069,126,000.
Average total deposits had a five-year annual compound growth rate of 7.5%.
Average total deposits for 1993 and 1992 funded 75.0% and 77.8%, respectively,
of average total assets. The decrease between 1993 and 1992 was primarily
attributable to the transfer of public deposits to security repurchase
agreements. Demand, savings and domestic time deposits under $100,000--which
the Company considers its core deposits because of their historical stability
and relatively low cost--constituted 82.7% of total deposits at December 31,
1993 and 84.2% at December 31, 1992.
Additional liquidity was provided from short-term borrowings, which
consisted of commercial paper issued by the Parent, Federal funds purchased and
securities sold under agreements to repurchase, lines of credit from other
banks and credit facilities from the Federal Home Loan Bank. Additional
information on short-term borrowings is provided in Note 7 to the Financial
Statements. Also, the Company has access to offshore deposits in the
international market which provides another available source of funds.
The Company currently has a BankWatch rating of A/B, which describes a
company that "is financially very solid with a favorable track record and no
readily apparent weakness," from the internationally recognized bank rating
organization of Thomson Bankwatch, Inc. This was the highest rating assigned to
any local financial institution. In addition, the Company's commercial paper is
assigned a rating of A2 by Standard & Poor's ("S&P"). The Company's long-term
debt is assigned a rating of Baa-1 by Moody and BBB+ by S&P.
As indicated in the Consolidated Statements of Cash Flows, net cash
provided by operating and financing activities was $197,721,000 and net cash
used in investing activities was $87,251,000 for 1993. For 1992, net cash
provided by operating activities was $135,647,000 and net cash used in
investing and financing activities was $163,974,000. For 1991, net cash
provided by operating and financing activities was $220,860,000 and net cash
used in investing activities was $191,026,000.
Because the Parent is a holding company, its ability to pay dividends
depends primarily upon dividends and other payments from its subsidiaries,
which are subject to certain limitations as described in Note 10 to the
Financial Statements. In addition, at December 31, 1993, the Parent had
$18.4 million in liquid assets available to meet its current cash flow
requirements.
ASSET/LIABILITY MANAGEMENT
In order to minimize interest rate risk and stabilize net interest margin
while at the same time allowing the Company to take advantage of profitable
business opportunities, the Company actively manages the repricing
characteristics of its assets and liabilities.
Interest rate risk refers to the exposure to earnings and capital arising
from changes in future interest rates. In order to measure and monitor the
level of interest rate risk inherent in the Company, the balance sheet is
carefully evaluated using gap, simulation, and market value of equity analyses.
Identified exposure to adverse changes in interest rates is managed through the
use of off-balance sheet instruments such as interest rate swaps or floors and
through extending or shortening the duration of the securities portfolio.
The Company thus minimizes its negative exposure to changes in interest
rates while allowing for consistent growth in net interest income.
30
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
First Hawaiian, Inc. and Subsidiaries
INTEREST RATE SENSITIVITY
The Company's interest rate sensitivity position as of December 31, 1993, is
presented below. The interest rate sensitivity gap, shown at the bottom of the
table, refers to the difference between assets and liabilities subject to
repricing, maturity and/or volatility during a specified period. However, since
all interest rates and yields do not adjust at the same velocity and volatility
is subject to change, the gap is only a general indicator of interest rate
sensitivity. At December 31, 1993, the cumulative one-year contractual gap for
the Company was a negative $170.4 million, representing 2.34% of total assets.
<TABLE>
<CAPTION>
(dollars in thousands) 0-3 Months 4-6 Months 7-12 Months Over 1 year Total
----------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Assets:
Earning assets:
Interest-bearing deposits in
other bank $ 115,670 $ 1,066 $ -- $ -- $ 116,736
Federal funds sold and securities
purchased under agreements to
resell 35,000 -- -- -- 35,000
Investment securities 263,001 102,377 174,789 690,311 1,230,478
Net loans and leases 2,427,410 597,488 707,468 1,272,190 5,004,556
----------- ---------- ---------- ---------- ----------
Total earning assets 2,841,081 700,931 882,257 1,962,501 6,386,770
Other assets 320,924 -- -- 561,437 882,361
----------- ---------- ---------- ---------- ----------
Total assets $ 3,162,005 $ 700,931 $ 882,257 $2,523,938 $7,269,131
=========== ========== ========== ========== ==========
Liabilities and stockholders' equity:
Deposits $ 3,479,899 $ 226,278 $ 294,956 $1,218,995 $5,220,128
Short-term borrowings 757,771 224,577 79,667 7,667 1,069,682
Long-term debt 50,000 -- -- 171,767 221,767
Other liabilities 29,512 -- -- 119,673 149,185
Stockholders' equity -- -- -- 608,369 608,369
Off-balance sheet adjustment 190,905 (428,327) 10,341 227,081 --
----------- ---------- ---------- ---------- ----------
Total liabilities and
stockholders' equity $ 4,508,087 $ 22,528 $ 384,964 $2,353,552 $7,269,131
=========== ========== ========== ========== ==========
Interest sensitivity gap $(1,346,082) $ 678,403 $ 497,293 $ 170,386
Cumulative gap $(1,346,082) $ (667,679) $ (170,386) $ --
Cumulative gap as a percent of
total assets (18.52)% (9.19)% (2.34)% --%
=========== ========== ========== ==========
</TABLE>
31
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
First Hawaiian, Inc. and Subsidiaries
CAPITAL REQUIREMENTS
Bank holding companies are required to comply with risk-based capital
guidelines as established by the Federal Reserve Board. The guidelines define
qualifying capital (Tier 1 Capital and Total Capital) and risk-weighted assets.
Tier 1 Capital includes common and qualifying perpetual preferred stockholders'
equity and minority interests in equity accounts of consolidated subsidiaries,
less goodwill and, beginning in 1993, all other intangibles, subject to certain
exceptions described below.
Total Capital includes, in addition to Tier 1 Capital, mandatory
convertible debt, preferred stock not qualifying as Tier 1 Capital,
subordinated and other qualifying term debt and a portion of the allowance for
loan and lease losses. The Tier 1 component must comprise at least 50% of
qualifying Total Capital. Risk-based capital ratios are calculated with
reference to risk-weighted assets which include both on- and off-balance sheet
exposures. A company's risk-based capital ratio is calculated by dividing its
qualifying capital (the numerator of the ratio) by its risk-weighted assets
(the denominator). The minimum required qualifying Total Capital ratio is 8%,
of which at least 4% must consist of Tier 1 Capital.
In addition, bank holding companies are required to maintain a minimum
leverage ratio of Tier 1 Capital to average quarterly total assets (net of
goodwill). The Federal Reserve Board has stated that the minimum leverage ratio
is 3% for the most highly rated banking organizations which are not
experiencing or anticipating significant growth. Other banking organizations
are expected to maintain leverage ratios of at least one to two percent higher.
The following tables present the Corporation's regulatory capital position
at December 31, 1993:
Risk-Based Capital Ratios
<TABLE>
<CAPTION>
(in thousands) Amount Ratio
------ -----
<S> <C> <C>
Tier 1 Capital $ 522,832 10.10%
Tier 1 Capital minimum requirement 206,982 4.00
---------- -----
Excess $ 315,850 6.10%
========== =====
Total Capital $ 685,085 13.24%
Total Capital minimum requirement 413,963 8.00
---------- -----
Excess $ 271,122 5.24%
---------- -----
Risk-weighted Assets $5,174,542
==========
</TABLE>
Leverage Ratio
<TABLE>
<CAPTION>
(in thousands) Amount Ratio
------ -----
<S> <C> <C>
Tier 1 Capital to average quarterly
total assets (net of goodwill)
(Tier 1 Leverage Ratio) $ 522,832 7.45%
Minimum leverage requirement 210,628 3.00
---------- ----
Excess $ 312,204 4.45%
========== ====
Average Quarterly Total Assets
(net of goodwill) $7,020,949
==========
</TABLE>
32
<PAGE> 22
<TABLE>
SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED) First Hawaiian, Inc. and Subsidiaries
A summary of unaudited quarterly financial data for 1993 and 1992 is presented
below:
<CAPTION>
Quarter
-------------------------------------------------- Annual
(in thousands, except per share data) First Second Third Fourth Total
-------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
1993
Interest income $108,857 $107,841 $111,209 $113,688 $441,595
Interest expense 41,711 38,559 40,698 42,573 163,541
-------- -------- -------- -------- --------
Net interest income 67,146 69,282 70,511 71,115 278,054
Provision for loan and lease losses 3,903 2,903 3,213 3,243 13,262
Other operating income 15,684 17,709 18,337 18,283 70,013
Other operating expenses 53,225 51,371 54,487 56,617 215,700
-------- -------- -------- -------- --------
Income before income taxes and
cumulative effect of a change
in accounting principle 25,702 32,717 31,148 29,538 119,105
Income taxes 7,706 10,614 12,418 10,160 40,898
Cumulative effect of a change in
accounting principle 3,650 -- -- -- 3,650
-------- -------- -------- -------- --------
Net income $ 21,646 $ 22,103 $ 18,730 $ 19,378 $ 81,857
======== ======== ======== ======== ========
Per share:
Income before cumulative
effect of a change in
accounting principle $.56 $.68 $.57 $.60 $2.41
Net income $.67 $.68 $.57 $.60 $2.52
======== ======== ======== ======== ========
1992
Interest income $125,836 $125,437 $117,823 $117,176 $486,272
Interest expense 60,299 57,181 52,832 47,381 217,693
-------- -------- -------- -------- --------
Net interest income 65,537 68,256 64,991 69,795 268,579
Provision for loan and lease losses 2,453 3,128 2,753 4,478 12,812
Other operating income 15,263 14,662 15,484 15,329 60,738
Other operating expenses 47,485 47,272 46,436 47,432 188,625
-------- -------- -------- -------- --------
Income before income taxes 30,862 32,518 31,286 33,214 127,880
Income taxes 9,817 10,353 10,041 10,769 40,980
-------- -------- -------- -------- --------
Net income $ 21,045 $ 22,165 $ 21,245 $ 22,445 $ 86,900
======== ======== ======== ======== ========
Net income per share $.66 $.69 $.66 $.69 $2.70
======== ======== ======== ======== ========
</TABLE>
33
<PAGE> 23
REPORT OF INDEPENDENT ACCOUNTANTS
First Hawaiian, Inc. and Subsidiaries
TO THE STOCKHOLDERS
FIRST HAWAIIAN, INC.
We have audited the accompanying consolidated balance sheets of First Hawaiian,
Inc. and Subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of First
Hawaiian, Inc. and Subsidiaries as of December 31, 1993 and 1992, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993 in conformity with generally
accepted accounting principles.
As discussed in Notes 2 and 13 to the financial statements, the Company
changed its method of accounting for certain investments in debt and equity
securities and income taxes, respectively, in 1993.
COOPERS & LYBRAND
Honolulu, Hawaii
January 20, 1994
34
<PAGE> 24
CONSOLIDATED BALANCE SHEETS First Hawaiian, Inc. and Subsidiaries
<TABLE>
<CAPTION>
December 31,
---------------------------
(in thousands, except shares and per share data) 1993 1992
---------- ----------
<S> <C> <C>
Assets
Cash and due from banks $ 436,129 $ 325,659
Interest-bearing deposits in other banks 116,736 156,316
Federal funds sold and securities purchased under agreements to resell 35,000 405,000
Investment securities:
Held-to-maturity (fair value of $1,144,327 in 1993 and
$977,822 in 1992) (note 2) 1,132,025 951,189
Available-for-sale (note 2) 98,453 --
Loans and leases:
Loans and leases (note 3) 5,066,809 4,396,018
Less allowance for loan and lease losses (note 4) 62,253 56,385
---------- ----------
Net loans and leases 5,004,556 4,339,633
---------- ----------
Premises and equipment (note 5) 249,479 207,242
Customers' acceptance liability 854 1,000
Core deposit premium (net of accumulated amortization of
$3,026 in 1993 and $1,850 in 1992) (note 1) 15,380 12,250
Goodwill (net of accumulated amortization of
$6,348 in 1993 and $3,514 in 1992) (note 1) 81,231 61,257
Other assets 99,288 93,836
---------- ----------
Total Assets $7,269,131 $6,553,382
========== ==========
Liabilities and Stockholders' Equity
Deposits:
Noninterest-bearing demand $ 974,478 $1,027,796
Interest-bearing demand 1,143,037 1,203,441
Savings 1,507,200 1,399,362
Time (fair value of $1,352,925 in 1993 and $1,279,283 in 1992) (note 6) 1,343,841 1,271,090
Foreign (fair value of $252,715 in 1993 and $187,119 in 1992) (note 6) 251,572 186,470
---------- ----------
Total deposits 5,220,128 5,088,159
---------- ----------
Short-term borrowings (note 7) 1,069,682 713,914
Acceptances outstanding 854 1,000
Other liabilities 148,331 117,056
Long-term debt (note 8) 221,767 71,057
---------- ----------
Total liabilities 6,660,762 5,991,186
---------- ----------
Commitments and contingent liabilities (notes 11, 16 and 17)
Stockholders' equity:
Common stock $5 par value (notes 9 and 11)
Authorized--66,500,000 shares
Issued and outstanding--32,542,797 shares in 1993 and
32,501,611 shares in 1992 162,713 162,507
Surplus 133,820 132,889
Retained earnings (note 10) 311,836 266,800
---------- ----------
Total stockholders' equity 608,369 562,196
---------- ----------
Total liabilities and stockholders' equity $7,269,131 $6,553,382
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
35
<PAGE> 25
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME First Hawaiian, Inc. and Subsidiaries
<CAPTION>
Year Ended December 31,
---------------------------------------
(in thousands, except shares and per share data) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Interest income
Interest and fees on loans $ 356,687 $ 372,577 $ 382,220
Lease financing income 12,722 14,259 14,986
Interest on investment securities:
Taxable interest income 45,025 64,860 76,334
Exempt from Federal income taxes 14,765 15,987 20,133
Other interest income 12,396 18,589 29,905
---------- ---------- ----------
Total interest income 441,595 486,272 523,578
---------- ---------- ----------
Interest expense
Deposits (note 6) 129,719 186,725 255,099
Short-term borrowings 26,477 26,622 9,800
Long-term debt 7,345 4,346 5,952
---------- ---------- ----------
Total interest expense 163,541 217,693 270,851
---------- ---------- ----------
Net interest income 278,054 268,579 252,727
Provision for loan and lease losses (note 4) 13,262 12,812 10,252
---------- ---------- ----------
Net interest income after provision for loan and
lease losses 264,792 255,767 242,475
---------- ---------- ----------
Other operating income
Trust income 21,401 18,171 15,937
Service charges on deposit accounts 21,791 18,323 14,911
Other service charges and fees 17,918 17,287 15,913
Securities gains, net (note 2) 1,955 161 262
Other 6,948 6,796 7,242
---------- ---------- ----------
Total other operating income 70,013 60,738 54,265
---------- ---------- ----------
Other operating expenses
Salaries and wages 86,011 80,320 73,096
Employee benefits (note 11) 24,781 21,943 18,981
Occupancy expense (notes 5 and 16) 20,416 17,021 15,034
Equipment expense (notes 5 and 16) 20,243 18,522 16,815
Other (note 12) 64,249 50,819 52,614
---------- ---------- ----------
Total other operating expenses 215,700 188,625 176,540
---------- ---------- ----------
Income before income taxes and cumulative effect
of a change in accounting principle 119,105 127,880 120,200
---------- ---------- ----------
Income taxes (note 13)
Provision before effect of change in tax rate 38,976 40,980 38,490
Adjustment to deferred tax liability
for change in tax rate 1,520 -- --
Adjustment to current tax provision
for change in tax rate 402 -- --
---------- ---------- ----------
Total income taxes 40,898 40,980 38,490
---------- ---------- ----------
Income before cumulative effect of a
change in accounting principle 78,207 86,900 81,710
Cumulative effect of a change in accounting principle
(note 13) 3,650 -- --
---------- ---------- ----------
Net income $ 81,857 $ 86,900 $ 81,710
========== ========== ==========
Per share data
Income before cumulative effect of a
change in accounting principle $2.41 $2.70 $2.55
Cumulative effect of a change in accounting principle .11 -- --
----- ----- -----
Net income $2.52 $2.70 $2.55
===== ===== =====
Cash dividends $1.135 $1.06 $ .95
====== ===== =====
Average shares outstanding 32,505,109 32,225,339 32,078,534
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
36
<PAGE> 26
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY First Hawaiian, Inc. and Subsidiaries
<CAPTION>
Common Stock
----------------------- Retained
(in thousands, except shares and per share data) Shares Amount Surplus Earnings
------ ------ ------- --------
<S> <C> <C> <C> <C>
Balance, December 31, 1990 32,078,534 $160,392 $123,646 $162,746
Net income--1991 -- -- -- 81,710
Incentive Plan for Key Executives (note 11) -- -- 203 --
Cash dividends ($.95 per share) (note 10) -- -- -- (30,395)
---------- -------- -------- --------
Balance, December 31, 1991 32,078,534 160,392 123,849 214,061
Net income--1992 -- -- -- 86,900
Incentive Plan for Key Executives (note 11) -- -- 155 --
Cash dividends ($1.06 per share) (note 10) -- -- -- (34,161)
Issuance of common stock (note 9) 423,077 2,115 8,885 --
---------- -------- -------- --------
Balance, December 31, 1992 32,501,611 162,507 132,889 266,800
Net income--1993 -- -- -- 81,857
Incentive Plan for Key Executives (note 11) -- -- 137 --
Cash dividends ($1.135 per share) (note 10) -- -- -- (36,821)
Issuance of common stock (note 9) 41,186 206 794 --
---------- -------- -------- --------
Balance, December 31, 1993 32,542,797 $162,713 $133,820 $311,836
========== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
37
<PAGE> 27
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS First Hawaiian, Inc. and Subsidiaries
<CAPTION>
Year Ended December 31,
--------------------------------------
(in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Cash and due from banks at beginning of year $ 325,659 $ 353,986 $ 324,152
--------- --------- ---------
Cash flows from operating activities:
Net income 81,857 86,900 81,710
Provision for loan and lease losses 13,262 12,812 10,252
Depreciation and amortization 20,765 19,157 16,232
Income taxes (5,415) 21,682 6,342
Adjustment to current tax provision for change in tax rate 402 -- --
Adjustment to deferred tax liability for change in tax rate 1,520 -- --
Cumulative effect of a change in accounting principle (3,650) -- --
Decrease (increase) in interest receivable 170 9,043 (6,527)
Increase (decrease) in interest payable 1,424 10,083 (531)
Decrease (increase) in prepaid expenses (1,031) (3,864) 2,476
Write-off of building costs 5,444 -- --
Other 20,136 -- --
--------- --------- ---------
Net cash provided by operating activities 134,884 135,647 109,954
--------- --------- ---------
Cash flows from investing activities:
Net decrease in interest-bearing deposits in other banks 39,580 35,716 114,575
Net decrease (increase) in Federal funds sold and
securities purchased under agreements to resell 370,000 (235,136) 84,302
Purchase of held-to-maturity investment securities (940,385) (704,746) (520,194)
Proceeds from sale of held-to-maturity investment securities 322,315 402,201 169,383
Proceeds from maturity of held-to-maturity investment
securities 498,858 576,855 496,110
Purchase of available-for-sale investment securities (263,828) -- --
Proceeds from sale of available-for-sale investment securities 137,709 -- --
Proceeds from maturity of available-for-sale investment
securities 27,666 -- --
Net increase in loans and leases made to customers (166,146) (66,697) (424,479)
Capital expenditures (60,067) (65,484) (49,246)
Purchase of First Interstate of Hawaii, Inc., net of
cash acquired of $63,680 -- -- (75,646)
Purchase of Pioneer Fed BanCorp, Inc.,
net of cash acquired of $18,157 (68,950) -- --
Other 15,997 (43,071) 14,169)
--------- --------- ---------
Net cash used in investing activities (87,251) (100,362) (191,026)
--------- --------- ---------
Cash flows from financing activities:
Net decrease in deposits (293,973) (248,534) (225,496)
Net increase in short-term borrowings 309,631 209,743 357,452
Proceeds from long-term debt 108,000 10,000 36,000
Payments on long-term debt (21,525) (508) (26,411)
Cash dividends paid (36,821) (34,161) (30,395)
Purchase of common stock for issuance under
Incentive Plan for Key Executives and Stock Incentive Plan (2,475) (152) (244)
--------- --------- ---------
Net cash provided by (used in) financing activities 62,837 (63,612) 110,906
--------- --------- ---------
Cash and due from banks at end of year $ 436,129 $ 325,659 $ 353,986
========= ========= =========
Supplemental disclosures:
Interest paid $ 160,551 $ 227,776 $ 271,382
Net income taxes paid $ 40,945 $ 19,298 $ 32,148
========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
38
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS First Hawaiian, Inc. and Subsidi
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of First Hawaiian, Inc. and Subsidiaries
("Company") conform with generally accepted accounting principles and practices
within the banking industry. The following is a summary of the significant
accounting policies:
RECLASSIFICATIONS
Certain reclassifications were made to the 1992 and 1991 Consolidated
Statements of Income to conform to the 1993 presentation. Such
reclassifications did not have a material effect on the Consolidated Statements
of Income.
CONSOLIDATION
The consolidated financial statements of the Company include the accounts of
First Hawaiian, Inc. ("Parent") and its wholly-owned subsidiary
companies--First Hawaiian Bank and its wholly-owned subsidiaries ("Bank");
Pioneer Federal Savings Bank and its wholly-owned subsidiaries; First Hawaiian
Creditcorp, Inc.; First Hawaiian Leasing, Inc.; and FHI International, Inc. All
significant intercompany balances and transactions have been eliminated in
consolidation.
INVESTMENT SECURITIES
Investment securities consist principally of debt instruments issued by the
U.S. Treasury and other U.S. Government agencies and corporations, state and
local government units and asset-backed securities.
As of December 31, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." In accordance with SFAS No. 115, investment
securities are classified in three categories and accounted for as follows:
(1) held-to-maturity securities are debt securities, which the Company has the
positive intent and ability to hold to maturity, and are reported at amortized
cost; (2) trading securities are debt securities that are bought and held
principally for the purpose of selling them in the near term and are reported
at fair value, with unrealized gains and losses included in current earnings;
and (3) available-for-sale securities are debt securities not classified as
either held-to-maturity securities or trading securities and are reported at
fair value, with unrealized gains and losses excluded from current earnings and
reported in a separate component of stockholders' equity.
Certain securities which could be liquidated prior to their respective
maturities under certain circumstances have been classified as available-for-
sale. Unrealized gains or losses are reflected as changes to the capital
account.
Prior to December 31, 1993, since the Company had both the ability and
the intent to hold the investment securities to maturity, they were carried
at cost, adjusted for amortization of premiums and accretion of discounts.
Gains and losses realized on the sales of investment securities are
determined using the specific identification method.
LOANS AND LEASE FINANCING
Loans are stated at their principal outstanding amounts, net of any unearned
discounts. Interest income on loans is accrued and recognized on the principal
amount outstanding.
Loan origination fees and substantially all loan commitment fees are
deferred and accounted for as an adjustment of the yield.
Lease financing transactions consist of two types:
(1) Equipment without outside financing is accounted for using the direct
financing method with income recognized over the life of the lease based upon a
constant periodic rate of return on the net investment in the lease.
(2) Leveraged lease transactions are subject to outside financing through
one or more participants, without recourse to the Company. These transactions
are accounted for by recording as the net investment in each lease the
aggregate of rentals receivable (net of principal and interest on the related
nonrecourse debt) and estimated residual value of the equipment less the
unearned income. Income from these lease transactions is recognized during the
periods in which the net investment is positive.
Loans and leases are placed on nonaccrual status when serious doubt exists
as to the collectibility of the principal and/or interest. When loans are
placed on nonaccrual status, any accrued and unpaid interest is reversed
against interest income of the current period. Interest payments received on
nonaccrual loans and leases are applied as a reduction of the principal when
concern exists as to the ultimate collection of the principal; otherwise, such
payments are recorded as income. Loans and leases are removed from nonaccrual
status when they become current as to both principal and interest and when
concern no longer exists as to the collectibility of principal and interest.
ALLOWANCE FOR LOAN AND LEASE LOSSES
The allowance for loan and lease losses ("Allowance") is maintained at a level
which, in management's judgment, is adequate to absorb future losses. Estimates
of future loan and lease losses involve judgment and assumptions as to various
factors which, in manage-
39
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS (Continued) First Hawaiian, Inc. and Subsidiaries
ment's judgment, deserve current recognition in estimating such losses and in
determining the adequacy of the Allowance. Principal factors considered by
management include the historical loss experience, the value and adequacy of
collateral, the level of nonperforming (nonaccrual and renegotiated) loans and
leases, loan concentrations, risk exposures, if any, in connection with its
highly-leveraged transactions, the growth and composition of the portfolio, the
review of monthly delinquency reports, the results of examinations of
individual loans and leases and/or evaluation of the overall portfolio by
senior credit personnel, internal auditors, and Federal and State regulatory
agencies and general economic conditions.
The Allowance is reduced by loans and leases charged off when
collectibility becomes doubtful and the underlying collateral, if any, is
considered inadequate to liquidate the outstanding debt. Recoveries on loans
and leases previously charged off are added to the Allowance.
PREMISES AND EQUIPMENT
Premises and equipment, including leasehold improvements, are stated at cost
less accumulated depreciation and amortization. Depreciation and amortization
are computed on a straight-line basis over the estimated useful lives of 10-40
years for premises, 3-13 years for equipment and the lease term for leasehold
improvements.
CORE DEPOSIT PREMIUM AND GOODWILL
The core deposit premium is being amortized on the straight-line method over
various lives ranging from 9 to 20 years. The excess of the purchase price over
the fair value of the net assets acquired is accounted for as goodwill and is
being amortized on the straight-line method over 25 years.
INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting for
Income Taxes," which requires recognition of deferred income tax liabilities
and assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method,
deferred income tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
Prior to January 1, 1993, the provision for income taxes was based on
taxable income and expenses reported in the Consolidated Statements of Income,
in accordance with Accounting Principles Board Opinion No. 11, rather than
amounts currently payable under tax laws.
Excise tax credits relating to premises and equipment and certain
nonleveraged lease equipment are accounted for under the flow-through method
which recognizes the benefit in the year the asset is placed in service. The
investment and excise tax credits related to leveraged lease equipment, except
for investment and excise tax credits that are passed on to lessees, are
recognized during the periods in which the net investment is positive.
A consolidated Federal income tax return is filed for the Company. Amounts
equal to income tax benefits of those companies having taxable losses or
credits are reimbursed by other companies which would have incurred current
income tax liabilities.
INTEREST RATE SWAPS AND FLOORS
The Company engages in interest rate swap and floor activities in managing its
interest rate risk. Since the contracts represent an exchange of interest
payments and the underlying principal balances are not affected, there is no
effect on the total assets or liabilities of the Company. The net settlement
amount is recorded as an adjustment to interest expense on a periodic basis.
PER SHARE DATA
Net income per share is computed on the weighted average number of shares
outstanding during the year, adjusted to reflect stock splits.
Dividends per share are based on the number of outstanding shares, adjusted
to reflect stock splits, exclusive of reacquired shares, at the time of
dividend payments.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
the fair value of financial instruments:
Cash and due from banks: The carrying amounts reported in the Consolidated
Balance Sheets of cash and short-term instruments approximate fair values.
Investment securities (including mortgage-backed securities): Fair values
of investment securities are based on quoted market prices, where
available. If quoted market prices are not available, fair values are based
on quoted market prices of comparable instruments.
40
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS (Continued) First Hawaiian, Inc. and Subsidiaries
Loans and leases: For variable-rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on carrying values.
The fair values for certain mortgage loans (e.g., one-to-four family
residential), credit card loans, and other consumer loans are based on quoted
market prices of similar loans sold in conjunction with securitization
transactions, adjusted for differences in loan characteristics. The fair values
of other loans (e.g., commercial real estate and rental property mortgage
loans, commercial and industrial loans, financial institution loans, and
agricultural loans) are estimated using discounted cash flow analyses, which
utilize interest rates currently being offered for loans with similar terms to
borrowers of similar credit quality. The carrying amount of accrued interest
approximates its fair value.
Off-balance sheet commitments and contingent liabilities: Fair values of
off-balance sheet commitments and contingent liabilities are based upon quoted
market prices of comparable instruments (foreign currency exchange forward
contracts and interest rate floors); fees currently charged to enter into
similar agreements, taking into account the remaining terms of the agreements
and the counterparties' credit standing (letters of credit and commitments to
extend credit); or, pricing models based upon brokers' quoted markets, current
levels of interest rates, and specific cash flow schedules (interest rate
swaps).
Deposits: The fair values of demand deposits (e.g., interest and noninterest
checking, passbook savings, and certain types of money market accounts) are, by
definition, equal to the amount payable on demand at the reporting date (i.e.,
their carrying amounts). Fair values of fixed-rate certificates of deposit are
estimated using a discounted cash flow calculation that applies interest rates
currently being offered on certificates to a schedule of aggregated expected
monthly maturities on time deposits.
Short-term borrowings: The carrying amounts of overnight Federal funds
purchased, borrowings under repurchase agreements, and other short-term
borrowings approximate their fair values.
Long-term debt: The fair values of the Company's long-term debt (other than
deposits) are estimated using discounted cash flow analyses, based on the
Company's current incremental borrowing rates for similar types of borrowing
arrangements.
1. BUSINESS COMBINATIONS
PIONEER FEDERAL SAVINGS BANK
On August 6, 1993, the Company acquired for cash all of the outstanding
stock of Pioneer Fed BanCorp, Inc. ("Pioneer Holdings") at a purchase price of
$87 million through the merger of Pioneer Holdings with and into the Company
(the "Merger"). As a result of the Merger, Pioneer Federal Savings Bank
("Pioneer"), a savings bank with 19 branches statewide, became a wholly-owned
subsidiary of the Company. The acquisition was accounted for using the purchase
method of accounting and the results of operations of Pioneer are included in
the Consolidated Statements of Income from the date of acquisition. The excess
of cost over net assets acquired amounted to approximately $22 million.
The following unaudited pro forma information shows the consolidated
results of operations as though the above acquisition, including the related
purchase accounting adjustments, had been made at the beginning of the year:
<TABLE>
<CAPTION>
(in thousands, except per share data) 1993 1992
---- ----
<S> <C> <C>
Interest income $469,413 $533,427
Interest expense $183,860 $247,534
Other operating income $ 72,313 $ 65,446
Other operating expenses $227,473 $207,368
Net income $ 81,419 $ 88,550
Earnings per share $ 2.50 $ 2.75
======== ========
</TABLE>
FIRST INTERSTATE OF HAWAII, INC.
On May 31, 1991, the Company acquired for cash all of the outstanding stock of
First Interstate of Hawaii, Inc. ("FIHI") at a purchase price of $144 million.
The principal asset of FIHI was First Interstate Bank of Hawaii ("FIBH"), a
commercial bank with 19 branches statewide at the time of acquisition. The
acquisition was accounted for using the purchase method of accounting and the
results of operations of FIHI were included in the Consolidated Statements of
Income from the date of acquisition. The excess of cost over net assets
acquired amounted to approximately $62 million.
The following unaudited pro forma information shows the consolidated
results of operations as though the above acquisition, including the related
purchase accounting adjustments, had been made at the beginning of the year:
<TABLE>
<CAPTION>
(in thousands, except per share data) 1991
----
<S> <C>
Interest income $555,986
Interest expense $287,100
Other operating income $ 58,971
Other operating expenses $193,431
Net income $ 83,243
Earnings per share $ 2.59
========
</TABLE>
41
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS (Continued) First Hawaiian, Inc. and Subsidiaries
The final regulatory approvals received for the acquisition of FIHI required
the Company to (1) divest six FIBH branches and a branch of First Hawaiian
Creditcorp, Inc. ("Creditcorp"), a wholly-owned subsidiary of the Company; and
(2) terminate FIBH's license to participate as a franchisee in the First
Interstate system and terminate the use of the First Interstate trademark and
logos by May 31, 1992 (actually terminated in February, 1992).
As of December 31, 1993, the Company sold two branches of FIBH (October,
1991 and November, 1993) and a branch of Creditcorp (October, 1991). The
results of operations of the three branches are included in the Consolidated
Statements of Income up to the dates of sale. The sale of the remaining four
branches is pending consummation, expected in 1994. The sale of these branches
will not have a significant effect on the Company's financial position or
results of operations.
2. INVESTMENT SECURITIES
As of December 31, 1993, the Company adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." The adoption of this
accounting policy had no material effect on the consolidated financial
statements of the Company.
Held-to-Maturity
Comparative book and fair values of held-to-maturity investment securities at
December 31, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
1993
----------------------------------------------
Book Unrealized Unrealized Fair
(in thousands) Value Gains Losses Value
----- ---------- ---------- -----
<S> <C> <C> <C> <C>
U.S. Treasury
and other U.S.
Government
agencies and
corporations $ 914,868 $ 1,490 $1,321 $ 915,037
States and political
subdivisions 177,876 12,530 413 189,993
Other 39,281 16 -- 39,297
---------- ------- ------ ----------
Total held-to-maturity
investment
securities $1,132,025 $14,036 $1,734 $1,144,327
========== ======= ====== ==========
</TABLE>
<TABLE>
<CAPTION>
1992
--------------------------------------------
Book Unrealized Unrealized Fair
(in thousands) Value Gains Losses Value
----- ---------- ---------- -----
<S> <C> <C> <C> <C>
U.S. Treasury & other
U.S. Government
agencies and
corporations $684,734 $ 9,338 $265 $693,807
States and political
subdivisions 196,270 15,346 25 211,591
Other 70,185 2,600 361 72,424
-------- ------- ---- --------
Total held-to-maturity
investment
securities $951,189 $27,284 $651 $977,822
======== ======= ==== ========
</TABLE>
The book and fair values of held-to-maturity investment securities at
December 31, 1993, by contractual maturity, excluding securities which have no
stated maturity, were as follows:
<TABLE>
<CAPTION>
Book Fair
(in thousands) Value Value
----- ----------
<S> <C> <C>
Due within one year $ 360,464 $ 361,485
Due after one but within five year 507,098 519,178
Due after five but within ten years 86,213 86,145
Due after ten years 143,920 143,188
---------- ----------
Total held-to-maturity
investment securities $1,097,695 $1,109,996
========== ==========
</TABLE>
Available-for-Sale
At December 31, 1993, the unamortized cost, which approximates fair value, of
available-for-sale investment securities, by contractual maturity, excluding
securities which have no stated maturity, was as follows:
<TABLE>
<CAPTION>
U.S. Treasury States
and other U.S. and
Government political
agencies and sub-
corporations divisions Other Total
------------ --------- ----- -----
<S> <C> <C> <C> <C>
Due within one year $ -- $ -- $ -- $ --
Due after one but
within five years -- -- 10,460 10,460
Due after five but
within ten years -- 3,000 17,211 20,211
Due after ten years 3,202 22,700 41,880 67,782
------ ------- ------- -------
Total available-for-
sale investment
securities $3,202 $25,700 $69,551 $98,453
====== ======= ======= =======
</TABLE>
The Company sold certain trading securities and recognized a gain of $1,873,000
in the second quarter of 1993. The Company held no trading securities as of
December 31, 1993.
As of December 31, 1993, the Company had entered into interest rate swaps
of $168,247,000 designed to modify the repricing characteristics of a portion
of its municipal holdings. The fair value of the interest rate swaps was an
unrealized loss of $17,848,000. However, it is management's intent to keep the
interest rate swaps in place until their respective termination dates which
approximate the maturities of the municipal holdings, at which time the
unrealized losses would be eliminated.
The Company also had other interest rate swaps of $450,970,000 and floors
of $300,000,000 hedging other parts of the balance sheet. The fair value of
these other interest rate swaps was an unrealized loss of $1,965,000.
Investment securities with an aggregate book value of $1,046,026,000 at
December 31, 1993 were pledged to secure public deposits and repurchase
agreements as required by law.
42
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS (Continued) First Hawaiian, Inc. and Subsidiaries
The Company did not hold any investment securities which were in excess of
10% of stockholders' equity at December 31, 1993.
Gross gains of $2,038,000, $283,000 and $315,000 and gross losses of
$83,000, $122,000 and $53,000 were realized on sales of investment securities
during 1993, 1992 and 1991, respectively.
3. LOANS AND LEASES
At December 31, 1993 and 1992, loans and leases were comprised of the
following:
<TABLE>
<CAPTION>
1993 1992
----------------------- -----------------------
(in thousands) Book Value Fair Value Book Value Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Commercial,
financial and
agricultural $1,208,912 $1,219,156 $1,175,395 $1,203,172
Real estate:
Construction 317,036 317,017 438,041 438,540
Commercial 882,628 949,425 720,082 739,562
Residential 1,785,961 1,734,467 1,217,331 1,209,838
Consumer 459,910 456,226 473,510 475,318
Lease financing 201,449 201,512 170,558 170,558
Foreign 210,913 210,755 201,101 201,348
---------- ---------- ---------- ----------
Total loans
and leases $5,066,809 $5,088,558 $4,396,018 $4,438,336
========== ========== ========== ==========
</TABLE>
At December 31, 1993, loans totalling $40,848,000 were pledged to secure public
deposits as required by law.
At December 31, 1993 and 1992, loans and leases aggregating $60,312,000 and
$71,454,000, respectively, were on a nonaccrual basis.
In the normal course of business, the Company makes loans to its executive
officers and directors, and to companies and individuals affiliated with
executive officers and directors of the Company. Changes in the loans to such
parties were as follows:
<TABLE>
<CAPTION>
(in thousands) 1993 1992
---- ----
<S> <C> <C>
Balance at beginning of year $ 370,169 $ 309,422
New loans made 244,171 351,015
Repayments (203,061) (290,268)
--------- ---------
Balance at end of year $ 411,279 $ 370,169
========= =========
</TABLE>
At December 31, 1993 and 1992, loans to such parties by the Parent were
$15,759,000 and $15,102,000, respectively, and the income related to these
loans was $920,000, $1,134,000 and $1,092,000 for 1993, 1992 and 1991,
respectively.
4. ALLOWANCE FOR LOAN AND LEASE LOSSES
Changes in the allowance for loan and lease losses were as follows for the
years indicated:
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 56,385 $ 55,134 $39,847
Provision charged to expense 13,262 12,812 10,252
Net charge-offs:
Loans and leases charged off (15,063) (13,410) (6,533)
Recoveries on loans and
leases charged off 2,444 1,849 1,427
-------- -------- -------
Net charge-offs (12,619) (11,561) (5,106)
-------- -------- -------
Allowance applicable to loans
of purchased company 5,225 -- 10,141
-------- -------- -------
Balance at end of year $ 62,253 $ 56,385 $55,134
======== ======== =======
</TABLE>
In May, 1993, the Financial Accounting Standards Board ("FASB") issued SFAS No.
114, "Accounting by Creditors for Impairment of a Loan," which requires that
impaired loans be measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate or the market price or
fair value of the collateral if the loan is collateral dependent. SFAS No. 114
is effective for fiscal years beginning after December 15, 1994. The Company
has not determined the effect, if any, the adoption of SFAS No. 114 will have
on its financial position or results of operations.
5. PREMISES AND EQUIPMENT
At December 31, 1993 and 1992, premises and equipment were comprised of the
following:
<TABLE>
<CAPTION>
(in thousands) 1993 1992
---- ----
<S> <C> <C>
Premises $207,080 $194,515
Equipment 128,302 107,469
-------- --------
335,382 301,984
Less accumulated depreciation
and amortization 85,903 94,742
-------- --------
Net book value $249,479 $207,242
======== ========
</TABLE>
Occupancy and equipment expenses include depreciation and amortization expenses
of $15,133,000, $14,383,000 and $13,248,000 for 1993, 1992 and 1991,
respectively.
6. DEPOSITS
For 1993, 1992 and 1991, interest expense related to deposits was as follows:
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Interest-bearing demand $ 26,036 $ 34,858 $ 49,851
Savings 35,964 61,178 46,835
Time--Under $100 40,324 47,595 63,403
Time--$100 and over 23,581 36,281 80,733
Foreign 3,814 6,813 14,277
-------- -------- --------
Total interest expense
on deposits $129,719 $186,725 $255,099
======== ======== ========
</TABLE>
43
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS (Continued) First Hawaiian, Inc. and Subsidiaries
Time deposits in denominations of $100,000 or more at December 31, 1993 and
1992 were as follows:
<TABLE>
<CAPTION>
(in thousands) 1993 1992
---- ----
<S> <C> <C>
Domestic $522,892 $558,116
Foreign $130,108 $ 60,611
======== ========
</TABLE>
7. SHORT-TERM BORROWINGS
At December 31, 1993 and 1992, short-term borrowings were comprised of the
following:
<TABLE>
<CAPTION>
(in thousands) 1993 1992
---- ----
<S> <C> <C>
First Hawaiian Bank:
Federal funds purchased $ 122,975 $ 20,825
Securities sold under agreements
to repurchase 825,837 673,352
First Hawaiian, Inc. (Parent)--
Commercial paper 9,605 10,237
Nonbank subsidiaries:
Advances from Federal Home Loan
Bank of Seattle 111,265 9,500
---------- --------
Total short-term borrowings $1,069,682 $713,914
========== ========
</TABLE>
Average rates and average and maximum balances for these short-term borrowings
were as follows for the years indicated:
<TABLE>
<CAPTION>
(dollars in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Federal funds purchased:
Average interest rate at
December 31 2.7% 2.8% 3.9%
Highest month-end balance $172,215 $340,375 $143,525
Average daily outstanding
balance $ 98,042 $180,991 $110,600
Average daily interest
rate paid 2.8% 3.6% 5.3%
Securities sold under
agreements to repurchase:
Average interest rate at
December 31 3.2% 3.5% 4.2%
Highest month-end balance $871,891 $806,793 $316,846
Average daily outstanding
balance $660,474 $499,084 $ 47,570
Average daily interest
rate paid 3.2% 3.6% 4.6%
Commercial paper:
Average interest rate at
December 31 4.0% 3.4% 4.8%
Highest month-end balance $ 11,271 $ 25,549 $ 55,126
Average daily outstanding
balance $ 8,430 $ 13,617 $ 33,000
Average daily interest
rate paid 3.1% 4.1% 5.8%
Advances from Federal Home
Loan Bank of Seattle:
Average interest rate at
December 31 4.3% 3.4% 6.2%
Highest month-end balance $111,265 $ 37,500 $ 20,000
Average daily outstanding
balance $ 43,499 $ 29,891 $ 10,740
Average daily interest
rate paid 4.6% 4.6% 5.5%
=== === ===
</TABLE>
Securities sold under agreements to repurchase were treated as financings and
the obligations to repurchase the identical securities sold were reflected as a
liability with the dollar amount of securities underlying the agreements
remaining in the asset accounts. At December 31, 1993, the weighted average
contractual maturity of these agreements was 140 days and represents
investments by public (governmental) entities. A schedule of maturities of
these agreements is as follows:
<TABLE>
<CAPTION>
(in thousands of dollars)
<S> <C>
Overnight $ --
Less than 30 days 270,149
30 to 90 days 287,653
Over 90 days 268,035
--------
$825,837
========
</TABLE>
Commercial paper represents obligations of the Parent with maturities up to 180
days. The Parent has $70,000,000 in unused lines of credit with unaffiliated
banks to support its commercial paper borrowings as of December 31, 1993.
8. LONG-TERM DEBT
At December 31, 1993 and 1992, long-term debt was comprised of the following:
<TABLE>
<CAPTION>
1993 1992
------------------- -----------------
Book Fair Book Fair
(dollars in thousands) Value Value Value Value
----- ----- ----- -----
<S> <C> <C> <C> <C>
First Hawaiian, Inc.
(Parent):
Note due 1997 $ 50,000 $ 50,006 $50,000 $50,000
6.25% subordinated
notes due 2000 100,000 97,345 -- --
First Hawaiian Bank--
7%-11% capital
lease obligations
due through 2041 826 1,804 1,057 1,833
Nonbank subsidiaries--
4.24%-9.10% notes
due through 2000 70,941 70,991 20,000 20,416
-------- -------- ------- -------
Total long-term debt $221,767 $220,146 $71,057 $72,249
======== ======== ======= =======
</TABLE>
First Hawaiian, Inc. (Parent)
The note due in 1997 represents two separate drawings of $24,000,000 and
$26,000,000 on a $50,000,000 unsecured commitment with interest payable at
preselected periods of one, two or three months at London Interbank Offered
Rate (LIBOR) plus .225% ($24,000,000 at 3.60% and $26,000,000 at 3.7875% at
December 31, 1993).
The 6.25% subordinated notes due in 2000 are unsecured obligations with
interest payable semiannually.
44
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS (Continued) First Hawaiian, Inc. and Subsidiaries
Nonbank Subsidiaries
The 4.24%-9.10% notes due through 2000 represent advances from the Federal Home
Loan Bank of Seattle of the Company's nonbank subsidiaries (Creditcorp and
Pioneer) with interest payable monthly.
As of December 31, 1993, the principal payments due in the next five years
and thereafter on these borrowed funds were as follows:
<TABLE>
<CAPTION>
First First
Hawaiian, Inc. Hawaiian Nonbank
(in thousands) (Parent) Bank Subsidiaries Total
-------------- -------- ------------ -----
<S> <C> <C> <C> <C>
1994 $ -- $ 43 $23,701 $ 23,744
1995 -- 33 21,192 21,225
1996 -- 27 20,053 20,080
1997 50,000 29 3,995 54,024
1998 -- 33 1,000 1,033
1999 and thereafter 100,000 661 1,000 101,661
-------- ---- ------- --------
Total $150,000 $826 $70,941 $221,767
======== ==== ======= ========
</TABLE>
9. COMMON STOCK
On December 1, 1993, the Bank purchased certain assets and assumed certain
liabilities of GKN, Inc., which did business as Phoenix Financial Services for
$1,000,000 in the form of an exchange for 41,186 newly-issued shares of the
Company's common stock.
On August 27, 1992, the Company entered into a merger agreement with
Finance Investment Company, Limited whereby the Company acquired FH Center,
Inc. and its parcel of land in exchange for 423,077 newly-issued shares of the
Company's common stock.
10. LIMITATIONS ON PAYMENT OF DIVIDENDS
The primary source of funds for the dividends paid by First Hawaiian, Inc. to
its stockholders is dividends received from its subsidiaries. The Bank, Pioneer
and Creditcorp are subject to regulatory limitations on the amount of dividends
they may declare or pay. In addition, the payment of dividends by the Company,
is limited to an amount not greater than 50% of consolidated net income as
stipulated in the debt covenants of a certain line of credit.
11. EMPLOYEE BENEFIT PLANS
Pension Plans
The Company has a noncontributory pension plan, covering substantially all
employees (except for Pioneer employees who will participate in the plans
effective January 1, 1994), after satisfying age and length of service
requirements. It also has an unfunded supplemental employee retirement plan for
key executives.
The net pension expense for 1993, 1992 and 1991 included the following
components:
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Service cost-benefits earned
during the period $3,955 $3,724 $ 2,618
Interest cost on projected
benefit obligation 6,553 5,933 4,579
Actual return on plan assets (3,810) (3,619) (15,708)
Net amortization and deferral (3,577) (3,429) 9,846
------ ------ -------
Net pension expense $3,121 $2,609 $ 1,335
====== ====== =======
</TABLE>
The Company generally makes contributions to the trust fund of the regular
employee retirement plan equal to the amounts accrued for pension expense to
the extent such contributions are currently deductible for tax purposes.
The following table sets forth the reconciliation of the funded status of
the plans at December 31, 1993 and 1992:
<TABLE>
<CAPTION>
(in thousands) 1993 1992
---- ----
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefits $54,524 $48,032
Nonvested benefits 2,581 2,585
------- -------
Accumulated benefit obligation $57,105 $50,617
======= =======
Plan assets at fair value (primarily listed
stocks and fixed income securities) $88,873 $88,544
Projected benefit obligation 90,668 82,456
------- -------
Plan assets in excess of (less than)
projected benefit obligation (1,795) 6,088
Unrecognized net gain (6,138) (8,549)
Unrecognized prior service cost 7,640 6,148
Unrecognized net asset being
recognized over 9 and 15 years (9,328) (10,392)
------- -------
Pension liability $(9,621) $(6,705)
======= =======
</TABLE>
Plan assets included common stock of the Company with a fair value of
$14,549,000 at December 31, 1993.
In 1993 and 1992, the weighted average discount rate was 8.0%; the rates of
increase in future compensation used in determining the projected benefit
obligation were 8.5% to age 45, 7.5% to age 55, and 6.5% thereafter; and the
expected long-term rate of return on plan assets was 8.5% for 1993 and 1992.
Pioneer's pension plan had a net pension credit of $3,000 and a prepaid
pension cost of $1,194,000 at December 31, 1993.
Postretirement Benefits
Effective January 1, 1993, the Company adopted SFAS No. 106, "Employer's
Accounting for Postretirement Benefits Other than Pensions" which changed the
prevalent practice of accounting for postretirement benefits from a cash basis
to an accrual basis during the expected service life of an employee. The
Company has been accounting for postretirement medical benefits on an accrual
basis. As a result, the adoption of SFAS No. 106 did not have a material
effect on the consolidated financial statements of the Company.
45
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS (Continued) First Hawaiian, Inc. and Subsidiaries
The Company has unfunded postretirement medical and life insurance plans
which are available to retirees who have satisfied age and length of service
requirements. The following table sets forth the reconciliation of the funded
status of the plan at December 31, 1993:
<TABLE>
<S> <C>
Accumulated postretirement benefit obligation:
Retirees $3,217,952
Other fully eligible plan participants 1,353,395
Other active plan participants 1,665,143
----------
Total $6,236,490
==========
Fair value of assets --
----------
Funded status $6,236,490
Unrecognized transition obligation (2,714,387)
Unrecognized prior service cost --
Unrecognized net gain (696,644)
----------
Accrued postretirement benefit cost $2,825,459
==========
Service cost $ 161,691
Interest cost 405,794
Expected return on assets --
Amortization of:
Transition obligation 142,863
Unrecognized prior service cost --
Unrecognized net (gain) loss --
----------
Net periodic postretirement benefit cost $ 710,348
==========
</TABLE>
The assumed health care cost trend is not applicable since the medical plan
provides a flat dollar commitment. Thus, there is no effect due to a
one-percentage-point increase in the trend rate.
In 1993, the weighted average discount rate was 7.0% and the rate of
increase in future compensation used in determining the projected benefit
obligation was 5.0%.
PROFIT SHARING AND CASH BONUS PLANS
The profit sharing and cash bonus plans cover substantially all employees,
after satisfying age and length of service requirements. Annual contributions
to the plans are based upon a formula and are limited to the total amount
deductible under the applicable provisions of the Internal Revenue Code. The
profit sharing and cash bonus formula provides that 50% of the Company's
contribution be paid directly to eligible members as a year-end cash bonus and
the other 50%, less forfeitures, be paid into the profit sharing trust fund.
The profit sharing contribution and cash bonus (reflected in salaries and
wages) for 1993, 1992 and 1991 totalled $4,328,000, $4,738,000 and $6,043,000,
respectively.
INCENTIVE PLAN FOR KEY EXECUTIVES
The Company has an Incentive Plan for Key Executives ("IPKE"), under which
awards of cash or common stock of the Company, or both, are made to key
executives. The IPKE limits the aggregate and individual value of the awards
that could be issued in any one fiscal year. Shares awarded under the Plan are
held in escrow and key executives concerned may not, under any circumstances,
voluntarily dispose or transfer such shares prior to the earliest of attaining
60 years of age, completion of 20 full years of employment with the Company,
retirement, death or termination of employment prior to retirement with the
approval of the Company. Additionally, there is a five year restriction from
the date of all subsequent shares awarded to those key executives who had
previously met the minimum restrictions of completion of 20 full years of
employment or attaining 60 years of age.
At December 31, 1993, 157,397 shares, including 20,049 shares authorized,
but unissued, were available for future awards under the IPKE.
STOCK INCENTIVE PLAN
In 1992, the stockholders approved a Stock Incentive Plan ("SIP"), which
authorized the granting of up to 1,000,000 shares of common stock to key
employees. The purpose of the SIP is to promote the success and enhance the
value of the Company by providing additional incentives to selected key
employees in a way that links their interests with those of stockholders and
provides those employees with an incentive for outstanding performances. The
SIP is administered by the Executive Compensation Committee of the Board of
Directors. The SIP provides for grants of restricted stock, incentive stock
options, non-qualified stock options and reload options. Options are granted at
exercise prices not less than the fair market value of the common stock on the
date of grant. Options vest 25% per year after the date of grant. Stock options
have exercise periods no longer than ten years from the date of grant and may
not be exercised for six months after the date of grant and/or vesting. Stock
options can be exercised, in whole or in part, by payment of the option price
in cash or, if allowed under the option agreement, shares of common stock
already owned by the optionee (reload options). Upon the occurrence of a change
in control of the Company, as defined in the SIP, all options granted and held
at least six months become immediately vested and exercisable.
46
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS (Continued)
First Hawaiian, Inc. and Subsidiaries
The following table summarizes activity under the SIP for 1993 and 1992 and
the status at December 31, 1993:
<TABLE>
<CAPTION>
Options
----------------------------------------------
Outstanding Exercisable
-------------------- --------------------
Average Average
Option Option
(dollars in thousands) Shares Price Shares Price
------- ------- ------ -------
<S> <C> <C> <C> <C>
Options granted 113,690 $ 26.00 -- $ --
Less Forfeitures (770) 26.00 -- --
------- ------- ------ ------
Balance at
December 31, 1992 112,920 26.00 -- --
Options granted 106,060 30.25 -- --
Became exercisable -- -- 28,230 26.00
Less:
Exercised (60) 26.00 (60) 26.00
Forfeitures (435) 30.25 -- --
------- ------ ------ ------
Balance at
December 31, 1993 218,485 $28.05 28,170 $26.00
======= ====== ====== ======
</TABLE>
At December 31, 1993, 781,455 stock options were available for future
grants under the SIP.
LONG-TERM INCENTIVE PLAN
The Company has a Long-Term Incentive Plan ("LTIP") designed to reward key
executives for the Company's and individuals' performances measured over
three-year periods. The first period covers 1991-1993; the second period
1992-1994; and so on. The LTIP has no expiration date. The LTIP is administered
by the Executive Compensation Committee of the Board of Directors. The LTIP
provides for the grant of incentive cash awards to certain key employees of the
Company after each three-year performance cycle. For each of the current
performance cycles, the Company's average return on assets relative to a group
of peer financial institutions and the Company's growth in assets are used to
measure the Company's performance and to determine the payout factor, which
ranges from 0% to 140% of base salaries. A threshold minimum performance level
of 15% average return on stockholders' equity must be achieved for each of the
current three-year performance cycles. The first three-year performance cycle
(1991-1993) ended on December 31, 1993. The threshold level was achieved during
this cycle. Financial information for the peer companies is not presently
available. Accordingly, awards will be paid for this cycle sometime in 1994
when the Executive Compensation Committee can calculate and approve awards. The
Company has accrued $1,000,000 for potential LTIP payouts.
POSTEMPLOYMENT BENEFITS
In November, 1992, the FASB issued SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," which requires that the estimated cost of benefits
provided by an employer to former or inactive employees after employment but
before retirement be accounted for on an accrual basis. SFAS No. 112 is
effective for fiscal years beginning after December 15, 1993. The Company has
not determined the effect, if any, the adoption of SFAS No. 112 will have on
its financial position or results of operations.
12. OTHER EXPENSES
For the years ended December 31, 1993, 1992 and 1991, other expenses included
the following:
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Deposit insurance $11,122 $11,122 $10,468
Stationery and supplies 8,430 8,922 8,284
Advertising and promotion 6,911 6,326 7,216
Write-off of building costs 5,444 -- --
Other 32,342 24,449 26,646
------- ------- -------
Total other expenses $64,249 $50,819 $52,614
======= ======= =======
</TABLE>
13. INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting for
Income Taxes," the cumulative effect of which was the recognition of an income
tax benefit of $3,650,000, or $.11 per share, in the first quarter of 1993.
Such amount has been reflected in the Consolidated Statements of Income as the
cumulative effect of a change in accounting principle. Under SFAS No. 109,
deferred tax assets and liabilities are measured using enacted tax rates
scheduled to be in effect at the time the related temporary differences between
financial reporting and tax reporting of income and expense are expected to
reverse. The effect of changes in tax rates is recognized in income in the
period that includes the enactment date. On August 10, 1993, the Omnibus Budget
Reconciliation Act of 1993 was signed into law, increasing the Federal
corporate tax rate from 34% to 35%, retroactive to January 1, 1993. As a
result, the Company recognized retroactive adjustments to its deferred tax
liability and current tax provision of $1,520,000 and $402,000, respectively,
in the third quarter of 1993.
For the years ended December 31, 1993, 1992 and 1991, the provision for
income taxes was comprised of the following:
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $19,755 $21,135 $20,714
Hawaii 4,776 5,923 5,211
------- ------- -------
Total current 24,531 27,058 25,925
------- ------- -------
Deferred:
Federal 12,116 11,243 9,391
Hawaii 4,251 2,679 3,174
------- ------- -------
Total deferred 16,367 13,922 12,565
------- ------- -------
Total income tax provision $40,898 $40,980 $38,490
======= ======= =======
</TABLE>
47
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS (Continued)
First Hawaiian, Inc. and Subsidiaries
The provision for income taxes has been reduced by investment and excise tax
credits of $1,000,000, $988,000 and $1,024,000 in 1993, 1992 and 1991,
respectively. The Company also has alternative minimum tax credit and foreign
tax credit carryforwards amounting to $3,689,000 at December 31, 1993 which may
be used to offset future Federal income tax expense. The foreign tax credit
carryover of $1,041,000 will expire at the end of 1997, and the remainder of
$1,000,000 will expire at the end of 1998.
The components of net deferred income tax liabilities at December 31, 1993
and January 1, 1993 were as follows:
<TABLE>
<CAPTION>
December 31, January 1,
(in thousands) 1993 1993
------------ ----------
<S> <C> <C>
Assets
Federal and State income tax
credit carryovers $ 2,494 $ 2,071
Employee benefit deductions 10,443 6,689
Provision for loan and lease losses 25,201 21,838
Loan fees and other income 5,324 6,646
Hawaii State franchise taxes 5,959 2,481
Other -- 3,754
--------- --------
Total deferred income
tax assets 49,421 43,479
========= ========
Liabilities
Lease expenses (103,046) (79,243)
Depreciation expense (17,930) (18,775)
Intangible assets-net premiums (3,801) --
Other (3,531) --
--------- --------
Total deferred income
tax liabilities (128,308) (98,018)
========= ========
Net deferred income
tax liabilities $ (78,887) $(54,539)
========= ========
</TABLE>
Net deferred income tax liabilities are included in other liabilities in the
Consolidated Balance Sheets.
At December 31, 1993, net deferred income tax liabilities include
$8,578,000 of net deferred income tax liabilities acquired in connection with
the Pioneer Federal Savings Bank acquisition.
At December 31, 1993, Federal income taxes had not been provided on
$2,832,000 of bad debt deductions. If in the future, these amounts are used for
any purpose other than to absorb losses on bad debts, a tax liability will be
imposed on the Company for these amounts at the then current income tax rates.
The following analysis reconciles the Federal statutory income tax rate to
the effective income tax rate for the years indicated:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Federal statutory income tax
rate 35.0% 34.0% 34.0%
Municipal and other tax-
exempt income (4.4) (4.5) (5.9)
Hawaii State income and franchise
taxes, net of Federal
tax benefit 4.9 4.4 4.6
Other (1.2) (1.9) (.7)
---- ---- ----
Effective income tax rate 34.3% 32.0% 32.0%
==== ==== ====
</TABLE>
14. INTERNATIONAL OPERATIONS
The Company's international operations involve foreign banking and
international financing activities, including short-term investments, loans,
acceptances, letters of credit financing and international funds transfers.
International activities are identified on the basis of the domicile of the
Company's customer.
Total revenue, income before income taxes, net income and total assets for
foreign, domestic and consolidated operations at and for the years ended
December 31, 1993, 1992 and 1991 were as follows:
<TABLE>
<CAPTION>
(in thousands) Foreign Domestic Consolidated
-------- ---------- ------------
<S> <C> <C> <C>
1993
Total revenue $ 26,586 $ 485,022 $ 511,608
Income before
income taxes $ 2,726 $ 116,379 $ 119,105
Net income $ 1,772 $ 80,085 $ 81,857
Total assets $326,197 $6,942,934 $7,269,131
======== ========== ==========
1992
Total revenue $ 32,443 $ 514,567 $ 547,010
Income before
income taxes $ 4,843 $ 123,037 $ 127,880
Net income $ 3,196 $ 83,704 $ 86,900
Total assets $356,414 $6,196,968 $6,553,382
======== ========== ==========
1991
Total revenue $ 43,507 $ 534,336 $ 577,843
Income before
income taxes $ 6,599 $ 113,601 $ 120,200
Net income $ 4,355 $ 77,355 $ 81,710
Total assets $396,503 $6,114,051 $6,510,554
======== ========== ==========
</TABLE>
Under current intercompany pricing procedures, transfers of funds are priced at
prevailing market rates. In general, the Company has allocated all direct
expenses and a proportionate share of general and administrative expenses to
the income derived from loans and transactions by the Company's international
operations.
48
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS (Continued) First Hawaiian, Inc. and Subsidiaries
15. FIRST HAWAIIAN, INC. (PARENT COMPANY ONLY) FINANCIAL STATEMENTS
Balance Sheets
<TABLE>
<CAPTION>
December 31,
-----------------
(in thousands, except shares and per share data) 1993 1992
---- ----
<S> <C> <C>
Assets
Cash on deposit with First Hawaiian Bank $ 250 $ 985
Loans 15,759 15,102
Investment securities 5,000 --
Securities purchased from
First Hawaiian Bank 13,125 10,580
Investment in subsidiaries:
First Hawaiian Bank 571,551 520,916
Other subsidiaries 146,153 61,716
Due from:
First Hawaiian Bank 65,886 77,530
Other subsidiaries 23,053 27,140
Other assets 4,919 1,115
-------- --------
Total assets $845,696 $715,084
======== ========
Liabilities and Stockholders' Equity
Commercial paper $ 9,605 $ 10,237
Current and deferred income taxes 74,919 92,192
Other liabilities 2,803 459
Long-term debt 150,000 50,000
-------- --------
Total liabilities 237,327 152,888
-------- --------
Commitments and contingent liabilities
Stockholders' equity:
Common stock $5 par value
Authorized--66,500,000 shares
Issued and outstanding--32,542,797
shares in 1993 and 32,501,611
shares in 1992 162,713 162,507
Surplus 133,820 132,889
Retained earnings 311,836 266,800
-------- --------
Total stockholders' equity 608,369 562,196
-------- --------
Total liabilities and stockholders'
equity $845,696 $715,084
======== ========
</TABLE>
Statements of Income
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
(in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Income
Dividends from:
First Hawaiian Bank $33,551 $31,043 $26,085
Other subsidiaries 4,590 3,225 3,375
Interest from First Hawaiian Bank 419 417 3,286
Interest and fees from other
subsidiaries 321 817 2,524
Other interest and dividends 1,148 1,177 1,159
------- ------- -------
Total income 40,029 36,679 36,429
------- ------- -------
Expenses
Interest expense:
Commercial paper 259 564 1,923
Long-term debt 5,514 3,250 3,122
Other 254 125 130
Professional services 493 219 190
Other 381 106 199
------- ------- -------
Total expenses 6,901 4,264 5,564
------- ------- -------
Income before income tax expense
(benefit) and equity in
undistributed income of
subsidiaries 33,128 32,415 30,865
Income tax expense (benefit) (1,763) (582) 433
------- ------- -------
Income before equity in undistributed
income of subsidiaries 34,891 32,997 30,432
Equity in undistributed income
of subsidiaries:
First Hawaiian Bank 38,620 47,145 43,377
Other subsidiaries 8,346 6,758 7,901
------- ------- -------
Net income $81,857 $86,900 $81,710
======= ======= =======
</TABLE>
49
<PAGE> 39
NOTES TO FINANCIAL STATEMENTS (Continued)
STATEMENTS OF CASH FLOWS First Hawaiian, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
(in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Cash at beginning of year $ 985 $ 240 $ 807
-------- -------- --------
Cash flows from operating activities:
Net income 81,857 86,900 81,710
Excess of equity in earnings
of subsidiaries over
dividends received (46,966) (53,903) (51,278)
Other (439) (145) 90
-------- -------- --------
Net cash provided by operating
activities 34,452 32,852 30,522
-------- -------- --------
Cash flows from investing activities:
Net change in:
Securities sold to (purchased
from) First Hawaiian Bank (2,545) 1,605 135,105
Loans made to directors and
officers (657) (942) (3,625)
Advances from (to)
subsidiaries (100) 40,100 1,650
Purchase of investment
securities (5,000) -- --
Purchase of First Interstate of
Hawaii, Inc. -- -- (139,326)
Purchase of Pioneer
Fed BanCorp, Inc. (87,107) -- --
Capital contributions to
subsidiaries -- (4,509) --
Other (343) (425) (3,828)
-------- -------- --------
Net cash provided by (used in)
investing activities (95,752) 35,829 (10,024)
-------- -------- --------
Cash flows from financing activities:
Net change in commercial
paper balances (632) (34,061) (17,018)
Proceeds from long-term debt 100,000 -- 26,000
Cash dividends paid (36,821) (34,161) (30,395)
Issuance of common stock
under IPKE 493 438 592
Purchase of common stock for
issuance under IPKE and SIP (2,475) (152) (244)
-------- -------- --------
Net cash provided by (used in)
financing activities 60,565 (67,936) (21,065)
-------- -------- --------
Cash at end of year $ 250 $ 985 $ 240
======== ======== ========
Supplemental disclosures:
Interest paid $ 3,740 $ 4,186 $ 5,171
Net income taxes
paid (refund) $ (375) $ (338) $ 632
======== ======== ========
</TABLE>
16. LEASE COMMITMENTS
Future minimum lease payments by year and in the aggregate under all
noncancelable operating and capital leases having initial or remaining terms in
excess of one year consisted of the following at December 31, 1993:
<TABLE>
<CAPTION>
Less Net
Operating Sublease Operating Capital
(in thousands) Leases Income Leases Leases
--------- -------- --------- -------
<S> <C> <C> <C> <C>
1994 $ 10,108 $ 1,716 $ 8,392 $ 173
1995 10,365 1,464 8,901 173
1996 9,343 1,956 7,387 173
1997 23,148 3,254 19,894 173
1998 23,367 3,055 20,312 173
1999 and
thereafter 145,398 18,016 127,382 2,839
-------- ------- -------- ------
Total $221,729 $29,461 $192,268 3,704
======== ======= ========
Less amount representing imputed
interest 2,878
Present value of minimum ------
lease payments $ 826
======
</TABLE>
These premises and equipment leases extend for varying periods up to 48 years
and some of them may be renewed for periods ranging from 1 to 40 years. The
premises' leases also provide for payments of real property taxes, insurance
and maintenance.
In most cases, leases for the premises provide for periodic renegotiation
of the rents based upon a percentage of the appraised value of the leased
property. The renegotiated annual rent is usually not less than the annual
amount paid in the previous period. Where future commitments are subject to
appraisals, the minimum annual rental commitments are based on the latest
annual rents.
In December, 1993, the Company entered into a noncancelable agreement to
lease a certain office building to be constructed on land owned in fee simple
by the Company. Concurrently, the Company entered into a ground lease of the
land to the lessor of the building. Rent obligation for the building will
commence on December 1, 1996 and will expire on December 1, 2003 ("Primary
Term"). The Company is obligated to pay all taxes, insurance, maintenance and
other operating costs associated with the building during the Primary Term and
to assume certain responsibilities during the construction period. The Company
plans to occupy approximately 40% of the building and sublease the remaining
60% to third parties. As of December 31, 1993, the Company has executed certain
noncancelable subleases with third parties. These amounts are included in
sublease income in the above table.
At the end of the Primary Term, the Company may, at its option: (1)
extend the lease term at rents
50
<PAGE> 40
NOTES TO FINANCIAL STATEMENTS (Continued) First Hawaiian, Inc. and Subsidiaries
based on the lessor's cost of funds at the time of renewal; (2) purchase the
building for an amount approximately equal to that expended by the lessor to
construct the building; or (3) arrange for the sale of the building to a third
party on behalf of the lessor and pay to lessor any shortfall between the sales
proceeds and a specified residual value, such payment not to exceed
$161,990,000. This lease is accounted for as an operating lease.
For 1993, 1992 and 1991, rental expense was $8,782,000, $6,207,000 and
$4,530,000, respectively.
17. COMMITMENTS AND CONTINGENT LIABILITIES
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company is a party to various financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers and to reduce its own exposure to fluctuations in interest rates.
These financial instruments include commitments to extend credit, standby and
commercial letters of credit and interest rate floors and swaps. These
instruments involve, to varying degrees, elements of credit and interest rate
risk in excess of the amounts recognized in the Consolidated and Parent Company
Balance Sheets. The contract or notional amounts of those instruments reflect
the extent of involvement the Company has in particular classes of financial
instruments.
The Company's exposure to credit losses in the event of nonperformance by
the other party to the financial instrument for commitments to extend credit
and standby and commercial letters of credit is represented by the contractual
notional amount of those instruments. Since these commitments may expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash flows. For interest rate floor and swap transactions, the
contract or notional amounts do not represent exposure to credit losses.
Off-balance sheet instruments must meet the same criteria of acceptable
risk established for the Company's lending and other financing activities. The
Company manages the credit risk of counterparty defaults in these transactions
by limiting the total amount of outstanding arrangements, both by the
individual counterparty and in the aggregate, by monitoring the size and
maturity structure of the off-balance sheet portfolio, and by applying the
uniform credit standards maintained for all of its credit activities.
Off-balance sheet commitments and contingent liabilities at December 31,
1993 and 1992 were as follows:
<TABLE>
<CAPTION>
1993 1992
--------- ----------
Notional/ Notional/
Contract Contract
(in thousands) Amount Amount
---------- ----------
<S> <C> <C>
Commitments to
extend credit $2,377,421 $2,195,040
Standby letters of credit $ 103,537 $ 123,918
Commercial letters of
credit $ 18,628 $ 14,090
Interest rate floors $ 300,000 $ 220,500
Interest rate swaps $ 619,217 $ 557,047
========== ==========
</TABLE>
Fair values of off-balance sheet financial instruments are based upon the
following: commitments to extend credit ($11,032,000 in 1993 and $9,270,000 in
1992) and letters of credit ($1,531,000 in 1993 and $1,851,000 in 1992) are
based upon fees currently charged to enter into similar agreements, taking into
account the remaining terms of the agreements and the counterparties' credit
standing; foreign currency exchange forward contracts ($276,000 in 1993 and
$22,000 in 1992) and interest rate floors (zero for 1993 and 1992) are based
upon quoted market prices of comparable instruments and other interest rate
swaps and floors (net unrealized loss of $19,813,000 in 1993 and $16,576,000 in
1992) are determined using pricing models based upon brokers' quoted markets,
current levels of interest rates, and specific cash flow schedules.
Additional information related to interest rate swaps and floors as of
December 31, 1993 and 1992 was as follows:
<TABLE>
<CAPTION>
1993 1992
------------------ -------------------
Swaps Floors Swaps Floors
------ ------ ----- ------
<S> <C> <C> <C> <C>
Range of original terms
to maturity 2-10 year 1 year 2-10 year 4 years
Weighted average
original term 5.19 year 1 year 4.66 year 4 years
Weighted average term
to maturity 2.15 year .20 year 1.79 year .78 years
Weighted average fixed
rate 6.90% NA 7.54% NA
Weighted average
variable rate 3.47% NA 3.58% NA
==== == ==== ==
</TABLE>
LITIGATION
Various legal proceedings are pending against the Company. In the opinion of
management, based upon advice of counsel, the aggregate liability, if any,
resulting from these proceedings would not have a material effect on the
Company's consolidated financial position or results of operations.
51
<PAGE> 41
CORPORATE ADDRESSES First Hawaiian, Inc. and Subsidiaries
______________________________________________________________________________
FIRST HAWAIIAN, INC. FIRST HAWAIIAN BANK
1132 Bishop Street 1132 Bishop Street
Honolulu, Hawaii 96813 Honolulu, Hawaii 96813
or or
P.O. Box 3200 P.O. Box 3200
Honolulu, Hawaii 96847 Honolulu, Hawaii 96847
Telephone (808) 525-7000
FIRST HAWAIIAN CREDITCORP, INC. Cable Address: FIRSTBANK
Interstate Building, Second Floor (Honolulu, Hawaii)
1314 South King Street S.W.I.F.T.: FHBKUS77
Honolulu, Hawaii 96814 FedWire: ABA 121301015 FST HAW HONO
Telephone (808) 593-5500
FIRST HAWAIIAN LEASING, INC. Yasuraka (Peter) Onodera
Interstate Building, Second Floor Senior Vice President
1314 South King Street Japan Representative Office, Room 237,
Honolulu, Hawaii 96814 Ohtemachi Building 6-1,
Telephone (808) 593-5300 Ohtemachi 1-Chome, Chiyoda-Ku,
Tokyo 100, Japan
PIONEER FEDERAL SAVINGS BANK Telephone: (03) 3201-6081
900 Fort Street Telex: J27572 FHBTOKYO
Honolulu, Hawaii 96813
Telephone (808) 522-6777
SUPPLEMENTAL INFORMATION
______________________________________________________________________________
First Hawaiian, Inc.'s shares are traded on the Nasdaq National Market, and
quotations are furnished under the Nasdaq symbol: FHWN.
TRANSFER AGENT
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
FORM 10-K AND OTHER FINANCIAL INFORMATION
The Company's 1993 Form 10-K annual report, which is to be filed with the
Securities and Exchange Commission by March 31, 1994, will be available to
stockholders after that date. Analysts, investors and others seeking a copy of
the Form 10-K or any other financial information should write to:
Howard H. Karr
Executive Vice President and Treasurer
First Hawaiian, Inc.
P.O. Box 3200
Honolulu, Hawaii 96847
ANNUAL MEETING
The annual meeting of stockholders of First Hawaiian, Inc. will be held on
Thursday, April 21, 1994 at 9:30 A.M. in the 20th floor Dining Room of the
Plaza Club, 900 Fort Street, Honolulu, Hawaii.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand
Honolulu, Hawaii
DIVIDEND REINVESTMENT PLAN
Stockholders may reinvest their dividends in additional shares of the First
Hawaiian, Inc. common stock through the Dividend Reinvestment Plan.
Stockholders wishing to participate in the Plan can receive a descriptive
brochure and authorization card by writing to:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
or calling toll free at 1-800-937-5449
<PAGE> 1
EXHIBIT 22
SUBSIDIARIES OF THE REGISTRANT
<PAGE> 2
EXHIBIT 22. SUBSIDIARIES OF THE REGISTRANT
The Corporation or one of its wholly-owned subsidiaries beneficially owns 100%
of the outstanding capital stock and voting securities of the following
corporations. The Corporation is indirectly the sole general partner of First
Hawaiian Center Limited Partnership.
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION OF
NAME INCORPORATION
---- -------------
<S> <C>
First Hawaiian Bank Hawaii
First Hawaiian Overseas Corporation Hawaii
FIH International, Inc. Hawaii
American Security Properties, Inc. Hawaii
Real Estate Delivery, Inc. Hawaii
FH Center, Inc. Hawaii
FHB Mortgage Company, Inc. Hawaii
dba Phoenix Financial Services
FHB Properties, Inc. Hawaii
First Hawaiian Center Limited Partnership Hawaii
First Hawaiian Creditcorp, Inc. Hawaii
First Hawaiian Leasing, Inc. Hawaii
FHI International, Inc. Hawaii
Pioneer Federal Savings Bank Federal
Pioneer Insurance Agency, Inc. Hawaii
Pioneer Advertising Agency, Inc. Hawaii
</TABLE>
All subsidiaries were included in the consolidated financial statements of the
Corporation.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
<PAGE> 2
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTS
We consent to the incorporation by reference in the registration statements of
First Hawaiian, Inc. and subsidiaries on Forms S-3 (File No. 33-64786) and S-8
(File No. 33-66400) of our report dated January 20, 1994, on our audits of the
consolidated financial statements of First Hawaiian, Inc. and subsidiaries as
of December 31, 1993 and 1992, and for the years ended December 31, 1993, 1992,
and 1991, which report is incorporated by reference in this Annual Report on
Form 10-K.
COOPERS & LYBRAND
Honolulu, Hawaii
March 22, 1994
